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Driller Pleads Guilty in Gulf Disaster

Tuesday, February 19, 2013

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The world's largest offshore drilling company will pay $400 million in fines and penalties stemming from crimes in the 2010 Deepwater Horizon disaster that killed 11 workers, under an agreement accompanying the company's new guilty plea.

Transocean Deepwater Inc., based in Houston, TX, pleaded guilty Thursday (Feb. 14) to a violation of the Clean Water Act (CWA) for its illegal conduct leading to the accident and was sentenced to pay $400 million in criminal fines and penalties, Attorney General Eric Holder announced.

The company was also put on five years' probation, the maximum probation term allowed by law.

The guilty plea, previewed in January, is the second largest environmental crime settlement in U.S. history, after the $4.5 billion sentence imposed on BP Exploration and Production Inc. in the same case.

Transocean
Transocean

At BP's direction, Transocean's crews ignored danger signs before the disaster, authorities said.

A separate proposed civil consent decree that would impose a record $1 billion civil Clean Water Act penalty on Transocean is pending before a federal judge in Louisiana.

'Senseless Tragedy'

“Transocean’s guilty plea and sentencing are the latest steps in the department’s ongoing efforts to seek justice on behalf of the victims of the Deepwater Horizon disaster,” said Holder. “Most of the $400 million criminal recovery—one of the largest for an environmental crime in U.S. history—will go toward protecting, restoring and rebuilding the Gulf Coast region.”

Assistant Attorney General Lanny A. Breuer of the Justice Department’s Criminal Division called the Deepwater Horizon explosion "a senseless tragedy that could have been avoided."

"Eleven men died, and the Gulf’s waters, shorelines, communities and economies suffered enormous damage," said Breuer, who supervises a federal multiagency investigation and prosecution team known as the Deepwater Horizon Task Force.

"With today’s guilty plea, BP and Transocean have now both been held criminally accountable for their roles in this disaster.”

'Clear Indications' Ignored

Transocean pleaded guilty to an information, previously filed in federal court in New Orleans, charging the company with violating the CWA.

During Thurday's guilty plea proceedings, Transocean admitted that members of its crew onboard the Deepwater Horizon, acting at the direction of BP’s well site leaders (known as “company men"), were negligent in failing to investigate fully clear indications that the Macondo well was not secure and that oil and gas were flowing into the well, the Environmental Protection Agency reported in a release.

U.S. Coast Guard

The supervisor of the federal multi-agency Deepwater Horizon Task Force called the deadly April 20, 2010, explosion "a senseless tragedy that could have been avoided."

The plea was accepted and sentencing imposed by U.S. District Judge Jane Triche Milazzo of the Eastern District of Louisiana.

Restoration Efforts

During the proceeding, Milazzo found that the sentence appropriately reflected Transocean’s role in the disaster and that the criminal payments directed to the National Academy of Sciences and National Fish and Wildlife Foundation were appropriately designed to help remedy the harm to the Gulf of Mexico caused by Transocean’s actions, according to EPA.

Under the plea agreement, $150 million of the $400 million criminal recovery is dedicated to acquiring, restoring, preserving and conserving the marine and coastal environments, ecosystems and bird and wildlife habitat harmed by the months-long Deepwater Horizon oil spill. An additional $150 million will be used to fund improved oil spill prevention and response efforts in the Gulf through research, development, education and training.

Who's Liable?

BP PLC leased the Deepwater Horizon rig from Transocean to drill the Macondo well; the oil company's criminal and civil penalties have also run into the billions of dollars. The explosions and fire followed an "uncontrolled blowout" on the rig, according to court documents.

The issue of liability in the Deepwater Horizon has been a source of extensive litigation between BP and Transocean. The original 1998 drilling contract—normally kept confidential but released as part of the case litigation—shows that a BP entity (then known as Vastar Resources) hired a Transocean entity (then known as R&B Falcon Drilling Co.) as an independent contractor for the project.

Transocean
Transocean

Although the drilling contract assigned primary safety responsibility to Transocean, the contractor argued later that BP was "in the best position to mitigate or eliminate risks."

The contract specified that the contractor would "have the primary responsibility for the safety of all it operation." It also noted that the contractor would have its own safety manual and that when the contractor's and oil company's safety manuals conflicted, the contractor's manual "shall control."

Nevertheless, in an insurance-related lawsuit after the disaster, Transocean argued that BP had greater liability in the case.

"BP is significantly larger than any other Macondo contractor, and so are its rewards and its risks," Transocean argued in a 2011 motion in support of that claim. "BP controls the ownership and development of Macondo, and is in the best position to mitigate or eliminate risks. The Macondo contractors are smaller, and they accept proportionate risks."

The motion added, “BP’s promise to Transocean also expressly included indemnity for fines and penalties. Regarding environmental pollution, BP promised to indemnify Transocean for any and all pollution obligations (except those originating on or above the surface of the water), including any 'LOSS, DAMAGE, EXPENSE, CLAIM, FINE, PENALTY, DEMAND OR LIABILITY.' [emphasis in original].”

   

Tagged categories: BP; Business matters; Contracts; Fatalities; Insurance; Offshore; Oil and Gas

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