The BP Blowout: Legal Claims and Questions

JURIST Guest Columnist Itzchak Kornfeld of the Faculty of Law at The Hebrew University in Jerusalem says the blowout at BP's Deepwater Horizon Well in the Gulf of Mexico will lead to a plethora of legal claims...

The tragic blowout at BP's Deepwater Horizon well will likely cause damage in excess of $8 billion. An ecological disaster faces the Gulf Coast. In a 52-page filing with the Minerals Management Service, the unit in the US Interior Department that leases offshore tracts for drilling, BP insisted that such a catastrophe could never happen. Now the company says that this incident is 'unprecedented'.

The disaster will cause untold devastation to birds, fisheries, oyster reefs, crab and shrimp nurseries, beaches, as well as tens of thousands of small businesses. It will likely also cause a tectonic shift in the tone of the "drill baby drill" crowd and the policies of the federal and state governments. Unfortunately, the story of the eleven men killed in the explosion of the rig has been subsumed by the environmental tragedy. And on Sunday, May 16, 2010 marine scientists working on board the research vessel Pelican found three enormous plumes of oil in the deep waters of the Gulf of Mexico. Some of these plumes are more than 10 miles long and 300 feet deep and are moving towards the southern Florida coastline.

Lawyers, as is true following any catastrophe, will be called upon to fix the post-cleanup mess - via litigation and legislation. What causes of action will the lawyers who will represent aggrieved businesses and individuals employ? In this article I list some of the common claims that will most likely be employed. And as a former Texaco geologist I will pose two questions.

A number of class action law suits have already been filed. On April 30 an action was filed in the US District Court for the Northern District of Florida on behalf of seafood wholesalers, fishermen, seafood processors, charter boat operators and rental condominium owners, who are seeking damages sounding in tort and strict liability. Two commercial shrimpers have meanwhile filed an action in Mississippi federal court seeking $5 million in damages based on claims that the oil spill could destroy their livelihoods. In Louisiana, lawyers have proposed class actions in the Eastern District of Louisiana, located in New Orleans, on behalf of fishing companies who assert that they are and will suffer pecuniary injuries from the ongoing spill.

Other suits are inevitable. The first foreseeable cause of action will be the wrongful death suits on behalf of the dead workers. A second may be filed under the Occupational Safety and Health Act ("OSHA"), 29 U.S.C. s.651 et seq., on behalf of current workers who will allege that their work place was not safe. A third cause of action will doubtless be filed pursuant to the post-Exxon Valdez Oil Pollution Act ("OPA") of 1990, 33 U.S.C. ss.2701ff, et seq.

OPA extended the former limits on liability, and there is a special twist for "offshore facilities," such as BP's well. Pursuant to 33 U.S.C. s.2704. Limits on Liability, subsection (a) general rule, provides that

[e]xcept as otherwise provided in this section, the total of the liability of a responsible party under section 1002 [33 U.S.C. s.2702] and any removal costs incurred by, or on behalf of, the responsible party, with respect to each incident shall not exceed--
. . . (3) for an offshore facility except a deepwater port, the total of all removal costs plus $75,000,000.
As the operator of the rig, BP is the responsible party here. Therefore, it will be on the hook to the United States for all of the cleanup costs - a very broad scope of action - plus $75 million on top of cleanup costs. Indeed, BP plc's CEO, Tony Hayward has promised that his company's compensation payouts to people affected by the ongoing oil spill in the Gulf of Mexico won't be limited by the $75 million legal cap on such liabilities. Hayward was quoted in a Wall Street Journal article dated May 17, 2010, as having asserted the following in a letter to Homeland Security Secretary Janet Napolitano and Interior Secretary Ken Salazar: "We believe claims related to this event will exceed the limit. We are prepared to pay above $75 million on these claims and we will not seek reimbursement from the U.S. government or the Oil Spill Liability Trust Fund."

The United States will also seek recovery for damage to natural resources. OPA's Title I, s.1006, provides that "Federal trustees shall assess natural resource damages for natural resources under their trusteeship. Federal trustees may, upon request from a State or Indian tribe, assess damages to natural resources for them as well. Trustees shall develop and implement a plan for the restoration, rehabilitation, replacement, or acquisition of the equivalent of natural resources under their trusteeship." If the oil slick or the cleanup operation interferes or impedes marine shipping, a number of marine statutes may be employed against BP and the other defendants.

Suits sounding in negligence will certainly abound. They will be filed against BP and the rig's owner, Transocean - whose rig measured 396' long by 256' wide and operated at water depths up to 8,000' deep, and up to a maximum drilling depth of 30,000'. The rig was built in 2001 by Hyundai Heavy Industries, and leased to BP through September 2013. Hyundai may also face claims for product defects. In addition, suits sounding in negligence and possibly strict liability will be filed against Cameron International Corp. due to a hydraulic leak and a failed battery that most likely prevented the blowout preventer that Cameron designed and built from working as designed. Negligence actions will likely also be filed against Halliburton, which is said to have had problems with cementing the hole - cementing is a procedure used when drilling oil and natural gas wells in order to prevent oil and gas from leaking or escaping out of the drilling hole, by filling the gaps between the casing, the pipe in which the entire drill stem and bit circulate, as the drilling operation progresses. Halliburton's cementing operation procedure is coming under scrutiny as a possible cause of the explosion on the Deepwater Horizon rig.

According to the Wall Street Journal, "regulators have previously identified problems in the cementing process as a leading cause of well blowouts, in which oil and natural gas surge out of a well with explosive force. When cement develops cracks or doesn't set properly, oil and gas can escape, ultimately flowing out of control. The gas is highly combustible and prone to ignite, as it appears to have done aboard the Deepwater Horizon." BP will also face negligence actions because it failed to install remote-control or acoustically-activated shut-off valves, designed in case of emergencies, e.g., loss of pressure or the rig sinking. Norway and Brazil require them on all offshore rigs. However, oil companies persuaded U.S. regulators that such backup devices, which cost $500,000, were an unnecessary expense.

Negligence claims have already be filed and will certainly continue to be filed by fishermen, crab, oyster and shrimp processing facilities, hotels on the beaches, charter operators, and many others. Moreover, if plaintiffs can demonstrate that the rig operations were inherently dangerous they will file strict liability causes of action. Robert Kennedy, Jr., one of the lawyers who already has filed a class action suit, recently stated on the Larry King Show that BP's permit allowed it to drill to 18,000' but in fact the well was drilled deeper, approaching 25,000'. There will surely be additional claims for equitable remedies.

Concomitantly, given BP's dubious safety record, including the leaks in its Alaskan pipeline, an explosion at its Texas City refinery and a whistleblower's suit, BP may be found liable for punitive damages. In Abbott v. Salazar, 4:10-cv-01759, (S.D. Tex.), plaintiffs have requested that the court issues an order requiring BP to shut down its Atlantis platform - which is situated in the Gulf of Mexico and is capable of producing 200,000 barrels of oil and 180 million cubic feet of gas daily - until the company can prove that the system, one of the Gulf's largest, was built according to engineer-certified designs and is operating safely. Ken Abbott, who was in charge of BPs documents regarding the Atlantis project supplied documents to an environmental goup. Some of these written by Barry Duff, then an Atlantis project manager in BP's Houston operations headquarters, said in an Aug. 15, 2008, message that partially complete and unapproved design specs had been provided to platform operators in violation of federal law and the company's own safety policies. This, Duff wrote, "could lead to catastrophic operator errors due to their assuming the drawing is correct," and that "there are hundreds if not thousands of subsea documents that have never been finalized, yet the facilities have been turned over" to operators who rely on the design specs to safely operate Atlantis, he said.

The MMS and the Interior Department may also face suits for violating the National Environmental Policy Act ("NEPA"), 42 USC § 4321, which, provides in 42 USC § 4332 that

(2) all agencies of the Federal Government shall . . . (C) include in every recommendation or report on proposals for legislation and other major Federal actions significantly affecting the quality of the human environment, a detailed statement by the responsible official on -- (i) the environmental impact of the proposed action, (ii) any adverse environmental effects which cannot be avoided should the proposal be implemented, (iii) alternatives to the proposed action...
MMS' activities in leasing the tract to BP and its partners as well as permitting the well triggered the requirement for the Agency to prepare an Environmental Impact Statement ("EIS"). The EIS must contain a worst case scenario and alternatives. Current reports suggest that these two factors were not addressed at all. If true, the EIS was flawed and violated NEPA's non-delegable and compulsory mandate.

Finally, the following questions should be answered. Why did Transocean apparently keep rescued workers on the dock for up to twenty hours following their arrival there without allowing them to contact their families? And why did no one, including the news media, address the common sense possibility of blowing up the well so that it would implode in on itself and seal the hole?


Itzchak Kornfeld is a researcher at the Hebrew University of Jerusalem Faculty of Law. His e-mail is kornfeld.itzchak@mail.huji.ac.il

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