THE DEEPWATER HORIZON: WHO IS RESPONSIBLE? By: Anya Perrilloux. Admiralty Law. November 10, 2012

Transcription

1 THE DEEPWATER HORIZON: WHO IS RESPONSIBLE? By: Anya Perrilloux Admiralty Law November 10, 2012

2 THE DEEPWATER HORIZON: WHO IS RESPONSIBLE? I. INTRODUCTION On April 20, 2010, an explosion and fire erupted abroad the Deepwater Horizon offshore drilling rig in the Gulf of Mexico, instigating a series of catastrophic events. 1 The Deepwater Horizon was located approximately 130 miles southeast of New Orleans and 50 miles from the Mississippi River s delta. 2 This calamitous incident resulted in the drilling rig sinking approximately 5,000 feet, eleven of the 126 workers being killed, dozens of injuries occurring, and millions of gallons of crude oil gushing from the rig s site from the date of the explosion until the leaking well was capped on July 15, The Deepwater Horizon s oil spill was the largest cataclysmic oil spill event in United States history. Oil was reported to have come ashore the coasts of Louisiana, Florida, Mississippi, Alabama, and Texas. 4 This impacted the lives of tens of thousands of Americans not only living near the Gulf of Mexico but also 1 In re: Oil Spill by the Oil Rig Deepwater Horizon in the Gulf of Mexico on April 20, 2010, 731 F.Supp.2d 1352, MDL No. 2179, page 2 2 In re: Oil Spill by the Oil Rig Deepwater Horizon in the Gulf of Mexico on April 20, 2010, 731 F.Supp.2d 1352, MDL No. 2179, page 2 3 Id. 4 In re: Oil Spill by the Oil Rig Deepwater Horizon in the Gulf of Mexico on April 20, 2010, 731 F.Supp.2d 1352, MDL No. 2179, page 2

3 many others, eviscerating the trawling and tourism industries along southeastern shores of the United States. 5 II. DISCUSSION A. Oil Pollution Act Under the Oil Pollution Act ( OPA ), responsible parties are strictly liable for removal costs and damages resulting from the discharge of oil. 6 OPA defines liable and liability as the standard of liability that obtains this title under Section Under Section 311, liability has been determined repeatedly to be strict, joint, and several. 8 Owner or operator is used in 33 U.S.C. (c)(3) to assign responsibility, not responsible party. 9 Section 1004(c)(3) of OPA states: Notwithstanding the limitations established under subsection (a) of this section and the defenses of Section 2703 of this title, all removal costs incurred by the United States Government or any state or local official or agency in connection with a discharge or substantial threat of a discharge of oil from any Outer Continental Shelf facility or vessel carrying oil as cargo from such a facility shall be borne by the 10 owner or operator of such facility or vessel. 5 In re: Oil Spill by the Oil Rig Deepwater Horizon in the Gulf of Mexico on April 20, 2010, 731 F.Supp.2d 1352, MDL No. 2179, page 2 6 In re: Oil Spill by the Oil Rig Deepwater Horizon in the Gulf of Mexico on April 20, 2010, 844 F.Supp.2d In re: Oil Spill by the Oil Rig Deepwater Horizon in the Gulf of Mexico on April 20, 2010, 844 F.Supp.2d 746 (EDLA) 8/22/12), at In re: Oil Spill by the Oil Rig Deepwater Horizon in the Gulf of Mexico on April 20, 2010, 844 F.Supp.2d 746 (EDLA) 8/22/12), at In re: Oil Spill by the Oil Rig Deepwater Horizon in the Gulf of Mexico on April 20, 2010, 844 F.Supp.2d 746 (EDLA) 8/22/12), at In re: Oil Spill by the Oil Rig Deepwater Horizon in the Gulf of Mexico on April 20, 2010, 844 F.Supp.2d 746 (EDLA) 8/22/12), at 753.

4 Moreover, according to Section 1002(a) each responsible party for a vessel or a facility from which oil is discharged into or upon the navigable waters or adjoining shorelines or the exclusive economic zone is liable for the removal costs and damages specified in subsection (b) of this section that result from such incident. 33 U.S.C. 2702(a) provides information concerning a party set out to be a responsible party in OPA s definition section, Section 1001: Responsible party means the following: (A) Vessel In the case of vessel, any person owning, operating, or demise chartering the vessel (C) Offshore facilities In the case of an offshore facility, the lessee or permittee of the area in which the facility is located. 11 Furthermore, according to 33 U.S.C. 2701(32), Vessel means every description to watercraft or other artificial contrivance used, or capable of being used, as a means of transportation on water, other than a public vessel. 12 Offshore facility means any facility of any kind located in, on, or under any of the navigable waters of the United States other than a vessel or a public vessel. 13 Furthermore, facility, as used to define offshore facility means any structure, group of structures, equipment, or device (other than a vessel) which is used for one or more of the following purposes: exploring for, drilling for, producing, storing, handling, transferring, processing, or transporting oil 33 U.S.C. 2701(9) In re: Oil Spill by the Oil Rig Deepwater Horizon in the Gulf of Mexico on April 20, 2010, 844 F.Supp.2d In re: Oil Spill by the Oil Rig Deepwater Horizon in the Gulf of Mexico on April 20, 2010, 844 F.Supp.2d In re: Oil Spill by the Oil Rig Deepwater Horizon in the Gulf of Mexico on April 20, 2010, 844 F.Supp.2d In re: Oil Spill by the Oil Rig Deepwater Horizon in the Gulf of Mexico on April 20, 2010, 844 F.Supp.2d 746

5 Thus, when oil discharges from a vessel, the responsible party is the owner, operator, or demise charter of the vessel. When oil discharges from an offshore facility, the responsible party is the lessee or permittee of the area in which the facility is located. 15 In terms of the mobile offshore drilling unit ( MODU ), the responsible party is determined by how the MODU was used at the time of the incident. Under OPA, a MODU is a vessel (other than a self-evacuating lift vessel) capable of use as an offshore facility. 16 When the MODU is not used as an offshore facility, it is treated as a vessel and the owner/operator is responsible. 17 Thus, the lessee is the responsible party when the MODU is used as an offshore facility. 18 B. General Background the Instant Case Seventy-seven actions were instituted in various federal district courts as a result of the Deepwater Horizon explosion, which included claims of personal injury, wrongful death, and some arising under the OPA. 19 Additionally, more than 200 tag-along actions were incorporated, added, or noticed in connection with 15 In re: Oil Spill by the Oil Rig Deepwater Horizon in the Gulf of Mexico on April 20, 2010, 844 F.Supp.2d U.S.C. 2701(18); see also In re: Oil Spill by the Oil Rig Deepwater Horizon in the Gulf of Mexico on April 20, 2010, 844 F.Supp.2d In re: Oil Spill by the Oil Rig Deepwater Horizon in the Gulf of Mexico on April 20, 2010, 844 F.Supp.2d In re: Oil Spill by the Oil Rig Deepwater Horizon in the Gulf of Mexico on April 20, 2010, 844 F.Supp.2d Case 2:10-md CJB-SS; Document 1; In re: Oil Spill by the Oil Rig Deepwater Horizon in the Gulf of Mexico

6 said explosion. 20 Of the 77 constituent actions, 31 were from the Eastern District of Louisiana, 23 from the Southern District of Alabama, ten from the Northern District of Florida, eight from the Southern District of Mississippi, two from the Western District of Louisiana, two from the Southern District of Texas, and one from the Northern District of Alabama. 21 Four motions that sought to consolidate the constituent and tag-along pretrial proceedings were filed, resulting in mixed feelings regarding centralization. 22 Some responding parties opposed centralization while others varied with respect to which district court would be the apposite transferee court. 23 Although most plaintiffs within the Eastern District of Louisiana ( EDLA ) moved to centralize all actions in EDLA, one plaintiff within the EDLA moved for centralization in the Southern District of Texas. 24 The plaintiffs opposing EDLA argued in favor not only of all other districts where the 77 constituent actions were filed but also the District of South Carolina. 25 Other plaintiffs argued the Judicial Panel on Multidistrict Litigation ( JPML or the Panel ) should divide the docket 20 Case 2:10-md CJB-SS; Document 1; In re: Oil Spill by the Oil Rig Deepwater Horizon in the Gulf of Mexico 21 Case 2:10-md CJB-SS; Document 1; In re: Oil Spill by the Oil Rig Deepwater Horizon in the Gulf of Mexico 22 Id. 23 Id. 24 Case 2:10-md CJB-SS; Document 1; In re: Oil Spill by the Oil Rig Deepwater Horizon in the Gulf of Mexico 25 Case 2:10-md CJB-SS; Document 1; In re: Oil Spill by the Oil Rig Deepwater Horizon in the Gulf of Mexico

7 among three districts. 26 A few plaintiffs argued that a Florida judge should be appointed to ride circuit amid many convoluted sections. 27 A small number of plaintiffs argued that Judge Shira Ann Scheindlin of the Southern District of New York should be assigned by designation to the EDLA docket, overseeing the centralization. 28 The defendants that favored centralization, which included BP Exploration and Production, Inc. ( BP ) preferred the Southern District of Texas as the transferee court. 29 Arguments were presented by parties and nonparties. Many nonparties that favored the Eastern District of Louisiana as the centralized transferee court filed amicus curiae briefs. 30 Such nonparties included the United States of America, the State of Louisiana, and the Board of Commissioners of the Port of New Orleans. 31 The JPML further held that the transferee judge would be Judge Carl J. Barbier. 32 The Panel reasoned that Judge Barbier had considerable experience 26 Case 2:10-md CJB-SS; Document 1; In re: Oil Spill by the Oil Rig Deepwater Horizon in the Gulf of Mexico 27 Case 2:10-md CJB-SS; Document 1; In re: Oil Spill by the Oil Rig Deepwater Horizon in the Gulf of Mexico 28 Case 2:10-md CJB-SS; Document 1; In re: Oil Spill by the Oil Rig Deepwater Horizon in the Gulf of Mexico 29 Case 2:10-md CJB-SS; Document 1; In re: Oil Spill by the Oil Rig Deepwater Horizon in the Gulf of Mexico 30 Id. 31 Case 2:10-md CJB-SS; Document 1; In re: Oil Spill by the Oil Rig Deepwater Horizon in the Gulf of Mexico 32 In re: Oil Spill by the Oil Rig Deepwater Horizon in the Gulf of Mexico on April 20, 2010, 731 F.Supp.2d 1352 (8/10/10).

8 with multidistrict litigation. Moreover, Judge Barbier actively had been managing dozens of cases on the docket. The JPML held that the Eastern District of Louisiana was the most appropriate transferee district for the copious actions pretrial proceedings, ordering the transfer of more than 3,000 cases to the Eastern District of Louisiana be consolidated into In re: Deepwater Horizon Incident Litig., MDL Doc. No The JPML reasoned that the Eastern District of Louisiana was nearest to any topographical and psychosomatic derivation in the resulting litigation. 34 Each action undisputedly shared factual issues regarding reasons for the Deepwater Horizon s fire and explosion and each defendant s role in it. 35 Moreover, centralization would eliminate duplicate discovery, prevent inconsistent pretrial rulings, and conserve each party, counsel, and judiciary s resources. 36 Centralization would facilitate a closer coordination of BP s compensation fund, be more convenient to all involved, and better promote justice. 37 Furthermore, the Panel reasoned that, although the three constituent personal injury and wrongful death actions will require some individualized discovery, they 33 Id. 34 Id. 35 In re: Oil Spill by the Oil Rig Deepwater Horizon in the Gulf of Mexico on April 20, 2010, 731 F.Supp.2d 1352 (8/10/10). 36 In re: Oil Spill by the Oil Rig Deepwater Horizon in the Gulf of Mexico on April 20, 2010, 731 F.Supp.2d 1352 (8/10/10), at In re: Oil Spill by the Oil Rig Deepwater Horizon in the Gulf of Mexico on April 20, 2010, 731 F.Supp.2d 1352 (8/10/10), at 1354.

9 overlap factually with the other actions. 38 The three personal injury and wrongful death actions may receive other pretrial techniques as required to address the differences. 39 Likewise, the Panel held that it would not separate the OPA claims, as it found no strong reasons to separate OPA claims. 40 The Panel reasoned that separating the OPA claims only would complicate matters. 41 Additionally, failing to include OPA claims would raise the probability of having numerous fickle rulings. 42 III. THE INTERPLAY OF THE PARTIES ROLES AND THE LEGAL BASIS FOR POTENTIAL RESPONSIBILITY Defendant parties to the litigation included entities of BP, Anadarko, Transocean, and Halliburton. Entities of Transocean included, to wit: Transocean Deepwater, Inc.; Transocean Offshore Deepwater Drilling, Inc.; Transocean Holdings, LLC; and Triton Asset Leasing GmbH. Entities of BP included, to wit: BP, PLC; BP America; BP Products North America, Inc.; and BP Exploration and 38 In re: Oil Spill by the Oil Rig Deepwater Horizon in the Gulf of Mexico on April 20, 2010, 731 F.Supp.2d 1352 (8/10/10), at In re: Oil Spill by the Oil Rig Deepwater Horizon in the Gulf of Mexico on April 20, 2010, 731 F.Supp.2d 1352 (8/10/10), at In re: Oil Spill by the Oil Rig Deepwater Horizon in the Gulf of Mexico on April 20, 2010, 731 F.Supp.2d 1352 (8/10/10), at In re: Oil Spill by the Oil Rig Deepwater Horizon in the Gulf of Mexico on April 20, 2010, 731 F.Supp.2d 1352 (8/10/10), at In re: Oil Spill by the Oil Rig Deepwater Horizon in the Gulf of Mexico on April 20, 2010, 731 F.Supp.2d 1352 (8/10/10), at 1355.

10 Production, Inc. However, two of the responsible parties, Transocean and Halliburton, were not released under payment pursuant to the settlement agreement. 43 One or more of the Transocean entities owned and operated the mobile offshore drilling unit called the Deepwater Horizon, which was engaged in drilling activities between February and April 2010 on the Macondo Well, an exploratory well on Mississippi Canyon (MC 252) on the Outer Continental Shelf. 44 BP and Anadarko were co-owners of the Macondo Well, and co-lessees of Block 252, Mississippi Canyon on the Outer Continental Shelf. 45 The Deepwater Horizon was preparing to temporarily abandon the well when a blowout of the well occurred on the date of the explosion, resulting in the explosion, fire, and sinking of the Deepwater Horizon into the Gulf of Mexico, which caused the riser pipe connected to the mobile offshore drilling unit to break. 46 As a result, oil flowed through the well, wellbore, blowout preventer, and remaining segment of the riser pipe into the Gulf of Mexico until July 15, In re: Oil Spill by the Oil Rig Deepwater Horizon in the Gulf of Mexico on April 20, 2010, 844 F.Supp.2d 746 (EDLA) 8/22/12). 44 In re: Oil Spill by the Oil Rig Deepwater Horizon in the Gulf of Mexico on April 20, 2010, 844 F.Supp.2d 746 (EDLA) 8/22/12). 45 In re: Oil Spill by the Oil Rig Deepwater Horizon in the Gulf of Mexico on April 20, 2010, 844 F.Supp.2d 746 (EDLA) 8/22/12). 46 In re: Oil Spill by the Oil Rig Deepwater Horizon in the Gulf of Mexico on April 20, 2010, 844 F.Supp.2d 746 (EDLA) 8/22/12), at In re: Oil Spill by the Oil Rig Deepwater Horizon in the Gulf of Mexico on April 20, 2010, 844 F.Supp.2d 746 (EDLA) 8/22/12), at 748.

11 The United States sought a declaratory judgment against the defendants, instituting Case Number , averring civil penalties for past and future removal costs and damages resulting from the oil discharge under the POA. 48 The Government moved for partial summary judgment. 49 Both Anadarko and Transocean cross-moved for partial summary judgment, refuting liability under CWA and OPA for underwater oil discharge. 50 The parties raised issues under OPA to determine if liability had a cap and was divisible, joint, and/or several. 51 Moreover, the parties wanted to determine if the Government would be entitled to a declaratory judgment for removal costs and damages. 52 Transocean s liability for removal costs was questioned but not damages. 53 The United States Partial Motion for Summary Judgment was denied. 54 The court did not have to determine if the oil was from the appurtenance of the MODU or the MODU was being used as an offshore facility. 55 Thus, Anadarko and BP were held to be the responsible parties in connection with the subsurface 48 In re: Oil Spill by the Oil Rig Deepwater Horizon in the Gulf of Mexico on April 20, 2010, 844 F.Supp.2d 746 (EDLA) 8/22/12), at In re: Oil Spill by the Oil Rig Deepwater Horizon in the Gulf of Mexico on April 20, 2010, 844 F.Supp.2d 746 (EDLA) 8/22/12), at In re: Oil Spill by the Oil Rig Deepwater Horizon in the Gulf of Mexico on April 20, 2010, 844 F.Supp.2d 746 (EDLA) 8/22/12), at In re: Oil Spill by the Oil Rig Deepwater Horizon in the Gulf of Mexico on April 20, 2010, 844 F.Supp.2d 746 (EDLA) 8/22/12), at In re: Oil Spill by the Oil Rig Deepwater Horizon in the Gulf of Mexico on April 20, 2010, 844 F.Supp.2d 746 (EDLA) 8/22/12), at In re: Oil Spill by the Oil Rig Deepwater Horizon in the Gulf of Mexico on April 20, 2010, 844 F.Supp.2d 746 (EDLA) 8/22/12), at In re: Oil Spill by the Oil Rig Deepwater Horizon in the Gulf of Mexico on April 20, 2010, 844 F.Supp.2d 746 (EDLA) 8/22/12), at In re: Oil Spill by the Oil Rig Deepwater Horizon in the Gulf of Mexico on April 20, 2010, 844 F.Supp.2d 746 (EDLA) 8/22/12), at 751.

12 discharge. 56 The court further held that liability under OPA was joint and several with regard to the subsurface discharge of oil. 57 The court reasoned that if only is logical to use the water s surface as a way to apportion liability in the offshore facility context of the MODU, as discharge beneath the MODU likely would be oil from the well. 58 Conversely, it is logical to assume oil may have originated from the MODU or the Well and apportion liability to the owner/operator for surface discharge with excess liability shifting to the lessee. 59 IV. Conclusion Two main settlements were reached as a result of the Deepwater Horizon oil spill, the Economic and Property Damages Settlement and the Medical Benefits Settlement. There were four features of the proposed settlement guarantee, to wit: a. Satisfaction of all economic and property loss claims by class members, even for actions or omissions of Halliburton and Transunion: b. Receipt of Risk Transfer Premium (RTP) payments by certain claimants; c. Assignments and protections assigned to plaintiff s BP s spillrelated claims against Transunion and Halliburton; and d. Ability of class members to receive settlement payments on an accelerated schedule. 56 In re: Oil Spill by the Oil Rig Deepwater Horizon in the Gulf of Mexico on April 20, 2010, 844 F.Supp.2d 746 (EDLA) 8/22/12), at In re: Oil Spill by the Oil Rig Deepwater Horizon in the Gulf of Mexico on April 20, 2010, 844 F.Supp.2d 746 (EDLA) 8/22/12), at In re: Oil Spill by the Oil Rig Deepwater Horizon in the Gulf of Mexico on April 20, 2010, 844 F.Supp.2d 746 (EDLA) 8/22/12), at In re: Oil Spill by the Oil Rig Deepwater Horizon in the Gulf of Mexico on April 20, 2010, 844 F.Supp.2d 746 (EDLA) 8/22/12), at 752.

13 Under the final judgment, the class was certified for settlement purposes. 60 Additionally, economic and property claims against BP were dismissed. 61 BP did not contest a class counsel for fees, costs, and expenses for up to a maximum of $600 million. 62 All class members who accepted the settlement offer released defendants Anadarko and BP of all federal and state oil spill liability funds for any claims arising out of the Deepwater Horizon litigation. 63 For plaintiffs who sought punitive damage recoveries, Halliburton and Transocean were not released. 64 The agreement provided that BP paid all compensatory damages, allowing the plaintiffs to seek punitive damages from Halliburton and Transocean. 65 The economic and property damages settlement covered specific geographical areas with precise settlement zone causations and designations. 66 The economic and property damages settlement covered losses pertaining to coastal real property damages, wetlands real property sales loss, loss of subsistence, 60 Case 2:10-md CJB-SS; Document ; In re: Oil Spill by the Oil Rig Deepwater Horizon in the Gulf of Mexico on April 20, 2010, Transfer Order, MDL No. 2179, 4/18/12, at Case 2:10-md CJB-SS; Document ; In re: Oil Spill by the Oil Rig Deepwater Horizon in the Gulf of Mexico on April 20, 2010, Transfer Order, MDL No. 2179, 4/18/12, at Case 2:10-md CJB-SS; Document ; In re: Oil Spill by the Oil Rig Deepwater Horizon in the Gulf of Mexico on April 20, 2010, Transfer Order, MDL No. 2179, 4/18/12, at Case 2:10-md CJB-SS; Document ; In re: Oil Spill by the Oil Rig Deepwater Horizon in the Gulf of Mexico on April 20, 2010, Transfer Order, MDL No. 2179, 4/18/12, at Case 2:10-md CJB-SS; Document ; In re: Oil Spill by the Oil Rig Deepwater Horizon in the Gulf of Mexico on April 20, 2010, Transfer Order, MDL No. 2179, 4/18/12, at Case 2:10-md CJB-SS; Document ; In re: Oil Spill by the Oil Rig Deepwater Horizon in the Gulf of Mexico on April 20, 2010, Transfer Order, MDL No. 2179, 4/18/12, at Kenneth Hooks, Deepwater Horizon Economic and Property Damages Settlement, pdf document

14 seafood compensation, business economic loss, individual economic loss, charter payment, and vessel physical damages. 67 A standard V-test was used to determine the businesses revenue patterns. 68 Zone A was granted a presumed causation, and any business situated in Zone A received presumed causation. 69 Zones B through D not receiving presumed causation was required to show a 2010 revenue drop of eight and one half percent and subsequent revenue rebound of five percent. 70 Businesses located in Zone D were required to show a 15% revenue drop in 2010 with a subsequent ten percent rebound in Compensation was provided for vessels that signed a Master Vessel Charter Agreement with BP and participated in the vessel of opportunity program after the subject explosion and spill irrespective of if the vessel worked. 72 BP was granted a one-third credit for the value paid to the vessel owner. 73 Compensation was provided for vessels damaged by the Deepwater Horizon oil spill. 74 Moreover, the settlement addressed causation and compensation for start-up and failed businesses. 75 Businesses meeting causation received compensation for 67 Kenneth Hooks, Deepwater Horizon Economic and Property Damages Settlement, pdf document 68 Kenneth Hooks, Deepwater Horizon Economic and Property Damages Settlement, pdf document 69 Kenneth Hooks, Deepwater Horizon Economic and Property Damages Settlement, pdf document 70 Kenneth Hooks, Deepwater Horizon Economic and Property Damages Settlement, pdf document 71 Kenneth Hooks, Deepwater Horizon Economic and Property Damages Settlement, pdf document 72 Kenneth Hooks, Deepwater Horizon Economic and Property Damages Settlement, pdf document 73 Kenneth Hooks, Deepwater Horizon Economic and Property Damages Settlement, pdf document 74 Kenneth Hooks, Deepwater Horizon Economic and Property Damages Settlement, pdf document 75 Kenneth Hooks, Deepwater Horizon Economic and Property Damages Settlement, pdf document

15 loss profits incurred from May through December Other factors considered included zone exception rules and multi-facility businesses. 77 Compensation was provided to/from individuals living, working, and/or who were offered and had accepted work in Louisiana, Mississippi, Alabama, or certain counties in Florida and Texas. Causation was tied to the individuals employers. 78 Compensation was provided to/for independent contractors having business loss claims, not individual loss claims. 79 Finally, prescription for the OPA claims/issues is April 20, Businesses with clear economic injuries are allowed moratorium claims. 76 Kenneth Hooks, Deepwater Horizon Economic and Property Damages Settlement, pdf document 77 Kenneth Hooks, Deepwater Horizon Economic and Property Damages Settlement, pdf document 78 Kenneth Hooks, Deepwater Horizon Economic and Property Damages Settlement, pdf document 79 Kenneth Hooks, Deepwater Horizon Economic and Property Damages Settlement, pdf document