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BP Trial Opens, With Possible Deal in Background As Oil Spill Trial Opens, Bid for Deal Continues
(about 1 hour later)
NEW ORLEANS — The long-awaited civil trial against BP and its contractors stemming from the 2010 explosion of a drilling rig in the Gulf of Mexico that left 11 dead and soiled hundreds of beaches began on Monday, even as settlement talks appeared to intensify between the oil company and federal and state governments. NEW ORLEANS — BP finally faced off in court on Monday against an army of federal prosecutors, lawyers and even its contract partners over the Gulf of Mexico oil spill three years ago, contending that it alone should not shoulder blame for the rig explosion that killed 11 workers and soiled beaches and marshes from Louisiana to Florida.
James P. Roy, the lead lawyer of private plaintiffs, started the trial with a scathing attack on BP for ignoring multiple signs of problems on the rig and in routine maintenance of safety tests and equipment that led to the Macondo well accident. BP’s share of responsibility is not only at the crux of the trial that opened Monday, but it also is at the heart of a last-minute settlement proposal offered by the Justice Department and the five affected gulf states — Alabama, Florida, Louisiana, Mississippi and Texas — that are demanding that BP pay $16 billion in spill-related fines and penalties.
“BP made a series of decisions to save time and money that substantially increased risk,” Mr. Roy told a packed courtroom. He said the decisions were typical of “a culture of profit and production over safety.” But as the long-awaited trial began here, federal prosecutors and plaintiffs’ lawyers made emotional appeals for the trial judge to find BP guilty of gross negligence, pointing to mounds of e-mails, documents and reports that had already been made public in the case. BP believes it should be held to a more lenient standard.
Mr. Roy noted that BP had decided to employ single-walled drill pipe, which provided inferior barriers to leaks, and it decided that it was not necessary to circulate drilling mud, a method designed to strengthen cement, before installing a seal on the well. He reminded the court that BP opted against conducting a cement bond test, an acoustics test that could have identified the gas that had leached into the piping during the well cementing process. “Reckless actions were tolerated by BP, sometimes encouraged by BP,” said Michael Underhill, the Justice Department’s lead prosecutor. “These damages were caused by actions that cannot be seen as anything but inexcusable behavior.”
And finally, he said, using information that has previously been described in numerous government and private reports since the accident, BP ignored the results of a failed pressure test shortly before the well was sealed and blew out. Mr. Underhill discussed a phone call between Donald Vidrine, a BP supervisor on the rig who faces criminal charges, with Mark Hafle, an onshore engineer, in which Mr. Vidrine described problems with a critical test less than an hour before the explosion. Neither man took action to prevent the eventual blowout.
But Mr. Roy also argued that Transocean, the owner and operator of the Deepwater Horizon rig, had failed to adequately train its employees in emergency operations, and Halliburton was deficient in testing and mixing the cement to seal the well. “They had a conversation that could have saved 11 lives, saved the gulf, saved the people of the gulf from catastrophe,” Mr. Underhill said.
The first phase of the trial, which was expected to last three months under Judge Carl J. Barbier of Federal District Court in New Orleans, will determine whether BP or its contractors were “grossly negligent” in causing the accident. The private plaintiffs in the trial, including thousands of businesses and individuals, are suing for damages from all the companies. If federal and state officials were successful in proving gross negligence against BP in its handling of the spill, the fines against the company would be four times as high as under a lower standard of liability, negligence.
In his opening statement, Michael Underhill, the Justice Department’s lead attorney, said the government would prove that BP was grossly negligent. “Reckless actions were tolerated by BP, sometimes encouraged by BP,” he said. “These damages were caused by actions that cannot be seen as anything but inexcusable behavior.” BP’s lawyer, Robert C. Brock, defended the company’s design of the well and denied that the company was grossly negligent. He characterized the drilling of a well as a team effort in which the company and its contractors — namely Halliburton and Transocean, who also are defendants — all needed to take responsibility.
He discussed a phone call between Donald Vidrine, a BP supervisor on the rig who has already been criminally charged, with Mark Hafle, an onshore engineer, in which Mr. Vidrine described problems with a critical test less than an hour before the explosion. But neither man took action to stop operations to prevent the eventual blowout.
“They had a conversation that could have saved 11 lives, saved the Gulf, saved the people of the Gulf from catastrophe,” Mr. Underhill said.
BP’s lawyer, Robert C. Brock, defended the company’s design of the well and denied that the company was grossly negligent. He characterized the drilling of a well as a team effort in which the company and its contractors all needed to take responsibility.
“Everyone on the rig is empowered to say stop the job,” Mr. Brock said. “There were no dictators in this group.”“Everyone on the rig is empowered to say stop the job,” Mr. Brock said. “There were no dictators in this group.”
Separately, details of a settlement offer by federal and state officials to the oil company began to emerge over the weekend. The plan, worth a total of $16 billion, would limit the fines paid by BP under the Clean Water Act to $6 billion, a proposal that could help reduce its tax liability, one person briefed on the plan said Sunday, speaking on the condition of anonymity. The settlement proposal would cap the amount of fines that BP might pay for violations of the Clean Water Act to $6 billion, significantly less that it might face if the trial proceeds. The proposal would allow BP to pay an additional $9 billion to resolve environmental penalties related to the spill, an alternative that would lessen the impact on the company’s tax liabilities. The environmental penalties, under separate laws, are tax deductible, while fines like those imposed under the Clean Water Act are not.
BP would also pay $9 billion in penalties to cover damages to natural resources as well as the cost of restoration, that person said. The remaining $1 billion would be set aside in a fund that could be tapped if unanticipated environmental damages related to the spill developed. The remaining $1 billion would be put in a fund for unanticipated environmental damages from the spill.
No one at BP, the Justice Department or the states involved has commented on any settlement proposal, but several lawyers briefed on the negotiations said that a $16 billion proposal had been made. The affected states are Alabama, Florida, Louisiana, Mississippi and Texas, although only Alabama and Louisiana are participating in the trial. One lawyer, who was briefed on the settlement talks, said on Monday that discussions were still under way. Another lawyer, also briefed on the efforts, said that a number of witnesses who were scheduled to appear as trial witnesses have been told that their testimony might not be needed.
Even if settlement talks slow or stall, the proposal represents a big breakthrough for several reasons, lawyers briefed on the talks said. For one, it represents the first time that Louisiana, which was hardest hit by the spill and would receive the largest payout of any state from a settlement, has participated in an offer. The frequently intense opening arguments in court on Monday, however, outlined an extravagance of errors.
In addition, the proposal signals the first agreement among states and the federal government on two other crucial issues: a rough plan for how the states would divide any settlement money, and how the settlement would balance fines and penalties against BP. Several referred to one Halliburton technician who missed key signs that the well was on the verge of blowing out when he took a 10-minute cigarette break during a safety test. In one of the e-mail exchanges between two BP workers discussing problems with the well, one of the two wrote that he had to leave for a dance class and would get back to him.
BP pleaded guilty last year to 14 criminal charges, including manslaughter; admitted negligence in misreading important tests before the blowout; and agreed to pay $4.5 billion in fines and other penalties. The Justice Department has also filed criminal charges against four BP employees. Transocean employees came up with a theory they called “the bladder effect” to explain a failed 11th-hour test showing pressure building in a drill pipe that otherwise should have stopped all operations and averted the blowout.
Last February, a trial to resolve claims against BP by individuals and businesses affected by the spill was delayed by Judge Barbier on the eve of trial because of settlement talks. BP subsequently agreed to create a fund now valued at $8.5 billion to settle those claims. However, numerous individuals and businesses chose not to participate and are also parties to the trial that started Monday. But it was BP that was the central focus of the day’s proceedings.
Lawyers for the Justice Department, two gulf states and private plaintiffs mounted scathing attacks on the company for ignoring multiple signs of problems on the rig in routine maintenance of safety tests and equipment.
In several hours of arguments, they noted numerous errors by BP in managing a high-pressure well. The company had decided to employ single-walled drill pipe, which provided inferior barriers to leaks, and it decided that it was not necessary to circulate drilling mud, a method designed to strengthen cement, before installing a seal on the well.
They reminded the court that BP opted against conducting a cement bond test, which is an acoustics test that could have identified the gas that had leached into the piping during the well-cementing process.
And finally, using information that has previously been described in numerous government and private reports since the accident, they said BP ignored the results of a failed pressure test shortly before the well blew out.
Mr. Brock, representing BP, said the well design followed industry standards.
“There were a number of mistakes and misjudgments that were made by BP, Transocean and Halliburton,” he said. He argued that Transocean was responsible for maintenance and operations of the rig it owned, and Halliburton was responsible for designing and testing the cement to seal the well.
Lawyers for both Transocean and Halliburton said their companies were following BP’s lead, and that it was BP who was overwhelmingly responsible for the accident.
This is the first trial phase of a two-part case. The second phase is intended to determine how much oil was actually spilled. The federal government estimates that more than four million barrels of oil spilled from the Macondo well, covering birds with tarry crude and extending a slick across nearly 30,000 square miles of the gulf.
BP says the government’s estimate is at least 20 percent too high.
Last November, BP agreed to pay $4.5 billion in fines and other penalties and pleaded guilty to 14 criminal charges related to the accident. It has also paid out $9 billion in a partial settlement with businesses, individuals and local governments. The company has set aside $42 billion for payouts, largely by selling $38 billion of global oil and gas assets.
Four of its employees face criminal charges of manslaughter and obstruction of justice or are accused of making false statements related to how much oil was escaping the well.
The government and Transocean have already come to a $1 billion civil settlement and the rig company will pay an additional $400 million criminal penalty. Halliburton has not settled yet and says that it has no liability under contracts signed with BP, but it may yet be held liable for punitive damages or civil penalties under the Clean Water Act.