Tag Archives: Deepwater Horizon oil spill

Gross Negligence: the BP Approach to the Gulf Oil Spill

Gulf of Mexico disaster. image wikipedia

BP wants its money back — hundreds of millions of dollars of it — but a federal judge said Wednesday (Sept 24. 2014) that the oil giant must stand by the agreement it made with the companies it compensated for losses blamed on the 2010 Gulf oil spill.BP argued that a flawed funding formula enabled nearly 800 businesses to overestimate their spill-related claims.

One construction company hundreds of miles from the coast received $13.2 million, but deserved $4.8 million at most, BP said. Another company selling “animals and animal skins” was overpaid about $14 million, and about 50 others shouldn’t have been paid at all, the company said.  About 150 claimants should return a total of $185 million, and overpayments to the rest haven’t been calculated, attorney Kevin Downey argued.

U.S. District Judge Carl Barbier was not persuaded, thwarting BP’s latest attempt to control potential liabilities now approaching $50 billion.  The judge agreed weeks ago to change the compensation formula for any future payments, but ruled that a deal is a deal when it comes to the money BP has already paid out. Under that deal, claimants agreed not to sue, and BP agreed that no future court action could change their payments….

Barbier said he would rule later on the issue of compensation for cleanup workers whose chronic medical problems weren’t diagnosed until after the deal’s cutoff date of April 16, 2012. The settlement entitled cleanup workers with chronic conditions including rashes and breathing problems to receive up to $60,700 if the problems first surfaced within days of their cleanup work…

BP’s closing share price was $50.20 the day of the explosion, and fell to $22.80 in June 2010, before the well was capped. Shareholders returned after BP set aside $42 billion to cover its liabilities, reassured the financial damage was contained.  That’s no longer so clear: The judge’s ruling this month that BP showed gross negligence and willful misconduct added a new level of uncertainty around BP’s spill-related expenses, reducing its market value by $9 billion in a single day.,,BP’s total potential liabilities now include up to $18 billion in fines and penalties that could be imposed for violating federal pollution laws, and more than $27 billion BP says it has already paid to restore the coast and settle damage claims.

JANET MCCONNAUGHEY and JONATHAN FAHEY,Businesses Won’t Have to Return BP Spill, Associated Press, Sept. 24, 2014

See  also http://www.alphabetics.info/international/2012/09/12/bp-and-gross-negligence/

Halliburton Pleads Guilty to Destruction of Evidence in Deepwater Horizon

Halliburton

Halliburton Energy Services Inc. has agreed to plead guilty to destroying evidence in connection with the Deepwater Horizon disaster, the Department of Justice announced on July 25, 2013.. A criminal information charging Halliburton with one count of destruction of evidence was filed today in U.S. District Court in the Eastern District of Louisiana.

Halliburton has signed a cooperation and guilty plea agreement with the government in which Halliburton has agreed to plead guilty and admit its criminal conduct. As part of the plea agreement, Halliburton has further agreed, subject to the court’s approval, to pay the maximum-available statutory fine, to be subject to three years of probation and to continue its cooperation in the government’s ongoing criminal investigation.

According to court documents, on April 20, 2010, while stationed at the Macondo well site in the Gulf of Mexico, the Deepwater Horizon rig experienced an uncontrolled blowout and related explosions and fire, which resulted in the deaths of 11 rig workers and the largest oil spill in U.S. history. Following the blowout, Halliburton conducted its own review of various technical aspects of the well’s design and construction. On or about May 3, 2010, Halliburton established an internal working group to examine the Macondo well blowout, including whether the number of centralizers used on the final production casing could have contributed to the blowout. A production casing is a long, heavy metal pipe set across the area of the oil and natural gas reservoir. Centralizers are protruding metal collars affixed at various intervals on the outside of the casing. Use of centralizers can help keep the casing centered in the wellbore away from the surrounding walls as it is lowered and placed in the well. Centralization can be significant to the quality of subsequent cementing around the bottom of the casing. Prior to the blowout, Halliburton had recommended to BP the use of 21 centralizers in the Macondo well. BP opted to use six centralizers instead.

As detailed in the information, in connection with its own internal post-incident examination of the well, in or about May 2010, Halliburton, through its Cementing Technology Director, directed a Senior Program Manager for the Cement Product Line (Program Manager) to run two computer simulations of the Macondo well final cementing job using Halliburton’s Displace 3D simulation program to compare the impact of using six versus 21 centralizers. Displace 3D was a next-generation simulation program that was being developed to model fluid interfaces and their movement through the wellbore and annulus of a well. These simulations indicated that there was little difference between using six and 21 centralizers. Program Manager was directed to, and did, destroy these results.

In or about June 2010, similar evidence was also destroyed in a later incident. Halliburton’s Cementing Technology Director asked another, more experienced, employee (“Employee 1”) to run simulations again comparing six versus 21 centralizers. Employee 1 reached the same conclusion and, like Program Manager before him, was then directed to “get rid of” the simulations.

Efforts to forensically recover the original destroyed Displace 3D computer simulations during ensuing civil litigation and federal criminal investigation by the Deepwater Horizon Task Force were unsuccessful.  In agreeing to plead guilty, Halliburton has accepted criminal responsibility for destroying the aforementioned evidence.

Excerpt, Department of Justice, Halliburton Agrees to Plead Guilty to Destruction of Evidence in Connection with Deepwater Horizon Tragedy,July 25, 2013

Crying over Spilled Oil is Useful; BP Deepwater Horizon

An oil containment boom deployed by the U.S. Navy surrounds New Harbor Island, Louisiana.  Image from wikipedia

After the Deepwater Horizon oil rig exploded in 2010, killing 11 workers and spewing a lake of oil into the Gulf of Mexico, BP knew it would be punished severely. So far, the British oil firm has set aside $42 billion to pay fines, compensate victims and clean up the mess. Of this, some $36 billion has already been paid out or earmarked. America has also temporarily barred the company from bidding for federal contracts.

In all, BP has shelled out $14 billion to stop the spill and restore the coast to the way it was. It has paid out or earmarked $17.5 billion to compensate individuals and small businesses, plus another $4 billion to settle criminal charges with the Department of Justice. It has also set aside $3.5 billion to pay penalties for oil leaks under America’s Clean Water Act.  These have yet to be determined. A civil trial, set to begin on February 25th in New Orleans, will apportion blame for the accident, determine how much oil gushed out and apply financial penalties. The federal government is demanding $21 billion in compensation for spilt oil. To get that much, it must prove BP was “grossly negligent”. It must also persuade the court to accept its estimate of the size of the leak, rather than

As if that were not enough, BP’s annual results, released on February 5th, harboured another nasty surprise. Tucked away on page 42 were details of hefty new claims against the oil giant. Alabama, Mississippi, Florida and Louisiana are demanding $34 billion for economic losses and property damage. These mainly relate to tax revenues allegedly lost as a result of disruptions to businesses, says BP.  The oil giant knew that a bill was in the post: a three-year statute of limitations will soon expire. However, it was not expecting the bill to be so big. BP disputes the way the sum has been calculated and is ready to fight the claims in court. It reckons that the states will have a tough job substantiating their calculations of forgone taxes.

Both claims seem likely to be settled out of court…BP would far rather end the matter quickly and get on with its business. The uncertainty over the final bill is weighing down its share price. And its sheer size is daunting. If all the claims against it are upheld, BP’s total bill will amount to $90 billion or so. By way of comparison, Saddam Hussein’s Iraq was ordered to pay reparations of $52 billion ($88 billion in today’s money) for invading Kuwait.

One reason why a settlement has proved elusive is that the case is so complex. It involves three pieces of legislation and several layers of federal, state and local government with precious little co-ordination between them. For example, BP notes that 11 tiny Louisiana parishes have made a separate claim for damage to local wildlife. BP’s woes are not over.

The Deepwater Horizon disaster: Spills and bills, Economist, Feb. 9, 2013, at 66

How Much Oil Spills Cost? BP and Deepwater Horizon

BP and Anadarko Petroleum Company have reached an agreement to settle all claims between them related to the Deepwater Horizon accident…. The agreement is not an admission of liability by any party regarding the accident.  Under the settlement agreement, Anadarko will pay BP $4 billion in a single cash payment. BP will apply the payment to the $20 billion trust it established that is available to meet individual, business and government claims, as well as the cost of the natural resource damages. Anadarko will also transfer all of its 25 per cent interest in the MC252 lease to BP.  In addition, Anadarko will no longer pursue its allegations of gross negligence with respect to BP. Anadarko and BP have agreed to work cooperatively with respect to indemnified claims, and Anadarko has the opportunity for a 12.5 per cent participation in future recoveries from third parties or insurance proceeds cumulatively exceeding $1.5 billion, up to a total cap of $1 billion.  Finally, the parties have also agreed to mutual releases of claims against each other. BP has agreed to indemnify Anadarko for certain claims arising from the accident. However, BP’s indemnity excludes civil, criminal or administrative fines and penalties, claims for punitive damages, and certain other claims.

“This settlement represents a positive resolution of a significant uncertainty and it resolves the issues among all the leaseholders of the Macondo well,” said Bob Dudley, BP group chief executive. “There is clear progress with parties stepping forward to meet their obligations and help fund the economic and environmental restoration of the Gulf. It’s time for the contractors, including Transocean and Halliburton, to do the same.”  BP previously announced settlements with MOEX, which had a 10 per cent interest in the Macondo well, and Weatherford, which provided drilling equipment.

According to its public filings, BP has recorded a charge in excess of $40 billion for total estimated costs associated with the event. To date, BP has invoiced Anadarko an aggregate of $6.1 billion for what BP considers to be Anadarko’s 25-percent proportionate share of BP’s actual and near-term costs….Anadarko will record a $4.0 billion liability associated with this settlement in its third-quarter 2011 financials……

“Consistent with official investigations that found the accident was the result of multiple causes, involving multiple parties, BP is working to ensure that other parties, including Halliburton and Transocean, contribute appropriately,” says a BP press release. “Multiple official investigations, including those conducted by the Presidential Commission and the Marine Board of Investigation, found that conduct by those parties contributed to the accident. The issuance of regulatory violations last week to BP, Transocean and Halliburton by the U.S. Department of Interior demonstrates that the contractors responsible for well control and cementing, not just the operator, should be held accountable for their conduct.  From the outset, says BP, it has committed to paying all legitimate claims and fulfilling its obligations to the Gulf Coast communities under the Oil Pollution Act. BP has to date paid out more than $7 billion.

BP chief says agreement with Andarko resolves “a significant uncertainty”, http://www.marinelog.com, Oct. 21, 2011

See also http://www.restorethegulf.gov/