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BP Files Legal Action Against Transocean and Cameron International Over Gulf Oil Explosion

Source: WSJ

Posted on 21 Apr 2011

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At the one-year anniversary mark of the Deepwater Horizon explosion in the Gulf, BP PLC, the owner of the blown well, filed suit against two of its contractors, accusing them of negligence that led directly to the disaster that killed 11 workers and caused a massive oil spill.

At stake in the litigation is who owes the federal and local governments billions of dollars in compensation for the 4.9 million barrels of oil that gushed into the Gulf of Mexico after the BP well exploded and the Deepwater Horizon drilling rig sank.

On Wednesday, the final day to file legal action, BP filed claims against Transocean Ltd., which owned and operated the Deepwater Horizon, and Cameron International Corp., which manufactured a critical safety device called a blowout preventer, an enormous set of valves that was intended to shut down BP's well in an emergency.

The claims are part of extensive litigation filed in the federal court in New Orleans related to the disaster on April 20, 2010. The BP complaint says that Transocean is responsible for multiple failures of safety devices and well control procedures and is seeking at least $40 billion in damages. BP also seeks to force Cameron to contribute all or part of the damages that could be levied against the oil giant by the federal government.

BP is contending that if the blowout preventer had functioned properly, the spill could have been largely avoided.

In one filing, BP claimed that the Cameron-built blowout preventer "failed to properly operate when needed and was unreasonably dangerous when used as intended." BP alleges that the safety device didn't meet design and manufacturing standards.

In another filing, BP claimed that Transocean was negligent in making sure the blowout preventer was in good shape. The Zug, Switzerland-based company had "deficient inspection and maintenance practices," BP claims, which led to leaks in the device's controls and caused it to not work properly.

Both claims focus on the blowout preventer's inadequate system to alert operators that a "deadman switch"—which was supposed to automatically shut off the well if the blowout preventer lost contact with the rig—wasn't operating because of dead batteries.

While Cameron designed and manufactured the blowout preventer, Transocean was responsible for its maintenance.

Cameron said in a statement: "It is not surprising that the companies are filing to protect their indemnity rights," adding that in order to protect itself it had filed counterclaims against other parties to the litigation.

A Transocean spokesman called the lawsuit "specious and unconscionable" and claimed the rig and its crew was endangered by BP cost-cutting measures including the well design and last-minute changes to operational plans that created confusion. Transocean also said its contract with BP indemnified it against all claims related to pollution and environmental damage.

Last month, a federal investigation into the explosion issued a report by Norwegian risk-management company Det Norske Veritas that found the blowout preventer failed as a result of a design flaw, not because of misuse or poor maintenance.

Those investigators concluded that the force of the blowout bent the drill pipe, knocking it off-center. The double-bladed shearing rams on the blowout preventer that were intended to sever the pipe and seal off the well weren't able to close around the bent pipe and left a gap, allowing oil and gas to flow up towards the rig.

Still, several other investigations have placed blame heavily on BP.

Despite its claims against its contractors Wednesday, BP spokesman Scott Dean said the company has agreed to pay all legitimate claims and agreed to waive a $75 million liability cap under federal law. It has set up a $20 billion trust fund to pay claims, including the cost of environmental damages.