Legal Ramifications of the BP Gulf Oil Spill

A fatal explosion took place on the Deepwater Horizon Oil Rig just off the Louisiana coast on April 20, 2010. Eleven workers died in the explosion. When the rig sank, it created one of the largest oil spills experienced in all U.S. history. As much as 25 thousand barrels of crude oil spilled daily into the Gulf of Mexico causing unprecedented environmental destruction. Billions of dollars of damage occurred to property owners and Gulf Coast businesses.

Those who were adversely affected included commercial fishermen, their crew members, seafood processing and packaging industries and their workers, oyster and shrimping fields, small boat and dock owners, owners of waterfront property, the tourism industry, marina owners and operators, the local restaurant industry, and coastal city, county and state governments. Basically all property owners and businesses in the Gulf Coast areas suffered.

Although BP proposed a $7.8 million settlement of damage and medical claims brought about by the spill, thousands of individuals and businesses have opted out of the deal. Some of those who have chosen to opt-out would not have qualified as part of the class action lawsuit anyway. According to Scott Dean the agreement is "fair and reasonable and amply meets all the legal requirements for final approval.

"The settlement is a superior alternative to continued lengthy litigation, provides numerous unique claimant-friendly benefits, and fulfils BP's commitment to pay all legitimate claims stemming from the Deepwater Horizon accident." Several attorneys representing large numbers of claimants don't hold such a positive view of the settlement. It could take years to resolve all the claims for those who choose to opt-out, if they pursue their cases individually.

In talks with the Department of Justice (DoJ) and other agencies about a final settlement, BP has shown a willingness to discuss reasonable terms, but still continues to prepare for a trial. The trial has been scheduled for February 2013 charging gross negligence on the part of BP for causing the oil spill. This charge alone could cost BP $21 billion under the Clean Water Act. The company has already spent $14 billion on clean-up along the Gulf Coast and $8 billion in claims.

BP could end up paying as much as $17 billion if the court decides that they showed “gross negligence” by failing to take reasonable steps that would have averted the spill. It is estimated that 4.2 million barrels of oil remained in the Gulf after BP clean-up extracted 800,000 barrels from the waters. A decision of “gross negligence would take the amount of their fine from $1,100 per barrel to as much as $4,300 per barrel. This would cost the company an additional $13 billion.

In order to have more funds readily available BP has begun re-arranging their Russian assets. They have sold half of TNK-BP for $12.4 billion in cash and a 19.75% stake in Rosnett, a state-controlled oil company. TNK-BP had paid no dividends to BP over the past year and this new part ownership in Rosnett will give them a relationship with a more controlled Russian government oil resource.

The American Petroleum Institute is trying to become involved in the federal lawsuit since environmental groups are going after stricter standards regarding chemical dispersants such as those used in the BP oil spill. This group contends that any new restrictions on dispersants could impact planned response to future oil spills. Their brief says this could lead to removal of some or all of the 59 chemical dispersants currently in the National Contingency Plan regarding oil spills.

Obama administration officials contend that dispersants used during the BP Gulf oil spill actually prevented the massive spill from doing even more damage to the environment. However, a group of Alabama scientists published a study they conducted that said those dispersants killed plankton and continue to disrupt the aquatic food chain in the Gulf of Mexico. The lawsuit filed by the environmentalists said the EPA needs to study the impact of dispersants to determine which ones are safe to use in future oil spills.

The varied aspects of the litigations stemming from the 2010 BP oil spill will undoubtedly continue in the courts for several years to come, even after the class action portion of the case has been concluded.