Investigations and legal proceedings
Investigations into the Deepwater Horizon accident continue to play an important role in understanding its causes, preventing future accidents and improving the safety of deepwater drilling
In the immediate aftermath of the explosion, BP launched an investigation, drawing on the expertise of more than 50 technical and other specialists from within BP and the industry. The BP investigation concluded that no single cause was responsible for the accident. The investigation team made 26 recommendations specific to deepwater drilling which BP has accepted and is implementing across its worldwide drilling operations.
External investigations and hearings
We co-operated with all official investigations and hearings related to the accident. Several entities have issued reports of their investigations, including the US Coast Guard, the Bureau of Ocean Energy Management, Regulation and Enforcement, the National Commission on the BP Deepwater Horizon Oil Spill and Offshore Drilling and the National Academy of Engineering.
While the reports contain criticisms of BP, we believe the findings of these reports support the conclusion, consistent with our own investigation, that the accident resulted from multiple causes and was due to the actions of multiple parties.
The US Chemical Safety and Hazard Investigation Board issued an interim report in 2012 and is due to release final reports in 2014.
The criminal plea agreement reached with the US government in 2012 to resolve all federal criminal claims arising out of the Deepwater Horizon accident and oil spill, provides for the US government to appoint two independent monitors – a process safety monitor and an ethics monitor.
The process safety monitor has been retained for a period of up to four years from February 2014, and will review and provide recommendations concerning BP Exploration & Production Inc’s (BPXP) process safety and risk management procedures for deepwater drilling in the Gulf of Mexico. BPXP is the BP group company that conducts exploration and production operations in the Gulf of Mexico.
The ethics monitor will review and provide recommendations concerning BP’s ethics and compliance programme, and has been retained for a term of up to four years from 2013.
BP began paying compensation for legitimate claims for damages within weeks of the Deepwater Horizon accident. Since May 2010, BP has paid a total of approximately $11 billion to individuals and businesses through various claims processes, with $2.9 billion being paid in 2013. BP has paid almost $1.5 billion for claims, advances and settlements with government entities.
In 2012, BP reached settlements with the Plaintiffs’ Steering Committee (PSC) to resolve the substantial majority of legitimate private economic and property damage claims and medical claims stemming from the accident and oil spill. The PSC acts on behalf of individual and business plaintiffs in the multi-district litigation proceedings.
As part of its monitoring of payments made by the court-supervised settlement programme for the economic and property damages settlement, BP identified and disputed claims that appeared to result from an incorrect interpretation of the settlement by the claims administrator.
There have been various court rulings on this, including the meaning of the causation requirements of the settlement agreement.
In December 2013, the district court in New Orleans ruled that for the purposes of determining business economic loss claims, revenues must be matched with expenses incurred by claimants in conducting their business even where the revenues and expenses were recorded at different times.
The court also ruled that the settlement agreement did not contain a causation requirement beyond the revenue and related tests set out in an exhibit to that agreement. BP appealed the district court’s ruling on causation to the court of appeals, but the panel affirmed the district court’s ruling in March 2014. There is currently a temporary injunction on business economic loss claims offers and payments, and the timing of when this will be lifted will be affected by the status of any such appeal by BP.
The multi-district litigation trial relating to liability, limitation, exoneration and fault allocation began in the federal district court in New Orleans in February 2013. The first phase of the trial focused on the causes of the accident and the allocation of fault among the defendants. The second phase focused on efforts to stop the flow of oil and the volume of oil spilled. BP is not aware of the timing of the rulings for these phases.
In a subsequent trial phase, the per-barrel penalty rate to be applied in determining applicable penalties under the Clean Water Act will be considered. There is significant uncertainty about the amount of Clean Water Act penalties to be paid, and the timing of payment, as these will depend on the finding as to negligence or gross negligence, the volume of oil spilled and the application of statutory penalty factors, or upon any settlement, if one were to be reached. The district court has wide discretion in its determination as to whether a defendant’s conduct involved negligence, or gross negligence as well as in its determinations on the volume of oil spilled and the application of statutory penalty factors.
Agreement with EPA
Following the Deepwater Horizon incident, the US Environmental Protection Agency (EPA) suspended or debarred various BP companies from entering into new contracts with the US government or renewing existing ones.
BP entered into an agreement with the EPA in March 2014, resolving all debarment and suspension matters. Under this agreement, which will apply for five years, BP has agreed to a set of safety and operations, ethics and compliance and corporate governance requirements, including those contained in the 2012 criminal plea agreement and settlement with the US Securities and Exchange Commission.
The agreement means that BP is once again eligible to enter into new contracts with the US government, including deepwater drilling leases in the Gulf of Mexico.
Last edited - 14 March 2014