BP 2012 Annual Report Download - page 168

On 14 September 2011, the US Coast Guard and Bureau of Ocean Energy
Management, Regulation and Enforcement (BOEMRE) issued a report
(BOEMRE Report) regarding the causes of the 20 April 2010 Macondo
well blowout. The BOEMRE Report states that decisions by BP,
Halliburton and Transocean increased the risk or failed to fully consider or
mitigate the risk of a blowout on 20 April 2010. The BOEMRE Report also
states that BP, Transocean and Halliburton violated certain regulations
related to offshore drilling. In itself, the BOEMRE Report does not
constitute the initiation of enforcement proceedings relating to any
violation. On 12 October 2011, the U.S. Department of the Interior Bureau
of Safety and Environmental Enforcement issued to BPXP, Transocean,
and Halliburton Notification of Incidents of Noncompliance (INCs). The
notification issued to BPXP is for a number of alleged regulatory violations
concerning Macondo well operations. The Department of Interior has
indicated that this list of violations may be supplemented as additional
evidence is reviewed, and on 7 December 2011, the Bureau of Safety and
Environmental Enforcement issued to BPXP a second INC. This
notification was issued to BP for five alleged violations related to drilling
and abandonment operations at the Macondo well. BP has filed an
administrative appeal with respect to the first and second INCs. BP has
filed a joint stay of proceedings with the Department of Interior with
respect to both INCs.
On 18 October 2011, Cameron filed a petition for writ of mandamus with
US Court of Appeals for the Fifth Circuit seeking an order vacating the trial
plan for the 27 February 2012 trial and requiring that all claims against
Cameron in that proceeding be tried before a jury. On 26 December 2011,
the Court of Appeals denied the application for mandamus.
The State of Alabama has filed a lawsuit seeking damages for alleged
economic and environmental harms, including natural resource damages,
civil penalties under state law, declaratory and injunctive relief, and
punitive damages as a result of the Incident. The State of Louisiana has
filed a lawsuit to declare various BP entities (as well as other entities)
liable for removal costs and damages, including natural resource damages
under federal and state law, to recover civil penalties, attorney’s fees, and
response costs under state law, and to recover for alleged negligence,
nuisance, trespass, fraudulent concealment and negligent
misrepresentation of material facts regarding safety procedures and BP’s
(and other defendants’) ability to manage the oil spill, unjust enrichment
from economic and other damages to the State of Louisiana and its
citizens, and punitive damages. The Louisiana Department of
Environmental Quality has issued an administrative order seeking
environmental civil penalties and other relief under state law. On
23 September 2011, BP removed this matter to federal district court,
and it has been consolidated with the multi-district proceedings in
New Orleans.
District Attorneys of 11 parishes in the State of Louisiana have filed suits
under state wildlife statutes seeking penalties for damage to wildlife as a
result of the spill. On 10 December 2010, the Mississippi Department of
Environmental Quality issued a Complaint and Notice of Violation alleging
violations of several state environmental statutes.
On 14 November 2011, the judge in the federal multi-district litigation
proceeding in New Orleans granted in part BP’s motion to dismiss the
complaints filed by the States of Alabama and Louisiana. The judge’s
order dismissed the States’ claims brought under state law, including
claims for civil penalties and the State of Louisiana’s request for a
declaratory judgment under the Louisiana Oil Spill Prevention and
Response Act, holding that those claims were pre-empted by federal law.
It also dismissed the State of Louisiana’s claims of nuisance and trespass
under general maritime law. The judge’s order further held that the States
have stated claims for negligence and products liability under general
maritime law, that the States have sufficiently alleged presentment of
their claims under OPA 90, and that the States may seek punitive
damages under general maritime law. On 9 December 2011, the judge in
the federal multi-district litigation proceeding in New Orleans granted in
part BP’s motion to dismiss a master complaint brought on behalf of local
government entities. The judge’s order dismissed plaintiffs’ state law
claims and limited the types of maritime law claims plaintiffs may pursue,
but also held that the plaintiffs have sufficiently alleged presentment of
their claims under OPA 90 and that certain local government entity
claimants may seek punitive damages under general maritime law. The
judge did not, however, lift an earlier stay on the underlying
individual complaints raising those claims or otherwise apply his dismissal
of the master complaint to those individual complaints.
In January 2013, the States of Alabama, Mississippi and Florida formally
presented their claims to BP under OPA 90 for alleged losses including
economic losses and property damage as a result of the Gulf of Mexico oil
spill. BP is evaluating these claims. The State of Louisiana has also
asserted similar claims. The amounts claimed, certain of which include
punitive damages or other multipliers, are very substantial. However, BP
considers the methodologies used to calculate these claims to be
seriously flawed, not supported by the legislation and to substantially
overstate the claims. Claims have also been presented by various local
governments which are substantial in aggregate and more claims are
expected to be presented. The amounts alleged in the presentments for
State and Local government claims total over $34 billion. BP will defend
vigorously against these claims if adjudicated at trial.
On 9 December 2011 and 28 December 2011, the judge in the federal
multi-district litigation proceeding in New Orleans also granted BP’s
motions to dismiss complaints filed by the District Attorneys of 11
parishes in the State of Louisiana seeking penalties for damage to wildlife,
holding that those claims are pre-empted by the Clean Water Act. All 11 of
the District Attorneys of parishes in the State of Louisiana have now filed
notices of appeal. The State of Alabama’s attempt to intervene into the
case has been denied. Since May 2012, amicus briefs have been filed in
those appeals by the States of Alabama, Louisiana, and Mississippi. The
appeal is now fully briefed and was scheduled for oral argument on
5 March 2013.
On 3 March 2012, BP announced an agreement in principle with the
Plaintiffs’ Steering Committee (PSC) in the federal multi-district litigation
proceedings pending in the federal district court in New Orleans (MDL
2179) to settle the substantial majority of legitimate private economic and
property damages claims and exposure-based medical claims stemming
from the Incident. On 18 April 2012, BP and the PSC filed with that court
the Economic and Property Damages Settlement Agreement and the
Medical Benefits Class Action Settlement Agreement.
The Economic and Property Damages Settlement resolves certain
economic and property damage claims, and the Medical Benefits Class
Action Settlement resolves medical claims by response workers and
certain Gulf Coast residents. The Economic and Property Damages
Settlement includes a $2.3-billion BP commitment to help resolve
economic loss claims related to the Gulf seafood industry and a $57-
million fund to support continued advertising that promotes Gulf Coast
tourism. It also resolves property damage in certain areas along the Gulf
Coast, as well as claims for additional payments under certain Master
Vessel Charter Agreements entered into in the course of the Vessels of
Opportunity Program implemented as part of the response to the Incident.
The Economic and Property Damages Settlement does not include claims
made against BP by the DoJ or other federal agencies (including under the
Clean Water Act and for Natural Resource Damages under the Oil
Pollution Act) or by the states and local governments. Also excluded are
certain other claims against BP, such as securities and shareholder claims
pending in MDL 2185, and claims based solely on the deepwater drilling
moratorium and/or the related permitting process.
The Medical Benefits Class Action Settlement involves payments to
qualifying class members based on a matrix for certain Specified Physical
Conditions, as well as a 21-year Periodic Medical Consultation Programme
for qualifying class members. Although claims will not be paid until the
agreement’s Effective Date – i.e., the final approval of the Medical
Benefits Class Action Settlement and resolution of all appeals – class
members are permitted to file claim forms in advance of the Effective
Date to facilitate administration of the Medical Benefits Class Action
Settlement upon the Effective Date. It also provides that class members
claiming Later-Manifested Physical Conditions may pursue their claims
through a mediation/litigation process, but waive, among other things, the
right to seek punitive damages. Consistent with its commitment to the
Gulf, BP has also agreed as part of the Medical Benefits Class Action
Settlement to provide $105 million to the Gulf Region Health Outreach
Program to improve the availability, scope and quality of healthcare in
certain Gulf Coast communities. This healthcare outreach programme will
be available to, and is intended to benefit, class members and other
individuals in those communities.
166 Additional disclosures
BP Annual Report and Form 20-F 2012