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In this June 23, 2010 file photo, crews work to clean up oil from the Deepwater Horizon oil spill washed ashore at Pensacola Beach in Pensacola Fla. (Michael Spooneybarger/Michael Spooneybarger/Associated Press)
In this June 23, 2010 file photo, crews work to clean up oil from the Deepwater Horizon oil spill washed ashore at Pensacola Beach in Pensacola Fla. (Michael Spooneybarger/Michael Spooneybarger/Associated Press)

Global Exchange

The levy is high: BP's reckoning in New Orleans Add to ...

Multi-District Litigation 2179 is not a pretty name, but learn to love it. It is the technical name for what may be the biggest ever civil damages trial. It starts on Monday in New Orleans, two years after the Macondo accident that killed 11 men and spewed more than 4 million barrels of oil into the Gulf of Mexico.

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BP and its partners have a reckoning with Judge Carl Barbier. A settlement looks likely - it seems the most desirable outcome for all involved. But the nature of the case means that it may not be imminent.



One argument in favour of a settlement is that the case is vastly complex and unwieldy. BP, the operator of the Deepwater Horizon rig, is the main defendant, alongside Transocean, the rig’s owner, and Halliburton, which worked on the Macondo well. The plaintiffs include the federal government, the states of Alabama and Louisiana, some 120,000 people from the Gulf coast, and various federal and local agencies. Who, apart from lawyers, would not want to avoid taking that to court?



A better argument for settling may be the uncertainty of the outcome. BP has set aside $37-billion to cover the costs of the leak. That has covered $20-billion in a special fund for victims and the $14-billion paid out so far in clean up and compensation. But it includes a provision of only $3.5-billon against fines that the oil company could face under the Clean Water Act, which is what the New Orleans case will decide. BP could face a fine of up to five times that if “gross negligence” (which it denies) is established. That is a material difference that does not look to be discounted in the BP share price.



Mitsui, which had a 10 per cent stake in Macondo, has agreed to pay $90-million to settle civil claims in the case. But it was a sleeping partner; its settlement, which would appear to cap CWA liabilities at less than $1-billion, is hardly a benchmark. There is upside for BP, Halliburton and Transocean in settling the damaging episode quickly. But MDL 2179 has a lot of legs in it yet.

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