NEW ORLEANS - One year ago on April 20, an explosion and fire on the Deepwater Horizon oil rig killed 11 people and sent millions of gallons of oil into the Gulf of Mexico in a spill it took three months to stop.
A year after the worst offshore oil spill in U.S. history, many on the Gulf Coast still feel the economic pain, and hundreds of lawsuits have been filed. But there are signs of a rebound in jobs, the tourism industry and the health of Gulf waters.
The Explosion
On April 20, 2010, an explosion occurred on the Deepwater Horizon, an offshore oil rig owned by Transocean and leased to BP about 50 miles off the Louisiana coast. The massive rig sank two days later and searches for the 11 missing crewmembers were suspended. Attempts to use robotic submersibles to activate the Macondo well's blowout preventer failed, and it took 152 days to cap the well. An estimated 4.9 million barrels of oil leaked before the well was permanently plugged on Sept. 19, 2010.
The Litigation
More than 300 lawsuits from 12 states have been consolidated in a BP Oil Spill MDL overseen by U.S. Judge Carl Barbier of the Eastern District of Louisiana. All but three of the cases were filed in federal courts.
The nature of lawsuits consolidated in the New Orleans MDL include antitrust, environmental, Jones Act admiralty/personal injury, Oil Pollution Act (OPA), Outer Continental Shelf Lands Act and RICO racketeering cases.
The most cases have originated from Louisiana, 116, followed by Florida with 66, Alabama with 47, Texas with 40, Mississippi with 18, South Carolina with four, Virginia with three, Georgia, Kentucky and Tennessee, with two apiece, and California and Colorado with one each. The three state lawsuits that were transferred to the MDL were filed in Alabama, Florida and Colorado. Trial is set for February 2012.
On the one-year anniversary, April 12, 2011, BP said in papers filed in New Orleans federal court that it is suing rig owner Transocean for at least $40 billion in damages, accusing it of causing last year's deadly blowout. It also sued Cameron International, alleging that the manufacturer of the rig's blowout preventer provided a safety device with a faulty design that caused an unreasonable amount of risk (see The Investigation, below).
The same day, Transocean filed court papers demanding that judgments in its favor be made against BP for $12.9 million and Halliburton and other companies for $20 million. Cameron also filed counterclaims against BP.
The Investigation
The presidential commission appointed to study the Deepwater Horizon disaster concluded in its final report that the Macondo well blowout can be traced to a series of mistakes by numerous parties "that reveal such systemic failures in risk management that they place in doubt the safety culture of the entire industry."
The National Commission on the BP Deepwater Horizon Oil Spill and Offshore Drilling was created by President Obama on May 22, 2010, to determine the cause of the disaster, improve the country's ability to respond to spills and to recommend reforms to make offshore energy production safer.
In a 398-page report to the president released in January, the commission said that the April 20, 2010, explosion that killed 11 crew members was a failure by both industry and government.
"Investments in safety, containment, and response equipment and practices failed to keep pace with the rapid move into deepwater drilling," it said. "Absent major crises, and given the remarkable financial returns available from deepwater reserves, the business culture succumbed to a false sense of security. The Deepwater Horizon disaster exhibits the costs of a culture of complacency. . . .
"But that complacency affect government as well as industry. The Commission has documented the weaknesses and the inadequacies of the federal regulations and oversight, and made important recommendations for changes in legal authority, regulations, investments in expertise, and management."
BP on Sept. 8 released a report blaming a number of factors and parties, including itself, Halliburton Co. and Transocean, for the April 20 explosion on its Deepwater Horizon deepwater oil drilling rig. Halliburton was responsible for cementing the drill into place below the water. Halliburton and Transocean disputed the BP report's conclusions.
A government-funded study concluded in March that the well's blowout preventer failed as a result of a design flaw, not because of poor maintenance or misuse by the companies involved. The safety device was equipped with shears designed to cut through pipe and seal the well. The study conducted by the Norwegian risk-management company Det Norske Veritas concluded that the force of the blowout bent the drill pipe, knocking it off-center and jamming the shears.
A joint U.S. Coast Guard-Bureau of Ocean Energy Management Regulation and Enforcement investigative panel is expected to release some preliminary findings on the disaster's causes.
The Compensation Fund
At the request of Congress and the White House, BP on June 16, 2010, set up a $20 billion fund to compensate those affected by the spill. President Obama and BP tapped Kenneth Feinberg, who served as the administrator to compensate victims and families of the Sept. 11 terrorist attacks, to administer the Gulf Coast Claims Facility (GCCF).
The GCCF has paid out roughly $3.8 billion to 177,000 claimants, but thousands of the 857,000 claims from more than 504,000 people and businesses remain unresolved and many claimants have been frustrated with the slow, cumbersome process.
On Feb. 25, 2011, a lawsuit was filed in Florida state court against the GCCF, Feinberg and his law firm, Feinberg Rozen LLP, alleging gross negligence, fraud, fraudulent inducement and unjust enrichment.
Feinberg on April 18, 2011, issued a statement defending the GCCF's work.
The following day, Omega Protein Corporation, a nutritional ingredient company that is also the nation's leading producer of Omega-3 fish oil and specialty fish meal products, announced the final settlement of all of its claims for costs and damages incurred as a result of the oil spill. On April 18, 2011, the company received an additional payment of $26.2 million, net of fees and expenses, from the GCCF. In total, the company has received payments of $44.8 million, net of fees and expenses, from the GCCF, including emergency payments of $7.3 million and $11.4 million in September and October of 2010, respectively.
Several families of the 11 men who died are pursuing legal claims against the companies involved, the Associated Press reported. Transocean has settled with at least five families; BP hasn't settled with any, according to AP.
The Gulf of Mexico
An Associated Press survey of researchers showed scientists rating the health of the Gulf of Mexico as nearly back to normal a year after the spill. However, AP said, they noted "significant declines in key health indicators such as the sea floor, dolphins and oysters." It will likely take years to assess the full environmental effects on the Gulf, AP concluded.
Still, some have questions about the quality of Gulf seafood and say the public may remain leery about eating it. There are still scattered reports of oil on beaches in the form of tar balls.
On April 21, the Justice Department announced that BP has agreed to provide $1 billion for projects that will restore natural resources in the Gulf of Mexico, including rebuilding coastal marshes, replenishing beaches, conservation of ocean habitat for injured wildlife and restoration of barrier islands. The program will be administered by a group of trustees, including the Gulf Coast states, and federal officials.
The Economy
The Wall Street Journal reported April 18 that tourists are returning to the beaches of Florida and Alabama and that rental bookings have returned to pre-spill levels. Unemployment is up along the Louisiana coast, the Journal said, but New Orleans benefited from an influx of spill-related business. According to the Journal report, a number of Gulf Coast areas have reported job increases. The fate of the region's fishing industry is unclear, the Journal noted.
The Oil Industry
The Obama administration recently issued 10 permits for deepwater drilling, and the oil industry is hopeful that will resume soon. Operators must follow strict new rules and show they could contain a deepwater blowout.
As for the companies involved in the Gulf spill:
BP CEO Tony Hayward was ousted from his job and replaced by American Bob Dudley, who took over Oct. 1. Hayward was transferred to a BP affiliate in Russia. Chief Operating Officer Doug Suttles, senior vice president Kent Wells and former head of exploration and production Andy Inglis left the company.
BP reported its first annual loss in 18 years in 2010 as a result of the spill, and Transocean saw its annual profit fall by two-thirds, The Wall Street Journal reported. Still, the AP reported that BP is making strong profits again, its stock has largely rebounded, and it is paying dividends to shareholders once more. It is also pursuing new ventures, including in Gulf of Mexico, where it holds more leases than any oil company. According to the Journal, Halliburton was largely unscathed, reporting a 60 percent increase in profits in 2010 to $1.8 billion.
Additional Gulf Oil Spill Resources:
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Lexis.com subscribers can find Deepwater Horizon oil spill related filings and Mealey's Oil Spill News here.
You may also find helpful Vincent Foley's Emerging Issues Analysis, Backgrounder on Liability, Fines and Penalties for Oil Pollution.
Research Marine Oil Pollution in 3-IX Benedict on Admiralty § 111 (Matthew Bender).
Research the Oil Pollution Act of 1990 in 112-IX Benedict on Admiralty § 112 (Matthew Bender).
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