BP's Deepwater Horizon spill comes to court

By Michael Donhauser Feb 24, 2012, 5:06 GMT

London - There are 535 individual lawsuits, 120,000 plaintiffs and 72 million documents relating to the Deepwater Horizon oil spill.

The US federal government, several states and various local government authorities are suing BP and its associated companies for the damage caused in the biggest oil spill in US history.

BP, in turn, is suing its partners, in particular energy giant Haliburton, which it accuses of providing the wrong type of concrete to seal the offshore well that for months gushed millions of barrels of oil into the ocean.

The court battle begins in New Orleans on Monday before Federal Judge Carl Barbier, but legal wrangling over out-of-court settlements has been underway for some time.

BP itself has indicated a willingness to talk to plaintiffs. 'We are ready to settle, if we can do so on fair and reasonable terms... but we are preparing vigorously for trial,' BP chief executive Robert Dudley said. Still, such a development would by no means be the end of the legal battle.

Analysts in London, where BP is headquartered, as well as in the United States, believe the oil multinational is facing a huge risk. Its share price - it is listed on the London and New York stock exchanges - rose after speculation over recent days of a possible settlement.

BP sees a deal as possibly leading to improved relations with the US and perhaps further exploration in the Gulf of Mexico.

Still, the sheer number of plaintiffs puts the company's lawyers in an awkward negotiating position, and a compromise appears problematic.

The leak in the Macondo field that erupted in April 2010, claiming the lives of 11 oilmen and releasing between 4 and 5 million barrels of crude into the Gulf, has already cost the company dearly. BP has had to pay 7.5 billion dollars in clean-up costs and compensation.

More than 200,000 individuals and businesses have been compensated by a 20 billion-dollar BP fund set aside for victims of the spill.

Total costs of the disaster could reach 40 billion dollars, according to BP estimates. BP posted a loss of 4.9 billion dollars in 2010, although it has since returned to profitability.

But profits could be hit hard by a legal process that could drag on for months or even years. The US government is entitled to demand compensation amounting to 1,100 dollars for each barrel spilled, according to the Clean Water Act.

And if gross negligence is shown in court, BP and associated companies could be liable for up to 4,300 dollars per barrel. That amounts to up to 17.6 billion dollars for water pollution alone. Legal fees would also cost millions.

BP has set aside just 3.5 billion dollars for water pollution damages, as it places a lower figure than the federal government on the quantity of oil leaked and rejects allegations of gross negligence. The company also aims to shift a considerable part of the blame onto other companies.

Its stake in the Macondo field is just 65 per cent. US-based company Moex, which holds a stake of 10 per cent, settled last week with federal and state governments, paying 90 million dollars. The Texas-based company Anadarko owns the remaining 25 per cent.