OilVoice - BP may have to pay entire $42 billion clean up bill

BP may have to pay entire $42 billion clean up bill

Friday, January 27, 2012

BP has lost its attempt to shift $15 billion of costs related to the Gulf of Mexico oil spill onto contractor Transocean.

This increases the possibility that BP may have to pay the entire $42 billion clean up bill.

A U.S. federal judge said BP must uphold a clause in its contract with Transocean Ltd that would shield them from compensatory damage claims related to the disaster.

BP may have to confront these compensation claims alone. The compensation claims were brought by the likes of fishermen and hoteliers whose livelihoods were affected by the offshore oil spill.

However, Transocean might still have to pay all or part of any punitive damages and civil penalties imposed by the U.S. government under the federal Clean Water Act, according to U.S. District Judge Carl Barbier.

Barbier, who oversees multi-state litigation over the spill, ruled that BP need not indemnify Transocean for these.

$3.5 billion in civil fines related to the spill have been estimated by BP, although maximum possible fines could be more than $20 billion if gross negligence was established on the part of BP or its contractors.

No provision for punitive damages because it says there is no legal basis for them. Cases in which claims for punitive damages can be brought have been limited by Barbier.

Decision made on Thursday could mean Transocean's potential liability over the April 20, 2010 Deepwater Horizon drilling rig explosion that caused 11 deaths, was "materially diminished" analysts at UBS said in a research note.

BP had previously sought to shift the whole cost of the disaster, currently estimated at around $42 billion, onto Transocean.

Shares of Transocean rose 8.2 percent today, while BP shares fell 1.7 percent.