U.S. Files Motion Seeking Moex Accord in BP Spill Case

Mitsui & Co.’s MOEX Offshore 2007 LLC will pay $90 million to the U.S. and five states to settle pollution violations related to 2010 Gulf of Mexico oil spill while BP Plc (BP/) and its drilling fluid provider for the Macondo well agreed to dismiss claims against each other.

The U.S. filed a consent order yesterday in federal court in New Orleans outlining the MOEX settlement of Clean Water Act violations. The agreement requires MOEX to pay $45 million in civil penalties to the U.S. and about $25 million total to Alabama, Florida, Louisiana, Mississippi and Texas, court papers show. MOEX will also pay $20 million for land acquisition projects, the U.S. said.

MOEX held a 10 percent share of BP’s Macondo well, which blew up in April 2010, setting off the largest offshore oil spill in U.S. history. The company earlier paid BP about $1 billion to settle claims. The U.S. has also sued BP and Anadarko Petroleum Corp. (APC), which held a 25 percent interest in the well, over Clean Water Act violations.

The settlement is the first of what may be a series of agreements with the U.S. as lawsuits over the 2010 spill approach a trial set for Feb. 27. The U.S. Justice Department sued MOEX, BP, Anadarko and Transocean Ltd. (RIG), which owned the rig that exploded, in December 2010, seeking fines for each barrel of oil discharged.

Photographer: Derick E. Hingle/Bloomberg

Smoke billows from controlled burns of oil on the surface of the water near the site of the BP Plc Deepwater Horizon oil spill on June 19, 2010. Close

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Photographer: Derick E. Hingle/Bloomberg

Smoke billows from controlled burns of oil on the surface of the water near the site of the BP Plc Deepwater Horizon oil spill on June 19, 2010.

M-1 Agreement

BP agreed with drilling fluid provider M-I Swaco, a unit of Houston-based Schlumberger Ltd. (SLB), not to pursue allegations against each other, the companies said in a court filing yesterday. M-I has been named as a defendant in hundreds of lawsuits over the spill by businesses, property owners and state governments. M-I said it wasn’t responsible for the Deepwater Horizon rig explosion and that BP and other companies were, according to court papers filed last year.

BP said in a claim filed in June that M-I LLC, also known as M-I Swaco, “failed to provide, control, and monitor the mud and spacer solutions used on the Deepwater Horizon in a reasonably safe manner.”

In yesterday’s filing, the companies said they “have agreed to mutually dismiss with all prejudice all claims that the parties brought, or could have brought, against each other.” The filing didn’t mention whether either company would be making a payment as part of the agreement.

Potential Recoveries

The MOEX settlement doesn’t affect claims against or potential recoveries from other companies over the spill, the Justice Department said yesterday in a statement. MOEX no longer owns a share of the lease, the U.S. said.

“This landmark settlement is an important step -- but only a first step -- toward achieving accountability and protecting the future of the Gulf ecosystem by funding critical habitat preservation projects,” U.S. Attorney General Eric Holder said in the statement.

The Macondo well blowout and the explosion that followed killed 11 workers. The sinking of Transocean’s Deepwater Horizon drilling rig and subsequent spill led to hundreds of lawsuits against London-based BP and its partners and contractors.

U.S. District Judge Carl Barbier in New Orleans, who’s overseeing much of the spill litigation, has scheduled a nonjury trial for Feb. 27 to determine liability and apportion fault for the disaster. M-I remains a defendant in the trial.

$1,100 a Barrel

A U.S. motion to hold BP, Anadarko and Transocean liable by law for Clean Water Act violations is pending before Barbier. A ruling against the defendants would allow the U.S. to seek fines against each company of as much as $1,100 per barrel of oil spilled, without having to prove the issue of liability at trial.

The Clean Water Act also allows the government to seek fines of as much as $4,300 for each spilled barrel on a finding of gross negligence. The government estimates that 4.1 million barrels were spilled before the well was capped, putting BP at risk of fines of as much as $17.6 billion.

BP set aside $3.5 billion for Clean Water Act fines, assuming $1,100 a barrel and its own estimate of 3.2 million barrels spilled, according to an annual report extract posted on the company website. The company is negotiating with the U.S. over settlement of the Clean Water Act claims, according to a person familiar with the talks.

Daren Beaudo, a BP spokesman, declined to comment on the MOEX settlement or any possible BP agreement with the U.S. on pollution law claims.

The company is prepared to settle with other parties before trial if the conditions are right, Chief Executive Officer Robert Dudley told Bloomberg Television Feb. 7.

‘Reasonable Settlement’

“With a reasonable settlement, we will settle,” he said. “If it’s not a reasonable settlement, we’ll go to court.”

The MOEX settlement doesn’t necessarily reflect what other companies might pay the U.S. “because it had only a 10 percent ownership share in the Macondo lease and no operational role in the drilling activity,” said David Uhlmann, a University of Michigan law professor and former chief of the Justice Department’s environmental crime section.

“Nonetheless, MOEX, like every other company involved faced far larger civil penalties than they have agreed to pay yesterday,” he said. “So the question going forward is whether this heralds similarly modest settlements with the other companies or is the MOEX settlement an outlier and any other civil penalties will be much larger.”

John Christiansen, an Anadarko spokesman, declined to comment on a possible settlement with the U.S.

“Transocean continues to have confidence in the strength of our case and is pleased with the court’s recent rulings on insurance and indemnity matters,” Lou Colasuonno, a spokesman for the company, said yesterday in an e-mail. “We are unable to comment on other developments.”

No ‘Admission’

MOEX said in the consent decree that it wasn’t admitting any liability under the Clean Water Act. The settlement also wasn’t “an admission by the MOEX entities of any liability for civil payments or any other claim out of or relating to the Deepwater Horizon incident,” according to the filing.

In return for the settlement, “the U.S. will provide MOEX Offshore, MOEX USA, and their affiliates, directors and other related individuals with a covenant not to sue with respect” to other possible civil and administrative penalty claims, a MOEX spokesman said.

MOEX Offshore is a wholly owned unit of MOEX USA, which in turn is wholly owned by Tokyo-based Mitsui Oil Exploration Co., in which Mitsui & Co. (8031) holds a 70 percent equity interest.

‘Outright Mistakes’

MOEX agreed in May 2011 to pay BP $1.065 billion to resolve all claims between the companies over liability for the spill tied to the Deepwater Horizon explosion. As part of that accord, MOEX officials agreed to accept findings by a federal commission that probed the explosion and concluded the accident resulted from “a number of causes” tied to “oversights and outright mistakes” by a number of parties, BP officials said last year.

BP’s American depositary receipts rose 97 cents, or 2.1 percent, to $47.62 in trading in New York yesterday. Transocean rose $1.54, or 3.1 percent, to $50.79. Schlumberger fell 0.4 percent to $77.74.

The government case is U.S. v. BP Exploration & Production Inc., 2:10-cv-04536, U.S. District Court, Eastern District of Louisiana (New Orleans). The lawsuit 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: Margaret Cronin Fisk in Southfield, Michigan, at mcfisk@bloomberg.net; Dawn McCarty in Wilmington, Delaware, at dmccarty@bloomberg.net

To contact the editors responsible for this story: Michael Hytha at mhytha@bloomberg.net; John Pickering at jpickering@bloomberg.net

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