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Deepwater Horizon Hairsplitting Fails to Impress 5th Circuit

(CN) - Unimpressed by BP and Anadarko's attempts to shift blame for the 2010 oil spill, the 5th Circuit confirmed orders holding them liable for Clean Water Act violations.

The Macondo Prospect, a well that BP and Anadarko co-owned, blew out on April 20, 2010, when its cement lining failed, causing a high-pressure release of oil, gas and drilling fluids.

Transocean owned Deepwater Horizon, the rig that drilled the well, as well as the riser that connected the well to the rig.

The resulting explosion killed 11 workers and capsized the rig, severing the riser, and causing oil to spill from the pipe for three months until it was capped.

BP estimates that 2.45 million barrels of oil gushed from the well. The Department of Justice pegs the figure at 4.2 million barrels.

After U.S. District Judge Carl Barbier found Anadarko and BP liable in 2012 for penalties under the Clean Water Act, the companies told the 5th Circuit their well did not actually discharge the oil since it entered the Gulf of Mexico from Transocean's broken riser.

They also claimed Transocean's blowout preventer should have stopped the oil from flowing.

A three-judge panel for the 5th Circuit upheld BP and Anadarko's liability for the spill in June, prompting the companies to petition the court for an en banc rehearing.

With those petitions pending, the companies also asked the original panel in New Orleans to revisit its analysis of their arguments against Clean Water Act liability.

Anadarko tried to split hairs by claiming that the panel's June opinion relied on the mistaken premise the well had been sealed with cement.

"Contrary to the assumption of the panel, all parties to this appeal agree that the cement never sealed off the well from the oil and gas in the rock formation beneath it," Anadarko said in one court filing.

The Woodlands, Texas-based company said the alleged factual error has, and will, create problems with the litigation.

Those arguments failed Wednesday to sway the original 5th Circuit panel.

"This issue is a red herring," an unsigned order states. "Whether the cement initially sealed the well was immaterial to the panel opinion's holding. ... It is only the fact that the cement in the well ultimately failed to stop the flow of oil (regardless of whether the cement at any prior point functioned as expected), and that control was therefore lost in the well, that prompted our determination that the well was a point 'from which oil or a hazardous substance [was] discharged.'" (Parentheses and brackets in original.)

The panel conceded that control over the drilling was also lost when Transocean's blowout preventer failed.

"Our determination that controlled confinement was lost in the well does not preclude the possibility that controlled confinement was also lost elsewhere, an issue that we did not need to rule on," the 12-page order states.

Transocean's guilty plea to a misdemeanor Clean Water Act violation in 2013, and its agreement to pay the government a $1 billion fine, precluded the need for a ruling on the issue.

BP and Anadarko also alleged the 5th Circuit made legal errors in its previous ruling.

"When oil simply moves from one confined instrumentality to another without escaping, no Clean Water Act violation can possibly occur," BP's motion said.

Finding the argument "lacks merit," the panel noted that nowhere in its previous ruling does it suggest that simply moving oil and gas from a well to a rig equals a discharge.

"Such an act does not result in oil entering navigable waters and does not necessarily denote a loss of controlled confinement," the order states. "But it does not follow from this that when the controlled confinement of oil in a facility [i.e. well] is lost such that it enters a vessel and then navigable waters, only the vessel is liable. Neither the CWA nor 'common sense' dictate otherwise."

BP and Anadarko further argued the 5th Circuit should have applied the rule of lenity, a doctrine that calls for enforcing ambiguous criminal laws with a lenient penalty, and interpreted the Clean Water Act narrowly so it wouldn't apply to them.

But, citing case law that defines a well as a point from which oil is discharged "if it is at a point at which controlled confinement is lost," the panel sidestepped the leniency plea.

The panel's ruling means the companies will face trial before Judge Barbier in January to determine how much they owe in Clean Water Act penalties. Petitions for an en banc rehearing remain pending.

Anadarko paid BP $4 billion in 2011 to settle litigation from the oil spill, and BP has paid more than $12 billion so far.

Under the Clean Water Act, the companies are facing fines of "up to $25,000 per day of violation or an amount up to $1,000 per barrel of oil" spilled.

BP declined to comment on the ruling. Attorneys for Anadarko were not immediately available Friday afternoon.

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