Transocean Cleared from Deepwater Horizon Blowout Liability

Deepwater Horizon, file photo, courtesy Transocean

Steven Newman, Chief Executive of deepwater drilling firm Transocean scored a big victory today, both for his company and most certainly on a personal level as U.S. District Judge Carl Barbier ruled gross negligence on the part of BP was to blame for the blowout on board the Deepwater Horizon drilling rig, the deaths of 11 rig workers and the subsequent massive oil spill in 2010.

Newman took the helm of Transocean in March 2010 from long-time CEO Bob Long and less than two months later, faced the enormous challenge of leading Transocean through the worst oil spill the offshore industry had ever faced, the total loss of one of their rigs, the deaths of 11 offshore workers and a stock price that has struggled to recover.

For drilling contractors worldwide however, this ruling today was a positive sign that the contracts they each sign with their clients protect them from the risk incurred while drilling the wells of their clients.

Key findings in the Court’s decision with respect to Transocean are as follows:

• Contractual indemnity: The Court found that BP’s contractual agreement to indemnify Transocean for compensatory damages is valid and enforceable.
• Liability for punitive damages: The Court’s finding that Transocean was not grossly negligent means that the company is not liable for punitive damages.
• BP’s claims against Transocean: The Court ruled that BP’s contractual agreement to release its own claims against Transocean is valid and enforceable.  BP had assigned these claims to the Plaintiffs’ Steering Committee (“PSC”), and the release bars the PSC from pursuing the claims.

Although the decision is subject to appeal, Transocean notes that as written, it effectively eliminates their financial risk arising from the below-surface discharge of oil at Macondo.  Transocean’s remaining financial risk is for above-surface discharge of pollutants, if any, occurring during the initial two days of the spill. Transocean believes any such pollution either caused no significant harm or is covered by BP’s indemnity.

“This is a favorable and welcome ruling for Transocean, its employees, and all offshore drilling contractors, as the Court has again ratified the industry-standard allocation of liability between drilling contractors and the owners and operators of oil wells,” said Steven Newman, President and Chief Executive Officer.  “As we remember the 11 men who died in this tragic accident, we appreciate the Court’s observation that the Deepwater Horizon crew was attentive and serious and acted bravely in the face of chaotic circumstances, committing multiple heroic acts that saved many lives on April 20, 2010.”

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