BP 2013 Annual Report Download - page 261

• China has committed to reducing carbon intensity of GDP 40-45%
below 2005 levels by 2020 and increasing the share of non-fossil fuels
in total energy consumption from 7.5% in 2005 to 15% by 2020. The
country’s 12th (2011-2015) Development Programme has set the
target to reduce carbon intensity by 17% within five years, and this
national target has been deconstructed into provincial ones for local
actions. Four emission trading pilots have begun in the cities of Beijing,
Shenzhen and Shanghai and in Guangdong province. Additional
emission trading schemes have been approved for Tianjin and
Chongqing cities as well as Hubei province. As part of the country’s
energy saving programme, the government also requires any operating
entity with annual energy consumption of 10 thousand tonnes of coal
equivalent (7ktoe/a) to have an energy saving target for the next five
years. A number of BP joint venture companies in China will be
required to participate in these initiatives.
For information on the steps that BP is taking in relation to climate
change issues and in relation to GHG regulation and for details of BP’s
GHG reporting see Environment and society on page 45.
Legal proceedings
Proceedings relating to the Deepwater Horizon oil spill
BP’s potential liabilities resulting from threatened, pending and potential
future claims, lawsuits and enforcement actions relating to the 20 April
2010 explosions and fire on the semi-submersible rig Deepwater Horizon
and resulting oil spill (the Incident), together with the potential cost of
implementing remedies sought in the various proceedings, cannot be
fully estimated at this time but they have had and could continue to have
a material adverse impact on the group’s business, competitive position,
financial performance, cash flows, prospects, liquidity, shareholder
returns and/or implementation of its strategic agenda, particularly in the
US. The potential liabilities may continue to have a material adverse
effect on the group’s results and financial condition. See Financial
statements – Note 2 to the financial statements for information regarding
the financial impact of the Incident.
BP p.l.c., BP Exploration & Production Inc. (BPXP) and various other BP
entities (collectively referred to as BP) are among the companies named
as defendants in approximately 2,950 pending civil lawsuits relating to
the Incident and further actions are likely to be brought. BPXP was lease
operator of Mississippi Canyon, Block 252 in the Gulf of Mexico
(Macondo), where the Deepwater Horizon was deployed at the time of
the Incident. The other working interest owners at the time of the
Incident were Anadarko Petroleum Company (Anadarko) and MOEX
Offshore 2007 LLC (MOEX). The Deepwater Horizon, which was owned
and operated by certain affiliates of Transocean Ltd. (Transocean), sank
on 22 April 2010. The pending lawsuits and/or claims arising from the
Incident have generally been brought in US federal and state courts. The
plaintiffs include individuals, corporations, insurers, and governmental
entities and many of the lawsuits purport to be class actions. The
lawsuits assert, among others, claims under the Oil Pollution Act of 1990
(OPA 90), claims for personal injury in connection with the Incident itself
and the response to it, wrongful death, commercial and economic injury,
breach of contract and violations of statutes. Many of the lawsuits assert
claims which are excluded from the Economic and Property Damages
Settlement Agreement (discussed below), including claims for recovery
for losses allegedly resulting from the 2010 federal deepwater drilling
moratoria and/or the related permitting process. The lawsuits seek
various remedies including compensation to injured workers, recovery for
commercial losses and property damage, compensation for personal
injuries and medical monitoring, claims for environmental damage,
remediation costs, claims for unpaid wages, injunctive and declaratory
relief, treble damages and punitive damages. Purported classes of
claimants include residents of the states of Louisiana, Mississippi,
Alabama, Florida and Texas; property owners and rental agents,
fishermen and persons dependent on the fishing industry, charter boat
owners and deck hands, marina owners, gasoline distributors, shipping
interests, restaurant and hotel owners, cruise lines and others who are
property and/or business owners alleged to have suffered economic loss;
and response workers and residents claiming injuries due to exposure to
the components of oil and/or chemical dispersants. Among other claims
arising from the spill response efforts, lawsuits have been filed claiming
that additional payments are due by BP under certain Master Vessel
Charter Agreements entered into in the course of the Vessels of
Opportunity Program implemented as part of the response to the
Incident. Purported class action and individual lawsuits have also been
filed in US state and federal courts, as well as one suit in Canada, against
BP entities and/or various current and former officers and directors
alleging, among other things, shareholder derivative claims, securities
fraud claims, violations of the Employee Retirement Income Security Act
(ERISA) and contractual and quasi-contractual claims related to the
cancellation of the dividend on 16 June 2010.
In August 2010, many of the lawsuits pending in federal court were
consolidated by the Federal Judicial Panel on Multi-district Litigation into
two multi-district litigation proceedings, one in federal district court in
Houston for the securities, derivative and ERISA cases (MDL 2185) and
another in federal district court in New Orleans for the remaining cases
(MDL 2179).
Presentation of evidence in the first trial phase (Phase 1) of a Trial of
Liability, Limitation, Exoneration and Fault Allocation in MDL 2179
concluded on 17 April 2013, and the parties completed post-trial briefing
in respect of Phase 1 on 12 July 2013. The second trial phase (Phase 2),
which addressed source control efforts and the amount of oil that was
spilled into the Gulf as a result of the Incident, completed on 18 October
2013, and post-trial briefing in respect of Phase 2 is substantially
complete. In a further trial phase, which is yet to be scheduled, the
district court will determine the amount of civil penalties arising under the
Clean Water Act based on the court’s rulings as to the presence of
negligence, gross negligence or wilful misconduct in Phases 1 and 2, the
court’s rulings as to quantification of discharge in Phase 2 and the
application of the penalty factors under the Clean Water Act. For further
information, see MDL 2179 and related matters – Trial phases below.
On 3 March 2012, BP announced an agreement in principle with the
Plaintiffs’ Steering Committee (PSC) in MDL 2179 to settle the
substantial majority of legitimate private economic and property damages
claims and exposure-based medical claims stemming from the Incident.
See MDL 2179 and related matters – PSC settlements below.
On 1 June 2010, the US Department of Justice (the DoJ) announced that
it was conducting an investigation into the Incident encompassing
possible violations of US civil or criminal laws, and subsequently created
a unified task force of federal agencies to investigate the Incident. On
15 November 2012, BP announced that it reached agreement with the
US government, subject to court approval, to resolve all federal criminal
charges and all claims by the US Securities and Exchange Commission
(the SEC) against BP arising from the Deepwater Horizon accident, oil
spill and response. See Settlements with the DoJ and SEC below.
MDL 2179 and related matters
DoJ Action; liability limitation-, contribution- and indemnity-related
proceedings; and Trial of Liability, Limitation, Exoneration and Fault
Allocation
On 13 May 2010, Transocean and certain affiliates filed a complaint under
admiralty law in federal court in Texas seeking exoneration from or
limitation of liability as managing owners and operators of the Deepwater
Horizon. That action (the Limitation Action) was consolidated with
MDL 2179 on 24 August 2010.
The United States filed a civil complaint in MDL 2179 against BPXP and
others on 15 December 2010 (the DoJ Action). The complaint seeks a
declaration of liability under OPA 90 and civil penalties under the Clean
Water Act and sets forth a purported reservation of rights on behalf of
the US to amend the complaint or file additional complaints seeking
various remedies under various US federal laws and statutes. See
Financial statements – Note 2.
On 18 February 2011, Transocean filed a third-party complaint against BP,
the US government, and other corporations involved in the Incident,
naming those entities as formal parties in the Limitation Action. On
20 April 2011, Transocean filed claims in the Limitation Action alleging
that BP had breached BP America Production Company’s contract with
Transocean Holdings LLC by BP not agreeing to indemnify Transocean
against liability related to the Incident and by not paying certain invoices.
Transocean also asserted claims against BP under state law, maritime
law, and OPA 90 for contribution.
Additional disclosures
BP Annual Report and Form 20-F 2013 257