BP is preparing for the federal civil trial beginning next Monday in the Deepwater Horizon Multi-District Litigation pending in the US District Court for the Eastern District of Louisiana. This proceeding is the first of at least two phases the Court has set for the trial. The first phase will be focused on the causes of the Deepwater Horizon accident, who should be held responsible, and to what degree. Judge Carl J Barbier will preside over the trial.
“We have always been open to settlements on reasonable terms, failing which we have always been prepared to defend our case at trial. Faced with demands that are excessive and not based on reality or the merits of the case, we are going to trial,” said Rupert Bondy, Group General Counsel of BP. “We have confidence in our case and in the legal team representing the company and defending our interests.”
The Court will ultimately determine the legal and factual issues at the heart of the case, including whether BP or any other party was grossly negligent.
“Gross negligence is a very high bar that BP believes cannot be met in this case,” said Mr Bondy. “This was a tragic accident, resulting from multiple causes and involving multiple parties. We firmly believe we were not grossly negligent.”
Oil flow rate and quantification of barrels of oil spilled are issues that will be addressed in the second phase of the trial, which is scheduled to begin in September 2013. As BP previously said, although there is inherent uncertainty in this quantification, the company believes that the government’s public estimate of 4.9 million barrels of oil released is at least 20 per cent overstated.
“These issues are extremely complicated as a technical matter, and there is still further analysis to do,” said Mr Bondy. “But it is clear, based on our analysis so far, that the government’s public estimate is simply wrong and overstated by at least 20 per cent.”
Whatever the final number of barrels released from the reservoir is proven to be, BP does not believe that the 810,000 barrels of oil that the company successfully captured from the Macondo reservoir without it entering the Gulf of Mexico waters should be considered in the Court’s future determination of Clean Water Act penalties. Under the Clean Water Act, civil penalties are assessed only on oil that has actually entered the environment and potentially caused harm. The US Department of Justice has indicated that it agrees with BP’s position on this issue. On the basis that the 4.9 million barrels figure includes an over-estimate of at least 20 per cent, and given that a further 810,000 barrels need to be deducted from the volume that flowed from the reservoir, BP believes that a figure of 3.1 million barrels should be the uppermost limit of the number of barrels spilled that should be used in calculating a Clean Water Act penalty.
Finally, the Court has broad discretion to assess a per-barrel Clean Water Act penalty between zero and the statutory maximum. In deciding on the per-barrel fine, the Court must consider not only the level of culpability, but also seven other statutory penalty factors. The intent behind the statute is to enable courts to account for the violating company’s conduct following the violation where public policy merits such treatment. In practice, courts have historically awarded only a fraction of the statutory maximum penalty, generally choosing penalties that are far closer to zero than to the statutory maximum.
“We believe that consideration of all eight legal factors together weighs in favour of a penalty that is lower than the statutory maximum,” continued Mr Bondy. “In determining the penalty, we believe the Court should consider, among other things, the fact that BP immediately stepped up and acknowledged our role in the accident. We waived the statutory cap on liability, and to date, we’ve spent more than $23 billion in response, clean-up, and payments on claims by individuals, businesses, and governments. No company has done more, faster, to meet its commitment to economic and environmental restoration efforts in the wake of an industrial accident, and although the Court will ultimately decide, we believe that both the statute and public policy more generally contemplate consideration of our efforts to do the right thing in determining an appropriate penalty.”
BP is engaged in a continuous effort to further enhance safety and risk management throughout its global operations and across the deepwater drilling industry. Immediately after the accident, the company launched an internal investigation. BP then publicly released the investigation’s results, and began the process of implementing all 26 of the investigation’s recommendations. The company has also, among other things, made key leadership changes, reorganized its upstream business, created a more robust centralized Safety and Operational Risk organization, and adopted new deepwater drilling standards in the Gulf of Mexico that exceed current regulatory requirements. BP has shared what it has learned with industry and regulators around the world.
“Our actions show that we have been willing to settle. We settled with our partners in the well and with some of our contractors. We began paying claims immediately after the accident and have settled with the PSC the substantial majority of all legitimate private economic loss and medical claims. In addition, we settled all of the federal government’s criminal and securities claims against the company,” said Mr Bondy. “There are remaining claims which we have been unable to settle on reasonable terms. Consequently, we are prepared to go to trial and present our case to Judge Barbier.”
BP will be represented at trial by Robert C (“Mike”) Brock of Covington & Burling LLP; Hariklia (“Carrie”) Karis, J Andrew (“Andy”) Langan and Matthew T Regan of Kirkland & Ellis LLP; and Don Haycraft of Liskow & Lewis.
BP press office, London: +44 (0)20 7496 4076, firstname.lastname@example.org
For further information relating to the Deepwater Horizon accident, please see BP’s fourth quarter and full year 2012 results announcement dated 5 February 2013, the “Principal risks and uncertainties” included in the company’s results announcement dated 31 July 2012, and BP’s Annual Report and Form 20-F 2011 as filed with the US Securities and Exchange Commission. All of these materials are available on BP’s website.