Restore the Mississipi River Delta

Analysis: Judge poses questions to better understand BP’s liability in Gulf oil disaster

By Whit Remer, Policy Analyst, Environmental Defense Fund

The National Wildlife Federation's David Muth speaks at a press event and rally for the 3-year memorial of the BP oil disaster.

Though Phase I of the BP trial may be complete, both parties have a mountain of follow-up work, analysis, and then preparation to do for Phase II, which starts in September.  Phase I of the trial covered the events leading up to the spill while Phase II will look at the explosion and response. When both phases are complete and after weighing all the evidence, Judge Carl Barbier will apportion liability between BP and its subcontractors, Halliburton and Transocean. Days after the conclusion of Phase I, Judge Barbier ordered the parties to submit post-trial briefs to help clarify some difficult questions in the case. The order, issued on April 24, asked the parties to address seven important questions before the court.

In this two-part blog, we will provide some commentary on those questions, which could have profound implications on BP’s liability. Of particular interest is whether the company will be found grossly negligent, which could quadruple the amount of Clean Water Act fines assessed in the case and substantially increase the amount of money subject to the RESTORE Act.

In this post, we will walk through the first three questions. Check back next week for our remaining commentary.

Question 1: What is the standard for finding “gross negligence” or “willful misconduct” under the Clean Water Act and Oil Pollution Act?

Our commentary: In tort law, degrees of negligence are associated with how careless a person or company was when it committed the wrongdoing. On one side of the spectrum, there is ordinary negligence. On the other side is gross negligence or willful misconduct. The more careless the mistake is, the higher the degree of negligence. In BP’s case, that could mean the difference between $4.5 and $17.6 billion.

Judge Barbier is interested in the standards of negligence under two important environmental laws, the Clean Water Act (CWA) and Oil Pollution Act (OPA). The laws have vastly different consequences depending on the degree of negligence (to the tune of tens of billions of dollars), hence Judge Barbier’s request for clarity. There is considerable room for debate, both in fact and in law on this issue, so each side will need to present crystal clear facts and apply helpful case law to persuade the court of their view.

Question 2: What is the standard for a finding of punitive damages under general maritime law? Is this a different standard than under the Clean Water Act or Oil Pollution Act, and if so, how?

Our commentary: There are two things to consider in this question: punitive damages and maritime law. Under the Clean Water Act, BP and other responsible parties will have to pay civil fines for breaking the law and polluting waters of the United States. The fines are based on the level of negligence and amount of oil spilled. Punitive damages are different in that they are imposed to deter conduct by others in similar situations and often give a jury or judge much more leeway in imposing.

In the 1989 Exxon Valdez spill, a jury imposed $5 billion in punitive damages against the company (this was on top of $7 billion in fines, penalties and settlements; $2.5 billion in cleanup costs; and $500 million in outstanding payments). The punitive damages were eventually reduced to $507.5 million after appealing the judgment all the way to the Supreme Court, but not without incurring significant legal costs and shaking up the company.  BP is understandably wondering, “Could the judge find both gross negligence and impose punitive damages?”

Also relevant to this question is the concept of “maritime law.” Maritime law governs legal disputes that occur offshore and varies, often significantly in substance and spirit, from common law actions on land. Early on in the BP case, Transocean attempted to limit their financial liability to $25 million under an 1851 maritime law.  That attempt was apparently unsuccessful considering the company agreed to a $1billion settlement with the US Department of Justice in January.

Question 3: In order to find that a party acted with gross negligence is it necessary to find that there be at least one single act or omission that equates to gross negligence, or can such a finding be based upon an accumulation or a series of negligence acts or omissions?

Our commentary: There’s a lot packed into this question, but the case law on factors that determine gross negligence is thin, prompting a difficult decision for the judge. It would seem that the clear-cut way for the government to prevail on this issue would be to find one, big mistake that amounts to gross negligence. However, reviewing briefs the government filed and looking back at how they presented their case at trial, it appears they are using the “bunch of mistakes add up to one huge grossly negligent mistake” approach.

Check back next week for our commentary on the remaining questions.

BP oil spill trial: Week two

By Whit Remer, Policy Analyst, Environmental Defense Fund

As week three of the BP trial continues, observers are seeing trends emerge from inside the courtroom. The plaintiffs are focusing on two primary causes of the massive 2010 Deepwater Horizon drilling rig explosion and ensuing oil spill: lack of adequate safety measures and aggressive cost cutting by BP. The defendant oil companies, namely BP, contend that while mistakes were made, their liability is offset by the negligence of subcontractors who were also working on the risky drilling venture. By diffusing responsibility, BP is attempting to spread the blame wide enough so as to avoid a finding of gross negligence for their conduct. If BP is found liable of gross negligence, their civil Clean Water Act fines could total more than $17 billion. Under the RESTORE Act, 80 percent of these fines will be used for Gulf Coast restoration.

Activists gather outside the courthouse in New Orleans (Feb. 25, 2013).

During the first two weeks of trial, expert testimony focused on BP’s aggressive drilling practices, insufficient safety plans and their negligent decisions made both on the rig and in Houston. Dr. Alan Huffman testified that the depth, complexity, pressure and heat of the BP Macondo well pushed the edges of modern technology. This type of drilling operation demanded the most rigorous and stringent safety protocols aboard any modern drilling rig. Instead, BP's safety procedures were vague or not enforced, and the company ignored several critical federal safety regulations. Testimony provided a sequence of events and mistakes that ultimately led to the disaster, including underreporting safety logs to the government and not responding appropriately to potentially lifesaving safety alarms that sounded on the rig in the hour prior to the explosion.

The plaintiffs are also focusing on aggressive cost cutting at BP as an underlying cause to the explosion. Experts testified that cost cutting was a “root cause” of the explosion, because BP senior officials demanded an aggressive drilling schedule while cutting operational staff. Another prime example of cutting corners to save money was BP’s decision to use recycled drilling cement to seal the well. The unsuccessful cement job and lack of “spacers” in the riser pipe ultimately caused oil to begin flowing. In the coming days and weeks, the plaintiffs will likely continue to highlight that this culture of cost cutting, particularly in BP’s Gulf of Mexico operations, came at the expense of safety.

Looking forward, the Gulf Coast is eagerly anticipating a fair and robust resolution to the case. The deteriorating gulf ecosystem can’t afford to wait much longer. Litigation is a long and arduous process that could drag on for years, or even decades. We need a court-approved fair and just verdict soon so the gulf can begin restoring its natural environment, which provides so many resources on which the Gulf Coast’s economy relies.

Plaintiffs could rest their case as early as next week, at which point BP would begin calling some of their 15 expert witnesses. The trial was initially expected to last three months, but Judge Carl Barbier recently announced that he would like to wrap up by the end of April. Stay tuned for future updates on the trial.