RIG: Transocean Says Cap Won't Limit Government Claims?
June 08, 2010, 7:46 PM EDT
By Laurel Brubaker Calkins and Margaret Cronin Fisk
June 8 (Bloomberg) -- Transocean Ltd., after seeking to limit its liability for oil-spill damage to $27 million under a 159-year-old maritime law, agreed today the cap doesn’t apply to environmental losses by the U.S. and Gulf Coast states.
Last week, the U.S. Justice Department objected to Transocean’s limitation request, telling a Houston judge the statute the company invoked can’t be used to limit governmental claims brought under more recent laws.
Governments are entitled to pursue claims “for pollution response costs, environmental damages and other injuries,” including civil and administrative penalties stemming from the largest oil spill in U.S. history, Assistant U.S. Attorney General Tony West said in a June 1 filing.
“There is no dispute between the government” and Transocean that its limitation action can be “modified for certain yet-to-be-filed claims of the government,” Frank Piccolo, the company’s lead attorney said in papers filed today in Houston federal court. Transocean agrees that “certain putative claims” by state and national governments should be excluded from the company’s limitation action, he said.
Transocean also agreed that its limitation action doesn’t cap any fines or penalties the U.S. may bring against the company, should the government determine state or federal environmental protection laws have been violated, Piccolo said in the filing.
Liability Cap
Transocean asked U.S. District Judge Keith Ellison in May to cap its liability to damages caused by an oil spill that resulted from the explosion and sinking of its Deepwater Horizon rig in the Gulf of Mexico to the value of the rig’s unpaid drilling rental fees, roughly $27 million.
The company seeks the cap as protection against more than 170 lawsuits including class actions filed by individuals and coastal businesses harmed by the spill, which threatens the coastline of at least five states.
BP Plc, which owns the offshore oil lease and had contracted Transocean to drill the well, has primary statutory liability for spill clean-up and restoration costs that could top $23 billion, according to a June 2 Credit Suisse analyst report. BP may seek to recover some of those costs or share liability for additional billions of dollars of economic damage claims with Transocean or other companies involved in the drilling operation.
Insurance Coverage
Yesterday, Ranger Insurance Ltd. filed suit in Houston federal court seeking declaratory judgment that BP isn’t entitled to access any of Transocean’s $50 million in primary liability insurance coverage. Last month, underwriters with Lloyd’s of London filed a similar request to block BP’s attempt to draw on $700 million in excess-coverage insurance the rig company also carries.
Lawyers for oil-spill victims claim the maritime statute is outdated and shouldn’t prevent injured parties from accessing Transocean’s insurance policies or other corporate assets to repay economic damages caused by the spill. They’ve asked the judge to toss out the limitation request and allow lawsuits against Transocean to proceed.
“The government’s memorandum cynically suggests that the limitation act is a cobwebbed piece of legislation that limitation petitioners dredged up from the deep, dark past,” Piccolo said. The government has utilized the same limitation statute in court proceedings, he said. “Just because a law is ‘old’ does not mean that it is wrong or that it was improperly invoked.”
The case is In Re the Complaint and Petition of Triton Asset Leasing GmbH, Transocean Holdings LLC, 10-01721, U.S. District Court for the Southern District of Texas (Houston).
--Editors: Peter Blumberg, Fred Strasser
To contact the reporters on this story: Laurel Brubaker Calkins in Houston at laurel@calkins.us.com; Margaret Cronin Fisk in Southfield, Michigan, at mcfisk@bloomberg.net.
To contact the editor responsible for this story: David E. Rovella at drovella@bloomberg.net
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