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Big Oozy on Trial

A Guide to the Deepwater Horizon Oil Disaster's Day in Court

Barring an eleventh-hour settlement, BP is set to unleash another unchecked torrent on the Gulf Coast that will require many days to solve. This time, however, the action won't be at the bottom of the Gulf, but in federal court on Poydras St. And it might even be more gross.


A bevy of legal reps are set to go to trial before U.S. District Judge Carl Barbier to determine liability for the 2010 Deepwater Horizon oil disaster. Despite two previous settlements between the oil giant and sides representing the people, there has yet to be a legal determination about who should pay for the April 20, 2010 blowout and 87-day disaster's wanton violations of the federal Clean Water Act.


The Road to the Courthouse Door

The trial was set to take place roughly a year ago to date, but a last-minute settlement delayed the trial. Further delays came following that settlement.


The two previous out-of-court settlements took care of the criminal claims brought against BP by the U.S. Department of Justice, and the claims for damages by individuals and businesses who live along the Gulf Coast. 


Announced in November, 2012, the criminal settlement found BP pleading guilty to felony charges for the death of the 11 rig workers onboard the Deepwater Horizon, as well as environmental claims and misleading members of Congress about how much oil was flowing into the Gulf. Two rig supervisors were also charged with manslaughter in connection with that settlement, and face trial this spring. BP had to pay $4.5 billion in damages in connection with that settlement, and faces probation for five years. Transocean, the Swiss company that owned the Deepwater Horizon, settled in a similar fashion with the feds, and paid $1.4 billion in fines.


Almost a year ago to the date the trial is set to begin, Gulf Coast residents and businesses represented by a group known as the Plaintiffs Steering Committee announced a separate settlement with BP. That out-of-court agreement covered economic and environmental losses wrought by the disaster that were not already settled through the feds' original claims center run by Kenneth Feinberg. BP set aside about $7.8 billion to pay out those damages.


Despite all the dealings and billions paid so far, some legal muck remains to be navigated. The many parties involved in the case have yet to make a determination on civil penalties for the companies responsible for the disaster. In legal terms, the civil penalties stem from the disaster's violations of the federal Clean Water Act. Ultimately, Barbier will have to decide the percentage of the blame that is shouldered by each of the defendants. Despite what's figured to be a year of negotiations, the many parties involved in the case could not reach a settlement.


The two parties have been in settlement negotiations off and on for close to a year. This week, however, BP indicated they were ready to go to trial. The stakes for going to court are high, as BP could end up having to fork over many more billions of dollars than they have already paid in penalties. Plus, they'll have to air the story of the disaster in public.


To argue their point, however, the company will rely on a rhetorical concoction involving the rarity of such a huge trial and its investment in the Gulf since the disaster - which it views as sizable.


"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,” Rupert Bondy, BP's head lawyer, said this week.


The trial will be conducted in two phases, with the first beginning Monday morning (Feb. 25). The first, which could take months, will focus on the accident itself. The second phase, which could begin in the fall, will deal with how much oil flowed into the Gulf, and other spill-related issues. On the defendant side, there will be BP, Deepwater Horizon rig owner Transocean and cement contractor Halliburton. On the other side will sit the federal government, states and lawyers representing Gulf Coast residents and businesses.


Though the dividing line between the two sides seem clear enough, the presence of so many parties adds layers of complexity to the case. For one, the three defendants aren't all necessarily playing as one team. Since the beginning of the process, they've attempted to blame each other for the disaster. Halliburton has been especially elusive, contending with apparent success that they were relying on the directions of BP, who contracted them to pour cement for the Macondo well's casing. In court, those three sides will put what until this point has been a legal blame game accessible only to readers of the federal docket on public display.


The Gross and the Not-So-Gross

Some help from the other side is likely in order, however. The feds have hinted at a strategy that mainly puts the blame on BP. According to a scorching court filing in summer 2012, the DOJ plans to attempt to convince Barbier that BP was grossly negligent in the case. At this point, there is little legal question that BP was negligent in the case, as the company had evidence of a possible well blowout and overlooked safety standards well before the disaster occurred. However, a legal classification above simply negligence could put the British company on the hook for even more money. 


In legal terms gross doesn't simply mean you've been disgusting. Instead, one has gone below the standard of what a normal human would be expected to uphold when they are legally gross. The argument about BP's gross negligence will be the centerpiece of the first phase of the trial. In addition to the warning signs that were present before the accident itself, the feds will also delve into BP's corporate culture to prove their claim, the DOJ's earlier filing indicates.


"The behavior, words, and actions of these BP executives would not be tolerated in a middling size company manufacturing dry goods for sale in a suburban mall," the filing states. "Yet they were condoned in a corporation engaged in an activity that no less a witness than (former BP CEO) Tony Hayward himself described as comparable to exploring outer space."


To hammer home the point, the feds will call University of California-Berkeley professor Robert Bea as their first witness. A star in the field of risk management, Bea has lambasted BP for their record on safety in the aftermath of the disaster.


"BP’s organizations and operating teams did not possess a functional Safety Culture," said the report of the Deepwater Horizon Study Group, which Bea led. "Their system was not propelled toward the goal of maximum safety in all of its manifestations but was rather geared toward a trip-and-fall compliance mentality rather than  being focused on the Big-Picture."


In their filing, the feds focus specifically on BP's undertaking of a test on the well that was supposed to lower the pressure of Macondo well, but wasn't performed correctly.


In its own report about the accident, BP indicated that the negative pressure test didn't have the proper instructions with it.


“The guidelines for the negative-pressure test, a critical activity, did not provide detailed steps and did not specify expected bleed volumes or success/failure criteria. Therefore, effective performance of the test placed a higher reliance on the competency and leadership skills of the BP and Transocean rig leaders."


Rather than pointing to heroic leadership skills, however, the feds call the test a simple procedure that could've been executed by almost anybody.


"Although deepwater drilling is as complex as it is dangerous, the 'negative pressure test” performed by BP and Transocean only hours before the blowout was not only simple to perform, but equally simple to comprehend – even for laymen unschooled in the most rudimentary principles of drilling," the feds' summer filing states. "That such a simple, yet fundamental and safety-critical test could have been so stunningly, blindingly botched in so many ways, by so many people, demonstrates gross negligence."


BP denied the gross negligence claims this week.


“Gross negligence is a very high bar that BP believes cannot be met in this case,” said Rupert Bondy, BP's head lawyer on the case. “This was a tragic accident, resulting from multiple causes and involving multiple parties. We firmly believe we were not grossly negligent.”


BP's gross negligence isn't simply a classification. There is a price tag attached to it. Negligence carries Clean Water Act fines of $1,100 per barrel while gross negligence carries Clean Water Act fines of $4,300 per barrel of oil leaked.


Barrel Bonanza

That's not where the math will end, however. Just how far apart the two sides remain in this case might lie in the argument that will take up the bulk of the trial's second phase. BP and the feds can't even agree on how many barrels of oil were leaked.


The government maintains that 4.9 million barrels of oil leaked before the flow was cut off in July, 2010. But BP has its own estimate of 3.1 million barrels of oil.


“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 percent.” 


Despite its assertions, BP has a history of being fuzzy with the numbers. In its guilty plea in the criminal case, BP already admitted to playing fast and loose with the well's flow rate. In the contempt of Congress charge, BP employee David Rainey concocted a flow rate that was 5,000 barrels of oil per day, when in fact the well was leaking 50,000 barrels of oil per day. The company had to pay $520 million in U.S. Securities and Exchange Commission penalties for misleading investors with the figure.


Further adding to the confusion over the eventual dollar figure, Barbier also agreed to lop 810,000 barrels that was captured before entering Gulf of Mexico waters off the final total this week. 


Using the government's estimate, BP would then be liable for a maximum of $17.6 billion in penalties, and a minimum of $4.5 billion. BP's estimate would lower the maximum to $14.1 billion, and the minimum to $3.6 billion.


Even that may not be the end of the penalties, however, as a finding of gross negligence could hitch the parties to punitive damages, which historically outpace civil penalties.


The parties could still reach a settlement before going to trial. With so much money at stake, however, the complex matter seems like it will have to be decided in court. 



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