British Petroleum (BP) PLC, is a British, multinational oil and gas company that is based in London, England. BP finds and produces oil and gas on land and offshore. They manufacture and market fuels and other raw materials that are used in everyday products. BP is a major marketer that sells at least fifty million gallons of high quality fuel to customers through over 7,000 BP-brand stores in the United States.
BP is organized as a Public Limited Company, a version of a Limited Liability Company that offers its shares to the public but still limits its liabilities. The finances are separate from the company members’ personal finances due to the company being able to exist in its own right. To have a PLC, the company must have a qualified secretary, there must be a minimum of two shareholders and two directors, and the directors must be at least sixteen years of age. Before the company can trade, it must issue shares to the public that are at least £50,000 or its equivalent in euros. The company also has to be registered with the Companies House.
Legal Issue in Question
The plaintiffs in the gross negligence lawsuit are the Gulf States and the Department of Justice and the defendant is British Petroleum (BP) PLC. This paper will be focused on the gross negligence and willful misconduct ruling given by the U.S. District Court for the Eastern District of Louisiana. The issue is whether BP was guilty of gross negligence and willful misconduct towards the explosion and oil spill at the Deepwater Horizon oil rig and if they violated the “”Clean Water Act?”” On April 20, 2010, an explosion occurred at the Deepwater Horizon oil rig near the Gulf of Mexico. Before the oil spill was contained, eighty-seven days later, 4.9 million barrels (over 200 million gallons) of crude oil was released into the Gulf of Mexico, damaging the economies in the Gulf region.
The Department of Justice filed criminal and civil charges against BP claiming BP was grossly negligent and violated the “”Clean Water Act.”” The defendant owned up to the violation but claimed that gross negligence was too high a charge that would not be met in this case. The defendant believed they had not been grossly negligent and would provide evidence in court.
The issue in this case is whether or not BP was grossly negligent and acted in willful misconduct towards the oil spill at the Deepwater Horizon oil rig and if they violated the “”Clean Water Act?””
Rule of Law Applying to Legal Issues in Question
The rule of law this case looks at is negligence, specifically gross negligence, which is part of tort law. Negligence is an act or failure to act by a person or business that results in harm to another to whom a duty of care is owed. The plaintiffs use gross negligence in this case which is a conscious and voluntary disregard for the need to use reasonable care. Gross negligence is a much stronger claim than ordinary negligence because it states that the defendant was engaged in willful misconduct. If the defendant is found in gross negligence it could lead to the charging of punitive damages as well as ordinary or compensatory damages.
To be considered gross negligence, the act(s) that were committed must pass the negligence test: did the individual owe the victim a duty? Did the individual fail to uphold the duty? Did the victim suffer an injury? Was the harm a foreseeable consequence of the individual failing to uphold their duty? The individual must also have to have consciously known what the consequences would be as well as the individual had intentionally harmed the victim.
The second law being applied to this case is the “”Clean Water Act,”” formerly known as the “”Federal Water Pollution Control Act.”” The “”Clean Water Act”” establishes the basic structure for maintaining the discharge of any pollutants into U.S. waters. The “”Clean Water Act”” makes it unlawful to release any pollutant from a point source into navigable waters, unless a permit has been obtained. The plaintiff claims that the defendant violated this act. If the defendant is found guilty of gross negligence, the defendant would have to pay quadruple the regular amount in punitive fines.
Analysis of Legal Issue
There were eight failures that led to the oil spill that the Department of Justice considered BP to have been negligent. The first was bad cement. The cement they used to seal the borehole at the bottom of the well did not create a seal; therefore, the oil leaked into the pipe leading to the surface. Next, there was a valve failure. The Macondo well could be sealed by two valves at the bottom of the well. Both of these valves failed allowing the oil and gas to continue to travel up the pipe to the surface. The third failure was the misinterpretation of the negative pressure tests. After attempting to seal the well with the bad cement during construction, the crew ran negative pressure tests to reduce pressure in the well and to determine if the well had been completely sealed. The fourth failure was that they did not spot the leak soon enough. Even if the well had been sealed, the crew should have been able to detect the oil and gas leaking to the surface through any unexpected changes in pressure. This happened about fifty minutes before the explosion but they did not interpret it as a leak. The fifth failure happened about eight minutes before the explosion when mud and gas started to leak onto the floor of the rig. The crew attempted to close the valve in a device called the blowout preventer that sits at the bottom of the ocean above the well’s borehole. The sixth failure happened after the valve failure on the blowout preventer. Instead of diverting the flow safely away from the rig through pipes on the side, the crew diverted the flow to a device on the rig that was used to separate small amounts of gas from a flow of mud. The separator soon became overwhelmed and flammable gas started to flow onto the rig. The seventh failure was the failure of the gas alarm. As a safety precaution, the rig had a gas alarm that would close the ventilation so that gas could not reach parts of the rig that could ignite, such as the engines. However, according to a survivor of the explosion, systems such as the gas alarm had been turned off so false alarms would not disturb the crew. Lastly, even though the crew tried to close the valves in the blowout preventer, the blowout preventer had its own device where two separate systems should have been able to close the valves automatically once it lost touch with the surface. Apparently, one of the systems had a dead battery and the other had a defective switch.
These eight acts that led to the explosion and oil spill amounted to gross negligence because BP did not exercise the reasonable care they were supposed to by consciously disregarding the safety of the people and the environment and ignoring what the consequences of their actions would be. BP had a responsibility to protect the environment, the workers on the rig, and the welfare of the Gulf States. Due to actions that were labeled to be profit-driven, BP breached that duty and it resulted in heavy consequences. If the rig was having too many issues, BP should have stopped working on the well and tried to fix the problems first. Everyone involved in the Deepwater Horizon project had the authority to halt the project if there were any safety concerns or issues, but no one exercised that power.
The civil trial lasted two years, starting in February 2013 and ending in February 2015. The trial had three stages: assessment of the degrees that the company was guilty and the distinction of negligence and gross negligence, establishment of how much oil was leaked, and the determination of the damages.
In the first phase, the court had to decide whether they were guilty of gross negligence or a lesser charge. One of the main reasons the Department of Justice states it is clear the defendant was grossly negligent was the disregard of the anomalies that showed up in the negative pressure tests the crew did to reduce the amount of pressure inside the Macondo Well as well as to monitor any leaks that would occur. The defendant also created unnecessary risks before the explosion by changing their plans and removing heavy drilling mud that acted as a barrier against the gas that came up to the rig and caused the explosion. The mud had been removed to a depth of over a mile below the rig, which left more light sea water than heavy mud. BP also changed their plan to put cement on the top of the well before removing the mud.
In the second phase, the court had to determine the amount of oil that was spilled. BP argued that there were about 2.45 million barrels of oil that had spilled but the Department of Justice argued that it was more like 4.2 million barrels. The court ruled that 3.1 million barrels of oil spilled into the Gulf of Mexico.
After determining whether the defendant’s actions were of gross negligence or regular negligence and finding out how much oil was spilled; the third and final phase of the trial begins. This phase determined how much the company would pay in damages.
Synopsis of the Conclusion of the Legal Matter
The court ruled that the defendant’s “”gross negligence and willful misconduct was the cause of the oil spill and that the company’s reckless behavior made it subject to fines as much as $4,300 per barrel.”” (Mufson, Washington Post) BP tried to appeal the final ruling but was rejected by the Supreme Court. BP ended up having to pay up to $18 billion due to the gross negligence ruling.
For violations of the “”Clean Water Act”” BP paid $5.5 billion, plus interest, in violation penalties, $8.1 billion in natural resource damages, up to $700 million in adaptive management or to address any injuries to natural resources from then to any time in the future since then, and $600 million for any other claims or violations. To resolve damages to the Gulf States, BP paid $4.9 billion and another $1 billion any similar claims by companies that were affected. After settlements, damage-control, and penalty fines, BP ended up having to pay an overall total of about $62 billion.