Oil Rig's Owner Settles Gulf Spill Case for $1.4 Billion

A dead fish lies on the beach in Pass Christian, Mississippi as the gulf coast is still threatened by the oil spill from the BP Deepwater Horizon platform disaster. , a photo by Pan-African News Wire File Photos on Flickr.

January 3, 2013

Oil Rig’s Owner Settles Gulf Spill Case for $1.4 Billion

By JOHN SCHWARTZ
New York Times

The driller whose floating Deepwater Horizon oil rig blew out in 2010 to cause the nation’s biggest oil spill has agreed to settle civil and criminal claims with the federal government for $1.4 billion, the Justice Department announced Thursday.

The Deepwater Horizon exploded, burned and sank in April 2010. Eleven men were killed and millions of gallons of oil flowed into the Gulf of Mexico and fouled the shores of coastal states. The well, known as Macondo, was owned by British oil giant BP, which settled its own criminal charges and some of its civil charges in November for $4.5 billion.

While this settlement resolves the government’s claims against Transocean, that company and the others involved in the spill still face the sprawling, multistate civil case, which is scheduled to begin in February in New Orleans. In a deal filed in federal court in New Orleans, a subsidiary, Transocean Deepwater, agreed to one criminal misdemeanor violation of the Clean Water Act and will pay a fine of $100 million. Over the next five years, the company will pay civil penalties of $1 billion, the largest ever under the act.

As part of the criminal settlement, Transocean also agreed to pay the National Academy of Sciences and the National Fish and Wildlife Foundation $150 million each. Those funds will be applied to oil spill prevention and response in the Gulf of Mexico and natural resource restoration projects. The agreement will be subject to public comment and court approval. The company agreed to five years of monitoring of its drilling practices and improved safety measures.

In a statement, Transocean Ltd., the Switzerland-based parent of the rig owner, said that the company thought these were “important agreements” and called them a “positive step forward” that were “in the best interest of its shareholders and employees.” Of the 11 men killed on the rig, the company said, “their families continue to be in the thoughts and prayers of all of us at Transocean.”

The company announced in September that it had set an “estimated loss contingency” of $1.5 billion against the Justice Department’s claims.

Shares of Transocean Ltd. rose nearly 3 percent on the news, to close at $49.20.

In a statement, Lanny A. Breuer, assistant attorney general for the Justice Department’s Criminal Division, seemed to suggest that Transocean had played a subservient and lesser role in the disaster to that of BP: “Transocean’s rig crew accepted the direction of BP well site leaders to proceed in the face of clear danger signs — at a tragic cost to many of them.” He said that the $1.4 billion “appropriately reflects its role in the Deepwater Horizon disaster.”

Under a law passed last year, 80 percent of the penalty will be applied to projects for restoring the environment and economies of gulf states.

That fact was applauded by a coalition of Gulf Coast restoration groups, including the Environmental Defense Fund and the National Audubon Society. A joint statement called this “a great day for the gulf environment and the communities that rely on a healthy ecosystem for their livelihoods.”

Still, the penalty struck some experts in environmental law as somewhat light. David M. Uhlmann, who headed the Justice Department’s environmental crimes section from 2000 to 2007, praised the size of the civil settlement, which he said “reflects the scope of the gulf oil spill tragedy.”

He argued, however, that the criminal penalty should have been at least as onerous, “given Transocean’s numerous failures to drill in a safe manner, which cost 11 workers their lives and billions of dollars in damages to communities along the gulf.” The settlement, he said, should have included seaman’s manslaughter charges, which were part of the BP settlement.

As for the company’s role in following the lead of BP, he said, “following orders is not a defense to criminal charges.”

At the Environmental Protection Agency, Cynthia Giles, assistant administrator for the office of enforcement and compliance assurance, called the settlement “an important step” toward holding Transocean and others involved in the spill accountable. “E.P.A. will continue to work with D.O.J. and its federal partners to vigorously pursue the government’s claims against all responsible parties and ensure that we are taking every possible step to restore and protect the Gulf Coast ecosystem,” she said.

The multistate trial over claims in the Deepwater Horizon cases that have not been settled are scheduled to begin in February. Stephen J. Herman and James P. Roy, lawyers who represent the steering committee of plaintiffs in the cases, said that Thursday’s settlement did not change the case, and that the plaintiffs thought that BP, Transocean and Halliburton “will be found grossly negligent” at trial.

BP continued its longstanding argument that the accident, in the words of the spokesman Geoff Morrell, “resulted from multiple causes, involving multiple parties,” and that other companies had to shoulder their share of the blame.

Transocean, Mr. Morrell said in a statement, “is finally starting, more than two-and-a-half years after the accident, to do its part for the Gulf Coast.” He then turned his attention to the other major contractor on the well, and said, “Unfortunately, Halliburton continues to deny its significant role in the accident, including its failure to adequately cement and monitor the well.”

Beverly Blohm Stafford, a Halliburton spokeswoman, said that the company “remains confident that all the work it performed with respect to the Macondo well was completed in accordance with BP’s specifications for its well construction plan and instructions,” and so Halliburton, she said was protected from liability through indemnity provisions of its drilling contract.

“We continue to believe that we have substantial legal arguments and defenses against any liability and that BP’s indemnity obligation protects us,” she said. “Accordingly we will maintain our approach of taking all proper actions to protect our interests.”