BP takes another Macondo ruling hit

BP has taken another blow in relation to the Deepwater Horizon spill after a US judge gave the green light for a group of shareholders to pursue a class action lawsuit, according to a report.

US District Judge Keith Ellison has allowed the group of holders of BP's American depository shares to pursue the action against the UK supermajor in relation to the April 2010 oil spill in the US Gulf of Mexico following the Macondo blowout, Reuters reported.

The group has accused BP of misleading them by understating the severity of the leak from the well after the explosion and fire that killed 11 rig workers.

The judge, delivering his decision in Houston on Tuesday, said the group can pursue their case on the grounds that the share price after the incident - when they bought their shares - "did not reflect the magnitude of the disaster facing the company", Reuters said.

Ellison rejected, however, another application from a second group to file a class action lawsuit against BP based on a claim that the company overstated its ability to manage safety issues before the blowout.

BP had no immediate comment in relation to Tuesday's decisions from Judge Ellison.

Earlier this week a US appeals court refused to revisit a decision made earlier in the year regarding payouts to victims of the spill.

The US Fifth Circuit Court of Appeals made a decision in March to authorise payments to businesses that lost money from the spill, ruling that an injunction on payments should be lifted.

BP requested a rehearing, but in an order filed late on Monday, a 13-member panel voted 8-5 to leave the March ruling as is, the latest rebuff to BP's ongoing push to rein in the estimated $42.7 billion pre-tax charge it has accumulated for the disaster.

That court loss alone means the UK giant may have to hike its estimated compensation costs from the disaster.

BP and investors have struggled to put a price tag on liability for the spill. The ultimate bill will also depend on the results of a trial next January to hash out penalties under the Clean Water Act, which could put BP on the hook for $17 billion or more.

BP had originally undergone detailed negotiations to hammer out a settlement agreement with a group called the Plaintiff's Steering Committee, which represented fishermen, restaurateurs and business owners who claimed their livelihoods were damaged by the spill.

The deal established a formula to compensate broad groups of claimants but did not require explicit proof the spill caused the harm.

BP has since tried to backpedal on the agreement as its Macondo bill mounted, as the supermajor has presented what it calls "fictitious claims".

But courts have refused to let BP off the hook for the compensation model, citing the company's agreement to the deal knowing causation was not a requirement and that some fraud was a possibility.

As for environmental penalties, the US Department of Energy estimates BP should be charged penalties for 4.05 million barrels of oil - its estimate of the spill less oil cleaned up - while BP has contended its responsibility should be for less at 3.2 million barrels.

The government's upper estimate could assess charges against BP of more than $17 billion in penalties if the company is found to have been grossly negligent.

The company puts its deserved penalty for the spill at around $3.51 billion and has maintained it should not be determined grossly negligent.

Newsletter signup

User

Become an Upstream member!

Membership includes a subscription to our weekly newspaper providing in-depth news from the energy industry, plus full-access to this site and its archives. Still not convinced? Try our free trial.

Already a member?

Login