The Deepwater Horizon disaster has sparked numerous inquiries from investment management, shipping and energy clients about which of the businesses involved in the massive release of crude oil into the Gulf of Mexico will be liable, for how much and to whom. There are many players involved with the rig, the blowout preventer, the spill and its aftermath (some of those players are as yet unknown to the public), and there will probably be years of litigation involving thousands of claims, before all of the facts are revealed and actual fault is determined. It is expected that the United States government, the governments of the impacted states, as well as third parties, will seek maximum compensation for their losses, and that criminal claims and civil penalties will ensue.
One of the primary statutes relating to this type of situation is the Oil Pollution Act of 1990 or OPA 90. OPA 90 is a strict liability statute which imposes liability on owners and operators of ships and oil patch lessees. It provides for the payment of cleanup expenses, natural resource damage, damages to certain third parties, civil fines and penalties. In addition, criminal claims may be made under OPA 90 and related statutes. While there currently may be limitations on the liability that is imposable under OPA 90, such limits can be overcome via a finding of gross negligence or violation of a federal statute. With respect to BP, these limits have already been exceeded. Moreover, Congress is now looking at ways to strip oil and shipping companies of many of the statutory limits and other protections that they are now afforded.
OPA 90 was originally enacted as a response to the Exxon Valdez spill in 1989. Because of its direct relationship with the Exxon Valdez spill, OPA 90 primarily addressed issues arising from a spill from a ship. Although OPA 90 indeed applies to rigs (and mobile offshore drilling units, or “MODUS” such as the Deepwater Horizon), its regime does not contemplate a spill of the current magnitude.
In addition to OPA 90, it is also expected that claimants will make claims under state law in state court, that members of the crew of the Deepwater Horizon who were injured or killed will make substantial claims under maritime and state law, and, of course, that there will be the claims process conducted by Kenneth Feinberg (the independent administrator appointed to handle BP’s $20 billion claims escrow fund). There will also be substantial economic impact on the entire oil business if the moratorium on offshore drilling is re-instated by an appeals court.
In short, liability issues at this point are difficult to project, except to say that every party involved in the venture that led to the fire, blowout and spill will be named as parties in federal and state lawsuits, administrative claims and criminal proceedings, that not all claims will be settled, that there will be findings and appeals, and that there will be allegations of fault and finger-pointing made as between the various defendants based on their contractual arrangements and applicable law.
Seward & Kissel’s Maritime Group has extensive expertise in the matters addressed in this memo. If you have any questions, please contact Maritime Group partners Bruce Paulsen (212-574-1533) or Larry Rutkowski (212-574-1206).
