December 2, 2015

Anadarko Ordered to Pay $159.5 Million for 2010 Gulf Spill

Anadarko Petroleum Corp. was ordered to pay almost $160 million for its role as part-owner of the doomed Gulf of Mexico well that in 2010 caused the biggest offshore oil spill in U.S. history.

The fine was the last big uncertainty hanging over Anadarko from the disaster. The order Monday comes after the government told U.S. District Judge Carl Barbier in New Orleans that the company should be fined more than $1 billion for its role in the well’s blowout, which killed 11 people and spewed oil for almost three months.

Anadarko, which had a 25 percent stake in the Macondo well, argued it shouldn’t be required to pay fines simply because it owned part of the well, as the accident wasn’t its fault. In 2014, The Woodlands, Texas-based company set aside $90 million for the case when it offered to settle for that amount.

Barbier said the fine reflected his finding that Anadarko didn’t have a role in causing the spill. Under the law, he could have imposed as much as $1,100 per barrel of oil spilled, or about $3.5 billion.

The fine is “only 4.5 percent of the maximum penalty, and therefore on the low end of the spectrum,” Barbier said in his order. “The court finds this amount strikes the appropriate balance between Anadarko’s lack of culpability and the extreme seriousness of this spill.”

Minority Partners

Barbier rejected Anadarko’s argument that a heavy penalty could cause minority partners to seek a larger role in offshore operations, which might complicate safety and drilling decisions. “A penalty of this size might encourage non-operators to avoid investing with careless operators,” he said.

The company said it’s pleased the penalty is less than what the government sought and that it’s reviewing whether to file an appeal.

“While we respect the court’s decision, we continue to believe that penalizing a non-operator for events beyond its control is inconsistent with the intent of the Clean Water Act,” Anadarko said in a statement posted on its website.

David Berg, a Houston attorney who has tracked the oil spill litigation and often sues polluters on behalf of municipalities, said given the damage from the spill, the fine is “not a slap on the wrist; it’s a tongue kiss from the judge.”

David Uhlmann, former head of the Justice Department’s environmental crimes unit, said the fine is “too small to be an effective deterrent.” It “will not have a significant effect on a company worth approximately $30 billion,” said Uhlmann, now a University of Michigan law professor.

The professor said Anadarko wasn’t a silent partner in its dealings with BP Plc, which owned 65 percent of the well.

“Anadarko urged BP to continue drilling deeper, even when BP wanted to stop,” he said. “Yet the judge refused to consider evidence of Anadarko’s risky behavior, which may explain the small size of Anadarko’s fine.”

Pollution Fines

BP agreed in July to pay $5.5 billion in pollution fines as a part of a $20.8 billion settlement with the U.S. and five Gulf states. That came on top of billions of dollars already spent on response, clean-up and compensation, pushing BP to raise its budget for the spill to $55 billion.

The Macondo blowout destroyed the Deepwater Horizon drilling rig and sparked thousands of lawsuits against BP, as well as Vernier, Switzerland-based Transocean Ltd., owner of the rig, and Houston-based Halliburton Co., which provided cementing services for the project.

The U.S. sued BP and Anadarko in December 2010. Anadarko agreed the following year to pay $4 billion to London-based BP to cover its share of all public and private oil-spill damage claims, cleanup costs and damage assessments. That deal didn’t cover any pollution fines or penalties Anadarko might face.

In 2012, Barbier ruled the companies were automatically liable for civil penalties under the Clean Water Act as co-owners of the well. That decision, upheld by the U.S. Supreme Court, left both companies vulnerable to fines of $1,100 per barrel spilled.

A separate decision by Barbier in 2014 that BP was grossly negligent in causing the spill, allowed for potential pollution fines against BP to be almost quadrupled. To calculate the penalty, Barbier determined in January 2014 that 3.19 million barrels were spilled.

Anadarko wasn’t vulnerable to the higher fines because Barbier had previously ruled it didn’t cause the accident. The judge wouldn’t allow the U.S. to argue otherwise in a trial over penalties. Fines under the Clean Water Act total $1 billion for Transocean.

The other partner in the well, Mitsui & Co.’s Moex Offshore 2007 LLC, which owned a 10 percent share, settled state and U.S. pollution law claims in 2012 for $90 million and paid BP more than $1 billion in 2011 for its share of spill costs.

The government case is U.S. v. BP Exploration & Production Inc., 10-cv-04536, which is part of In Re Oil Spill by the Oil Rig Deepwater Horizon in the Gulf of Mexico on April 20, 2010, MDL-2179, in U.S. District Court, Eastern District of Louisiana (New Orleans).