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Will BP have to face the music?

By MICHAEL KIRKLAND   |   May 15, 2011 at 3:30 AM   |   Comments

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WASHINGTON, May 15 (UPI) -- Should BP shoulder the entire burden of liability for the Deepwater Horizon disaster, which the British company puts at about $41 billion?

BP doesn't think so.

The company has filed suits against Cameron, the Houston oil services company that made the failed blowout preventer, Transocean, the Swiss owner of the leased rig, and Houston-based Halliburton, the oil services company that laid the well's cement, to recover actual and punitive damages.

The web of suits and countersuits surrounding the disaster -- with companies suing other companies, partners suing partners -- is so byzantine, it's hard to follow.

What isn't so hard to understand is the brutal reality of April 20, 2010.

The immense Deepwater Horizon rig leased by BP was taking oil from the ocean floor a mile down in the serene Gulf of Mexico, about 50 miles from the Louisiana shore, when the unthinkable happened.

That night, high-pressure methane gas shot up onto the rig and ignited, setting off an explosion and fire that could be seen for miles. While most rig workers escaped by lifeboat, 11 were killed. Two days later the Deepwater Horizon sank beneath the waves.

Meanwhile, a mile down on the ocean floor, the wellhead began to gush crude into the gulf. Despite repeated attempts by BP to staunch the flow, oil gushed for 86 days, spewing nearly 5 million gallons of oil into environment.

Scientists called it the worst maritime pollution disaster in history.

It was a scenario that congressional panels and government regulators were told by industry experts was impossible, there were too many redundant systems.

Now the approximately 48,000 workers participating in the cleanup have been reduced to about 2,000, U.S. President Barack Obama and BP have been reviled -- Obama because he could not stop the flow, and because his new safety regulations hinder future drilling -- and the National Oceanic and Atmospheric Administration says about a third of the spilled oil remains unaccounted for.

A prophetic article posted online by the American Prospect in July 2010 said the litigation following the oil spill could be as unprecedented as the disaster itself.

The article points out the 1990 Oil Pollution Liability and Compensation Act caps damages in federal courts at $75 million. But that doesn't include cleanup costs.

BP said last year it planned to disregard the cap and after a set-to with Obama, set up a $20 billion trust fund for those individuals and companies hurt by the spill.

The 1990 law was enacted in the wake of the 1989 Exxon Valdez disaster, but the issues in that case weren't resolved until the 2008 U.S. Supreme Court ruling, mostly unanimous in the judgment, that said in part the $2.5 billion punitive damages verdict against Exxon was excessive in light of maritime common law.

"There will likely be future legal wrangling over who among BP and the two contractors involved with the rig that exploded in April, Transocean and Halliburton, is more responsible and therefore more liable to pay cleanup costs and private claims," the article said.

The 1990 law does not prohibit individuals from making civil claims that the company was negligent, nor does it keep the federal government from going after BP and other companies "for civil or criminal penalties," the article said.

And the $75 million cap does not apply if a company is guilty of gross negligence or deliberate misconduct.

The article quoted Jody Freeman, a Harvard Law School professor, as saying the BP tussle "will make the Exxon Valdez look like a simple case."

The essence of the BP lawsuits -- which the British newspaper The Daily Telegraph said contribute to "a complex legal quagmire involving dozens of parties, claims and counterclaims" -- is detailed in BP's first-quarter 2011 report.

"On 20 April 2011, BP asserted claims against Cameron, Halliburton and Transocean in the limitation of liability action," the report said. "BP's claims against Transocean include breach of contract, unseaworthiness of the Deepwater Horizon vessel, negligence (or gross negligence and/or gross fault as may be established at trial based upon the evidence) ... as well as a declaratory claim that Transocean is wholly or partly at fault for the Incident and responsible for its proportionate share of the costs and damages."

The report said, "BP's claims against Cameron assert that Cameron is liable under maritime law for providing a blowout preventer that was unreasonably dangerous in design based on certain design defects, that Cameron was negligent with respect to certain maintenance and repair that it conducted on the Deepwater Horizon BOP ..."

A blowout preventer is a giant valve designed to prevent sudden eruptions of pressure.

Moreover, the report said, "BP asserted claims against Halliburton for fraud and fraudulent concealment based on Halliburton's misrepresentations to BP concerning, among other things, the stability testing on the foamed cement used at the Mississippi Canyon Block 252 well; for negligence (or, if established by the evidence at trial, gross negligence) based on Halliburton's performance of its professional services, including cementing and mud logging services; and for contribution and subrogation for amounts that BP has paid in responding to the incident and oil spill, as well. ..."

Also on April 20, the report said, BP filed a complaint in federal court in Houston against Halliburton alleging "the same counts as BP's claim against Halliburton in Transocean's limitation of liability action."

Halliburton, Cameron and Transocean all filed countersuits.

You can almost smell the legal fees.

But the definitive word at this early stage of the litigation may come from The Financial Times. In an article published last month, the Times said legal experts warn the case may never come to trial.

Yale Law Professor Doug Kysar told the newspaper: "The chances of the suit actually going to trial are quite low. But that doesn't mean that filing the suit won't be advantageous to BP".

All four companies were blamed by a presidential commission that investigated the spill.

Kysar said the reports from the commission and others "already provide enough of an evidentiary basis to establish triable facts regarding these companies' culpability."

He told the Times, "Those companies will not be able to easily dismiss BP's suit for contribution, which means the pressure on them to settle will be substantial."

Columbia Law Professor John Coffee told the Times: "All in all, (BP's action) makes sense in terms of economic logic, but less so if BP is trying to protect its reputation. You simply cannot vindicate your honor in messy litigation of this sort."

But David Uhlmann, a former environmental crimes prosecutor at the U.S. Department of Justice and now at the University of Michigan, took another view.

Uhlmann told the newspaper it was not clear BP had much chance to recover significant money, and the company "is not in the best position to be pointing fingers at other companies given its central role in the gulf tragedy."

Halliburton, Transocean and Cameron said they would defend themselves with vigor. In a statement, Transocean called the legal action "specious and unconscionable."

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