Join our crew and become one of the 110,634 members that receive our newsletter.

deepwater horizon disaster

RIG Stock Rebounds as Transocean Reaches Settlement in Deepwater Horizon Disaster [UPDATE]

Dow Jones
Total Views: 19
January 3, 2013

US Coast Guard image

*UPDATE*

ZUG, SWITZERLAND-Transocean Ltd. (NYSE: RIG) (SIX: RIGN) today announced that it has reached an agreement with the U.S. Department of Justice to resolve certain outstanding civil and potential criminal claims against the company arising from the April 20, 2010, accident involving the Deepwater Horizon in the Gulf of Mexico.

As part of this resolution, a Transocean subsidiary has agreed to plead guilty to one misdemeanor violation of the Clean Water Act (CWA) for negligent discharge of oil into the Gulf of Mexico and pay $1.4 billion in fines, recoveries and penalties, excluding interest.  This resolution will result in the Department of Justice concluding its criminal investigation of Transocean and settling its claims for civil penalties against the company relating to the spill from BP’s Macondo well.  The company intends to satisfy its payment obligations over a period of five years, using cash on hand and cash flow from operations.  At September 30, 2012, Transocean had accrued an estimated loss contingency of $1.5 billion associated with claims made by the Department of Justice.

These important agreements, which the company believes to be in the best interest of its shareholders and employees, remove much of the uncertainty associated with the accident.  This is a positive step forward, but it is also a time to reflect on the 11 men who lost their lives aboard the Deepwater Horizon.  Their families continue to be in the thoughts and prayers of all of us at Transocean.

Terms of the Agreement

A Transocean subsidiary has agreed to plead guilty to a single misdemeanor violation of the CWA for negligent discharge of oil into the Gulf of Mexico.  This violation pertains to well monitoring in connection with specific operations during the temporary abandonment procedure on April 20, 2010.  Pursuant to the agreement, Transocean will pay a fine in the amount of $100 million within 60 days of this agreement receiving U.S. federal court approval.  The Transocean subsidiary will also be subject to a statutory-maximum term of five years of probation.

Additionally, Transocean will pay $150 million to the National Academy of Sciences (NAS) over a five-year period, and $150 million to the National Fish and Wildlife Foundation (NFWF) over a three-year period.  The funds paid to the NAS will be for the purposes of oil spill prevention and response in the Gulf of Mexico; funds paid to the NFWF will be directed to natural resource restoration projects and coastal habitat restoration, including restoration of the barrier islands off the coast of Louisiana and diversion projects on the Mississippi and Atchafalaya Rivers.

To address the government’s pending civil claims, Transocean has agreed to pay $1 billion in CWA civil penalties over a period of three years.  Additionally, the company has agreed to implement certain measures to prevent a recurrence of an uncontrolled discharge of hydrocarbons.  Transocean has agreed to consult with the United States in preparing a performance plan for these improvement measures, which must be submitted for the government’s approval within 120 days of this agreement taking effect.

Any potential claims associated with the Natural Resources Damage Assessment (NRDA) process are excluded from the agreement with the Department of Justice. However, the district court previously held that Transocean is not liable under the Oil Pollution Act for damages caused by subsurface discharge from the Macondo well.  Assuming that this ruling is upheld on appeal, Transocean’s NRDA liability would be limited to any such damages arising from the above-surface discharge.

The Department of Justice has agreed that it will not pursue further prosecution of Transocean Ltd. and certain of its subsidiaries for any conduct regarding any matters under investigation by the Deepwater Horizon Task Force relating to or arising out of the Macondo well blowout, explosion, spill or response.  Transocean has agreed to continue to operate with the Deepwater Horizon Task Force in any ongoing investigation related to or arising from the accident.  The civil and criminal agreements are subject to court approval and, in the case of the civil agreement, public notice and comment.

 Original story by Tom Fowler – WSJ:

Offshore driller Transocean Ltd. (RIGN.VX, RIG) and the U.S. Department of Justice are expected to announce a settlement Thursday afternoon wrapping up all of the company’s civil and criminal issues relating to the 2010 Deepwater Horizon accident, according to sources familiar with the talks.

Transocean was the owner of the drilling rig that exploded in April 2010, killing 11 workers and leading to the largest offshore oil spill in U.S. history. It is expected to pay fines and penalties of about $1.4 billion, according to a person familiar with the matter.

Spokesmen for Transocean and the Department of Justice did not return calls seeking comment.

Transocean said previously in Securities and Exchange Commission filings that it has discussed a $1.5 billion payment with the Department of Justice to resolve the civil and criminal claims. The company has set aside a $2 billion non-cash reserve for all Deepwater Horizon-related claims.

Oil Giant BP PLC (BP, BP.LN), which had been leasing the Deepwater Horizon to drill an exploratory well in the Gulf of Mexico and was primarily in charge at the time of the accident, agreed to pay $4.5 billion in November to settle all criminal and some civil charges related to the accident.

The case against BP included 11 felony counts of “seaman’s manslaughter” and a misdemeanor violation of the Clean Water Act.

BP must still contend with civil Clean Water Act violations, which could total more than $20 billion. If BP agrees to settle the civil violations the payments would likely be much less. But if it chooses to fight the claims in court it could face fines of $4,300 for each of the estimated 4.9 million barrels of oil spilled if the company is found to have been grossly negligent.

– Tom Fowler, Wall Street Journal

(c) 2013 Dow Jones & Company

Unlock Exclusive Insights Today!

Join the gCaptain Club for curated content, insider opinions, and vibrant community discussions.

Sign Up
Back to Main
polygon icon polygon icon

Why Join the gCaptain Club?

Access exclusive insights, engage in vibrant discussions, and gain perspectives from our CEO.

Sign Up
close

JOIN OUR CREW

Maritime and offshore news trusted by our 110,634 members delivered daily straight to your inbox.