HOUSTON (CN) – A federal judge declined to dismiss a whistle-blower lawsuit that claims BP took $10 billion worth of oil and gas belonging to the U.S. government by submitting false documents about operations at its Atlantis rig.
Under the False Claims Act, the United States can recover $30 billion in treble damages plus civil penalties. Qui tam provisions entitle the whistle-blower to as much as 25 percent of any funds recovered from the lawsuit.
With U.S. District Judge Kenneth Hoyt’s March 15 ruling, the government can pursue an injunction to shut the rig down.
The government intervened as a plaintiff in the lawsuit after it was filed by former BP subcontractor Kenneth Abbott and consumer-advocacy group Food & Water Watch in April 2009. Abbott worked as project control supervisor for BP’s Atlantis rig.
BP is accused of violating the False Claims Act and the Outer Continental Shelf Land Act by knowingly submitting false compliance certifications to the U.S. Department of the Interior for its rig’s operations.
Located in the Gulf of Mexico, about 190 miles south of New Orleans, BP’s Atlantis rig started production in October 2007. The rig, which sits on land the Department of the Interior leased to BP, produces 200,000 barrels of oil per day, and 180 million cubic feet of gas per day.
BP’s continued operation of Atlantis without the necessary engineering documents poses a risk to the Gulf Coast that outweighs any loss of revenue that BP expects an injunction would cause, according to the ruling.
“The Gulf Coast environment sustains unique wildlife and aesthetic beauties, and thousands of people rely on it for income,” Hoyt concluded. “Further destruction of the Gulf by a spill or other incident at Atlantis would undoubtedly affect the public interest in a dramatically negative manner.
“Moreover, an incident at Atlantis could result in the permanent closure of the facility. While the court appreciates the national interests in being able to drill for and produce oil and gas in the Gulf, the permanent loss of a producing oil and gas facility would cause a greater economic impact to the public than prohibiting production for the duration of time it takes for BP to comply with the relevant regulations.”
BP tried to dismiss the case by claiming that the plaintiffs lack evidence of the allegedly fraudulent certification or of a false claim for money or property. The oil company also said the plaintiffs lack standing to seek an injunction under the Outer Continental Shelf Land Act.
Since the Outer Continental Shelf Land Act’s citizen-suit provision authorizes any interested entity to bring a claim to compel compliance with federal regulations, the judge concluded that Abbott has standing.
Hoyt also found that the Outer Continental Shelf Land Act gives the plaintiffs grounds to seek an injunction that would shut the Atlantis down. “BP’s alleged failure to maintain engineering documents required by DOI regulations creates an immediate and substantial risk to the plaintiffs’ enjoyment of, and livelihood from, the Gulf of Mexico environment,” Hoyt wrote in his 27-page ruling.
BP still needed federal approval to start oil production on Atlantis even though the government had already granted it a drilling lease, Hoyt wrote.
The “issuance of a lease begins, rather than ends” the process through which a company can extract oil and gas from its federal leases, Hoyt wrote. The process includes “critical government permits” that give oil companies the right to drill and extract oil from leased property. Since permit applications can make up actionable claims for property, they fall under the False Claims Act, according to the ruling.
Though leases convey valuable rights to oil companies, they do not carry rights to the oil and gas minerals themselves, Hoyt wrote, finding that the plaintiffs can use the False Claims Act to recover the value of the oil and gas.