Passive Owner Fined Nearly $160MM for DWH Spill

One unanswered question from the Deepwater Horizon litigation was the Clean Water Act civil penalty liability that would be imposed – or not – on Anadarko Petroleum, a passive owner of a 25% interest in the BP lease.  On November 30, 2015, the district court answered that question, imposing a penalty of $159.5MM.  The court observed that while “out of context,” this penalty might appear “high”, it amounted to $50 a barrel and only 4.5% of the maximum the court could have imposed, and was far outside the range of $1B to $5B requested by the United States.

The court went through an analysis of each of the eight factors listed in the CWA for assessment of civil penalties.  Essentially though, the court found most factors “neutral” and based its penalty on two factors -- the seriousness of the spill and Anadarko’s lack of culpability.  In putting the penalty at the low end of the potential range, the court noted that Anadarko was part of the project that had caused the harm, but had also paid $4B to BP to resolve its liability for non-civil penalty claims by numerous individual and governmental parties.  Likewise, the $159MM amount was “in step with” the $90MM settlement by the other passive party, MOEX, which had a 10% share.

Where both Anadarko and MOEX were non-culpable, passive investors in the BP lease who did not profit from that ownership, their relative shares of ownership would not appear by itself to justify a significant difference in the penalty assessed.  However, a factor not emphasized by the court was likely also relevant to the court’s decision. MOEX not only held a smaller ownership share in the BP lease,, but settled its liability to the United States before trial and very early in the litigation. Anadarko chose instead to litigate actively through trial raising numerous issues in the district court and on appeal to avoid any liability.  Accordingly, while under the court’s analysis of the CWA factors, there may be little reason why the two passive investors would pay significantly different amounts, it is likely that the court wanted to send a message to future defendants that there can be real benefits to early settlement.