Halliburton 2011 Annual Report Download - page 102

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In May 2010, the United States Department of the Interior effectively suspended all offshore
deepwater drilling projects in the United States Gulf of Mexico. The suspension was lifted in October 2010.
Later, the Department of the Interior issued new guidance and regulations for drillers that intend to resume
deepwater drilling activity and has proposed additional regulations. Despite the fact that the drilling
suspension was lifted, the BOEMRE did not issue permits for the resumption of drilling for an extended
period of time, and we experienced a significant reduction in our Gulf of Mexico operations. In the first
quarter of 2011, the BOEMRE resumed the issuance of drilling permits, and activity has gradually
recovered since that time, although there can be no assurance of future activity levels in the Gulf of
Mexico. For additional information, see Part II, Item 1(a), “Risk Factors” and “Management’ s Discussion
and Analysis of Financial Condition and Results of Operations – Business Environment and Results of
Operations.”
DOJ Investigations and Actions. On June 1, 2010, the United States Attorney General announced
that the Department of Justice (DOJ) was launching civil and criminal investigations into the Macondo well
incident to closely examine the actions of those involved, and that the DOJ was working with attorneys
general of states affected by the Macondo well incident. The DOJ announced that it was reviewing, among
other traditional criminal statutes, possible violations of and liabilities under The Clean Water Act (CWA),
The Oil Pollution Act of 1990 (OPA), The Migratory Bird Treaty Act of 1918 (MBTA), and the
Endangered Species Act of 1973 (ESA). As part of its criminal investigation, the DOJ is examining certain
aspects of our conduct after the incident, including with respect to record-keeping, record retention, post-
incident testing, securities filings, and public statements by us or our employees, to evaluate whether there
has been any violation of federal law.
The CWA provides authority for civil and criminal penalties for discharges of oil into or upon
navigable waters of the United States, adjoining shorelines, or in connection with the Outer Continental
Shelf Lands Act (OCSLA) in quantities that are deemed harmful. A single discharge event may result in the
assertion of numerous violations under the CWA. Criminal sanctions under the CWA can be assessed for
negligent discharges (up to $50,000 per day per violation), for knowing discharges (up to $100,000 per day
per violation), and for knowing endangerment (up to $2 million per violation), and federal agencies could
be precluded from contracting with a company that is criminally sanctioned under the CWA. Civil
proceedings under the CWA can be commenced against an “owner, operator, or person in charge of any
vessel, onshore facility, or offshore facility from which oil or a hazardous substance is discharged” in
violation of the CWA. The civil penalties that can be imposed against responsible parties range from up to
$1,100 per barrel of oil discharged in the case of those found strictly liable to $4,300 per barrel of oil
discharged in the case of those found to have been grossly negligent.
The OPA establishes liability for discharges of oil from vessels, onshore facilities, and offshore
facilities into or upon the navigable waters of the United States. Under the OPA, the “responsible party” for
the discharging vessel or facility is liable for removal and response costs as well as for damages, including
recovery costs to contain and remove discharged oil and damages for injury to natural resources and real or
personal property, lost revenues, lost profits, and lost earning capacity. The cap on liability under the OPA
is the full cost of removal of the discharged oil plus up to $75 million for damages, except that the $75
million cap does not apply in the event the damage was proximately caused by gross negligence or the
violation of certain federal safety, construction or operating standards. The OPA defines the set of
responsible parties differently depending on whether the source of the discharge is a vessel or an offshore
facility. Liability for vessels is imposed on owners and operators; liability for offshore facilities is imposed
on the holder of the permit or lessee of the area in which the facility is located.
The MBTA and the ESA provide penalties for injury and death to wildlife and bird species. The
MBTA provides that violators are strictly liable and such violations are misdemeanor crimes subject to
fines of up to $15,000 per bird killed and imprisonment of up to six months. The ESA provides for civil
penalties for knowing violations that can range up to $25,000 per violation and, in the case of criminal
penalties, up to $50,000 per violation.