On May 8, 2015, BP PLC. (BP, Financial) got a major breakthrough in the legal proceedings of the Oil Spill in the Gulf of Mexico 2010 case, when the U.S. federal appeals court awarded the oil and gas super major the right to appeal against the damage claims awarded to victims of the explosion and oil spill disaster. This right to appellate review permitted by the New Orleans Circuit Court may limit the pay-outs that escalated to $10.3 billion from the original $7.8 billion settlement claims raised in 2012. Out of this total, nearly $5.13 billion has already been paid to 63,597 claimants to date in compensation.
The Deepwater Horizon oil spill
Considered one of the worst environmental disasters to date, the Deepwater Horizon oil spill is commonly called the BP oil disaster as it originally started with an explosion and subsequent sinking of a Deepwater Horizon oil rig in Macondo Prospect that was owned by BP on April 20, 2010 in the Gulf of Mexico. The explosion that killed 11 workers triggered the largest U.S. offshore oil spill lasting for 87 days until it was finally controlled on July 15, 2010 and ultimately sealed in September 2010. With an estimated discharge of 4.9 million barrels which is around 210 million U.S. gallons of oil, the months-long accidental marine oil spill adversely affected the fishing and tourism industries and extensively damaged marine life with some cases of long-term and fatal effects due to oil contaminated aquatic habitats. Massive containment and clean-up drives ensued to protect beaches, estuaries and backwaters from oily residues with extensive evacuation and rescue efforts to revive the suffering marine wildlife.
The British multinational BP along with rig operator and contractor Transocean (RIG, Financial) and Halliburton (HAL, Financial) respectively, were blamed for the mishap after numerous investigations to identify the cause of the exploding disaster. In 2011, an official government commission faulted the inefficient safety procedures and cost cutting operations of BP and its partners and broached the need for significant reforms in operating practices and government policies in this sector.
Facing censure from U.S. government, public and Environmental Protection agencies, BP pleaded guilty to the raised federal criminal charges of manslaughter and felony in a settlement with the United States Department of Justice and was initially fined with a record high sum of $4.525 billion along with stringent monitoring of its safety procedures and temporary ban from new government contracts. The biggest blow to BP’s legal standing was the September 2014 ruling by a judge of the U.S. District Court citing gross negligence and reckless conduct by BP as the prime cause for the oil spill. BP appealed for a right to ask for a review as endorsement of such ruling could lead to additional financial penalties up to $18 billion, and the loss of credibility could severely damage the very foundations of this enterprise.
The current scenario
Judge Fortunato Benavides of the Appellate Court stated that the sixth-largest oil and gas company in the world deserved the right to appeal because the initial agreement between BP and the United States Department of Justice established a mechanism to resolve claims and did not explicitly waiver the right to appeal against a claim.
While this ruling brings hope to BP for revised claim settlements as per the discretion of district courts, the court rejected its appeal against compensation to three non-profit groups in a separate order. BP spokesman Geoff Morrell expressed his optimism for individual claim determination while the lawyer for victims accused BP of trying to renegade the settlement.
