Bloomberg News

Transocean Says It Doesn’t Owe Fines for Below-Surface Spill

December 14, 2011

(Updates with excerpt from filing in fourth paragraph.)

Dec. 12 (Bloomberg) -- Transocean Ltd. said it can’t be forced to pay federal fines or penalties for oil spilled below the surface of the Gulf of Mexico in the Deepwater Horizon incident because of an indemnity contract with BP Plc.

Transocean asked a federal judge in New Orleans to find that the indemnity provision in the drilling contract requires BP to pay virtually all damages and cleanup costs. BP has argued that Transocean’s conduct voided the agreement.

The indemnity provision doesn’t cover liabilities that resulted from willful misconduct, the U.S. Justice Department said last week in asking the court to delay ruling on the indemnity provision. Transocean isn’t asking to be held harmless for such misconduct, the company said in a court filing today.

“The drilling contract does not provide for indemnity in the event of intentional or willful misconduct in excess of gross negligence,” Transocean’s lawyers said. The company’s claim for indemnity for Clean Water Act fines “arises only if Transocean is held liable” for “underwater discharge from the well,” the company said.

Transocean “vehemently denies” it engaged in willful misconduct in the drilling of BP’s Macondo well, which exploded off Louisiana last year, the rig owner said today. The blowout killed 11 workers and sparked the worst offshore oil spill in U.S. history.

Consolidated Lawsuits

More than 350 lawsuits representing thousands of claims by coastal property owners and businesses for oil-spill damages are consolidated before Barbier in New Orleans for pretrial processing. BP and Transocean and other companies involved in the drilling project face billions of dollars in damages claims in these suits.

BP sued Transocean in April to recover a part of more than $40 billion, claiming the drilling contractor shares blame for the disaster. Transocean filed counterclaims against BP accusing the oil company of breaching their contract by failing to defend the rig owner and hold it harmless against all claims.

London-based BP claims Transocean’s conduct voided the indemnity clause. The oil giant contends the drilling company must pay its own share of any damages, which will be determined by a trial set to begin in February.

Wyn Hornbuckle, a spokesman for the U.S. Justice Department, declined to comment on Transocean’s filing. Ellen Moskowitz, a BP spokeswoman, didn’t immediately reply to a voice message or e-mail seeking comment on the filing.

The case is In re Oil Spill by the Oil Rig Deepwater Horizon in the Gulf of Mexico on April 20, 2010, MDL-2179, U.S. District Court, Eastern District of Louisiana (New Orleans).

--With assistance from Allen Johnson Jr. in New Orleans. Editors: Mary Romano, Glenn Holdcraft

To contact the reporters on this story: Margaret Cronin Fisk in Southfield, Michigan, at mcfisk@bloomberg.net; Laure Brubaker Calkins in Houston at laurel@calkins.us.com.

To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net.


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