Deepwater Horizon- Does The Penalty fit the Crime?

The U.S. Environmental Protection Agency, EPA, announced last Thursday that Transocean Deepwater Inc., Transocean Ocean Holdings LLC,Transocean Offshore Deepwater Drilling Inc., Transocean Deepwater Inc. and Triton Asset Leasing GMBH have signed a cooperation and guilty plea agreement with the U.S. government pleading guilty to criminal violation of the clean water act, and agreed to pay $400 million in criminal fines and penalties and have agreed to pay an additional $1 billion to resolve federal Clean Water Act civil penalty claims for the 87 day oil spill at the Macondo Well and the Transocean drilling rig Deepwater Horizon back in 2010.

Under the settlement, the Transocean must also implement court-enforceable measures to improve the operational safety and emergency response capabilities at all their drilling rigs working in waters of the United States. These measures are aimed at reducing the chances of another blowout and release/spill of oil and at improving emergency response capabilities and will be in place for at least five years.

Back on November 15, 2012, BP agreed to plead guilty to 11 counts of felony manslaughter, one count of felony obstruction of Congress, and violations of the Clean Water and Migratory Bird Treaty Acts., all arising from the 2010 Macondo Well/ Deepwater Horizon blowout that killed 11 people and caused the largest oil spill and what EPA called in their press release the largest environmental disaster in U.S. history. BP agreed to pay $4.5 billion, including $1.26 billion criminal fine, to end all criminal charges and resolve securities claims against them.

In addition, on November 28^th 2012 EPA announced that it had temporarily suspended BP Exploration and Production, Inc., BP PLC and affiliated companies (BP) from new contracts with the federal government. This includes oil development leases in a Gulf as well as contracts with the Department of Defense. The suspension does not affect existing agreements and contracts BP has with the government. Since the Deepwater Horizon accident, the US has granted BP more than 50 new leases in the Gulf of Mexico, where the company has been drilling since the government lifted the drilling moratorium. In addition, in 2011 BP was the largest fuel supplier to the U.S. Department of Defense and is likely to be the largest supplier in 2012, and 2013. BP has also reached an agreement to settle claims from fishermen and others affected by the oil spill for $7.8 billion that was approved by a federal judge on December 21, 2012. According to a press release by BP, this raises to $41.95 billion the charge taken against income in the third quarter financial statements. BP’s financial statements as of  December 31, 2012 will reflect this additional charge that reflects the criminal settlements, the $18 billion spent on cleanup costs and the $15 billion  paid into the trust fund to compensate victims.  This settlement only addresses economic and property damage and does not address claims made by cleanup workers and other who say exposure to oil or oil dispersant has made them sick.

Separate from the corporate charges and settlements, a federal grand jury has indicted two BP supervisors, Robert Kaluza and Donald Vidrine who were on board the Deepwater Horizon with seaman manslaughter and involuntary manslaughter for each of the 11 men killed in the blast, as well as a criminal violation of the clean water act. Robert Kaluza and Donald Vidrine were the on-site supervisors representing BP on the Deepwater Horizon drill rig. They were the Well Site Leaders known colloquially as the “company men.” Their job was to ensure that BP had “well control” by supervising the implementation of BP’s drilling plan and ensuring the safety of the operation.

According to charges filed by the United States against Mr. Kaluza and Mr. Vidrine on April 20^th 2010 a negative pressure test was performed on the well to ensure that the temporary cement seal just installed would hold when the drilling mud was removed when the well displacement took place. During the test the pressure quickly built up above acceptable values. Each time the pressure was bled off it built up again along with abnormal fluid flow.

The two men were presented with what the U.S. Government characterizes as a nonsensical explanation that this was due to a "bladder effect” and directed the testing of the “kill line.” The government charges that rather than consult with BP engineers on shore about the continued high pressure in the drill pipe and ask for advice, Mr. Kaluza and Mr. Vidrine passed the negative pressure test. The government characterizes this as gross negligence.

The well was not secure. The abnormal readings during the negative pressure test were the indication that the well was not secure and Mr. Kaluza and Mr. Vidrine failed to adequately account for the abnormal readings during the testing. The government charges that these two men by deeming the negative pressure test a success allowed the displacement of the well to proceed and resulted in the blowout that killed 11 men aboard the rig that same evening. Mr. Kaluza and Mr. Vidrine are charged with involuntary manslaughter, seaman manslaughter and criminal violation of the Clean Water Act. Both men have pleaded not guilty in a New Orleans court. They face up to 10 years in prison on each of 11 counts of seaman's manslaughter and eight years in prison on each of 11 counts of involuntary manslaughter. The trial has been delayed until 2014 to allow the defense to adequately prepare.

Finally, former senior BP executive David Rainey pleaded not guilty to obstruction of justice charges for lying about how much oil was gushing out of the runaway well. He faces five years in prison if convicted.