BP 2012 Annual Report Download - page 166

debarment is essentially the same as for resolving the temporary
suspension. BP continues to work with the EPA in preparing an
administrative agreement that will resolve suspension and debarment
issues. On 15 February 2013, BP filed an administrative challenge with the
EPA seeking to lift the 28 November 2012 suspension of 22 BP entities and
the 1 February 2013 statutory debarment of BPXP at its Houston
headquarters. BP maintains that the EPA’s actions do not reflect BP’s
present status as a responsible government contractor. The EPA will review
the administrative record and determine whether to change its decision.
Decisions reached by the EPA can be challenged in federal court.
The United States filed a civil complaint in the multi-district litigation
proceeding in New Orleans against BPXP and others on 15 December 2010
(DoJ Action). The complaint seeks a declaration of liability under OPA 90 and
civil penalties under the Clean Water Act and sets forth a purported
reservation of rights on behalf of the US to amend the complaint or file
additional complaints seeking various remedies under various US federal
laws and statutes. See Financial statements – Note 2 on page 194.
A Trial of Liability, Limitation, Exoneration, and Fault Allocation was originally
scheduled to begin in the federal multi-district litigation proceeding in New
Orleans in February 2012. The court’s pre-trial order issued 14 September
2011 provided for the trial to proceed in three phases and to include issues
asserted in or relevant to the claims, counterclaims, cross-claims, third-party
claims, and comparative fault defences raised in Transocean’s Limitation of
Liability Action (discussed below). Pursuant to an amended pre-trial order
dated 30 May 2012, the first phase of the Trial of Liability, Limitation,
Exoneration, and Fault Allocation commenced on 25 February 2013. The first
trial phase will address issues arising out of the conduct of various parties
allegedly relevant to the loss of well control at the Macondo well, the
ensuing fire and explosion on the Deepwater Horizon on 20 April 2010, the
sinking of the vessel on 22 April 2010 and the initiation of the release of oil
from the Deepwater Horizon or the Macondo well during those time
periods, including whether BP or any other party was grossly negligent. The
second trial phase, which is projected to commence in September 2013, will
address (i) “source control” issues pertaining to the conduct or inaction of
BP, Transocean or other relevant parties regarding stopping the release of
hydrocarbons stemming from the Incident from 22 April 2010 through
approximately 19 September 2010, and (ii) “quantification of discharge”
issues pertaining to the amount of oil actually released into the Gulf of
Mexico as a result of the Incident from the time when these releases began
until the Macondo well was capped on approximately 15 July 2010 and then
permanently cemented shut on approximately 19 September 2010.
On 20 April 2011, BP filed claims against Cameron International
Corporation (Cameron), Halliburton Energy Services, Inc. (Halliburton), and
Transocean in the DoJ Action, seeking contribution for any assessments
against BP under OPA 90 based on those entities’ fault. On 20 June 2011,
Cameron and Halliburton moved to dismiss BP’s claims against them in
the DoJ Action. BP’s claim against Cameron has been resolved pursuant
to settlement, but Halliburton’s motion remains pending.
On 30 May 2011, Transocean filed claims against BP in the DoJ Action
alleging that BP America Production Company had breached its contract
with Transocean Holdings LLC by not agreeing to indemnify Transocean
against liability related to the Incident. Transocean also asserted claims
against BP under state law, maritime law and OPA 90 for contribution. On
20 June 2011, Cameron filed similar claims against BP in the DoJ Action.
On 8 December 2011, the United States brought a motion for partial
summary judgment seeking, among other things, an order finding that BP,
Transocean and Anadarko are strictly liable for a civil penalty under
Section 311(b) (7)(A) of the Clean Water Act. On 22 February 2012, the
judge ruled on motions filed in the DoJ Action by the United States,
Anadarko, and Transocean seeking early rulings regarding the liability of BP,
Anadarko and Transocean under OPA 90 and the Clean Water Act, but
limited the order to addressing the discharge of hydrocarbons occurring
under the surface of the water. Regarding OPA 90, the judge held that BP
and Anadarko are responsible parties under OPA 90 with regard to the
subsurface discharge. The judge ruled that BP and Anadarko have joint and
several liability under OPA 90 for removal costs and damages for such
discharge, but did not rule on whether such liability under OPA 90 is
unlimited. While the judge held that Transocean is not a responsible party
under OPA 90 for subsurface discharge, the judge left open the question of
whether Transocean may be liable under OPA 90 for removal costs for such
discharge as the owner/operator of the Deepwater Horizon. Regarding the
Clean Water Act, the judge held that the subsurface discharge was from the
Macondo well, rather than from the Deepwater Horizon, and that BP and
Anadarko are liable for civil penalties under Section 311 of the Clean Water
Act as owners of the well. The judge left open the question of whether
Transocean may be liable under the Clean Water Act as an operator of the
Macondo well. Anadarko, BP and the United States have each appealed the
22 February 2012 ruling to the US Court of Appeals for the Fifth Circuit, and
the appeals have been consolidated. On 23 October 2012, Transocean filed
a motion to dismiss the appeal as untimely and for lack of jurisdiction. On 5
February 2013, the appeals court denied Transocean’s motion.
On 11 January 2013, BP filed a motion for partial summary judgment against
the United States, seeking rulings that (1) BP collected at least 810,000
barrels from the broken riser, from the top of the blowout preventer and
lower marine riser package, and from the choke and kill lines of the blowout
preventer, all before these barrels reached the waters of the Gulf of Mexico,
and (2) that these barrels may not be counted toward the maximum penalty
potentially to be assessed against BP under Section 311 of the Clean Water
Act, 33 U.S.C. § 1321. The court set a schedule under which briefing on
BP’s motion will be complete in February 2013. On 15 February 2013, BP
and the United States reached a stipulation, entered by the court on 19
February 2013. The stipulation provides that 810,000 barrels of oil were
collected without coming into contact with ambient Gulf waters and that
those 810,000 barrels of oil are not to be used in calculating the statutory
maximum penalty under the Clean Water Act.
On 1 March 2013, Transocean sought the MDL 2179 court’s leave to
supplement its pleadings to include an affirmative defence asserting that
BP’s representations regarding the flow rate at the Macondo well
constituted an intervening and superseding cause of the oil spill for the
majority of its duration. Transocean’s defence claims that BP fraudulently
misrepresented and concealed information regarding the flow rate at the
Macondo well in late April and May 2010, as well as the likelihood of
success of a top-kill approach to stopping the flow of hydrocarbons from
the well, and thus prevented the implementation of alternative means of
source control that Transocean asserts could have capped the well as
early as May 2010. Also on 1 March 2013, Halliburton filed a motion for
leave to amend its answers in MDL 2179 to assert a similar defence.
On 4 April 2011, BP initiated contractual out-of-court dispute resolution
proceedings against Anadarko and MOEX, claiming that they have breached
the parties’ contract by failing to reimburse BP for their working-interest
share of Incident-related costs. On 19 April 2011, Anadarko filed a cross-
claim against BP, alleging gross negligence and 15 other counts under state
and federal laws. Anadarko sought a declaration that it was excused from its
contractual obligation to pay Incident-related costs. Anadarko also sought
damages from alleged economic losses and contribution or indemnity for
claims filed against it by other parties. On 20 May 2011, BP and MOEX
announced a settlement agreement of all claims between them, including a
cross-claim brought by MOEX on 19 April 2011 similar to the Anadarko
claim. Under the settlement agreement, MOEX has paid BP $1.065 billion,
which BP has applied towards the $20-billion Trust, and has also agreed to
transfer all of its 10% interest in the MC252 lease to BP. On 17 October
2011, BP and Anadarko announced that they had reached a final agreement
to settle all claims between the companies related to the Incident, including
mutual releases of all claims between BP and Anadarko that are subject to
the contractual out-of-court dispute resolution proceedings or the federal
multi-district litigation proceeding in New Orleans. Under the settlement
agreement, Anadarko has paid BP $4 billion, which BP has applied towards
the $20-billion Trust, and has also agreed to transfer all of its 25% interest in
the MC252 lease to BP. The settlement agreement also grants Anadarko
the opportunity for a 12.5% participation in certain future recoveries from
third parties and certain insurance proceeds in the event that such
recoveries and proceeds exceed $1.5 billion in aggregate. Any such
payments to Anadarko are capped at a total of $1 billion. BP has agreed to
indemnify Anadarko and MOEX for certain claims arising from the Incident
(excluding civil, criminal or administrative fines and penalties, claims for
punitive damages, and certain other claims). The settlement agreements
with Anadarko and MOEX are not an admission of liability by any party
regarding the Incident.
On 18 February 2011, Transocean filed a third-party complaint against BP,
the US government, and other corporations involved in the Incident,
naming those entities as formal parties in its Limitation of Liability action
pending in federal court in New Orleans.
164 Additional disclosures
BP Annual Report and Form 20-F 2012