BP Well Partner Must Take Claims to Arbitration, Judge Rules

BP Plc (BP/) can halt litigation with minority business partner Anadarko Petroleum Corp. (APC) so the companies can arbitrate liability over costs of last year’s oil- well blowout in the Gulf of Mexico, a judge said.

Anadarko sued BP, asking a federal judge in New Orleans to declare it isn’t responsible for damages and cleanup costs created by the worst offshore oil spill in U.S. history. The Woodlands, Texas-based Anadarko, which owned 25 percent of the Macondo well, said BP’s conduct caused the blowout and the spill.

BP asked U.S. District Judge Carl Barbier to stall the lawsuit, contending that a partnership agreement required the companies to first attempt arbitration to resolve disputes. Barbier today sent the claim to arbitration.

“Anadarko has not met its burden to overcome the presumption in favor of arbitration,” Barbier said in his ruling. “Accordingly, Anadarko’s claim against BP must be stayed pursuant to the arbitration clause” in the joint operating agreement between the parties, he said.

Today’s decision “does nothing to diminish our claims,” John Christiansen, Anadarko’s spokesman, said in an e-mail. “It simply addresses the venue in which they may be resolved.”

Scott Dean, a spokesman for London-based BP, declined to comment on Barbier’s order regarding Anadarko.

‘Blatantly Disregarded’

“Anadarko has blatantly disregarded its responsibilities to the residents of the Gulf Coast by failing to pay its fair share of the costs relating to the accident and resulting spill,” Dean said in an e-mail today. “BP remains focused on ensuring that Anadarko lives up to its obligations.”

Jacob Frenkel, a former Securities and Exchange Commission lawyer, called the decision “a clear and compelling win” for BP.

“This insures that BP can advance its claims against Anadarko behind closed doors, which has significant public- relations and legal advantages for BP,” he said in a phone interview.

Because arbitrations typically move faster than trials, “BP could get to the money pot faster” if it has a strong case for making Anadarko share spill-related costs, said Frenkel, now in private practice at Shulman Rogers Gandal Pordy & Ecker PA in Potomac, Maryland.

Racketeering Suits

Barbier also dismissed lawsuits against BP claiming the company defrauded government regulators about the safety of its drilling operations and its ability to respond to oil spills, including its response to the Macondo incident. The plaintiffs claimed that BP engaged in racketeering, causing property damage and lost earnings.

The plaintiffs in the racketeering complaints included the owner of a penthouse in Pensacola Beach, Florida, who claimed property damage and a seafood restaurant in Laplace, Louisiana, which said it had to close because the spill cut off access to seafood.

Barbier said today the plaintiffs didn’t show a link between their losses and any alleged fraud.

“Plaintiffs’ failure to allege a direct relationship between BP’s alleged defrauding of government regulators and their economic injuries is the fatal flaw,” the judge said.

Dean, the BP spokesman, declined to comment on that decision.

The April 2010 Macondo well blowout and the explosion that followed killed 11 workers. The accident and spill led to hundreds of lawsuits against BP and its partners and contractors.

Billions of Dollars

BP is trying to get its partners to help pay billions of dollars of costs resulting from the explosion and spill. Anadarko has refused to pay its share of the bills, BP said in court papers.

BP also sought payment from a second minority partner, Moex Offshore 2007 LLC, which owned 10 percent of the well. Moex, a Mitsui & Co. unit, agreed on May 20 to pay $1.07 billion to settle BP’s claims.

Anadarko said in its lawsuit filed in April that it had no fault in the explosion and spill. Investigations into the incident “raise serious questions” about its contractual obligations to reimburse BP for costs of responding to the well blowout, Anadarko said in an April 19 filing.

The company also is seeking damages from BP for the loss of oil in the exploration area, loss of investment and lost profit.

Anadarko’s claims conflict with promises not to resort to court remedies, BP said in an April 27 filing. The three companies in the Macondo contract agreed to take such claims to arbitration, BP said.

Anadarko said BP’s argument for arbitration was meritless and would hamper the minority partner’s defense of lawsuits brought over the spill.

The case is part of 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).

To contact the reporters on this story: Allen Johnson Jr. in New Orleans at allenmct@gmail.com; Margaret Cronin Fisk in Southfield, Michigan, at mcfisk@bloomberg.net

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

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