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4 October 2010

Spill waters run deep

Oil stopped flowing from the Deepwater Horizon rig in July, but the legal wrangling is only just beg

By Annabel Symington

As the self-professed “Son of the Gulf”, Robert Dudley, takes over from BP’s vilified chief executive, Tony Hayward, the British oil giant is shifting gear. The focus now is on “making whole” the communities of the Gulf. But phase two brings a new threat: BP’s legal might.

For residents of the Gulf, the takeover is the end of the beginning: the leak has been plugged and the angry tide of public opinion, which swelled with the tally of leaked oil, has begun to subside. But uncertainty continues to hang over the region. For the Gulf Coast residents, who know only too well the difficulty of rebuilding post-disaster, a new kind of pain is being felt.

“It’s way worse than Katrina,” Lorrie Grimaldi of St Bernard, Louisiana, told me, as she cracked open a crab with the dexterity of a fisherman’s wife. “Katrina took everything we owned. But this? We still don’t know what it’s going to take.”

As we spoke, Lorrie passed me small pieces of freshly cooked crab. “I promise it ain’t got no oil in it,” she jokes. “Actually, I can’t promise that.”

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Blame acts as a catalyst for the added stress associated with man-made disasters, explains Steven Picou, a sociologist at the University of South Alabama. But where to lay the blame when responsibility is being constantly deflected by layers of complex litigation and obscured by claims funds?

Picou studied the impact of the 1989 Exxon Valdez oil spill on mental health and found that, for Alaskans involved in the ensuing litigation, stress levels were as high in 2009 as they were in 1991. Exxon led the small communities of Prince William Sound in a tightly choreographed legal dance that ended in 2008 with the oil titan paying $507m of a $5bn damage settlement, and $25m of a fine that was first pegged at $150m. Nineteen years after the Exxon Valdez tanker ran aground on Bligh Reef, some plaintiffs received their final payment.

For those in the Gulf, today’s race to the courthouse has begun. Alabama was the first state to sue BP and its reluctant coterie of fellow defendants. The state’s attorney general, Troy King, sidestepped accusations that his suit was premature, saying that BP had begun gathering witnesses and planning its defence on 20 April, the day of the explosion. Louisiana followed, filing a suit to have Transocean declared responsible for some of the 200 million gallons of oil that leaked into the Gulf.

Courting controversy

An estimated 400 cases have already been filed and the pre-trial proceedings have been consolidated to two courts: Houston for securities law cases and Louisiana for the rest. BP fought hard to merge the two multi-district litigation (MDL) hearings, and for it all to be heard in the oil-friendly court of Houston. But the MDL panel pointed out that while both actions share “an underlying genesis” – the causes and consequences of the explosion on the Deepwater Horizon rig – consolidating the two would only serve BP’s ends by muddling its liability with that of other actors.

The US district judge Carl Barbier, who was appointed in August to oversee the MDL in Louisiana, has taken steps to move the case forward in an attempt to avoid an Exxon-style protracted battle. He has set aside October and November 2011 for the first major trial, which will determine how liability is apportioned. At the first hearing in New Orleans on 16 September, Barbier warned that the case was not going “to be settled easily or quickly”.

The litigants have several obstacles to overcome before the first case can even be heard. Transocean is already in court seeking to limit its liability under the archaic Limitation of Liability Act (Lola), which allows shipowners to peg liability at the post-accident value of the vessel. Most legal analysts are sceptical of Trans­ocean’s chances of winning. If wrong­doing is proved, the protection offered by Lola evaporates. But it does cause delays for any plaintiffs seeking damages against Transocean.

The Securing Protections for the Injured from Limitations on Liability (Spill) Act, now working its way through the Senate, repeals Lola and amends the Death on the High Seas Act (DOHSA) to allow recovery of non-economic damages for maritime death victims’ families, starting with the families of the men killed on 20 April. Keith Jones, father of Gordon Jones, one of the engineers killed, is lobbying Washington to push through the changes.

As it stands, the families are only able to claim for financial damages, which are based on the deceased’s future earnings minus the costs they would have incurred had they continued to live. “Whoever is found to be at fault ought to be liable to pay greater damages than the loss of Gordon’s pay cheque,” said Jones.

Jones launched his campaign in June. “I am told the bill passed from introduction to passage on the House floor faster than anything in the history of Congress, other than compensation of victims of 9/11 and the declaration of war against Japan,” he said, “But then we went to the Senate and things stalled because special interests have flexed their muscles.” It’s not Big Oil that’s lobbying against the bill, but the cruise-line industry. The oil lobbyists are notable only by their silence. “They seem to be taking a more principled position,” Jones offered.

Uphill battle

Another point of contention is the limits of liability offered by the Oil Pollution Act (OPA), passed in 1991 in the wake of Exxon Valdez. The Consolidated Land, Energy and Aquatic Resources (Clear) Act, now in the Senate, seeks to remove the liability cap for responsible parties, currently set at $75m. BP volunteered to waive that protection in May, and the setting-up of the $20bn escrow fund dwarfs the cap. But, as it stands, BP could reimburse itself for its clean-up costs through the escrow fund.

The fund, which replaced BP’s own claims process on 23 August, is administered by Ken Feinberg, a lawyer, and is offering interim payments to people who have suffered damages as a direct result of the spill. Feinberg says that in three months time he will shift the focus to settlement payments, but those wanting one will also waive their right to sue BP and others. This outraged lawyers, who say Feinberg is forcing people to accept final payments out of need before the spill’s full impact is known.

Anyone filing a claim not meeting Feinberg’s guidelines will likely face an uphill battle trying to tap into the fund. Amanda Domangue of Houma, Louisiana, runs an oil trucking company. Since the moratorium was announced, business has all but dried up. Yet as her business was not directly affected by the spill, but the politics that ensued, her claim is not covered by the escrow fund. In late August, she took Feinberg to task at a town hall meeting – he had advised her and other oil industry workers not to file the suit because they were “unlikely to win”. “So what do I do?” she asked me when we spoke. “You either get a cheque, if you can, and you release BP, or you file a lawsuit and you’ll be tied up in court. Either way, it has no bearing on Feinberg. It’s not his personal issue. He comes from Massachusetts.”

Annabel Symington

An accident in slow motion

The BP oil spill disaster in the Gulf of Mexico began in April, when a bubble of methane rose from the well, causing an explosion that killed 11 people and injured a further 17.

The subsequent fire burned for two days, but the real disaster took place 5,000 feet below the Deepwater Horizon rig on the ocean floor, when the blowout preventer, a device intended to stem the flow of oil in an emergency, failed to engage. Initial estimates suggested that crude oil was flowing into the sea at a rate of 1,000 barrels a day, although this was rapidly revised upwards as the disaster intensified. The slick soon extended for 100 miles and tar balls began washing ashore in Louisiana and Alabama.

The first attempt to cap the well with a large metal dome came two weeks after the initial explosion, but failed when crystals formed inside and threatened to float it away. A week later, a second attempt also failed. By this point, experts estimated that 20,000 barrels of oil a day were spilling into the sea. This figure doubled again after Congress forced BP to release video footage of the leak.

In July, nearly three months after the initial leak, a containment cap stopped the flow of oil. This cap was then reinforced with cement, and by the beginning of September, a relief well was completed, permanently closing the leak.

Caroline Crampton