On April 20, 2010, an explosion on an offshore oil rig located in the Gulf of Mexico, the Deepwater Horizon, resulted in the presumed deaths of 11 missing men. The rig’s eventual collapse resulted in the estimated release of up to 5,000 barrels of oil per day. The oil spill reached the southern Louisiana shore late last week and (as of press time) could reach the Mississippi River delta by Thursday night.
Although the extent of the environmental and economic damage remains to be compiled, the impact of the Deepwater Horizon spill could exceed that of the 11 million gallons of oil spilled in Prince William Sound, Alaska in 1989 by the Exxon Valdez. With such an expansive potential impact on aquatic life along the Gulf coasts of Louisiana, Mississippi, Alabama and Florida, it is estimated that the negative economic impact of the Deepwater Horizon spill may exceed that of Hurricane Katrina within the Gulf of Mexico.
Following the spill, litigation ensued almost immediately. At least four federal class action lawsuits were brought by fishermen, shrimpers and residents who derive their income from Gulf coastal zones against the rig’s owner, Transocean Ltd., the leaseholder BP PLC and affiliated entities. Additionally, at least one wrongful death lawsuit was filed in Louisiana federal court, and at least one personal injury lawsuit was brought in Louisiana state court by and on behalf of some of the approximately 126 workers on the Deepwater Horizon against BP and Transocean.
While the full impact of the Deepwater Horizon spill is not yet realized, what is certain is that more suits are expected and that legislative and regulatory action affecting offshore oil development is sure to follow.
After the Exxon Valdez spill, Congress passed the Oil Pollution Act of 1990, which makes responsible persons liable for clean-up costs. The Act also provides for the recovery of damages for lost profits or impairment of earning capacity as a result of injury, destruction, or loss of real or personal property or natural resources. At least one of the Federal class action suits pending in Louisiana includes a claim under the Oil Pollution Act, as well as an allegation that BP and Transocean were negligent in their operation of the rig. Depending upon the results of the investigation concerning the cause of the rig explosion, additional claims could be brought against the current defendants or additional persons who may be allegedly liable for the eventual sinking of the Deepwater Horizon. Facing a wave of claims under the Oil Pollution Act, those who are named in such suits may in turn bring contribution actions against others under the Act, under the terms of relevant contracts, or at common law.
Additional lawsuits may involve claims under the Clean Water Act and/or similar state environmental laws for pollution caused by the release of oil in the Gulf, in addition to property damage, diminution in value and trespass claims by impacted landowners. Furthermore, insurance coverage litigation may also arise as potentially thousands of claims are tendered by impacted policy holders throughout the Gulf, including claims made by BP and Transocean against their own carriers.