Transocean's Battle in Gulf Oil Spill Case Concludes

Jan 7, 2013

The Deepwater Horizon rig exploded off Louisiana’s coast in 2010, unleashing an unmatched oil spill from BP’s Macondo well.

Platform supply vessels battle the blazing remnants of the off shore oil rig Deepwater Horizon, April, 20, 2010.
Credit U.S. Coast Guard

About eight months later, the Justice Department filed suit to recover damages.

BP entered into a $4.5 billion settlement of criminal claims in November.

The owner of the rig, Transocean, has just agreed to plead guilty and pay $1.4 billion in criminal and civil penalties for violating the Clean Water Act. A federal judge is likely to sign off on the agreement at a hearing set for Feb. 14.

Carrie Johnson, NPR’s Justice Correspondent, has been following this case from the beginning.

JEFFRIES: When the government first filed suit, Transocean denied any responsibility. When did their stance take a turn?

JOHNSON: Transocean had indicated in securities filings, corporate filings, with the federal government that it was trying to work out a settlement with the Justice Department, and that effort has been ongoing for some time. But the first hint of a major development came Jan. 3 when the company – a subsidiary of Transocean, actually – agreed to plead guilty to a single misdemeanor act for violating the Clean Water Act the day of the oil spill in April 2010.

And the company will agree to, you know, in essence, negligence, for not doing a good enough job on the night of that disaster. A judge needs to approve that settlement, but most people think that’s just a pro forma step at this point.

JEFFRIES: This case is not yet over for BP, though. The oil company that was leasing the Deepwater Horizon rig from Transocean is still facing civil claims that it violated the Clean Water Act and that’s still set to go to trial on Feb. 25. Is the Transocean settlement likely to have any bearing on the outcome there?

JOHNSON: The big fish in this case – to pardon the expression – has always been BP. 

And while BP, as you mentioned, has been able to negotiate a criminal settlement with the Justice Department, it’s been much harder to achieve a civil settlement. That would include penalties under the Clean Water Act for each barrel of oil that spilled into the Gulf – some people think that might go as high as $20/$21-billion dollars – and for natural resource damages, damages to wildlife and the waters and the fisheries there under the Oil Pollution Act, and the nature of those damages may not be known for years to come. So some people are predicting well upwards of a $20-billion settlement there, and that’s what’s issue in this case set to go to trial in February in New Orleans.

JEFFRIES: So is there anything in the settlement that Transocean has agreed to that points to how big that number’s going to be for BP?

JOHNSON: Not numerically.

But, it was very interesting, the day of the Transocean settlement, BP put out a statement saying, “Ah ha! We’ve all along maintained this was not just our fault. It was the fault of multiple companies, including Transocean and Halliburton (which has not been charged by the Justice Department).”

And so, BP has been undergoing a strategy of trying to spread the blame around.

That said, pursuant to some rulings by the trial judge in this case, Transocean is not responsible for the oil that went into the water and polluted the water, only for the surface violations.

So BP remains the major player with the biggest pockets here in this case.

JEFFRIES: The settlement that Transocean has agreed to also mandates that it improve safety measures at its drilling operations, such as certifying the maintenance and repair of the blowout preventers that went wrong in the Deepwater Horizon disaster. Could those safety measures become a standard in the oil industry, even without another explosion?

JOHNSON: That’s a really interesting question. Certainly, the Justice Department and the EPA hope that will be the case. The EPA said on the day of the settlement that it’s going to continue to work toward making operations much safer, and the Justice Department and Attorney General Eric Holder said this was just one step closer to justice for all of the human and economic devastation wrought by this Deepwater Horizon disaster. But certainly regulators are hoping that this will set a standard in the years to come.

JEFFRIES: Does it become also a cautionary tale? What does $1.4 billion mean to a rig operator like Transocean?

JOHNSON: Well, Transocean had reserved in its accounts as much as almost $2 billion to resolve all liability from this case. It wound up agreeing to pay the Justice Department about $1.4 billion.

Some people who have worked in the environmental advocacy community and some folks who have been prosecutors of environmental crimes say this number is a bit too low for their liking. They would have preferred to see much bigger criminal penalties from Transocean. BP, of course, paid over $4 billion; Transocean wasn’t on the hook for that much. But these folks would have wanted to see Transocean pay out more, and they also would have wanted to see, as they saw in the BP settlement, some criminal charges against individual workers.

No one at Transocean has been charged with a crime, and some prosecutors think that’s the major deterrent to prevent this kind of disaster in the future.

JEFFRIES: The other charge that Transocean ended up being off the hook for was also manslaughter, which BP ended up pleading guilty to as well, even though eight of the 11 people who were killed in the disaster worked for Transocean. Did the rig operator get away with something there?

JOHNSON: It’s hard to say.

It’s hard to charge people at Transocean with a crime that were on the rig the night of the disaster when so many of their colleagues perished – a terrible, terrible tragedy. It seemed behind the scenes that Transocean was arguing to the Justice Department that it should not have to sacrifice current employees because of that.

And in the settlement last week, the Assistant Attorney General for the Justice Department’s Criminal Division, Lanny Breuer, pointed out in a public statement that Transocean workers were essentially following the lead of the two BP company men on the well that night.

Those two BP company men have been charged with manslaughter and they’re fighting those charges in court.

JEFFRIES: Is this ultimately a good deal for the Gulf Coast?

JOHNSON: You know, I haven’t seen major criticism of the outlines of the deal.

There are two ways that money is going back to the Gulf in this deal. First is this: Transocean agreed to pay $400 million in criminal penalties, and $300 million of that is going to the National Academy of Sciences and the National Fish and Wildlife Federation to work on restoration and shoring up resources in that region. The $1 billion Transocean has agreed to pay in civil penalties is a much bigger pot of money, and that’s where 80 percent – or $800 million – is going back to the Gulf states to work on projects in that region.

Obviously, it’s going to take years to know just how much damage was done to fish, wildlife, and the waters in the Gulf, and this is going to be an ongoing project for decades to come.

JEFFRIES: Carrie Johnson, NPR Justice Correspondent, thank you for your reporting. I’m sure we’ll be hearing from you again soon as the remaining claims against BP move forward.

JOHNSON: It was a pleasure to talk to you.