BP Plc acted with gross negligence in setting off the biggest offshore oil spill in U.S. history, a federal judge ruled, handing down a long-awaited decision that may force the energy company to pay billions of dollars more for the 2010 Gulf of Mexico disaster.
U.S. District Judge Carl Barbier held a trial without a jury over who was at fault for the environmental catastrophe, which killed 11 people and spewed oil for almost three months into waters that touch the shores of five states. The case also included Transocean Ltd. and Halliburton Co., though the judge didn’t find them as responsible for the spill as BP.
“BP’s conduct was reckless,” Barbier wrote in a decision today in New Orleans federal court. “Transocean’s conduct was negligent. Halliburton’s conduct was negligent.”
Barbier apportioned fault at 67% for BP, 30% for Transocean and 3% for Halliburton. BP shares fell as much as 5.3% on the news.
The ruling marks a turning point in the legal morass surrounding the causes and impact of the disaster. Four years of debate and legal testimony have centered on who was at fault and how much blame each company should carry.
BP appeal
BP is “subject to enhanced penalties under the Clean Water Act,” because the discharge of oil was the result of its exploration unit’s gross negligence and willful misconduct, Barbier said. BP said it “strongly disagrees” with the decision and will challenge it before the U.S. Court of Appeals in New Orleans.
“BP believes that the finding that it was grossly negligent with respect to the accident and that its activities at the Macondo well amounted to willful misconduct is not supported by the evidence at trial,” the company said in an emailed statement. “The law is clear that proving gross negligence is a very high bar that was not met in this case.”
The coalition of plaintiffs included the federal government, five Gulf of Mexico states, banks, restaurants, fishermen and a host of others who have pursued redress for their losses. While today’s ruling provides a partial answer, appeals may mean it will be years before final penalties are settled.
BP, which may face fines of as much as $18 billion, has set aside $3.5 billion to cover those penalties. The company had taken a $43 billion charge to cover all the costs related to the spill, according to a July 29 earnings statement. The ultimate cost is “subject to significant uncertainty,” BP said.
Barbier has yet to rule on how much oil was spilled, a key factor in determining the extent of BP’s fines.
The decision nevertheless may expose BP to unspecified punitive damages for claimants who weren’t part of the $9.2 billion settlement the company reached with most non-government plaintiffs in 2012. The judge left that unclear in his ruling.
“Although BP’s conduct warrants the imposition of punitive damages under general maritime law, BP cannot be held liable for such damages under Fifth Circuit precedent,” he wrote, referring to the federal appellate jurisdiction that includes Louisiana.
In a footnote, however, Barbier said BP might be liable for punitive damages for other claims.
With only a ruling of negligence, Transocean escapes any such liability. Halliburton, which also won an earlier indemnity ruling, removed the threat of punitive damages by agreeing to a $1.1 billion settlement with most plaintiffs Sept. 2.
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