BP Gulf Spill Trial Delayed to Allow for Settlement Talks

The BP Plc trial over liability for the explosion aboard the Deepwater Horizon drilling rig and the Gulf of Mexico oil spill that followed was delayed until March 5 as settlement negotiations continue, according to court records.

The one-week postponement of tomorrow’s scheduled start of a multibillion-dollar trial over who is to blame for the accident and spill is to allow for negotiations to reach a settlement to “fairly compensate people and businesses,” BP and lawyers for the plaintiffs said in a joint statement.

“There can be no assurance that these discussions will lead to a settlement agreement,” according to the statement. “A further announcement will be made as appropriate.”

U.S. District Judge Carl Barbier in New Orleans is scheduled to oversee the first phase of the case against London- based BP (BP) and other companies over the blast that killed 11 workers and caused the largest offshore oil spill in U.S. history. In his order today delaying the trial, Barbier cited “reasons of judicial efficiency and to allow the parties to make further progress in their settlement discussions.”

The April 2010 Macondo well blowout sent more than 4 million barrels of oil spewing into the gulf over 87 days, according to a U.S. government report issued in September.

The accident spawned hundreds of lawsuits against BP and its partners, including Transocean Ltd. (RIG), the Vernier, Switzerland-based owner and operator of the drilling rig, and Houston-based Halliburton Co. (HAL), which provided cementing services on the facility.

Fishing, Tourism

The lawsuits include pollution claims by federal and state governments and consolidated cases brought by thousands of commercial fishermen, seafood processors, property owners and tourism-related businesses harmed by the spill.

BP has been in settlement talks with the federal government, plaintiffs suing over the spill and other companies facing liability in the cases for months, people familiar the discussions have said.

Barbier, who will hear the case without a jury, is to rule whether London-based BP should get help from the other firms involved in paying the $26 billion in costs associated with the sinking of the Deepwater Horizon and the spill. If there isn’t a deal reached by all sides, the judge will determine whether the companies must pay punitive damages to thousands of business and property owners, and fines to the government for polluting the Gulf of Mexico.

‘Significant Progress’

The trial delay may indicate “there has been significant progress in settlement talks and it may not be necessary to have a trial, or at least a trial as currently configured,” David Uhlmann, a University of Michigan law professor and former chief of the U.S. Justice Department’s environmental crime section, said today in a phone interview.

Any agreement will probably focus on claims filed by lawyers for federal and state governments, though it could also be broader, Uhlmann said.

“The delay indicates the judge believes there is some good-faith bargaining going on,” Carl Tobias, who teaches product-liability and mass-tort law at the University of Richmond in Virginia, said today in a phone interview.

‘Moving Parts’

“I think a global settlement is very unlikely to be consummated in the next day or two,” Tobias said. “There’s just too many moving parts. The real question is can they do it all in a week or will they just be able to settle parts of it.”

David Nicholas, a BP spokesman, declined to comment on the trial delay or settlement negotiations. Wyn Hornbuckle, a U.S. Justice Department spokesman, said, “We have no comment and refer you to the order just issued by the court.”

Beverly Stafford, a Halliburton spokeswoman, had no immediate comment on the trial delay.

“This delay doesn’t change the facts of the case and Transocean is still fully prepared to go to trial,” Lou Colasuonno, a spokesman for the company, said today in a phone interview.

The cases over economic and environmental damage were initially consolidated before Barbier, who has scheduled a three-phase trial. In the first phase, he will determine which companies share blame for the explosion, and whether any of them engaged in gross negligence or willful misconduct.

Such a finding might trigger punitive damages -- awards meant to punish the liable parties rather than compensate victims for losses -- to be paid to non-government plaintiffs.

Enhanced Penalties

Those companies sued by the federal government would face enhanced penalties under the U.S. Clean Water Act. That law lets the government seek fines of as much as $1,100 for each barrel of oil spilled as a result of simple negligence, often described as a failure to exercise ordinary care. The maximum increases to $4,300 a barrel for gross negligence, or a conscious act or omission, leaving BP liable for as much as $17.6 billion in fines. The London-based company set aside $3.5 billion to pay Clean Water Act fines based on its own lower estimate of barrels spilled and no finding of gross negligence.

Barbier on Feb. 22 held BP and Anadarko automatically liable under the act, allowing the U.S. to seek $1,100 a barrel spilled. Transocean’s liability is to be determined at trial.

On Feb. 24, Transocean alleged in a court filing that BP officials overseeing the Macondo well ignored questions about whether safety tests done hours before the blast were flawed.

Well Tests

Donald Vidrine, the senior BP manager on the Deepwater Horizon on April 20, 2010, talked with an engineer about unsatisfactory well tests less than an hour before the explosion, Transocean’s attorneys said. While Mark Hafle, a Houston-based BP drilling engineer, warned Vidrine in a phone call that stability tests on the well might be flawed, “neither man stopped work” at the facility, Transocean said. Scott Dean, a BP spokesman, declined to comment yesterday on the Transocean filing.

The judge is to conduct two subsequent nonjury proceedings on the size of the spill and efforts to contain it. Jury trials on damages to victims would follow, he has said. The outcomes might provide a template for settlement of the remaining cases, some of which might be distributed to other courts.

Barbier wouldn’t postpone the trial unless he saw progress toward a settlement, said Tulane University law professor Ed Sherman, who specializes in complex litigation.

“The judge really would want a genuine expectation of settlement and I assume he got that,” Sherman said. “He set a very tight deadline. He set a tough schedule -- 8 a.m. to 6 p.m., Monday through Thursday. He would not lightly agree to a delay unless he feels there is a genuine hope of an agreement.”

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).

To contact the reporters on this story: Jef Feeley in New Orleans, at jfeeley@bloomberg.net; Allen Johnson Jr. in New Orleans at allenmct@gmail.com.

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

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