Sorting Out BP's Gulf Oil Spill Liability: Four Blunt Points

By Paul M. Barrett September 05, 2014

Photograph by Jon T. Fritz/MCT via Getty Images

The Deepwater Horizon offshore oil rig burns in the Gulf of Mexico on April 21,
2010
Confused about where things stand in the litigation hurricane over the 2010 Gulf
of Mexico oil spill? Not surprising. On Thursday, BP (BP) suffered a major
setback in federal court in New Orleansthat much is clearbut what exactly the
ruling means in terms of the companys ultimate legal bill wont be known for
some time. Herewith: four blunt points to help cut through the murk.
1. Environmentalists feel vindicated. U.S. District Judge Carl Barbiers
ruling that BP committed gross negligence and bore most of the blame for the
disaster is an historic win for the gulf coast ecosystems and economies that were
damaged by the BP oil spill, said Fred Krupp, president of the Environmental
Defense Fund. This means that BP will finally be forced to pay what it owes to fix
what it broke, added David Yarnold, president of the National Audubon Society.

Barbiers interim decision that BPs conduct was reckless rather than merely
careless means that the companys liability under the Clear Water Act could
eventually come in at something closer to $18 billion than the $3 billion or $4
billion BP would have preferred.
2. Wait, hasnt BP already paid out a lot of money? Yes. The company has
acknowledged at least some responsibility for the explosion that killed 11 rig
workers, sullied shorelines, and shut down maritime businesses. Since 2010, BP
has paid out more than $28 billion in cleanup costs and damage claims. As a
matter of accounting, the company has taken a $43 billion charge to cover all the
costs related to the spill. Thats a $15 billion difference. After Barbiers ruling, its
far more likely that BP will need to pony up all of the $15 billionand maybe
more.
3. BP, however, sounds eager for more courtroom bloodshed. The
company immediately vowed to appeal. BP believes that the finding that it was
grossly negligent with respect to the accident and that its activities at the
Macondo well amounted to willful misconduct is not supported by the evidence at
trial, the company said. The law is clear that proving gross negligence is a very
high bar that was not met in this case. This will be a difficult argument to make.
Barbier based his determination on a detailed factual analysis of the sort
appellate courts typically hesitate to second-guess. Moreover, the distinction
between ordinary negligence and gross negligence, as those terms are used in
maritime law, comes down to a subjective assessment. Persuading a higher court
that Barbier was flat-out wrong in making this judgment wont be easy.