Original Story: latimes.com
The giant oil company BP doesn't do small-scale.
Not only is it responsible for the 2010 Deepwater Horizon oil spill -- "unprecedented" in its "volume, depth, and spatial scale," in the words of the National Research Council -- but the firm has mounted what certainly looks like an unprecedented PR campaign to minimize the damage, along with a years-long effort to dodge the financial consequences of its spill.
This week, Politico provided the company with another valuable platform for its PR -- a two-page online spread titled "No, BP Didn't Ruin the Gulf." The piece was written by one Geoff Morrell, who turns out to be the oil company's spokesman, as you'll discover if you read down to the bottom of the screen.
As we honor the life and career of the just-departed former Washington Post editor Ben Bradlee, we should mark this groundbreaking advance in Washington journalism: a corporate advertisement presented as "opinion." It's not evident that BP paid for its placement in Politico, but whether it forked over nothing, a little or a lot, it scored well: as we write, Morrell's piece is demurely sharing space on Politico Magazine's home page with reported articles on Ebola policy, the Supreme Court's influence on election rules, and the fall of Atlantic City. A Corpus Christi Energy Lawyer is experienced in legal issues that arise from energy disputes.
But it's not Politico's credibility that's at issue here; it's BP's. Let's examine whether the oil company has any.
Morrell begins by posing an overarching question: "What impact did the spill actually have on the Gulf Coast environment?"
The answer, if you study the findings of experts, is that the spill has had massive impacts. These include immediate effects on sea fowl, marine mammals, and coral; and long-term effects on dolphins, sea turtles, fish and wildlife populations, and the gulf food web. Moreover, many effects are still imponderable at this time, because no one has studied an oil spill of this magnitude in a unique ecosystem such as the gulf. Assessing the damage may take decades, covering generations of animals. A Charleston Environmental Lawyer has experience representing clients in all areas of general environmental law.
BP sidesteps that point. Morrell mentions several predictions that were made in the immediate aftermath of the spill, and that were manifestly conjectural -- "tar balls...all the way to Europe," "a permanent end" to the gulf seafood industry, tourism revenues depressed for years.
"None of those things happened," Morrell states, as if that proves that there were no major effects. The only effects he acknowledges are short-term--11 workers killed, birds, fish and wildlife killed. "And with a camera trained 24/7 on the wellhead," he writes, "a sense of alarm was understandable while the well was flowing." (Yes, durn that camera -- if only the spill unfolded without witnesses, things would have been so much better.) A Boston Business Lawyer is experienced in providing legal advice to business clients on a variety of legal matters.
As for longer-term effects, Morrell attributes many of the reports to "advocacy groups (that) cherry-pick evidence and promote studies that paint an incomplete and inaccurate picture." He then proceeds to cherry-pick ostensibly exaggerated impacts: "For example, these groups claim the spill harmed the Gulf’s oyster population," he writes. "What they don’t say is that government sampling in 2010, 2011 and 2012 did not document a single visibly oiled oyster bed.
Here's what Morrell didn't say: The gulf oyster harvest is today near a historical low. Because oysters take three years to reach maturity, according to the Gulf Seafood Institute, gulf harvesters fear that they're seeing the oil spill impacts right now. According to historical cycles, oyster landings "currently should be trending upwards; but they’re not." Is this a consequence of the Deepwater Horizon spill? The most anyone can say is that the jury is still out. But it's certainly way too early to declare the impact "fiction," as BP would prefer.
In short, the questions about the impact of the oil spill haven't yet been answered. Not even close. BP has an obvious corporate interest in treating the spill as yesterday's news. It's not. BP has been adjudicated the legally responsible party for the Deepwater Horizon disaster. It's a litigant facing billions of dollars in claims and penalties. It doesn't have an "opinion" worth reading, only a legal interest to promote. When a news organization such as Politico helps it promote its own interest, neither partner looks good.
Showing posts with label oil spill. Show all posts
Showing posts with label oil spill. Show all posts
Monday, October 27, 2014
Friday, February 22, 2013
BP Excluding Billions In Possible Claims, Arguing U.S. Benefited
Story first appeared on Bloomberg News -
Bill Floyd, owner of an upscale seafood restaurant near downtown Houston, is a poster-child for the type of damage claim BP Plc left out of its $8.5 billion settlement for the biggest offshore oil spill in U.S. history.
When the energy company’s blown-out Macondo well dumped more than 4 million barrels of crude oil into the Gulf of Mexico in 2010, Floyd saw his costs for fresh shrimp, crab and oysters almost double overnight while his sales flat-lined. A Business Interruption Insurance policy might have benefited this company.
“Ninety percent of our menu comes out of the Gulf,” said Floyd, whose eatery, Reef, was named the best seafood restaurant in the U.S. in 2008 by Bon Appetit magazine. “Our shrimp prices went through the roof while our increase in sales, which had been averaging about 20 percent each year, went almost dead.”
Floyd’s is one of thousands of businesses, banks and municipalities excluded from the settlement last March. Many of those left out stretch tens or hundreds of miles inland from the once-blackened coastlines. Next week, fault for the spill will be determined in a sprawling trial in New Orleans federal court, the first step for claimants like Floyd seeking what may total billions of dollars from the companies behind the accident.
But their path may be difficult, as BP has pledged to “vigorously” fight their claims. Lawyers for claimants said BP didn’t settle with them because it sees a chance of victory.
And in some cases, the U.K.-based company said in court filings, it may even argue U.S. businesses and governments benefited from the spill, claiming spending and taxes paid by cleanup crews exceeded the losses caused by the catastrophe that brought them there in the first place.
Prove Damages
All victims whose claims were excluded from the settlement must prove the spill directly caused their physical or economic injury, as required under the Oil Pollution Act, which governs spill-damage compensation, legal experts said.
“Causation is the main hurdle, because the bulk of claims for economic loss are by people without physical damage,” said David Robertson, a University of Texas law professor who has advised lawyers leading the spill suits. “There’s a whole huge block of the economy that was heavily affected by the spill, and some of these are very large claims.”
U.S. District Judge Carl Barbier will preside over the Feb. 25 trial without a jury, under maritime law, which governs this phase of the litigation.
As the sole finder of fact, he will apportion fault for the explosion and spill among BP and subcontractors Transocean Ltd. (RIG), which owned and operated the Deepwater Horizon rig, and Halliburton Co. (HAL), which was responsible for cementing services. The subcontractors would only be responsible for punitive damages, based on Barbier's ruling that the project contract required BP to indemnify them for compensatory damages.
Fault Findings
The judge’s findings of fault will be applied to subsequent trials where specific dollar-amounts for spill damages will be determined, including those on claims excluded from the initial settlement. Plaintiffs’ lawyers said those damages trials, unlike the phase beginning next week, will be heard by juries.
BP’s settlement addressed damages to waterfront property owners, coastal tourism and seafood-industry interests, as well as some medical injuries suffered by residents who worked in the spill or live within a mile of the beach.
Medical-injury claims from people living further inland, and economic-loss claims from industries such as offshore drillers hurt by a federal moratorium and Houston seafood restaurants like Reef, weren’t addressed by the accord. State and local governmental claims for lost tax revenues were also excluded from the deal.
“Oil and gas industry losses were directly and immediately caused by the spill, and that’s an excluded category,” Robertson said. “Yet BP has also settled with some bait-and- tackle shops that were pretty far inland.”
Loss Claims
BP’s settlement assigned some value to economic-loss claims throughout Louisiana and Mississippi, with claim values decreasing the further away they were from the coast. In Texas and Florida, economic-loss claims were allowed only if they originated within a narrow coastal zone.
Reef is a 45-minute drive from the beach and outside that loss demarcation. So are owners of certain Mississippi coastal wetlands that were covered in oil during the spill, although similarly damaged properties in Louisiana were covered by the settlement, according to court papers.
“It looks like BP tried to resolve as many claims as it could for as little as it could as quickly as it could,” New Orleans lawyer Mike Stag, who represents about 3,000 spill victims, said of how the exclusions were determined.
“BP wants these claims sunk to the bottom of the ocean, like their oil,” Stag said.
Scott Dean, a spokesman for BP, said the company will fight the claims excluded from the earlier settlement, “including those based on the U.S. government’s decision to institute a drilling moratorium in the Gulf.”
Claims Administrator
Patrick Juneau, the court-appointed administrator for BP’s Deepwater Horizon Claims Center, said it paid a total of $1.5 billion in damage claims to 22,178 economic victims as of Feb. 19. The center, which administers the $8.5 billion settlement fund, is awaiting answers on another $500 million in compensation offered to victims, Juneau said. Reviews of all but about 30,000 of the 131,055 claims the center has received have been started, he said. New claims will be accepted until April 2014. Juneau said he can’t attach dollar amounts to the excluded claims because, by court order, he can only process claims that are included in the settlement.
Claims Received
To date, he said, he’s received more than 3,500 claims from victims excluded from the spill settlement, including 103 from the oil and gas industry, 249 from gaming firms, 61 from financial institutions, 43 from insurance companies and 170 from state and local governments.
“One of the biggest categories of excluded claims is losses tied to the deep-water drilling moratorium” imposed by the Obama administration after the spill, Stag said. They were specifically allowed by Barbier, the judge overseeing all BP spill-loss cases.
“Those claims will have substantial value, with all the rigs that were shut down and the onshore support-services demand that fell off as a result,” he said. “We’re talking billions of dollars in lost revenue and lost business.”
One offshore drilling company represented by Houston attorney Richard Mithoff suffered damage of as much as $250 million because of the spill, he said. The company, which he declined to name, lost favorable financing terms for a rig it was building at the time of the disaster, Mithoff said.
“These big offshore rigs can cost more than $1 billion, and my client had to go replace its financing when the credit market shut down” for offshore drilling companies when the spill began, Mithoff said.
‘No Choice’
“My client had no choice but to complete the financing at significantly higher rates,” he said. “We’re talking a difference of $200 million to $250 million.” His client hasn’t yet sued, he said.
Stag, who represents several banks alleging spill-related losses, said financial institutions are another large category of excluded claims. He also declined to name his clients.
“When the offshore business slows down and no lines of credit are being taken out for capital investment for ongoing drilling and everyone scales back, that’s going to have a substantial effect on banks’ revenues,” he said.
Stag said he represents a regional radio-communications company, which he declined to identify, that was selling its business when the deep-water drilling ban went into effect and killed the deal.
$8 Billion-Plus
“That’s a $10 million to $20 million loss right there,” Stag said. “I wouldn’t be surprised if there’s another $4 billion to $8 billion in total spill-related losses out there. If we include all the moratorium-related losses, it might be even more than that.”
Also excluded from BP’s settlement are Gulf Coast residents with certain medical injuries who live more than half a mile off the beach or a mile inland from a wetland.
Michael Robichaux, a Raceland, Louisiana doctor, said he has treated scores of spill patients for “the exact same injuries” he treated in U.S. veterans of the Persian Gulf War. The injuries range from skin and eye irritations to chronic headaches, he said.
All of these patients were exposed to oil or toxic chemical dispersants used to break up the spill, including ones who live outside the settlement boundaries, Robichaux said.
‘Screwed’ Patients
“I’m treating patients with chronic illnesses that will affect them for the rest of their lives, and they’re not even included in what was negotiated with BP,” Robichaux said. “These patients and their injuries are screwed, and that’s the nicest thing I can say about it.”
Stag said he opted-out about 600 medical victims from BP’s settlement because the compensation offered was too low.
“A lot of health effects have yet to be seen,” he said. “The result is some of these people are going to die. It’s just a matter of how many.”
Following next week’s trial, claimants may pursue their claims individually, with the court’s determination of fault in hand. However, they will have to then prove they were injured, and that it was caused by the spill defendants.
Thomas McGarity, another University of Texas law professor, said the more directly a victim can prove his loss was caused by the spill, the better his chances of making BP pay.
“With businesses that can say they lost this particular deal with this direct economic harm, they may have a chance” at a trial, McGarity said.
BP can be expected to dispute claims from the excluded categories, Mithoff said, adding: “They’re putting that fight off for another day.”
Cleanup Helped
The company said in court papers that it may try to prove that tax-revenue losses by some governmental entities and revenue-loss claims by some tourism businesses, such as casinos, were offset by increases in economic activity generated by BP’s cleanup crews.
Thousands of BP workers swarmed the coastline in 2010 and 2011 to clean up the spill, and BP said in court filings that spending by these workers largely replaced lost tourist dollars.
“I don’t think that argument will resonate well with a jury,” Stag said.
The case is In re Oil Spill by the Oil Rig Deepwater Horizon in the Gulf of Mexico on April 20, 2010, MDL-2179, U.S. District Court, Eastern District of Louisiana (New Orleans).
Bill Floyd, owner of an upscale seafood restaurant near downtown Houston, is a poster-child for the type of damage claim BP Plc left out of its $8.5 billion settlement for the biggest offshore oil spill in U.S. history.
When the energy company’s blown-out Macondo well dumped more than 4 million barrels of crude oil into the Gulf of Mexico in 2010, Floyd saw his costs for fresh shrimp, crab and oysters almost double overnight while his sales flat-lined. A Business Interruption Insurance policy might have benefited this company.
“Ninety percent of our menu comes out of the Gulf,” said Floyd, whose eatery, Reef, was named the best seafood restaurant in the U.S. in 2008 by Bon Appetit magazine. “Our shrimp prices went through the roof while our increase in sales, which had been averaging about 20 percent each year, went almost dead.”
Floyd’s is one of thousands of businesses, banks and municipalities excluded from the settlement last March. Many of those left out stretch tens or hundreds of miles inland from the once-blackened coastlines. Next week, fault for the spill will be determined in a sprawling trial in New Orleans federal court, the first step for claimants like Floyd seeking what may total billions of dollars from the companies behind the accident.
But their path may be difficult, as BP has pledged to “vigorously” fight their claims. Lawyers for claimants said BP didn’t settle with them because it sees a chance of victory.
And in some cases, the U.K.-based company said in court filings, it may even argue U.S. businesses and governments benefited from the spill, claiming spending and taxes paid by cleanup crews exceeded the losses caused by the catastrophe that brought them there in the first place.
Prove Damages
All victims whose claims were excluded from the settlement must prove the spill directly caused their physical or economic injury, as required under the Oil Pollution Act, which governs spill-damage compensation, legal experts said.
“Causation is the main hurdle, because the bulk of claims for economic loss are by people without physical damage,” said David Robertson, a University of Texas law professor who has advised lawyers leading the spill suits. “There’s a whole huge block of the economy that was heavily affected by the spill, and some of these are very large claims.”
U.S. District Judge Carl Barbier will preside over the Feb. 25 trial without a jury, under maritime law, which governs this phase of the litigation.
As the sole finder of fact, he will apportion fault for the explosion and spill among BP and subcontractors Transocean Ltd. (RIG), which owned and operated the Deepwater Horizon rig, and Halliburton Co. (HAL), which was responsible for cementing services. The subcontractors would only be responsible for punitive damages, based on Barbier's ruling that the project contract required BP to indemnify them for compensatory damages.
Fault Findings
The judge’s findings of fault will be applied to subsequent trials where specific dollar-amounts for spill damages will be determined, including those on claims excluded from the initial settlement. Plaintiffs’ lawyers said those damages trials, unlike the phase beginning next week, will be heard by juries.
BP’s settlement addressed damages to waterfront property owners, coastal tourism and seafood-industry interests, as well as some medical injuries suffered by residents who worked in the spill or live within a mile of the beach.
Medical-injury claims from people living further inland, and economic-loss claims from industries such as offshore drillers hurt by a federal moratorium and Houston seafood restaurants like Reef, weren’t addressed by the accord. State and local governmental claims for lost tax revenues were also excluded from the deal.
“Oil and gas industry losses were directly and immediately caused by the spill, and that’s an excluded category,” Robertson said. “Yet BP has also settled with some bait-and- tackle shops that were pretty far inland.”
Loss Claims
BP’s settlement assigned some value to economic-loss claims throughout Louisiana and Mississippi, with claim values decreasing the further away they were from the coast. In Texas and Florida, economic-loss claims were allowed only if they originated within a narrow coastal zone.
Reef is a 45-minute drive from the beach and outside that loss demarcation. So are owners of certain Mississippi coastal wetlands that were covered in oil during the spill, although similarly damaged properties in Louisiana were covered by the settlement, according to court papers.
“It looks like BP tried to resolve as many claims as it could for as little as it could as quickly as it could,” New Orleans lawyer Mike Stag, who represents about 3,000 spill victims, said of how the exclusions were determined.
“BP wants these claims sunk to the bottom of the ocean, like their oil,” Stag said.
Scott Dean, a spokesman for BP, said the company will fight the claims excluded from the earlier settlement, “including those based on the U.S. government’s decision to institute a drilling moratorium in the Gulf.”
Claims Administrator
Patrick Juneau, the court-appointed administrator for BP’s Deepwater Horizon Claims Center, said it paid a total of $1.5 billion in damage claims to 22,178 economic victims as of Feb. 19. The center, which administers the $8.5 billion settlement fund, is awaiting answers on another $500 million in compensation offered to victims, Juneau said. Reviews of all but about 30,000 of the 131,055 claims the center has received have been started, he said. New claims will be accepted until April 2014. Juneau said he can’t attach dollar amounts to the excluded claims because, by court order, he can only process claims that are included in the settlement.
Claims Received
To date, he said, he’s received more than 3,500 claims from victims excluded from the spill settlement, including 103 from the oil and gas industry, 249 from gaming firms, 61 from financial institutions, 43 from insurance companies and 170 from state and local governments.
“One of the biggest categories of excluded claims is losses tied to the deep-water drilling moratorium” imposed by the Obama administration after the spill, Stag said. They were specifically allowed by Barbier, the judge overseeing all BP spill-loss cases.
“Those claims will have substantial value, with all the rigs that were shut down and the onshore support-services demand that fell off as a result,” he said. “We’re talking billions of dollars in lost revenue and lost business.”
One offshore drilling company represented by Houston attorney Richard Mithoff suffered damage of as much as $250 million because of the spill, he said. The company, which he declined to name, lost favorable financing terms for a rig it was building at the time of the disaster, Mithoff said.
“These big offshore rigs can cost more than $1 billion, and my client had to go replace its financing when the credit market shut down” for offshore drilling companies when the spill began, Mithoff said.
‘No Choice’
“My client had no choice but to complete the financing at significantly higher rates,” he said. “We’re talking a difference of $200 million to $250 million.” His client hasn’t yet sued, he said.
Stag, who represents several banks alleging spill-related losses, said financial institutions are another large category of excluded claims. He also declined to name his clients.
“When the offshore business slows down and no lines of credit are being taken out for capital investment for ongoing drilling and everyone scales back, that’s going to have a substantial effect on banks’ revenues,” he said.
Stag said he represents a regional radio-communications company, which he declined to identify, that was selling its business when the deep-water drilling ban went into effect and killed the deal.
$8 Billion-Plus
“That’s a $10 million to $20 million loss right there,” Stag said. “I wouldn’t be surprised if there’s another $4 billion to $8 billion in total spill-related losses out there. If we include all the moratorium-related losses, it might be even more than that.”
Also excluded from BP’s settlement are Gulf Coast residents with certain medical injuries who live more than half a mile off the beach or a mile inland from a wetland.
Michael Robichaux, a Raceland, Louisiana doctor, said he has treated scores of spill patients for “the exact same injuries” he treated in U.S. veterans of the Persian Gulf War. The injuries range from skin and eye irritations to chronic headaches, he said.
All of these patients were exposed to oil or toxic chemical dispersants used to break up the spill, including ones who live outside the settlement boundaries, Robichaux said.
‘Screwed’ Patients
“I’m treating patients with chronic illnesses that will affect them for the rest of their lives, and they’re not even included in what was negotiated with BP,” Robichaux said. “These patients and their injuries are screwed, and that’s the nicest thing I can say about it.”
Stag said he opted-out about 600 medical victims from BP’s settlement because the compensation offered was too low.
“A lot of health effects have yet to be seen,” he said. “The result is some of these people are going to die. It’s just a matter of how many.”
Following next week’s trial, claimants may pursue their claims individually, with the court’s determination of fault in hand. However, they will have to then prove they were injured, and that it was caused by the spill defendants.
Thomas McGarity, another University of Texas law professor, said the more directly a victim can prove his loss was caused by the spill, the better his chances of making BP pay.
“With businesses that can say they lost this particular deal with this direct economic harm, they may have a chance” at a trial, McGarity said.
BP can be expected to dispute claims from the excluded categories, Mithoff said, adding: “They’re putting that fight off for another day.”
Cleanup Helped
The company said in court papers that it may try to prove that tax-revenue losses by some governmental entities and revenue-loss claims by some tourism businesses, such as casinos, were offset by increases in economic activity generated by BP’s cleanup crews.
Thousands of BP workers swarmed the coastline in 2010 and 2011 to clean up the spill, and BP said in court filings that spending by these workers largely replaced lost tourist dollars.
“I don’t think that argument will resonate well with a jury,” Stag said.
The case is In re Oil Spill by the Oil Rig Deepwater Horizon in the Gulf of Mexico on April 20, 2010, MDL-2179, U.S. District Court, Eastern District of Louisiana (New Orleans).
Wednesday, January 9, 2013
Arctic Drilling to Be Reviewed in Light of Accidents
originally appeared in The New York Times:
The Interior Department on Tuesday opened an urgent review of Arctic offshore drilling operations after a series of blunders and accidents involving Shell Oil’s drill ships and support equipment, culminating in the grounding of one of its drilling vessels last week off the coast of Alaska.
Officials said the new assessment by federal regulators could halt or scale back Shell’s program to open Alaska’s Arctic waters to oil exploration, a $4.5 billion effort that has been plagued by equipment failures, legal delays, mismanagement and bad weather.
Interior Secretary Ken Salazar said that the expedited review, which is to be completed within 60 days, was prompted by accidents and equipment problems aboard Shell’s two Arctic drilling rigs, the Kulluk and the Noble Discoverer, as well as the Arctic Challenger, a vessel designed to respond to a potential well blowout and oil spill.
In addition, the Coast Guard announced Tuesday that it would conduct a comprehensive marine casualty investigation of the grounding of the Kulluk on Dec. 31.
Shell’s repeated and early misadventures have confirmed the fears of Arctic drilling critics, who said that the company and its federal partners had not shown that they had the equipment, skill or experience to cope with the unforgiving environment there.
The director of the Interior Department’s Bureau of Ocean Energy Management, will lead the review. As part of our department’s oversight responsibilities, he said in a statement, our review will look at Shell’s management and operations in the Beaufort and Chukchi Seas. We will assess Shell’s performance in the Arctic’s challenging environment.
The assessment will look at Shell’s safety management systems, its oversight of contracted services and its ability to meet federal standards for Arctic oil and gas operations.
According to the president of Shell Oil, said of the government assessment: It’s not a concern to me. I welcome this kind of high-level review. It’s important that both we and the Department of Interior take a look at the 2012 season.
Shell's president added: There are obviously some issues that need to be worked on, particularly the marine transport. He said that it was too early to say what damage may have occurred to the Kulluk but that he had great confidence in this program.
Shell’s rigs drilled two shallow wells last summer, but were halted by government officials before they reached oil-bearing formations. Officials would not allow Shell to drill deeper because the company did not have the required capacity to contain spills after the testing failure of a device designed to cap a runaway well and collect the oil.
In the past several months, the Coast Guard has examined the containment barge and the rebuilt dome, and both passed necessary tests. But the Bureau of Safety and Environmental Enforcement still needs to inspect the equipment before it can be deployed. Those inspections were originally to be done later this month, but have been put off because of the Kulluk accident.
Environmental advocates have been leery of the Arctic drilling program for years and became especially vocal after the Kulluk ran aground.
Greenpeace, which is circulating petitions calling on President Obama to halt the Arctic drilling program, said that the Interior Department’s reassessment was long overdue.
We’ve repeatedly been told Shell is the best in the business, and so we can only conclude after this series of mishaps that the best in the business is simply not good enough for the Arctic, according to Greenpeace's deputy campaigns director. We only hope that 60 days is long enough to properly examine the extraordinary number of dangerous incidents that have beset Shell’s accident-prone drilling program and put Alaska’s environment at risk.
The senior Pacific counsel for the environmental advocacy group Oceana, said that government regulators were too lax in allowing the program to go forward without adequate assurances that Shell could operate safely and competently.
We hope this review amounts to more than a paper exercise, he said. The Department of the Interior, after all, is complicit in Shell’s failures because it granted the approvals that allowed Shell to operate.
The Kulluk was towed to a safe harbor on Monday, where it will undergo extensive inspections before continuing its journey to its winter home in Seattle.
If the Kulluk, which Shell has upgraded in recent years at a cost of nearly $300 million, is found to have been wrecked or substantially damaged, it will be hard for the company to find a replacement and receive the numerous government permits needed to resume drilling in July, as it has planned.
Under Department of Interior rules governing Arctic drilling, the company must have two rigs on site at all times to provide for a backup vessel to drill a relief well in case of a blowout, an uncontrolled escape of oil or gas.
The Kulluk, which does not have a propulsion system of its own, ran into trouble in late December when its tow ship, the Aiviq, lost engine power and the towline separated in high winds and heavy seas.
Shell’s other Arctic drill ship, the Noble Discoverer, has also had problems. In July, before sailing to the Arctic, it nearly ran aground after dragging its anchor in the Aleutian Islands. Then in November it had a small engine fire.
Later that month, during an inspection in the Alaskan port of Seward, the Coast Guard found more than a dozen violations involving safety systems and pollution equipment.
At the end of December, the Noble Corporation, the Swiss company that owns the 512-foot-long drill ship and is leasing it to Shell for $240,000 a day, said that many of the problems had been repaired and that the ship was preparing to sail to Seattle to fix the remainder of them.
The Interior Department on Tuesday opened an urgent review of Arctic offshore drilling operations after a series of blunders and accidents involving Shell Oil’s drill ships and support equipment, culminating in the grounding of one of its drilling vessels last week off the coast of Alaska.
Officials said the new assessment by federal regulators could halt or scale back Shell’s program to open Alaska’s Arctic waters to oil exploration, a $4.5 billion effort that has been plagued by equipment failures, legal delays, mismanagement and bad weather.
Interior Secretary Ken Salazar said that the expedited review, which is to be completed within 60 days, was prompted by accidents and equipment problems aboard Shell’s two Arctic drilling rigs, the Kulluk and the Noble Discoverer, as well as the Arctic Challenger, a vessel designed to respond to a potential well blowout and oil spill.
In addition, the Coast Guard announced Tuesday that it would conduct a comprehensive marine casualty investigation of the grounding of the Kulluk on Dec. 31.
Shell’s repeated and early misadventures have confirmed the fears of Arctic drilling critics, who said that the company and its federal partners had not shown that they had the equipment, skill or experience to cope with the unforgiving environment there.
The director of the Interior Department’s Bureau of Ocean Energy Management, will lead the review. As part of our department’s oversight responsibilities, he said in a statement, our review will look at Shell’s management and operations in the Beaufort and Chukchi Seas. We will assess Shell’s performance in the Arctic’s challenging environment.
The assessment will look at Shell’s safety management systems, its oversight of contracted services and its ability to meet federal standards for Arctic oil and gas operations.
According to the president of Shell Oil, said of the government assessment: It’s not a concern to me. I welcome this kind of high-level review. It’s important that both we and the Department of Interior take a look at the 2012 season.
Shell's president added: There are obviously some issues that need to be worked on, particularly the marine transport. He said that it was too early to say what damage may have occurred to the Kulluk but that he had great confidence in this program.
Shell’s rigs drilled two shallow wells last summer, but were halted by government officials before they reached oil-bearing formations. Officials would not allow Shell to drill deeper because the company did not have the required capacity to contain spills after the testing failure of a device designed to cap a runaway well and collect the oil.
In the past several months, the Coast Guard has examined the containment barge and the rebuilt dome, and both passed necessary tests. But the Bureau of Safety and Environmental Enforcement still needs to inspect the equipment before it can be deployed. Those inspections were originally to be done later this month, but have been put off because of the Kulluk accident.
Environmental advocates have been leery of the Arctic drilling program for years and became especially vocal after the Kulluk ran aground.
Greenpeace, which is circulating petitions calling on President Obama to halt the Arctic drilling program, said that the Interior Department’s reassessment was long overdue.
We’ve repeatedly been told Shell is the best in the business, and so we can only conclude after this series of mishaps that the best in the business is simply not good enough for the Arctic, according to Greenpeace's deputy campaigns director. We only hope that 60 days is long enough to properly examine the extraordinary number of dangerous incidents that have beset Shell’s accident-prone drilling program and put Alaska’s environment at risk.
The senior Pacific counsel for the environmental advocacy group Oceana, said that government regulators were too lax in allowing the program to go forward without adequate assurances that Shell could operate safely and competently.
We hope this review amounts to more than a paper exercise, he said. The Department of the Interior, after all, is complicit in Shell’s failures because it granted the approvals that allowed Shell to operate.
The Kulluk was towed to a safe harbor on Monday, where it will undergo extensive inspections before continuing its journey to its winter home in Seattle.
If the Kulluk, which Shell has upgraded in recent years at a cost of nearly $300 million, is found to have been wrecked or substantially damaged, it will be hard for the company to find a replacement and receive the numerous government permits needed to resume drilling in July, as it has planned.
Under Department of Interior rules governing Arctic drilling, the company must have two rigs on site at all times to provide for a backup vessel to drill a relief well in case of a blowout, an uncontrolled escape of oil or gas.
The Kulluk, which does not have a propulsion system of its own, ran into trouble in late December when its tow ship, the Aiviq, lost engine power and the towline separated in high winds and heavy seas.
Shell’s other Arctic drill ship, the Noble Discoverer, has also had problems. In July, before sailing to the Arctic, it nearly ran aground after dragging its anchor in the Aleutian Islands. Then in November it had a small engine fire.
Later that month, during an inspection in the Alaskan port of Seward, the Coast Guard found more than a dozen violations involving safety systems and pollution equipment.
At the end of December, the Noble Corporation, the Swiss company that owns the 512-foot-long drill ship and is leasing it to Shell for $240,000 a day, said that many of the problems had been repaired and that the ship was preparing to sail to Seattle to fix the remainder of them.
Tuesday, December 4, 2012
Ecuador Seeks Damages from Chevron Oil Spill
Chevron Corp. (CVX) is facing its first test of whether farmers and fishermen from the Amazon rainforest will collect $19 billion in environmental damages from the world’s fourth-largest oil company.
A group of 47 Ecuadoreans have asked Ontario’s Superior Court of Justice to seize Chevron assets in Canada, ranging from an oil sands project to offshore wells, to satisfy a 2011 court ruling in the Latin American nation that ordered the company to pay for oil pollution dating to the 1960s. Chevron said the Ecuadorean judgment is outside Ontario’s jurisdiction and that the ruling resulted from bribery and fraud.
A hearing in Toronto today marks the Ecuadoreans’ inaugural step in a global collection effort that includes seizure attempts in Argentina and Brazil. The Ecuadoreans estimated Chevron has $12 billion in Canadian assets, a figure that equates to almost half of the company’s 2011 profit. An adverse Ontario ruling for Chevron would put at risk fuel-manufacturing and oil-production operations across Canada.
Robert Sweet, who helps manage $150 million at Horizon Investment Services in Hammond, Indiana, said it is a cause for concern, and as with all ecological disasters will take a long time to resolve.
The company’s presence in Canada dates back to the 1930s and includes an oil-refining complex in British Columbia, an Alberta oil-sands venture, offshore wells in the Atlantic Ocean, and cash held in Canadian bank accounts.
The $19 billion ruling handed down last year by a court in Lago Agrio, a town near Ecuador’s border with Colombia, held Chevron accountable for health and environmental damages resulting from chemical-laden wastewater dumped from 1964 to 1992.
The Ecuadorean plaintiffs, from the remote northern Amazon River basin, are seeking enforcement of the judgment outside their home country because Chevron has no refineries, oil wells, storage terminals or other properties in the nation. Pablo Fajardo, their lead lawyer in Ecuador, said during a February 2011 conference call with reporters he would use every strategy and manner at his disposal to collect the award.
The Ecuadoreans face an “uphill battle” because they must convince the court that Chevron and its Canadian operations should be treated as one entity rather than separate companies, said Barry Leon, a partner and head of the international arbitration group at Perley-Robertson, Hill & McDougall LLP in Ottawa.
Chevron rose 0.8 percent to $106.35 at 9:35 a.m. in New York today. The shares have increased 9.1 percent in the past year.
Alan Lenczner, the Toronto attorney from the firm Lenczner Slaght Royce Smith Griffin LP representing the Ecuadoreans, when reached by phone declined to comment on the case.
Leon said it is likely that the initial decisions will be appealed.
Chevron doesn’t disclose how much it spends on legal fees.
Chevron’s campaign to avoid payment suffered a setback last month when the U.S. Supreme Court upheld a lower-court decision that rejected the company’s request for a pre-emptive block on collection efforts in Chevron’s home country. The lower court had ruled that it didn’t have authority to thwart payment when the Ecuadoreans hadn’t yet filed such a claim in the U.S.
Today, in paid statements published in two Argentine newspapers, Chevron urged the local court to release its money from escrow and indicated the company intends to pursue a legal defense identical to that employed in Canada. “Chevron Argentina has never had operations in Ecuador and has no relation with the fraudulent trial in Ecuador,” the company said in the newspapers Clarin and La Nacion.
Lawyers for the Ecuadoreans including Stephen Donzinger have accused Chevron of engaging in a campaign to discredit them, entrap an Ecuadorean judge that presided over the case and set up dummy corporations in Ecuador to hide Chevron’s alleged role in testing soil samples from the pollution sites.
Ecuador ranked 120th out of 183 nations in Transparency International’s 2011 corruption-perception index, where No. 1 New Zealand is perceived to be the most honest. Albania, Liberia and Lesotho were perceived as less corrupt than Ecuador, according to the index.
In February 2011, Chevron filed a racketeering lawsuit that’s ongoing against the Ecuadoreans and their lawyers in New York for “leading a fraudulent litigation and PR campaign against the company.”
Exxon Mobil Corp. (XOM) is the world’s biggest oil company by market value, followed by PetroChina Company Ltd. and Royal Dutch Shell Plc (RDSA), according to data compiled by Bloomberg.
A group of 47 Ecuadoreans have asked Ontario’s Superior Court of Justice to seize Chevron assets in Canada, ranging from an oil sands project to offshore wells, to satisfy a 2011 court ruling in the Latin American nation that ordered the company to pay for oil pollution dating to the 1960s. Chevron said the Ecuadorean judgment is outside Ontario’s jurisdiction and that the ruling resulted from bribery and fraud.
A hearing in Toronto today marks the Ecuadoreans’ inaugural step in a global collection effort that includes seizure attempts in Argentina and Brazil. The Ecuadoreans estimated Chevron has $12 billion in Canadian assets, a figure that equates to almost half of the company’s 2011 profit. An adverse Ontario ruling for Chevron would put at risk fuel-manufacturing and oil-production operations across Canada.
Robert Sweet, who helps manage $150 million at Horizon Investment Services in Hammond, Indiana, said it is a cause for concern, and as with all ecological disasters will take a long time to resolve.
The company’s presence in Canada dates back to the 1930s and includes an oil-refining complex in British Columbia, an Alberta oil-sands venture, offshore wells in the Atlantic Ocean, and cash held in Canadian bank accounts.
Every Strategy
San Ramon, California-based Chevron was on the losing side of last year’s ruling by a provincial Ecuadorean court that blamed decades of toxic soil and water contamination on Texaco Inc., which Chevron acquired in 2001. Texaco was found to have discharged into the environment saltwater and other byproducts of oil drilling. Texaco quit the country and its equipment was taken over by the Ecuadorean state oil company in 1992.The $19 billion ruling handed down last year by a court in Lago Agrio, a town near Ecuador’s border with Colombia, held Chevron accountable for health and environmental damages resulting from chemical-laden wastewater dumped from 1964 to 1992.
The Ecuadorean plaintiffs, from the remote northern Amazon River basin, are seeking enforcement of the judgment outside their home country because Chevron has no refineries, oil wells, storage terminals or other properties in the nation. Pablo Fajardo, their lead lawyer in Ecuador, said during a February 2011 conference call with reporters he would use every strategy and manner at his disposal to collect the award.
Corporate Veil
In a Nov. 23 filing, Chevron argued the Ontario court has no jurisdiction to grant the Ecuadorean judgment because the company’s Canadian units are indirect subsidiaries with independent boards separated from the U.S. parent by several levels of ownership.The Ecuadoreans face an “uphill battle” because they must convince the court that Chevron and its Canadian operations should be treated as one entity rather than separate companies, said Barry Leon, a partner and head of the international arbitration group at Perley-Robertson, Hill & McDougall LLP in Ottawa.
Chevron rose 0.8 percent to $106.35 at 9:35 a.m. in New York today. The shares have increased 9.1 percent in the past year.
Pending Arbitration
According to Chevron Chairman and Chief Executive Officer John Watson, the Ecuadoreans’ lawyers have blackmailed judges, bribed judges, falsified evidence, falsified expert witnesses, ghostwritten expert opinions and ghostwritten court judgments. If the plaintiffs were confident in the “integrity” of the ruling, they would seek enforcement in U.S. courts with jurisdiction over the parent company, Kent Robertson, a company spokesman, said in an e-mailed statement.Alan Lenczner, the Toronto attorney from the firm Lenczner Slaght Royce Smith Griffin LP representing the Ecuadoreans, when reached by phone declined to comment on the case.
Leon said it is likely that the initial decisions will be appealed.
Chevron doesn’t disclose how much it spends on legal fees.
The Hague
Chevron is awaiting a ruling in a related case before the Permanent Court of Arbitration, the 113-year-old panel based in The Hague that handles trade disputes between corporations and nations. Chevron filed the arbitration claim in 2009, accusing the government of Ecuador of reneging on a 1998 contract that absolved Texaco of Amazonian pollution claims. Three days of hearings in the case concluded yesterday, Robertson said.Chevron’s campaign to avoid payment suffered a setback last month when the U.S. Supreme Court upheld a lower-court decision that rejected the company’s request for a pre-emptive block on collection efforts in Chevron’s home country. The lower court had ruled that it didn’t have authority to thwart payment when the Ecuadoreans hadn’t yet filed such a claim in the U.S.
Unfair Influence
Following the filing of their Canadian seizure request in May, the Ecuadoreans sought similar forfeitures in a Brazilian tribunal in June and in Argentina earlier this month. A judge in Buenos Aires ordered some Chevron bank deposits held in escrow while the case is pending, Enrique Bruchou, a lawyer for the Ecuadoreans, said in an interview on Nov. 7.Today, in paid statements published in two Argentine newspapers, Chevron urged the local court to release its money from escrow and indicated the company intends to pursue a legal defense identical to that employed in Canada. “Chevron Argentina has never had operations in Ecuador and has no relation with the fraudulent trial in Ecuador,” the company said in the newspapers Clarin and La Nacion.
Transparency International
Chevron has accused the Ecuadorean government of unfairly influencing court proceedings that led to the $19 billion ruling and alleged that a damage assessment provided by a court- appointed expert was ghostwritten by consultants and lawyers hired by the plaintiffs.Lawyers for the Ecuadoreans including Stephen Donzinger have accused Chevron of engaging in a campaign to discredit them, entrap an Ecuadorean judge that presided over the case and set up dummy corporations in Ecuador to hide Chevron’s alleged role in testing soil samples from the pollution sites.
Ecuador ranked 120th out of 183 nations in Transparency International’s 2011 corruption-perception index, where No. 1 New Zealand is perceived to be the most honest. Albania, Liberia and Lesotho were perceived as less corrupt than Ecuador, according to the index.
In February 2011, Chevron filed a racketeering lawsuit that’s ongoing against the Ecuadoreans and their lawyers in New York for “leading a fraudulent litigation and PR campaign against the company.”
Exxon Mobil Corp. (XOM) is the world’s biggest oil company by market value, followed by PetroChina Company Ltd. and Royal Dutch Shell Plc (RDSA), according to data compiled by Bloomberg.
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