Macondo Well Was Source of Discharge for Purposes of CWA Civil Penalty Liability

Case:
In Re: Deepwater Horizon, United States of America v. B.P. Exploration & Production, Inc. and Anadarko Petroleum Corp.
Federal Fifth Circuit Court of Appeals
No. 12-30883 (5th Cir. 6/4/2014)

At issue was the responsibility of BP and Anadarko, co-owners of the well and co-lessors of the block in which the well was located, versus Transocean, the owner/operator of the rig, Deepwater Horizon, for civil penalties stemming from Clean Water Act violations (§311) associated with the 2010 Macondo Oil Spill. The CWA mandates the assessment of fines on the owners or operators of any vessel or facility “from which oil or a hazardous substance is discharged.” The United States sought civil penalties against BP, Anadarko and Transocean, urging the oil discharged both from the well and from the Deepwater Horizon, but the parties argued there could only be one discharge, with BP and Anadarko arguing the site of discharge was the place the oil entered the water, i.e. the Transocean riser, and Transocean arguing it was the origin or source of the discharge, i.e. the well.

The District Court, Judge Carl Barbier, held the discharge point was where “uncontrolled movement” of the oil began, which he held was the flow from the well. BP and Anadarko had earlier stipulated that the well was an offshore facility which they owned. Judge Barbier rejected BP and Anadarko’s arguments that the point of discharge for liability purposes was the Transocean riser, the last structure through which the oil flowed, holding, “the uncontrolled movement of oil began in the well. The riser and BOP, by contrast, were merely passive conduits through which oil flowed. For purposes of Section 311(b)(7), oil discharged from the Macondo Well.” In re Oil Spill by the Oil Rig “Deepwater Horizon” in the Gulf of Mexico, on April 20, 2010, 844 F. Supp. 2d 746, 758 (E.D. La. 2012).

In considering the issue, the Fifth Circuit noted the term “discharge” was not defined in the relevant section of the CWA, but that examples were given, including “spilling, leaking, pumping, pouring, emitting, emptying or dumping.” The Court noted this refers to a “fluid ‘flowout from where it has been confined.’” As a result, the Court held a vessel or facility is the point of discharge if it is the “point at which controlled confinement is lost.” The Fifth Circuit found no dispute that the oil had been confined in the well, but that confinement was lost when the cement in the well failed, resulting in the oil flowing freely into the Gulf of Mexico. It was found immaterial whether the oil flowed through other structures before entering the water.

BP and Anadarko attempted to distinguish previous cases involving oil crossing third party property before entering the water by arguing those third parties had been blameless, yet here, Transocean contributed to the spill because its blow out preventer did not function properly. However, the Court held it is well established that the CWA leaves no room for civil-penalty defendants to shift their liability due to third party fault, as the penalty is imposed irrespective of knowledge, intent or fault. Liability was described as “absolute” with “limited exceptions, which are to be narrowly construed.” The Fifth Circuit further noted the intent of the CWA was to have the owners of the well, the parties who would profit from its success, bear the penalty. The Court did acknowledge contributing fault could be considered a mitigating factor when the penalty is calculated.

So, BP and Anadarko alone bear responsibility for the Clean Water Act civil penalties stemming from the Macondo Spill.