Halliburton has wrapped up most of its lingering liability for the 2010 Gulf of Mexico oil spill with a $1.1 billion settlement announced on Tuesday. The pact will resolve accusations that Halliburton’s cement work on the ill-fated Macondo well contributed to a disaster that killed 11 rig workers and spewed millions of barrels of crude into the gulf. It also offers important hints about where the four-year-old litigation storm centered on New Orleans is headed from here.
First off, the timing of the settlement announcement may signal that U.S. District Judge Carl Barbier is nearing a decision on the Big Question of how to apportion overall blame for the spill—and, more specifically, what kind of additional legal bill faces BP as the main operator of the well. The British company has already paid out more than $28 billion and faces additional liability that could total an additional tens of billions. How much more is the issue before Barbier.
The $1.1 billion settlement represents Halliburton’s biggest payout yet in the disaster, according to Bloomberg News. Transocean, owner of the drilling rig, settled a batch of claims last year for $1.4 billion. Absent Tuesday’s settlement, Barbier could have found that Halliburton acted with “gross negligence,” opening the company to punitive damages. That’s the looming danger BP faces: a judicial determination that its conduct was worse than mere carelessness and merits a truly stupendous additional penalty.
Underlying the latest settlement—and explaining its relatively modest dollar value—was an earlier Barbier ruling that interpreted the contract between BP and Halliburton. According to the judge, that contract required BP to cover any compensatory damages assessed against Halliburton. His interpretation, in effect, shifted risk to BP and made it easier for Halliburton to reach a truce with the consortium of plaintiffs’ attorneys pressing claims on behalf of victims throughout the Gulf region.
Those plaintiffs’ lawyers celebrated the agreement with Halliburton, which will allow them to turn full attention to BP. “Halliburton stepped up to the plate and agreed to provide a fair measure of compensation to people and businesses harmed in the wake of the Deepwater Horizon tragedy,” co-lead plaintiffs’ attorneys Stephen Herman and James Roy said in a joint statement. That can be read as an accusation that BP has not stepped up to the plate, at least not yet.
Beyond settlement payouts, the Gulf spill litigation is costing the various companies implicated in the disaster enormous legal fees—or, more precisely, it’s costing their insurance carriers large amounts. Prior to settlement, Halliburton had incurred fees and expenses of $294 million, $263 million of which was covered by insurance, according to a filing in July. Halliburton had set aside reserves of $1.3 billion for costs related to the spill.
Investors have already expressed an expectation that Halliburton will weather the financial and legal storm following the spill. Since the disaster, the oil field services company has seen its share price double. Transocean stock has lost 58 percent. BP shares have fallen 27 percent.
BP issued this statement:
The settlement between Halliburton and the [plaintiffs] underscores what every official investigation has found and what the evidence presented during Phase 1 of the Multi-District Litigation trial has shown: that the fire and explosion aboard the Deepwater Horizon was an accident resulting from multiple causes, involving multiple parties. From the beginning, BP has acknowledged its role in the accident, worked to meet its commitments in the Gulf, and called on Halliburton and others to do the same. This settlement marks the very first time–despite three years of official investigations and litigation implicating the company–that Halliburton has acknowledged that it played a role in the accident.