Wednesday, June 9, 2010

Legal Liability and the Gulf Oil Spill

As efforts continue to halt the flow of oil following the April 20 explosion of the Deepwater Horizon drilling rig, questions continue to surface about who is legally to blame. Last week, Attorney General Eric Holder announced that the Justice Department had opened civil and criminal investigations into the matter. Mr. Holder did not indicate the parties under investigation, but likely targets include BP, the owner of the deep-sea well, Transocean, which leased the Deepwater Horizon to BP, Cameron, which manufactured the blowout preventer, and Halliburton, which performed services such as cementing.

Laws that the Justice Department could use to seek liability include the Oil Pollution Act of 1990, the Clean Water Act, the Migratory Bird Treaty Act, and the Endangered Species Act. Under the Oil Pollution Act, enacted in the wake of the Exxon Valdez spill off the coast of Alaska, parties can be held liable for oil removal costs as well as for economic and natural resources damage. The Justice Department will likely also investigate whether parties committed such crimes as false statement, conspiracy, or obstruction of justice in their dealings with federal regulatory authorities. In addition, state attorneys general may bring legal action under state law. Private attorneys have already filed civil lawsuits on behalf of individuals allegedly harmed by the spill.

It appears very likely that the Justice Department will file a civil suit. Under laws like the Oil Pollution Act and the Clean Water Act, the Justice Department would simply have to prove that an oil spill occurred and that a party such as BP was responsible. A court could order civil liability without a showing of intent. Under the Oil Pollution Act, the Justice Department could seek damages up to $75 million. This limit does not apply to oil removal costs or to damages resulting from gross negligence or federal safety violations. To prove a criminal case involving fines and potential jail time for culpable individuals, the Justice Department would have to show some degree of intent. A felony under the Clean Water Act, for example, would require that a party acted knowingly with regard to the creation of the spill, a difficult showing to make absent egregious conduct. A showing of negligence could result in a misdemeanor under the Act.

The actions of the Minerals Management Service, a division of the Department of the Interior that regulates offshore drilling, may also complicate matters. The MMS has received criticism for its dual role in both fostering and policing offshore drilling activity. If the MMS explicitly approved actions by parties such as BP with respect to the maintenance of the rig, the Justice Department will have difficulty proving criminal conduct. The Justice Department’s investigation could reveal as much about the need for regulatory reform as the feasibility of criminal prosecution.

Click here for a Washington Post article on this topic.

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