BP plc (ADR) (NYSE:BP) will no longer have to face any lawsuit at the hands of the energy and oilfield services companies, which blamed the oil giant for the losses they incurred due to the US drilling ban. The offshore drilling ban was imposed following the Gulf of Mexico oil spill. According to the US District Judge Carl Barbier, the Oil Pollution Act did not allow the British oil giant to be held responsible for moratorium claims.
The London-based oil company has already paid more than $55.5 billion in claims over the oil spill. The court’s decision has however, relieved the oil company from one of the biggest categories of claim. What remains for the oil company now is a lawsuit in Houston federal court where the investors are seeking damages worth $2.5 billion. Trial for this case is scheduled to be held in July and this remains as the only notable legal risk that BP has to face.
The Gulf of Mexico spill, also referred as the BP oil disaster, occurred in 2010 when the oil rig Deep-water Horizon faced a malfunction. Mud, oil, and natural gas surged up the drill pipe and exploded into an inferno. The oil spilled all across the Gulf and affected the area for around three months tenure.
After the oil spill, there were several other cases filed against BP apart from the moratorium claims. BP plc. settled property and economic loss claims with numerous private parties globally in 2012. Settlement of claims cost the British oil company around $12.4 billion, the company stated in a regulatory filing last month. Since many claims are still to be paid or processed, there is a high chance that the cost to settle the legal claims could be “significantly higher.”
The moratorium suits against BP were expected to go on test trials, but following Mr. Barbier’s decision, they will no longer be conducted. This includes the one by the successor to Seahawk Drilling. Seahawk that allegedly incurred losses around $174.8 million claimed that it was forced into bankruptcy due to the drilling ban. Looking at the larger picture, federal regulators estimated around 25000 regional jobs were impacted by the drilling ban.
Moratorium claims were filed by companies that owned and built the rigs. Moreover, they were also filed by the companies that provided boats to ferry crewmen and supplies. Lawyers of these companies persuaded Barbier to make the claims go to the trial citing in a January filing that the oil giant’s conduct was a “substantial cause” of their losses.
Mr. Barbier, however, rejected this stating that “Plaintiffs’ losses did not result from the discharge or substantial threat of discharge of oil from the Macondo.” He stated that these losses instead, “resulted from the perceived threat (whether substantial or not) of discharge from other wells.”
The oil spill resulted in huge claims by several oil companies against BP plc. The companies had to sideline work crews and close drilling operations for a long span of time after Obama’s administration put a stop to deep water drilling and delayed permits for new wells.
According to BP, federal law required these claims to be restricted to economic losses that were incurred due to the oil spill rather from the action of a third party such as the federal government. Carl Barbier supported this and stated that the Oil Pollution Act enactment was an outcome of the Exxon Valdez disaster.
“There is nothing to suggest that Congress intended the OPA to go so far as to hold a discharger liable for the financial consequences of subsequent government actions aimed at preventing similar tragedies in the future and which broadly affect the entire industry,” Mr. Barbier further added.
BP plc stock lat traded at 30.56, up 2.48%.
By: Camilla Pritchard.
Review: Emerging Market Formulations &
Research Unit, Flagship Records.
For The #FacebookTeam