Deepwater Horizon Oil SpillDeepwater Horizon Oil Spill

Keith Turner

Watkins Ludlam Winter & Stennis

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• "As of Wednesday, the 85th day of "As of Wednesday, the 85th day of the disaster, between 92 million and the disaster, between 92 million and 182 million gallons of oil had spewed 182 million gallons of oil had spewed into the Gulf." Associated Press JULY into the Gulf." Associated Press JULY 15 201015 2010

– equal between 2 million and 4 million equal between 2 million and 4 million barrelsbarrels

Past Oil Spills Past Oil Spills • Kuwait - 1991 - 520 million gallonsKuwait - 1991 - 520 million gallons

• Mexico - 1980 - 100 million gallons Mexico - 1980 - 100 million gallons 30,000 gallons a day into the ocean for a full year. 30,000 gallons a day into the ocean for a full year.

• Trinidad and Tobago - 1979 - 90 millionTrinidad and Tobago - 1979 - 90 million

• Russia - 1994 - 84 million gallonsRussia - 1994 - 84 million gallons

• Persian Gulf - 1983 - 80 million gallonsPersian Gulf - 1983 - 80 million gallons

• South Africa - 1983 - 79 million gallonsSouth Africa - 1983 - 79 million gallons

• France - 1978 - 69 million gallonsFrance - 1978 - 69 million gallons

• Angola - 1991 - more than 51 million gallonsAngola - 1991 - more than 51 million gallons

• Italy - 1991 - 45 million gallonsItaly - 1991 - 45 million gallonsThe tanker continued leaking it's oil into the ocean for 12 years. The tanker continued leaking it's oil into the ocean for 12 years.

• Odyssey Oil Spill - 1988 - 40 million gallonsOdyssey Oil Spill - 1988 - 40 million gallons 700 nautical miles off the cost of Nova Scotia 700 nautical miles off the cost of Nova Scotia

• US Production 2008US Production 2008– 6,734,000 barrels/day6,734,000 barrels/day

• US Consumption 2008US Consumption 2008– 19,498,000 barrels/day19,498,000 barrels/day

                                                                                                                                                                                                              

                                                                                                             

Who might be liable ?Who might be liable ?

• BP is operator and owns 65%BP is operator and owns 65%

• Transocean as Rig Owner ?Transocean as Rig Owner ?

• Halliburton as a drilling contractor ?Halliburton as a drilling contractor ?– (cementing the well)(cementing the well)

• Cameron as Well Blowout Cameron as Well Blowout Manufacturer ?Manufacturer ?

• Anadarko Petroleum owns 25%Anadarko Petroleum owns 25%

• Mitsui Oil owns 10%Mitsui Oil owns 10%

Oil Spill – Potential Federal Oil Spill – Potential Federal Environmental Laws Environmental Laws

• Oil Pollution Act Oil Pollution Act • Clean Water ActClean Water Act• Endangered Species ActEndangered Species Act• Clean Air ActClean Air Act• Marine Mammal Protection ActMarine Mammal Protection Act• National Environmental Policy ActNational Environmental Policy Act• Migratory Bird Treaty Act Migratory Bird Treaty Act • CERCLACERCLA• Solid Waste Disposal ActSolid Waste Disposal Act• Magnuson-Stevens Fishery Conservation and Magnuson-Stevens Fishery Conservation and

Management ActManagement Act

Other Relevant StatutesOther Relevant Statutes

• DebarmentDebarment– No future federal contractsNo future federal contracts

– BP has sold over several billion dollars in fuel to BP has sold over several billion dollars in fuel to US government in recent yearsUS government in recent years

• Alternative Fines ActAlternative Fines Act– If find criminal action can double the If find criminal action can double the

penaltiespenalties

Oil Pollution ActOil Pollution Act

– Who is liableWho is liable– How is liability establishedHow is liability established– What are the potential damagesWhat are the potential damages

OPA Liable PartiesOPA Liable Parties

• Section 1001Section 1001– Owner or Operator of the facilityOwner or Operator of the facility– Third Party Third Party – Responsible Parties (PRP) are defined for Responsible Parties (PRP) are defined for

Offshore FacilitiesOffshore Facilities•Offshore Facilities – “Facility of any kind”Offshore Facilities – “Facility of any kind”

•PRP are the lessee or permittee or holder of PRP are the lessee or permittee or holder of the right of use and easementthe right of use and easement

OPA - LiabilityOPA - Liability

• BP as operator and owner - YesBP as operator and owner - Yes

• Transocean as Rig Owner ? - YesTransocean as Rig Owner ? - Yes

• Halliburton as a drilling contractor ? - Halliburton as a drilling contractor ? - YesYes

• Cameron as Well Blowout Cameron as Well Blowout Manufacturer ? YesManufacturer ? Yes

• Anadarko Petroleum owns 25% - ?Anadarko Petroleum owns 25% - ?

• Mitsui Oil owns 10% - ?Mitsui Oil owns 10% - ?

OPAOPA• Section 1004 Limits of Liability Section 1004 Limits of Liability

(damage cap) (damage cap) – $75,000,000 for Offshore Facilities$75,000,000 for Offshore Facilities– Does not apply if:Does not apply if:

•““gross negligence or willful misconduct” or a gross negligence or willful misconduct” or a “violation of an applicable federal safety, “violation of an applicable federal safety, construction or operating regulations” by construction or operating regulations” by the responsible party, his agent, or the responsible party, his agent, or employee or person acting under contract employee or person acting under contract

OPAOPA

Section 1002 Elements of LiabilitySection 1002 Elements of Liability

Potential recoverable costs and Potential recoverable costs and damagesdamages– Removal CostsRemoval Costs

• Incurred by federal or stateIncurred by federal or state

• Incurred by other person Incurred by other person if consistentif consistent with with NCPNCP

OPAOPASection 1002 Elements of Liability – cont.Section 1002 Elements of Liability – cont.

DamagesDamages– Natural Resource Damage ClaimsNatural Resource Damage Claims

•Recoverable by federal or state onlyRecoverable by federal or state only

– Property Damages Property Damages •Owner or lesseeOwner or lessee

– Lost Profits & Earning CapacityLost Profits & Earning Capacity

OPAOPA

• Section 1002 Elements of Liability – Section 1002 Elements of Liability – cont.cont.DamagesDamages– Loss of Subsistence Use of Natural Loss of Subsistence Use of Natural

Resource Resource – Lost Government RevenueLost Government Revenue

•Taxes, royalties, rents, fees, net profitsTaxes, royalties, rents, fees, net profits

– Increased or Additional Public ServicesIncreased or Additional Public Services•Fire, safety, health hazardsFire, safety, health hazards

Claims against Oil Spill Liability Claims against Oil Spill Liability Trust Fund (OSLTF)Trust Fund (OSLTF)• Removal costs incurred by the Coast Removal costs incurred by the Coast

Guard and EPA Guard and EPA • State access for removal activities; State access for removal activities; • Payments to federal, state, and Indian Payments to federal, state, and Indian

tribe trustees to conduct natural resource tribe trustees to conduct natural resource damage assessments and restorations; damage assessments and restorations;

• Payment of claims for uncompensated Payment of claims for uncompensated removal costs and damages; removal costs and damages;

• Research and development; and Research and development; and • Other specific appropriations Other specific appropriations

OPAOPA

• Section 1013 Claims ProceduresSection 1013 Claims Procedures– Claim requirementsClaim requirements

• OPA requires that you OPA requires that you submit your claim to the submit your claim to the responsible party (RP) before submitting your claim responsible party (RP) before submitting your claim to the NPFCto the NPFC. You must give the RP 90 days to settle . You must give the RP 90 days to settle your claim. If after 90 days the RP has not settled your claim. If after 90 days the RP has not settled your claim (or any time after the RP denies your your claim (or any time after the RP denies your claim in writing), you may then submit your claim to claim in writing), you may then submit your claim to the NPFC. the NPFC.

• President can allow claims directly to fund if PRP President can allow claims directly to fund if PRP deny designation or can not determine source of oildeny designation or can not determine source of oil

BP Oil Spill FundBP Oil Spill Fund

• Local, state, tribal and federal Local, state, tribal and federal government claims not covered by government claims not covered by $20,000,000,000 fund$20,000,000,000 fund

OPAOPA

• Section 1018 – State AuthoritiesSection 1018 – State Authorities– OPA does not preempt state claims nor OPA does not preempt state claims nor

does the OPA damage limit language does the OPA damage limit language controlcontrol

Bay St. Louis ResponseBay St. Louis Response

OPA Claim ?OPA Claim ?

• Will a long term decrease in property Will a long term decrease in property values and the resulting decrease in values and the resulting decrease in property tax collections become a property tax collections become a recoverable damage under OPA?recoverable damage under OPA?

OPA Claim ?OPA Claim ?

• How do we address cash transaction How do we address cash transaction losses ?losses ?– ““At least $1.4 billion of income is likely kept off At least $1.4 billion of income is likely kept off

the books every year along this stretch of the books every year along this stretch of Texas, Louisiana, Mississippi, Alabama, and Texas, Louisiana, Mississippi, Alabama, and Florida – a system that’s prevailed for Florida – a system that’s prevailed for generations on well-worn docks and restaurant generations on well-worn docks and restaurant patios, far from the eyes of IRS agents.” patios, far from the eyes of IRS agents.” Christian Science Monitor July 6, 2010Christian Science Monitor July 6, 2010

Clean Water ActClean Water Act

• Who is liable ?Who is liable ?– How is liability establishedHow is liability established– What are the potential damagesWhat are the potential damages

• Section 309 and 311Section 309 and 311

CWACWA

• Section 309 Liability – any Section 309 Liability – any PersonPerson that causes a that causes a DischargeDischarge of a of a PollutantPollutant from a from a Point SourcePoint Source to the to the Waters of the USWaters of the US

CWACWA

• Section 311 LiabilitySection 311 Liability– DischargeDischarge of of OilOil or or Hazardous Substances Hazardous Substances

into or upon the into or upon the Navigable WatersNavigable Waters of the of the USUS

– Different definition of discharge than Different definition of discharge than Section 309Section 309

– Seeping a discharge ? Under 309 but not Seeping a discharge ? Under 309 but not 311?311?

CWACWA

• Section 311(b)(7) Civil PenaltiesSection 311(b)(7) Civil Penalties– $32,500/day or $1,100/barrel$32,500/day or $1,100/barrel

• If a result of gross negligence or willful If a result of gross negligence or willful misconduct can be up to $4,300/barrelmisconduct can be up to $4,300/barrel

• Section 309(d) Civil PenaltiesSection 309(d) Civil Penalties– Statutory $25,000/day (now Statutory $25,000/day (now

$32,500/day)$32,500/day)

CWA – Section 311 PenaltiesCWA – Section 311 Penalties

• Up to 182 Millions gallons = 4,333,333 Up to 182 Millions gallons = 4,333,333 barrelbarrel– $4,766,666,300$4,766,666,300

– If gross negligence or willfulIf gross negligence or willful

•$18,633,331,900$18,633,331,900

• Largest to date $4.6 billion (under 309) – but not Largest to date $4.6 billion (under 309) – but not all finesall fines

CWA Section 309 PenaltiesCWA Section 309 Penalties

• 85 days x $32,500 = $2,762,50085 days x $32,500 = $2,762,500

– If several Discharges determined could If several Discharges determined could be multiplied or will feds consider single be multiplied or will feds consider single source?source?

CWA – 309 or 311 CWA – 309 or 311

• Government must chose – can not Government must chose – can not use both enforcement statutesuse both enforcement statutes

CWA – Criminal LiabilityCWA – Criminal Liability

• For a CWA Section 1319(c)(1), the government For a CWA Section 1319(c)(1), the government would only have to show negligence, which is a would only have to show negligence, which is a fairly low threshold for criminal liability. fairly low threshold for criminal liability.

• For a CWA Section1319(c) violation, the For a CWA Section1319(c) violation, the maximum fine is $25,000 a day and up to one maximum fine is $25,000 a day and up to one year in prison for a conviction based on year in prison for a conviction based on negligence, ornegligence, or– $50,000 a day and up to three years in prison for a $50,000 a day and up to three years in prison for a

conviction based on conduct shown to be done conviction based on conduct shown to be done “knowingly.”“knowingly.”

– ““knowingly endangermentknowingly endangerment” could result in $250,000 ” could result in $250,000 ($1,000,000 for corp) and not more than 15 years($1,000,000 for corp) and not more than 15 years

Endangered Species ActEndangered Species Act

• 6 endangered species in the gulf6 endangered species in the gulf– Fish, turtles and mammalsFish, turtles and mammals

ESA – Civil LiabilityESA – Civil Liability

• Knowingly violates which includes a Knowingly violates which includes a takingtaking– Taking is “harass, harm, pursue, …..kill, Taking is “harass, harm, pursue, …..kill,

…..”…..”– Harm can mean to force a species from Harm can mean to force a species from

its habitatits habitat

• Up to $25,000 per violationsUp to $25,000 per violations

ESA – Section 11ESA – Section 11Criminal LiabilityCriminal Liability

• Any person knowingly violates Any person knowingly violates – Up to $50,000 or one year imprisonmentUp to $50,000 or one year imprisonment

Migratory Bird Treaty ActMigratory Bird Treaty Act

• Protects migratory birds and makes it Protects migratory birds and makes it illegal to harm some 836 species of illegal to harm some 836 species of birds as well as their nests and eggs birds as well as their nests and eggs includes the brown pelican. includes the brown pelican.

• Fines can be up to $15,000 per Fines can be up to $15,000 per violation. violation.

• Criminal Liability Criminal Liability

Marine Mammal Protection Marine Mammal Protection ActAct

• ESA approach for mammalsESA approach for mammals– Up to $10,000 for each violationUp to $10,000 for each violation– Up to $20,000 and one year Up to $20,000 and one year

imprisonment if knowinglyimprisonment if knowingly

• 125 Marine mammals protected125 Marine mammals protected

• 28 protected species in the gulf28 protected species in the gulf

Comprehensive Environmental Comprehensive Environmental Response, Compensation and Response, Compensation and Liability Act (“CERLCA”)Liability Act (“CERLCA”)

• ““Hazardous Substance” excludes Hazardous Substance” excludes crude oil and any fraction thereofcrude oil and any fraction thereof

• But the National Contingency Plan But the National Contingency Plan (“NCP”) is created within Section 106 (“NCP”) is created within Section 106 – Dispersants regulated under this Dispersants regulated under this

authorityauthority

““EPA Chief Calls for More EPA Chief Calls for More Authority Over Dispersants” Authority Over Dispersants” Greenwire July 15, 2010Greenwire July 15, 2010

• U.S. EPA Administrator Lisa Jackson U.S. EPA Administrator Lisa Jackson today urged Congress to take up today urged Congress to take up legislation strengthening her agency's legislation strengthening her agency's authority over oil dispersants in the authority over oil dispersants in the wake of the Gulf of Mexico gusher, wake of the Gulf of Mexico gusher, calling for more testing and disclosure calling for more testing and disclosure of the chemical ingredients in the of the chemical ingredients in the controversial spill-fighting products.controversial spill-fighting products.

• Up to 1,800,000 gallons used in BP spill Up to 1,800,000 gallons used in BP spill

Solid Waste Disposal ActSolid Waste Disposal Act

• How should the clean up waste be How should the clean up waste be disposed ? disposed ?

•Classification of the wasteClassification of the waste

•Disposal of “liquids”Disposal of “liquids”

•BP control of disposal locations BP control of disposal locations

Local Waste DisposalLocal Waste Disposal

• "It's like someone dumping this stuff in our front yard and apologizing for it, picking it up and then turning around and dumping it in our backyard," said Harrison County supervisor Marlin Ladner.

•July 2, 2010 Biloxi Sun Herald

Magnuson-Stevens Fishery Conservation and Management Act

• primary law governing marine primary law governing marine fisheries management in United fisheries management in United States federal waters. States federal waters.

• Authority to limit fishing in the Authority to limit fishing in the impacted areasimpacted areas

Clean Air ActClean Air Act

• Prior violations at BP facilities can be Prior violations at BP facilities can be considered in penalty calculationsconsidered in penalty calculations

National Environmental Policy National Environmental Policy ActAct

• Not a regulatory act but a procedural Not a regulatory act but a procedural requirementrequirement

• Many accuse MMA from not Many accuse MMA from not complying full with NEPA during the complying full with NEPA during the well permitting processwell permitting process

Other thoughtsOther thoughts

• Should the federal government have any Should the federal government have any liability because:liability because:– it “is in charge”?it “is in charge”?

• "The American people should know that from the moment this disaster began, "The American people should know that from the moment this disaster began, the federal government has been in charge of the response effort," President the federal government has been in charge of the response effort," President Obama May 27, 2010Obama May 27, 2010

– US Army Corps of Engineers time frame to m US Army Corps of Engineers time frame to m ake decisions on spill control actions ?ake decisions on spill control actions ?

– Allowed BP to “control” local and private Allowed BP to “control” local and private responses by requiring BP approval on spill responses by requiring BP approval on spill control methods etc ?control methods etc ?

Other thoughts Other thoughts

• Who should have liability for the any Who should have liability for the any damages arising from the damages arising from the dispersants ?dispersants ?

Other thoughtsOther thoughts

• Does the state have any liability Does the state have any liability because itbecause it– Relied upon BP for clean up and did not Relied upon BP for clean up and did not

use its own resources until many days use its own resources until many days into the response ?into the response ?•““Haley BarbourHaley Barbour claimed that oil was not a claimed that oil was not a

big threat to the people of the big threat to the people of the Gulf CoastGulf Coast. . Now, with oil hitting his state's beaches for Now, with oil hitting his state's beaches for the first time since the the first time since the start of the BP spillstart of the BP spill , , the the Republican governor says his state isn't governor says his state isn't prepared for the spill and needs more help.” prepared for the spill and needs more help.” June 28, 2010 ABC NEWSJune 28, 2010 ABC NEWS

Other thoughts Other thoughts

• What level of response is deemed What level of response is deemed acceptable – is there liability for not acceptable – is there liability for not using all available resources ?using all available resources ?– One of the most advanced oil clean up One of the most advanced oil clean up

ships remains idled in Alaska because ships remains idled in Alaska because BP decided in late June to not bring it to BP decided in late June to not bring it to the gulf – (BP claims the time to bring it the gulf – (BP claims the time to bring it down was too long so they purchased down was too long so they purchased the ships cleanup equipment – but only the ships cleanup equipment – but only 3 weeks ago)3 weeks ago)