Mardi Gras, Check. BP ‘Trial of the Century’ Here We Come.

Well, another magnificent Mardi Gras has ended, and at this point, I’d normally be slouched on the sofa sipping a tomato juice (neat) and sorting beads. But not this year.  That’s because next week, squadrons of lawyers, journalists, petroleum engineers, and fisher folk are scheduled to descend on New Orleans, squeeze into a federal courtroom, and begin on Monday what the media have modestly called, “The Trial of the Century,” otherwise known as the BP Oil Spill litigation.

Whatever the rest of the century holds, it seems fair to say that this legal dispute, if it does not settle, will be the most complicated environmental trial anyone has ever seen.  With a thousand plaintiffs, a galaxy of witnesses, and 20,000 exhibits, this spectacular has more moving parts than a Madonna half-time show. As the trial unfolds, I’ll provide you with some occasional shrimp-boots-on-the-ground legal blogging.

First, though, I’ll start with the background of the case (please see also two CPR white papers: Regulatory Blowout: How Regulatory Failures Made the BP Disaster Possible, and How the System Can Be Fixed to Avoid a Recurrence (Oct 2010) and The BP Catastrophe: When Hobbled Law and Hollow Regulation Leave Americans Unprotected (Jan 2011)). Here are some answers to common questions.

Q: Can you remind me what the BP Oil Spill was all about?  I remember “Top Kill” and “I’d like my life back,” but the rest of it is a little hazy.

A: On April 20, 2010 BP and its contractors were in the last stages of drilling a three-mile long hole in the seabed fifty miles off the Louisiana shore. They were in the process of plugging the hole, with plans to later extract oil from the massive reservoir that lay below.  The oil rig was called “Deepwater Horizon.”  The well was called “Macondo” (yes, the same name as the fictional village in Gabriel Garcia Marquez’s One Hundred Years of Solitude—the village that was eventually blown apart by an apocalyptic storm and erased from history.  This is what lit teachers call “foreshadowing”).

The project had not gone smoothly, and already operations were a month late and $40 million overdue. At 9:30 that night, the well started burping methane gas. The gas shot up through the pipes, caught fire, and engulfed the rig in flames. Eleven of the 126 people aboard died and many more were injured. Two days later the rig sank and oil began spewing from the wellhead, roughly a mile below the surface. BP applied thousands of gallons of toxic dispersants on and below the surface in an effort to prevent the oil from coming ashore. Even so, the oil severely damaged beaches, estuaries, and marshes, from Texas to Florida. Large swaths of the Gulf were closed to fishing.

As President Obama said two months after the blowout: “Already this oil spill is the worst environmental disaster America has ever faced.” Earlier, BP’s then-chief executive Tony Hayward invited public vilification when, in an inexplicable burst of self-pity, he whined, “I’d like my life back.” Despite efforts to cap the well (including the so-called “Top Kill” method), oil continued to spew until July 15, 2010 when BP successfully capped the well and later sealed it with cement. According to some estimates, nearly five million barrels of oil billowed into the Gulf before it was capped.

Q: What did later investigations show?

A: We’ve learned quite a bit from media reports, industry incident reports, a presidential commission, an examination by the Coast Guard and the Department of Interior, and a report from the National Academy of Engineering.

Basically, we know that before the blowout BP used cheaper and quicker methods for building the well’s walls, misread important diagnostic tests, and removed the most important protective barrier to methane bursts before it should have. We also know there were problems with a cement mixture that Halliburton had supplied and that employees of Transocean made some bad decisions when they realized the rig was going to blow.

Q: So that explains the lawsuit. Who’s suing?

A: The trial in New Orleans—officially called “Multi-District Litigation-2179” (MDL)—consolidates 535 lawsuits originally filed all over the country. More than 110,000 individuals and businesses have filed notice to take part in the MDL. Plaintiffs include fishers, seafood processors, restaurants, coastal landowners, individuals who were harmed by dispersants or oil, and many others.  The litigation also includes claims by the federal government, Gulf Coast states, and a few municipalities. Several states in Mexico have also filed claims. The federal and state government claims generally seek compensation for natural resource damage, response costs, or damage to their economies.

Many of these plaintiffs are at the same time trying to resolve their grievances through BP’s Gulf Coast Claims Facility (GCCF), a $20 billion compensation fund administered by Kenneth Feinberg. Plaintiffs who reach a final settlement with the GCCF waive their claims and must withdraw from the MDL.

This trial does not address shareholder suits (which will be handled in Houston) or criminal charges.

Q: Who are the defendants?

A: The most prominent defendants are BP, which held the lease on the Macondo well; Transocean, which owned Deepwater Horizon; Halliburton, which poured the cement lining into the well; Cameron, which manufactured the blowout-preventer that malfunctioned during the crisis; and Nalco, which manufactured the dispersants that are alleged to have made people sick and to have harmed the environment. In later stages of the litigation, the federal government and some states may be required to defend their actions in overseeing containment of the oil and clean-up operations.

Q: What issues will the court decide?

A: For all its complexity, the goal of the trial is pretty simple: to determine the proportion of fault among the defendant companies and to determine the extent of penalties and damages. These questions will be decided in a bench trial (without a jury) by federal district court judge Carl Barbier.  In reaching his decision, he will rely on federal maritime law, the Clean Water Act, the Oil Pollution Act, and the Outer Continental Shelf Lands Act. (The state law claims have all been dismissed as preempted by federal law.)

The allocation of fault, will, of course, affect the share that each defendant must pay. But that amount also depends on the degree of carelessness the court attributes to the parties. For instance, a finding of gross negligence or willful misconduct could result in punitive damages, driving the verdict from a few billion to more than $20 billion. An award on the higher side could go far in helping a state like Louisiana (which suffered the most damage) to restore its tattered coast and repair its economy.  But such an award would almost certainly be appealed.

Q: Tell me more about Judge Barbier.

A:  Judge Carl Barbier has served on the U.S. District Court for the Eastern District of Louisiana since 1998.  He is a Clinton appointee. Judge Barbier was born in New Orleans and holds a law degree from Loyola University New Orleans. He is known for his expertise in maritime law and complex litigation. Over the last year, he has impressed observers with his efficiency and endurance, wrestling hundreds of cases to the ground and consolidating them into this litigation.

Q: How long will this trial take?

A: If it does not settle, it will take more than a year. Judge Barbier has planned the trial to unfold in three phases. The first phase, beginning on Monday, will deal with everything leading up to the explosion and the start of the oil leak. The second phase, scheduled to begin in mid-July, will focus on attempts to stem the flow of oil, inquiring into the crucial question of how much oil was ultimately discharged into the Gulf (a fact that affects the amount of penalties under the Clean Water Act). The third phase, which is not yet scheduled, will deal with the efforts to contain and clean up the oil.

Q: You’ve mentioned settlement twice.  Will this case settle soon?

A: Honestly, nobody knows. Many of the traditional experts (experienced trial lawyers and legal scholars) say it should. With such uncertainty about the punitive damages, the argument goes, both sides have strong incentives to find middle ground. Plus, BP cannot be looking forward to seeing its dirty laundry aired out in court. But some local attorneys I’ve spoken to emphasize that individual personalities matter a lot in settlement negotiations and that with so many people involved, negotiations can easily derail.

Q: I missed Mardi Gras this year, should I make plans to visit New Orleans to see the trial instead?

A: No. The courtroom will be completely packed with lawyers and journalists.  There is only a small amount of seating available to the public on a first-come, first-served basis.  Everyone else will have to watch the trial on video from “overflow rooms.” My crack research assistant Stephen Wussow will occasionally visit the proceedings and report back. I’ve already warned him to bring lots of water and protein bars.

Q: Did Tony Hayward ever get his life back?

A: Sort of. The former geologist and yachting-enthusiast left BP in October 2010 and now works for Glencore International, a commodities company involved in hardrock mining.  Mr. Hayward oversees policy related to environment and safety.