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The trial to decide who is to blame, and who should pay, for the explosion of the Deepwater Horizon rig and subsequent oil spill has been delayed by a week to allow BP (NYSE:BP) to try to reach a settlement agreement with the tens of thousands of businesses and individuals affected by the disaster.
The case was set to start in a New Orleans federal court today, but U.S. District Judge Carl Barbier pushed back the date to March 5, allowing for further talks between BP and the Plaintiffs’ Steering Committee, or PSC, which represents condominium owners, hoteliers, fishermen, restaurateurs, and others whose livelihoods were affected by the disaster.
Eleven people were killed on April 20, 2010, when the Deepwater Horizon oil rig exploded, and 4.9 million barrels of oil spewed from the mile-deep Macondo oil well in the worst offshore U.S. oil spill in history.
“BP and the PSC are working to reach agreement to fairly compensate people and businesses affected by the Deepwater Horizon accident and oil spill,” BP said in a statement, adding that there was no assurance that the talks would lead to a settlement. Bloomberg reported on Monday that BP and plaintiffs were discussing a $14 billion settlement that was nearing completion, citing three people familiar with the talks.
A settlement would remove a significant portion of the complex litigation, the trial of which was expected to take nearly a year, while putting money in the pockets of those affected by the disaster much sooner. A settlement with the PSC would also be a key step toward reaching a global settlement with BP’s drilling partner, and with federal and state governments.
The U.S. government has sued BP and partners for violating the Clean Water Act and other laws in a suit that could result in fines totaling tens of billions of dollars. Gulf states are also seeking compensation. BP is both suing and being sued by its drilling partners.
However, a settlement between BP and the PSC looks more likely than ever. Judge Barbier has until now kept to a trial date set more than a year ago, which makes his sudden decision to delay the trial by a week significant. It’s a sign that a settlement must be within reach, said David Ulmann, a University of Michigan law professor and former chief of the Justice Department’s environmental crimes section.
Barbier said the delay made sense “for reasons of judicial efficiency and to allow the parties to make further progress in their settlement discussions” when he issued the order on Sunday.
The main corporate defendants, apart from BP, which owned 65 percent of the Macondo oil well, are Transocean Ltd. (NYSE:RIG), which owned the Deepwater Horizon rig, and Halliburton Co. (NYSE:HAL), which provided cementing services for the well. The three are also suing each other.
Several other companies are involved in the trial as well, including Anadarko Petroleum Corp. (NYSE:APC), which owned 25 percent of the well, Mitsui & Co.’s MOEX USA unit, which owned 10 percent of the well, Cameron International Corp. (NYSE:CAM), which made a blowout preventer, and Schlumberger NV’s M-I Swaco venture, which provided mud services. All of these companies have settled with BP. MOEX has also settled with the government.
BP has accepted responsibility for the disaster, and estimated its legal costs could total $43 billion. Earlier this month, BP said it set aside $6.1 million just to cover claims by businesses, though lawyers for those plaintiffs said the amount was too low, and that BP should also award punitive damages, which the company does not believe to be warranted. Some analysts say BP could be facing up to $60 billion in legal and cleanup costs for the spill, especially if its activities at the project were to found “grossly negligent.” A quick settlement has been widely agreed to be in BP’s best interest.
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