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Court Narrows Scope of Transocean Effort to Limit Spill Liability

Source: Dow Jones

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Posted on 15 Jun 2010

According to a court order signed Monday, an effort by Deepwater Horizon owner Transocean Ltd. (RIG) to use a 159-year-old maritime law to limit its liability in the Gulf of Mexico oil spill shields it against practically none of the lawsuits filed against it under the nation's environmental laws.

Judge Keith Ellison of the U.S. District Court in Houston signed the order clarifying that claims filed against Transocean under laws including the Clean Water Act, Clean Air Act and, with one exception, the Oil Pollution Act, can go forward outside of an ongoing process in which Transocean is attempting to limit its liability to about $27 million for the Deepwater Horizon accident.

The order comes after Transocean and the Department of Justice ended a dispute Friday over the scope of the Limitation of Liability Act of 1851, which Transocean evoked about three weeks after the burning and sinking of the rig.

While maritime lawyers say the Act, in practice, rarely helps vessel owners trim their financial liability for an accident, it can give them some legal breathing room by centralizing all lawsuits in federal court under a single judge. BP PLC (BP, BP.LN), which leased the rig from Transocean, has taken responsibility for the oil spill and recovery efforts.

The move to use the same law that allowed the owners of the RMS Titanic to limit their liability for that ship's infamous 1912 sinking sparked outrage among some lawmakers, federal officials and Gulf Coast residents.

The Department of Justice, in a letter to the company's lead attorney, called Transocean's effort "simply unconscionable," and asked the court to clarify that all lawsuits filed under federal and state environmental laws--including the nation's flagship oil-spill law, the Oil Pollution Act--were exempt from the liability-limitation procedure.

Meanwhile, plaintiffs' lawyers have requested that Judge Ellison move the venue of the case to the U.S. District of Eastern Louisiana from Houston, to make it easier for the families of the victims to participate.

The Deepwater Horizon exploded and sank about 50 miles off the Louisiana shore.

A spokesman for Transocean couldn't be reached immediately and the Department of Justice had no immediate comment.

All lawsuits against Transocean filed under the Oil Pollution Act of 1990, which was enacted following the Exxon Valdez spill, can go forward outside of the Limitation of Liability procedure, except if another party deemed responsible for the accident, namely BP, sues under the Act, according to the order filed Monday.


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