BP 2013 Annual Report Download - page 263

against BPXP under Section 311 of the Clean Water Act, 33 U.S.C.
§ 1321. BP and the United States subsequently reached a stipulation,
entered by the court on 19 February 2013, providing that 810,000 barrels
of oil were collected without coming into contact with ambient Gulf
waters and that those barrels are not to be used in calculating the
statutory maximum penalty under the Clean Water Act.
On 1 March 2013, Transocean sought the district court’s leave to
supplement its pleadings to include an affirmative defence asserting that
BP’s representations regarding the flow rate at the Macondo well
constituted an intervening and superseding cause of the oil spill for the
majority of its duration. Transocean’s defence claims that BP fraudulently
misrepresented and concealed information regarding the flow rate at the
Macondo well in late April and May 2010, as well as the likelihood of
success of a top-kill approach to stopping the flow of hydrocarbons from
the well, and thus prevented the implementation of alternative means of
source control that Transocean asserts could have capped the well as
early as May 2010. Also on 1 March 2013, Halliburton filed a motion for
leave to amend its answers to assert a similar defence. On 4 March
2013, the court granted Transocean’s motion to file amended answers,
and it granted Halliburton’s motion the following day.
Trial phases
To address certain issues asserted in or relevant to the claims,
counterclaims, cross-claims, third-party claims, and comparative fault
defences raised in the DoJ Action and the Limitation Action, a Trial of
Liability, Limitation, Exoneration and Fault Allocation commenced in
MDL 2179 on 25 February 2013. The presentation of evidence in the first
phase of the trial (Phase 1), which completed on 17 April 2013,
addressed issues arising out of the conduct of various parties allegedly
relevant to the loss of well control at the Macondo well, the ensuing fire
and explosion on the Deepwater Horizon on 20 April 2010, the sinking of
the vessel on 22 April 2010 and the initiation of the release of oil from the
Deepwater Horizon or the Macondo well during those time periods,
including whether BP or any other party was grossly negligent. The
parties completed court-ordered post-trial briefing in respect of Phase 1
on 12 July 2013. On 13 August 2013, BP moved for leave to supplement
the Phase 1 record to include Halliburton’s agreement to plead guilty to
destroying evidence relating to Halliburton’s internal examination of the
Incident and the US government’s press release announcing the
Halliburton plea agreement. The US government, the Plaintiffs’ Steering
Committee and Halliburton have also submitted briefs addressing the
implications of Halliburton’s plea agreement. The district court has yet to
rule on BP’s motion. BP is not currently aware of the timing of the district
court’s ruling in respect of issues addressed in Phase 1 which could be at
any time.
The second trial phase (Phase 2), which commenced on 30 September
2013, addressed (i) ’source control’ issues pertaining to the conduct or
inaction of BP, Transocean or other relevant parties regarding stopping
the release of hydrocarbons stemming from the Incident from 22 April
2010 through to approximately 19 September 2010, and (ii) ’quantification
of discharge’ issues pertaining to the amount of oil actually released into
the Gulf of Mexico as a result of the Incident from the time when these
releases began until the Macondo well was capped on approximately
15 July 2010 and then permanently cemented shut on approximately
19 September 2010. Post-trial briefing in respect of Phase 2 is
substantially complete. On 25 January 2014, Transocean filed a motion to
supplement the Phase 2 record with certain testimony that occurred in a
separate trial of a former BP employee related to the Incident. The district
court has yet to rule on this motion. BP is not currently aware of the
timing of the district court’s ruling in respect of issues addressed in
Phase 2 which could be at any time.
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. The district court set a status
conference for 21 March 2014 to address case management issues
relating to this phase of the litigation. The district court also ordered the
parties, on a schedule to be completed prior to 21 March, to serve initial
disclosures and written discovery requests, to provide proposed
stipulations, and to file submissions regarding potential evidence to be
adduced at a penalty phase trial, as well as certain other issues.
The district court in MDL 2179 has wide discretion in its determination as
to whether a defendant’s conduct involved negligence or gross
negligence as well as in its determinations on the volume of oil spilled
and the application of statutory penalty factors.
MOEX, Anadarko and Cameron settlements
BP announced settlement agreements in respect of all claims related to
the Incident with MOEX, Anadarko and Cameron on 20 May 2011,
17 October 2011 and 16 December 2011, respectively. Under the
settlement agreement with MOEX, MOEX paid BP $1.065 billion and also
agreed to transfer all of its 10% interest in the MC252 lease to BP. Under
the settlement agreement with Anadarko, Anadarko paid BP $4 billion
and also agreed to transfer all of its 25% interest in the MC252 lease to
BP. The settlement agreement with Anadarko grants Anadarko the
opportunity for a 12.5% participation in certain future recoveries from
third parties and certain insurance proceeds in the event that such
recoveries and proceeds exceed $1.5 billion in aggregate. Any such
payments to Anadarko are capped at a total of $1 billion. BP agreed to
indemnify MOEX, Anadarko and Cameron for certain claims arising from
the Incident (excluding civil, criminal or administrative fines and penalties,
claims for punitive damages, and certain other claims). The settlement
agreements with MOEX, Anadarko and Cameron are not an admission of
liability by any party regarding the Incident.
PSC settlements
The Economic and Property Damages Settlement resolves certain
economic and property damage claims, and the Medical Benefits Class
Action Settlement resolves certain medical claims by response workers
and certain Gulf Coast residents. The Economic and Property Damages
Settlement includes a $2.3 billion BP commitment to help resolve
economic loss claims related to the Gulf seafood industry (for further
information, see – PSC Settlements – Seafood Compensation Fund below)
and a $57 million fund to support continued advertising that promotes Gulf
Coast tourism. It also resolves property damage in certain areas along the
Gulf Coast, as well as claims for additional payments 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.
The Economic and Property Damages Settlement does not include claims
made against BP by the DoJ or other federal agencies (including under the
Clean Water Act and for Natural Resource Damages under OPA 90) or by
the states and local governments. Also excluded are certain other claims
against BP, such as securities and shareholder claims pending in MDL
2185, and claims based solely on the deepwater drilling moratorium and/or
the related permitting process.
The Medical Benefits Class Action Settlement involves payments to
qualifying class members based on a matrix for certain Specified Physical
Conditions, as well as a 21-year Periodic Medical Consultation Program
for qualifying class members. Payments of claims under the Medical
Benefits Class Action Settlement could not begin until after the
agreement’s 12 February 2014 Effective Date, being the day after the
resolution of all appeals from the final approval of the Medical Benefits
Class Action Settlement, though class members were permitted to file
claim forms in advance of the Effective Date to facilitate administration of
the Medical Benefits Class Action Settlement upon the Effective Date.
The deadline for submitting claims under the Medical Benefits Class
Action Settlement is one year after the Effective Date. The settlement
also provides that class members claiming Later-Manifested Physical
Conditions may pursue their claims through a mediation/litigation
process, but waive, among other things, the right to seek punitive
damages. Consistent with its commitment to the Gulf, BP has also
agreed as part of the Medical Benefits Class Action Settlement to
provide $105 million to the Gulf Region Health Outreach Program to
improve the availability, scope and quality of healthcare in certain Gulf
Coast communities. This healthcare outreach programme will be
available to, and is intended to benefit, class members and other
individuals in those communities. BP has already begun funding the
projects sponsored by this programme.
Each agreement provides that class members will be compensated for
their claims on a claims-made basis, according to agreed compensation
protocols in separate court-supervised claims processes. The
compensation protocols under the Economic and Property Damages
Settlement provide for the payment of class members’ economic losses
and property damages related to the oil spill. In addition many economic
Additional disclosures
BP Annual Report and Form 20-F 2013 259