BP, Gulf-spill plaintiffs spar over ‘moratorium’ claims
NEW ORLEANS — BP and businesses affected by the catastrophic 2010 Gulf oil spill have filed their arguments in federal court over the last major unresolved question of their litigation:
Is BP responsible for the impacts of the Obama administration’s five-month deepwater drilling moratorium imposed after the spill?
For the two sides — and for the federal government, which also filed its arguments in the matter Wednesday — it all comes down to how the courts interpret the Oil Pollution Act of 1990, the main law governing BP’s legal liability for the worst offshore oil spill in American history.
BP eventually accepted its responsibility to pay “all legitimate claims” for damages “due to the spill” under a massive 2012 settlement — although the company spent more than a year trying to reinterpret the deal after agreeing to it.
But BP has always opposed paying claims from around 3,000 businesses that lost money due to the temporary government shutdown of offshore oil and gas drilling. The oil giant argues that the Oil Pollution Act does not cover “deliberate decisions by the government,” like a drilling moratorium that many argued was unnecessary.
The class-action attorneys for the plaintiffs, meanwhile, contend the moratorium was a “direct and foreseeable” result of BP’s oil spill, and BP’s argument about government decisions is faulty because fishing losses — which BP has readily agreed to pay — also resulted from the government shutdown of fishing areas after the spill polluted the waters.
The U.S. Justice Department, which enforces the Oil Pollution Act, did not take a position on the businesses’ claims but joined the plaintiffs to argue there should be no requirement in the law that the oil spill be the sole or even “proximate cause” of a claimant’s losses. The government also said BP shouldn’t be allowed to claim that the moratorium replaced the spill as the true cause of someone’s losses.
President Obama’s Interior Department imposed the drilling moratorium from May to October 2010 while it investigated what caused the Deepwater Horizon rig to explode on April 20, 2010, tried for three months to cap the gushing well, and scrambled to improve offshore safety regulations.
The moratorium proved to have little negative impact for major oil industry players, who mostly kept their rigs under contract in the Gulf and used the break in drilling to perform maintenance, training and upgrades at Gulf Coast ports.
But the shutdown was wildly unpopular in Louisiana, the home base for most of the rig supply and support companies that did lose significant business because of the moratorium.
Their claims have rarely been paid by BP. Any ties to oil field support work has tended to freeze all compensation for claimants. For example, a Harvey, La.-based company, R&D Enterprises, wasn’t even able to collect lost revenue for the fuel containers it leased to the Deepwater Horizon rig and that burned up in the rig fire because it was part of its “moratorium claim.”
At Obama’s urging, BP set up a $100 million rig worker assistance fund to offset some of the moratorium pain, but it was barely used because of minimal rig-crew layoffs. The support businesses that actually suffered the losses from the rig shutdown were not eligible. The fund paid out just $12 million in worker aid before it was converted to other uses by the administrator, the Baton Rouge Area Foundation, and redistributed to Catholic Charities and other charitable agencies.
Meanwhile, many of the offshore support companies claim they continued to lose business well into 2011 as the Interior Department cautiously resumed permitting for deepwater drilling activities, leading to another set of claims known colloquially as “permitorium claims.”
The viability of those claims will also be decided by Barbier.