Responsible Party under OPA not responsible for damages resulting from government imposed Moratorium

Responsible Party under OPA not responsible for damages resulting from government imposed Moratorium and Permitorium

Case: In re: Oil Spill by the Oil Rig “Deepwater Horizon” in the Gulf of Mexico, on April 20, 2010
United States District Court for the Eastern District of Louisiana
No. 2:10-md-02179

Appeal: In Re: Deepwater Horizon
United States Court of Appeals for the Fifth Circuit
No. 16-30245

Adding to the wealth of case law stemming from the DEEPWATER HORIZON/Macondo spill, Judge Carl J. Barbier refused to impose liability on BP for the economic losses sustained by various oil industry-related businesses due to the U.S. Government imposed 6-month moratorium on both continuing ongoing activity on 33 deepwater wells being drilled (deepwater being defined as more than 500 feet of water) and on granting of permits for new wells being drilled using floating rigs.

BP was a responsible party under OPA, 33 U.S.C. Section 2702(a), which states:

[E]ach responsible party for a vessel or a facility from which oil is discharged, or which poses the substantial threat of a discharge of oil, into or upon the navigable waters . . . is liable for the removal costs and damages specified in subsection (b) of this section that result from such incident.

The specific damages sought were those under Section 2702(b)(E), “profits and earning capacity,” defined as:

Damages equal to the loss of profits or impairment of earning capacity due to the injury, destruction, or loss of real property, personal property, or natural resources, which shall be recoverable by any claimant.

The question posed, then, was whether the economic losses sustained were “due to the injury, destruction, or loss of real property, personal property, or natural resources” that “resulted from” the discharge or threatened discharge from the Macondo well. Even though the Court found there would have been no moratorium but for the spill, the Court reviewed the stated reason for it and noted it was to address and reduce the risk of future spills due to weakness in industry safety procedures. Thus, under “the OPA Test Plaintiffs’ losses did not result from the discharge or substantial threat of discharge of oil from the Macondo Well, they resulted from the perceived threat (whether substantial or not) of discharge from other wells.” The Court concluded “there is nothing to suggest that Congress intended OPA to go so far as to hold a discharger liable for the financial consequences of the subsequent government actions aimed at preventing similar tragedies in the future and which broadly affect an entire industry.”

Judge Barbier found Plaintiffs had failed to sustain their burden of plausibly alleging claims which satisfied OPA’s causation standard, and thus granted BP’s Motion to Dismiss. Of note, Plaintiffs have appealed the district court ruling to the U.S. Fifth Circuit Court of Appeals. Initial briefing should be filed in mid-July.