Obama administration sues BP, others over Gulf spill

By Jeremy Pelofsky and James Vicini

WASHINGTON (BestGrowthStock) – The Obama administration on Wednesday launched a legal battle against BP Plc and its partners by suing them for the worst offshore oil spill in U.S. history, which could cost the companies billions of dollars.

The lawsuit seeks damages from the well owners BP, Anadarko Petroleum Corp and Mitsui & Co Ltd unit MOEX, and well driller Transocean Ltd and its insurer QBE Underwriting/Lloyd’s Syndicate 1036, part of Lloyds of London, for their roles in the Gulf of Mexico disaster.

“While today’s civil action marks a critical step forward, it is not a final step,” U.S. Attorney General Eric Holder told reporters at a news conference.

“Both our criminal and civil investigations are continuing, and our work to ensure that the American taxpayers are not forced to bear the costs of restoring the Gulf area — and its economy — goes on,” he said.

The suit, the first by the U.S. government after the April 20 explosion aboard the drilling rig in which 11 workers died, was filed in a New Orleans federal court which is considering private lawsuits against BP and the others for the spill.

BP, which returned to profitability in the third quarter of 2010, has begun selling assets and amassing a massive warchest to pay for damages caused by the oil spill, which the oil concern has estimated could reach as much as $40 billion.

The oil company said on Wednesday it was weighing the sale of its Canadian natural-gas liquids business.

In response to the lawsuit, BP said it is “solely a statement of the government’s allegations and does not in any manner constitute any finding of liability or any judicial finding that the allegations have merit.”

“BP will answer the government’s allegations in a timely manner and will continue to cooperate with all government investigations and inquiries,” the company said.


Legal experts have said they expect the two sides to settle eventually but it could take years. In comparison, Exxon XOM.N> settled government claims over the spill by its Valdez tanker in Alaska in 1991, two years after the oil hit the coast.

The lawsuit against BP and others warned that “the full extent of potential injuries, destruction, loss and loss of services is not yet fully known and may not be fully known for many years.”

Shares in the companies targeted in the lawsuit fell in the wake of the lawsuit.

The stocks trimmed early losses to close off their lows, with BP down 1.3 percent at $43.86 and Anadarko Petroleum down 2.3 percent at $67.41. Halliburton, which wasn’t named in the suit, closed near session lows, down 3.1 percent at $39.79.

The Deepwater Horizon drilling rig blowout spilled about 4.9 million barrels of oil over several months. It fouled resort beaches and fishing grounds and led to hundreds of lawsuits over lost revenues and wages.

“This is about getting a fair deal for the region that suffered enormous consequences from this disaster,” said Lisa Jackson, head of the Environmental Protection Agency.

The lawsuit accused the companies of violating safety and operating regulations in the period leading up to the disaster, including keeping the well under control, failing to use the best available and safest drilling technology and failing to maintain continuous surveillance of the well.

The government claimed the companies violated the U.S. Clean Water Act and the Oil Pollution Act, but the lawsuit does not request a specific dollar amount for damages.

For every barrel of oil spilled into the Gulf of Mexico, there could be a fine of up to $4,300 if gross negligence is found. That would equal a fine of at least $21 billion. If no gross negligence is found, the fine could be up to $1,100 per barrel or almost $5.4 billion.

It will be up to the judge to weigh the evidence presented in court to determine if the defendants were grossly negligent in their conduct, a Justice Department official said.

The Justice Department could also seek additional fines for harm to any animals protected by the Endangered Species Act and the Migratory Bird Treaty Act, among other environmental laws.

The lawsuit did not name Halliburton, which did the cementing for the well, or Cameron International which provided well equipment, but Justice Department officials made it clear more defendants and charges could be added later.


BP has taken responsibility for the cleanup but has questioned government estimates of how much oil came out of the well. BP co-owned the Macondo well with Anadarko and MOEX.

After the lawsuit was filed, its partners said the blame and liability laid squarely on BP.

Anadarko said it was not responsible for the decisions and operation for the well and therefore BP should be held responsible. Transocean, which drilled the well, also tried to pin the blame on BP.

“The responsibility for hydrocarbons discharged from a well lies solely with its owner and operator,” Transocean said in a statement, adding it was “indemnified in this matter.”

BP has estimated it may cost as much as $40 billion to pay for the spill, including the cleanup and penalties. The London-based oil firm has been selling numerous assets to raise as much as $30 billion to cover those costs.

The Justice Department asked a federal judge in New Orleans overseeing the litigation to hold the companies liable, except for Lloyds, for unlimited damages, beyond the $75 million cap under the Oil Pollution Act.

The judge in Louisiana, Carl Barbier, has been overseeing the hundreds of private lawsuits involving thousands of plaintiffs against BP and its partners. He has a status hearing set for Friday.

A lawyer for private individuals suing BP over the spill said the new lawsuit by the Obama administration would not hurt their efforts.

“We look forward to continued cooperation with the U.S. government in pursuit of justice for all victims of the Deepwater Horizon tragedy,” said the lawyer Steve Herman. “(I) think it demonstrates confidence and momentum in the Court proceedings as we approach the February 2012 trial.”

(Additional reporting by Kristen Hays and Anna Driver in Houston and Tom Hals in Wilmington; Editing by Todd Eastham)

Obama administration sues BP, others over Gulf spill