BP 2014 Annual Report Download - page 234

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 US, Anadarko,
and Transocean seeking early rulings regarding the liability of BPXP,
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
BPXP and Anadarko are responsible parties under OPA 90 with regard to
the subsurface discharge. The judge ruled that BPXP 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 BPXP and Anadarko are liable for civil
penalties under Section 311 of the Clean Water Act as owners of the
well. Anadarko, BPXP and the US each appealed to the US Court of
Appeals for the Fifth Circuit (the Fifth Circuit), and on 4 June 2014 the
Fifth Circuit unanimously affirmed the district court’s decision. On 21 July
2014, Anadarko and BPXP filed petitions requesting that all active judges
of the Fifth Circuit review the 4 June 2014 decision. On 9 January 2015,
the Fifth Circuit issued an order denying the petition for rehearing, on a
7-6 vote. Absent an extension, BPXP’s deadline for seeking US Supreme
Court review is 9 April 2015.
On 18 December 2012, Transocean filed a motion seeking an early ruling
that it is not liable in connection with claims for compensatory or punitive
damages, or claims for contribution, brought by private, state, or local
government entities and based on the subsurface discharge of oil.
Transocean’s motion has been fully briefed but remains pending.
Also on 18 December 2012, Transocean filed a motion seeking an early
ruling that it is not liable in connection with punitive damages claims
brought by members of the Economic and Property Damages Settlement
Class (for a description of the Economic and Property Damages
Settlement Agreement, see below). On 20 December 2012, Transocean
filed a motion seeking an early ruling that it is not liable in connection
with BP’s claims for reimbursement of payments made under the
Economic and Property Damages Settlement Agreement and BP’s
separate claims for spill-related damages, such as lost profits from the
Macondo well, which claims were assigned by BP to the Economic and
Property Damages Settlement Class. On 17 January 2013, Halliburton
filed motions seeking early rulings that it is not liable in connection with
punitive damages claims brought by members of the Economic and
Property Damages Settlement Class; that it is not liable in connection
with any contribution claim for punitive damages, whether asserted by
BP or by the Economic and Property Damages Settlement Class as BP’s
assignee; and that it is not liable in connection with claims assigned by
BP to the Economic and Property Damages Settlement Class.
Transocean’s and Halliburton’s motions have been fully briefed but
remain pending.
On 1 March 2013, Transocean sought the district 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 to assert a similar defence. On 4 March
2013, the court granted Transocean’s motion to file amended answers,
and it granted Halliburton’s motion the following day.
Trial phases
To address certain issues asserted in or relevant to the claims,
counterclaims, cross-claims, third-party claims, and comparative fault
defences raised in the DoJ Action and the Limitation Action, a Trial of
Liability, Limitation, Exoneration and Fault Allocation commenced in MDL
2179 on 25 February 2013. The presentation of evidence in Phase 1
addressed 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. After the
completion of post-trial briefing, BP moved for leave to supplement the
Phase 1 record to include Halliburton’s agreement to plead guilty to
destroying evidence relating to Halliburton’s internal examination of the
Incident and the US government’s press release announcing the
Halliburton plea agreement. The US government, the PSC and Halliburton
also submitted briefs addressing the implications of Halliburton’s plea
agreement. On 4 September 2014 the court granted BP’s motion in part,
supplementing the Phase 1 trial record with the Halliburton plea
agreement, the US press release, and certain other documents related to
Halliburton’s criminal plea. The court also found that the simulations at
issue in Halliburton’s criminal plea, if not deleted by Halliburton
employees, would have indicated that using 6 centralizers, as opposed to
21, would not have caused cement channeling in the Macondo well and
that Halliburton’s deletion of the simulations was done intentionally and
in bad faith.
On 4 September 2014, the court issued its Phase 1 Ruling. The court
found that BPXP, BPAPC, Transocean Holdings LLC, Transocean
Deepwater Inc., Transocean Offshore Deepwater Drilling Inc.
(Transocean Entities), and Halliburton are each liable under general
maritime law for the blowout, explosion, and oil spill from the Macondo
well. The court found that the conduct of BPXP and BPAPC was reckless,
and it apportioned to them 67% of the fault for the blowout, explosion,
and oil spill. The court found that the conduct of the Transocean Entities
was negligent and apportioned to them 30% of the fault for the blowout,
explosion, and oil spill. The court found that Halliburton’s conduct was
negligent and apportioned to it 3% of the fault for the blowout, explosion,
and oil spill.
The district court ruled that under Fifth Circuit precedent BPXP and
BPAPC cannot be liable for punitive damages under general maritime
law, but to the extent the standards of the First Circuit or Ninth Circuit
Courts of Appeals would apply to a particular claim, the court found that
BPXP would be liable for punitive damages under those rules.
With respect to the US’ claims against BPXP under the Clean Water Act,
the district court found that the discharge of oil was the result of BPXP’s
gross negligence and wilful misconduct and that BPXP is therefore
subject to enhanced civil penalties. The court further found that BPXP
was an ‘operator’ and ‘person in charge’ of the Macondo well and the
Deepwater Horizon vessel for the purposes of the Clean Water Act.
The district court did not find BP p.l.c. to be at fault in connection with
the blowout, explosion, and oil spill, and it ruled that BP p.l.c., Transocean
Ltd., and Triton Asset Leasing GmbH are not liable under general
maritime law.
The district court ruled that Transocean Entities are not entitled to limit
liability under the Limitation of Liability Act and that they are liable to the
US for removal costs under OPA 90.
In addition, the district court ruled that the indemnity and release clauses
in BP’s contracts with Halliburton and Transocean Entities are valid and
enforceable against BP and granted BP’s motion to supplement the
Phase 1 trial record with Halliburton’s agreement to plead guilty to
destroying evidence relating to Halliburton’s internal examination of the
Incident and the US government’s press release announcing the
Halliburton plea agreement.
On 2 October 2014, BPXP and BPAPC filed a motion with the district
court to amend the findings in the Phase 1 Ruling, to alter or amend the
judgment, or for a new trial on the grounds that the court’s allocation of
fault and findings of gross negligence and wilful misconduct relied upon
testimony which had been excluded from the evidence presented at the
Phase 1 trial and as to which BPXP and BPAPC did not have adequate
notice and opportunity to present evidence in rebuttal. The court denied
BPXP’s and BPAPC’s motion to amend to the Phase 1 Ruling on
13 November 2014. On 11 December 2014, BPXP and BPAPC filed a
notice of appeal of the Phase 1 Ruling to the Fifth Circuit, and
subsequently notices of appeal were also filed by the PSC, Transocean,
Halliburton and the State of Alabama.
230 BP Annual Report and Form 20-F 2014