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The BP Deepwater Horizon Disaster: an Overview of Immediate and Long-Term Legal and Environmental Consequences

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The BP Deepwater Horizon Disaster: an Overview of Immediate and Long-Term Legal and Environmental Consequences The BP Deepwater Horizon Disaster: An Overview of Immediate and Long-Term Legal and Environmental Consequences W. Paul Andersson, Esq. Edward T. Hayes, Esq. ALFA INTERNATIONAL International Law Practice Group Seminar September, 2010--Paris, France Fleet Specifications The DEEPWATER HORIZON is a Reading & Bates Classification ABS Falcon RBS8D design semi-submersible drilling unit Flag Marshall Islands capable of operating in harsh environments and water Accommodation 130 berths depths up to 8,000 ft (2.438m). Helideck Rated for S61-N Helicopter Moonpool 21ft x 91ft Station Keeping Dynamically Positioned Max Drill Depth 30,000 ft / 9,144 m Max Water Depth 8,000 ft / 2,438 m Operating Conditions Significant Wave: 29 ft;@ 10.1 sec; Wind: 60 knots; Current: 3.5 knots Storm Conditions Significant Wave: 41 ft @ 15 sec; Wind: 103 knots; Current: 3.5 knots Rig Type 5th Generation Deepwater Design Reading & Bates Falcon RBS-8D Builder Hyundai Heavy Industries Shipyard, Ulsan, South Korea Year Built 2001 February, 2010 Drilling begins in the Macondo Prospect approximately 41 miles (66 km) southeast of Louisiana April 20, 2010 Explosion occurs, followed by fire and sinking of rig 126 Crew on board: 11 workers died, 4 critically injured, 111 workers rescued Steadily Increasing Flow of Oil Threatens Gulf Coast April 24 - BP reports oil leaking at rate of 1,000 barrels (160 cubic metres) per day April 28 - National Oceanic and Atmospheric Administration estimates oil leaking at rate of 5,000 barrels (790 cubic metres) per day April 30 - Oil first reaches land at Venice, Louisiana May 27 –Oil leaking at estimated rate of 12,000 to 19,000 barrels (1,900 to 3,000 cubic metres) per day June 10 – Oil leaking at estimated rate of 25,000 to 30,000 barrels (4,000 to 4,800 cubic metres) per day June 15 – Oil leaking at estimated rate of 35,000 to 60,000 barrels (5,600 and 9,500 cubic metres) July 15 – A cap is placed over the well, stopping the flow of oil for the first time August 2 – Final estimate of oil leak: 4.9 million barrels – Per barrel fine under US law: USD$1,100.00: potential BP fine USD$5,390,000,000.00 – Over 2 million gallons of chemical dispersant Corexit (banned in UK) used to dilute oil Largest Oil Spills - in millions of gallons 1. Kuwait (1991) 300mm 2. Gulf Coast Deepwater Horizon 205+mm 3. Mexico-Ixtoc (1979) 138mm 4. Trinidad (1979) 90mm 5. Uzbekistan (1994) 84mm 6. Persian Gulf (1983) 80mm 7. Angola (1991) 80mm 8. South Africa (1983) 79mm 9. France (1978) 69mm Notable Absence?? . 34. Exxon Valdez (1989) 11mm 9. Paris, France (1978) – 69mm gallons Amaco Cadiz tanker runs aground on Portsall Rocks near the coast of Brittany Largest oil spill of its kind to that date Oiled beach in Brittany View of BP oil slick transposed over Paris, France as of July 6, 2010 Fishing Closures (July 4, 2010) US System for Regulation of Large-Scale Marine Environmental Disasters Two primary statutory schemes and issues related to Deepwater Horizon: 1. Shipowner’s Limitation of Liability Act (1851) - 46 United States Code § 30501 et seq. - Pertains only to Personal Injury and Death Claims 2. Oil Pollution Act (1990) - 33 United States Code § 2701 et seq. - Pertains to Environmental Response and Economic Damage Claims Shipowner’s Limitation of Liability Act 46 USC 30501 et seq. • Enacted to promote maritime commerce by protecting shipowners from unlimited liability associated with large losses • Shipowner’s limitation laws date back to Middle Ages • First codified by King Louis XIV in Marine Ordinance of 1681 • English Parliament enacted first statute in 1734 relieving shipowners from liability for acts of master and crew to the extent of the value of the ship, its equipment, and freight • Early American courts did not recognize limitation and American shipowners experienced a competitive disadvantage to their English brethren US Shipowner’s Limitation of Liability • US law enacted in 1851 to limit liability of the vessel owner for personal injury or death claims to the value of the vessel and pending freight after the loss • Limitation is granted if the shipowner proves that the loss occurred without his privity or knowledge (Actual knowledge of events leading to loss) • Deepwater Horizon is a VESSEL under the terms of the Act (self-propelled) • May 13, 2010 – Transocean, owner and operator of Deepwater Horizon, files request in US District Court in Houston, Texas to limit liability under the statute to USD$27 million, the value of the rig sitting on the ocean floor – Value of rig prior to sinking was approx USD$650 million • US Liability Act widely viewed as anachronistic and inequitable in modern day with availability of marine insurance • Two separate bills pending in US Congress (S3478 and H.R. 5503) to retroactively repeal the Shipowner’s Limitation of Liability Act Oil Pollution Act 33 U.S.C. § 2701 et seq. • Prior to 1989, the US did not have comprehensive legislation regarding oil pollution and oil disasters • March 24, 1989: Exxon-Valdez disaster in Prince William Sound • 11 million gallons of oil are spilled (205 million in Deepwater Horizon) • No overriding federal rules and regulations regarding environmental response or payment of economic damages • Under then existing maritime law, recovery for economic damages limited to those who sustained property damage • No recovery for lost profits or economic losses unless oil damaged your property-Robins Dry Dock rule (275 U.S. 303 (1927)) • Exxon Valdez disaster highlighted the need for a federal coordinated environmental response and economic loss scheme Oil Pollution Act – Liability 33 USC §2701 et seq. • Establishes comprehensive scheme for reacting to and addressing large-scale oil related environmental disasters • BP Deepwater Horizon Disaster is first large-scale application of Oil Pollution Act • Strict liability statute that imposes liability upon the “Responsible Party” for environmental clean- up, remediation and economic losses • Responsible Party is generally defined as the owner of the vessel, oil well, etc. that is the source of the oil discharge • Federal Government establishes and names the Responsible Party • BP named responsible party in Deepwater Horizon incident • Environmental Removal Costs and Damages • Responsible Party liable for ALL removal costs and damages to natural resources, real property • Includes reimbursement to federal and state governments for their efforts • Economic Damages • Responsible Party liable for ALL Lost Profits and Loss of Earning Capacity for those who depend upon the natural resource, including lost taxes and revenues suffered by municipalities • Statutorily abrogates the Robins Dry Dock rule (allows downstream businesses to receive compensation Oil Pollution Act – Liability 33 USC §2701 et seq. • No punitive damages • Exxon-Valdez litigation lasted nearly 20 years over issue of punitive damages • Liability limited to the total of all environmental clean-up costs, plus $75,000,000 • Liability limit does not apply if the incident was proximately caused by • acts of gross negligence or willful misconduct, or • violation of Federal safety, construction, or operating regulation • BP conceded it has excess liability in Deepwater Horizon • Statute establishes a Claims Process to administer environmental and economic damage claims • Responsible Party administers the process and all claims must first be presented to Responsible Party before lawsuit • BP handled the claims process initially but under severe criticism for low payments, process turned over to Mr. Ken Feinberg (agent orange, 9/11, Virginia Tech) • BP established USD$20billion fund for Mr. Feinberg to administer Current Status of BP Deepwater Horizon • As of July 28, 2010 at least 300 federal lawsuits filed in 12 different states – Almost all name BP, Halliburton, Transocean, and Cameron as defendants • Examples of lawsuits: – Wrongful death claims by families of rig workers – Economic injury claims by fishermen, processors, docks, distributors, wholesalers – Personal injury claims by relief workers exposed to oil and dispersants – Shareholder suits against BP for gross negligence and decrease in share value – State and municipal pension funds with BP holdings claiming decreased value – Restaurants, Bars, Hotels, Condo Owners, Tourist Attractions, Bait and Tackle Shops • All lawsuits consolidated into one proceeding before one judge in New Orleans under rules of Multi District Litigation • Open question whether claims settled in BP claims process will require release of all parties that may have played a separate role in causing the accident Current Status of BP Deepwater Horizon & Federal Response • US federal government imposed a deepwater drilling moratorium to study the causes of the disaster – 80 percent of offshore oil production comes from deep water off Louisiana • President Obama has used disaster to emphasize need for comprehensive energy reform • American Clean Energy and Security Act of 2009 (ACES) – A cap-and-trade global warming reduction plan designed to reduce economy-wide greenhouse gas emissions, compared to 2005 levels – Requires 20 percent of electricity from renewable sources and increased energy efficiency by 2020 – Performance standards for new coal-fired power plants and increased research for nuclear energy • Current Status of ACES – Passed House with minimum 219 votes (H.R. 2454) – Stalled in Senate Committee on Environment and Public Works (S. 1733) EU System for Regulation of Large-Scale Marine Environmental Disasters • Environmental and economic issues
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