One Reason Why Victims of the Norfolk Southern Derailment Should Be Wary of Trusting the U.S. Government (The BP Oil Well Blowout of 2010: A Case Study)

By Brian J. Donovan

February 18, 2023

During a recent visit to East Palestine, Ohio, Michael Regan, the EPA administrator, walked along a creek that reeks of chemicals and sought to reassure skeptical residents that the water was fit for drinking and the air safe to breathe around East Palestine. “I’m asking they trust the government. I know that’s hard. We know there’s a lack of trust,” Regan said. “We’re testing for everything that was on that train.”

The public’s lack of trust is understandable.

Background

The Clean Water Act (CWA), 33 U.S.C. §1251 et seq. (1972), a strict liability statute, establishes the basic structure for regulating discharges of pollutants into the waters of the United States and regulating quality standards for surface waters. The basis of the CWA was enacted in 1948 and was called the Federal Water Pollution Control Act, but the Act was significantly reorganized and expanded in 1972. “Clean Water Act” became the Act’s common name with amendments in 1972.

Under the CWA, the U.S. Environmental Protection Agency (EPA) has implemented pollution control programs such as setting wastewater standards for industry. EPA has also developed national water quality criteria recommendations for pollutants in surface waters. The Office of Water (OW) ensures drinking water is safe, and restores and maintains oceans, watersheds, and their aquatic ecosystems to protect human health, support economic and recreational activities, and provide healthy habitat for fish, plants and wildlife.

The BP Oil Well Blowout of 2010

The following is an excerpt from my book “COLLUSION: Judicial Discretion vs. Judicial Deception - The Impending Meltdown of the United States Federal Judicial System.”

The way the MDL court and EPA addressed the environmental disaster resulting from the BP oil well blowout of 2010 in the Gulf of Mexico is instructive.

Section 311(b)(3) of the CWA prohibits the ‘discharge of oil….(i) into or upon the navigable waters of the United States, adjoining shorelines, or into or upon the waters of the contiguous zone, or (ii) in connection with activities under the Outer Continental Shelf Lands Act (OCSLA)….in such quantities as may be harmful….’

Where Section 311(b)(3) is violated, Section 311(b)(7) imposes a civil penalty: ‘Any person who is the owner, operator, or person in charge of any vessel, onshore facility, or offshore facility from which oil or a hazardous substance is discharged in violation of paragraph (3), shall be subject to a civil penalty in an amount up to US$25,000 per day of violation or an amount up to US$1,000 per barrel of oil or unit of reportable quantity of hazardous substances discharged.’

Federal regulations increased this amount to US$1,100 per barrel. The maximum penal amount is increased in the event of gross negligence or willful misconduct.

Thus, to establish liability for civil penalties under CWA Section 311(b)(7), the Government must show that each Defendant is (1) an ‘owner, operator, or person in charge of’ (2) a ‘vessel….or offshore facility’ (3) ‘from which oil….discharged’ (4) in a harmful quantity (5) into or upon covered waters or ‘in connection with activities under OCSLA.’ There is no dispute that elements (4) and (5) are met in the BP oil well blowout incident.

A discharge is ‘harmful’ if it ‘causes a film or sheen or discoloration of the surface of the water or adjoining shorelines or causes a sludge or emulsion to be deposited beneath the surface of the water or upon adjoining shorelines.’

The Fifth Circuit has stated that the civil penalty in Section 311(b)(6) - which is functionally similar to, albeit smaller than, a (b)(7) penalty - is designed to ‘place a major part of the financial burden for achieving and maintaining clean water upon those who would profit by the use of our navigable waters and adjacent areas, and who pollute same.’

Anadarko and BP were the ones directly engaged in the enterprise which caused the spill. They were the mineral lessees, they owned the well, and they stood to profit directly from the oil it produced. Thus, Congress intended that the cost of pollution would be borne by these parties.

By contrast, Transocean was involved in the ‘enterprise’ by virtue of its contract with BP. Transocean was paid charter hire by BP; it did not stand to profit directly from the oil.

Furthermore, this interpretation is also consistent with OPA, which was similarly designed to impose the greatest liability upon those who would benefit the most from oil production and transportation. Congress intended that OPA would ‘build upon section 311 of the Clean Water Act to create a single Federal law providing cleanup authority, penalties, and liability for oil pollution.’ Thus, it is logical that the responsible parties for a discharge under OPA would also be liable for penalties under the CWA.

The overarching purpose of the CWA is ‘to achieve the result of clean water as well as to deter conduct causing spills.’ Indeed, § 1321 begins by declaring: ‘It is the policy of the United States that there should be no discharges of oil….into or upon the navigable waters of the United States….’

Two objectives of the CWA civil penalty, certainly after the amendments by the Oil Pollution Act of 1990, are to punish polluters and deter future oil spills by the violator and potential violators.

The MDL 2179 Court held that, for purposes of CWA Section 311(b)(7) and with respect to the subsurface discharge, oil discharged from the Macondo Well, an offshore facility. Conversely, the Court finds that the subsurface discharge was not from the vessel, the Deepwater Horizon. Furthermore, because it is undisputed that BP and Anadarko were owners of the offshore facility, BP and Anadarko are liable for civil penalties under the Section 311(b)(7).

In short, BP and Anadarko are liable for civil penalties under Section 311(b)(7) of the CWA, 33 U.S.C. § 1321(b)(7), because they are both owners of the offshore facility from which oil discharged.

The MDL 2179 Court adopted a phased trial proceeding that ultimately focused on two cases within MDL 2179: In re Triton Asset Leasing GmbH, et al. (Civ. A. No. 10-2771) and United States v. BP Exploration & Production Inc., et al. (Civ. A. No. 10-4536). Both cases proceeded in admiralty under 28 U.S.C. § 1333(1) and Federal Rule of Civil Procedure 9(h). Consequently, these cases may be tried by the MDL 2179 Court without a jury.

United States v. BP Exploration & Production Inc., in pertinent part, concerns the United States’ claims for civil penalties under Section 311(b) of the Clean Water Act, 33 U.S.C. § 1321(b). The United States sued BP Exploration and Production, Inc., Anadarko Exploration & Production LP, Anadarko Petroleum Corporation, MOEX Offshore 2007 LLC, various Transocean entities, and QBE Underwriting Ltd., Lloyd’s Syndicate 1036.

The ‘Phase One’ trial commenced on February 25, 2013, and concluded on April 17, 2013. Known as the ‘Incident Phase,’ it addressed fault determinations relating to the loss of well control, the ensuing explosion and fire, the sinking of the Deepwater Horizon, and the initiation of the release of oil from the well.

‘Phase Two’ commenced on September 30, 2013, and concluded on October 18, 2013. This phase was divided into two segments: ‘Source Control’ and ‘Quantification.’ The former concerned issues pertaining to the conduct or omissions relative to stopping the release of hydrocarbons. The latter segment pertained to the amount of oil actually released into the Gulf of Mexico, which is an important factor for determining the amount of civil penalties under the CWA.

As noted above, the ‘Phase One’ trial addressed fault allocation for the loss of well control, blowout, explosion, fire, and oil spill. This includes determining if any Defendant engaged in misconduct in excess of ordinary negligence.

The MDL 2179 Court concluded that the discharge of oil was the result of BP’s ‘gross negligence’ and ‘willful misconduct’ under the CWA.

The MDL 2179 Court is mindful of the concept that ‘a greater degree of care is required when the circumstances present a greater apparent risk.’ A corollary here is that similar actions or omissions may be judged as meeting the standard of care, or falling just below the standard of care, or an extreme departure from the standard of care, depending on the context in which the action or omission occurred.

The oil & gas industry and BP recognized that a blowout, explosion, and oil spill are potential harms associated with offshore drilling. Obviously, the magnitude of this potential harm is great in terms of severity, which in turn raises the standard of care.

The Macondo well was drilled in deepwater, which adds certain complexities not found in shallower waters or onshore. Furthermore, the high pressure and high temperature characteristics of the geological formation into which the Macondo well was drilled added complexity that is not present in all deepwater wells. These features increased the chance that a blowout, explosion, and oil spill would occur, which, in turn, further raises the standard of care.

Justice Story illustrated this point with his ‘bag of apples.’ ‘If a bag of apples were left in a street for a short time, without a person to guard it, it would certainly not be more than ordinary neglect. But if the bag were of jewels or gold, such conduct would be gross negligence. In short, care and diligence are to be proportional to the value of the goods, the temptation and facility of stealing them, and the danger of losing them.’

A series of negligent acts may also constitute gross negligence or willful misconduct under the CWA.

The CWA states, in pertinent part, ‘In any case in which a discharge of oil was the result of gross negligence or willful misconduct of a person described in subparagraph (A), the person shall be subject to higher maximum civil penalties.’

Subparagraph (A) is the strict-liability penalty provision for non-negligent and negligent conduct. It states, ‘Any person who is the owner, operator, or person in charge of any vessel….or offshore facility from which oil….is discharged….shall be subject to a civil penalty in an amount up to….US$1,100.’

‘Person’ is defined under the CWA to include ‘corporations’ and contains no requirement to identify corporate management, officers, etc. The enhanced penalty provision, § 1321(b)(7)(D), also does not require any specific level of corporate management; it merely refers back to the entities that can be held strictly liable under the CWA.

Congress could have added a requirement that corporate management, etc., be involved in order to obtain enhanced penalties, but it did not. In fact, Congress actually removed similar requirements from the CWA when it passed OPA.

When OPA deleted ‘privity and knowledge’ from the CWA, it removed a significant hurdle to accessing higher maximum penalties: no longer was the Government required to show that the extra-negligent conduct was committed by an employee of a certain rank or an agent with the requisite level of authority.

The MDL 2179 Court concluded that a corporation is vicariously liable under the CWA’s enhanced penalty provision for the gross negligence and/or willful misconduct of its employees.

In determining the amount of a civil penalty, the….court….shall consider the seriousness of the violation or violations, the economic benefit to the violator, if any, resulting from the violation, the degree of culpability involved, any other penalty for the same incident, any history of prior violations, the nature, extent, and degree of success of any efforts of the violator to minimize or mitigate the effects of the discharge, the economic impact of the penalty on the violator, and any other matters as justice may require.

The parties stipulated that during the spill response 810,000 barrels of oil were collected without contacting any ambient sea water (‘Collected Oil’). Thus, while the parties present estimates of the total volume of oil that left the reservoir, they agree that 810,000 barrels should not be used to calculate the statutory maximum penalty under the CWA.

Ultimately, the United States proposed that 5.0 million barrels of oil exited the reservoir, resulting in a net discharge of 4.19 million barrels once adjusted for the collected oil.

The MDL 2179 Court found that 4.0 million barrels of oil released from the reservoir. After deducting the collected oil from this amount per the parties’ stipulation, the Court found for purposes of calculating the maximum possible civil penalty under the CWA that 3.19 million barrels of oil discharged into the Gulf of Mexico.

The MDL 2179 Court found that the EPA’s regulation, 40 C.F.R. § 19.4 (2010), adjusting the civil penalty in 33 U.S.C. § 1321(b)(7)(D) is valid and that the maximum CWA civil penalty that may be imposed against BP is US$4,300 per barrel of oil discharged.

In short, the maximum CWA civil penalty that could be assessed against BP is approximately US$13.72 billion (3,190,000 x US$4,300).

If the Honorable Carl J. Barbier had not arbitrarily reduced the amount of oil released from the reservoir by 1.0 million barrels, the maximum CWA civil penalty that could be assessed against BP would have been approximately US$18.02 billion (4,190,000 x US$4,300).

Government Entity Settlements

On October 5, 2015, the United States lodged with the Court a proposed Consent Decree between the United States, the Gulf States, and BP. By its terms, the Consent Decree fully and finally resolved as to BP any and all natural resource damages claims of the United States, the five Gulf States, and their respective natural resource trustees, all Clean Water Act penalty claims, and certain other claims of the United States and the Gulf States.

After a period of public comment, the Court entered the Consent Decree on April 4, 2016.

Following the Court’s entry of the Consent Decree, BP, PSC, the United States, and the State of Alabama voluntary dismissed their appeals to the Fifth Circuit of the Court’s rulings.

BP’s Limited Liability

As part of the overall strategy to limit BP’s liability, the Honorable Carl J. Barbier knowingly failed to hold BP accountable in regard to the CWA civil penalty as follows.

(a) The total amount of oil released from the reservoir was 5,000,000 barrels;

(b) The total amount of “collected oil” was 810,000 barrels;

(c) The net discharge of oil was 4,190,000 barrels;

(d) The CWA civil penalty due to BP’s gross negligence is $4,300/barrel;

(e) The CWA penalty BP should pay is $18.02 billion; and

(f) The total CWA penalty BP actually paid is $13.72 billion.

Judge Barbier saved BP approximately $4.30 billion by finding that only 4.0 million barrels of oil, rather than 5.0 million barrels of oil proposed by the United States, exited the reservoir.

The Favorable Payment Schedule

The following very favorable payment schedule for BP in regard to the government entity settlements was also negotiated. BP is required to pay,

(a) $5.5 billion to the United States as a civil penalty under the Clean Water Act, payable over 15 years;

(b) $7.1 billion to the United States and the five Gulf states for natural resource damages, payable over 15 years; and

(c) $4.9 billion to settle economic and other claims made by the five Gulf Coast states, payable over 18 years.

BP’s Tax Deduction

On October 5, 2015, the DOJ released the following statement: “….This global settlement resolves the governments’ civil claims under the Clean Water Act and natural resources damage claims under the Oil Pollution Act, as well as economic damage claims of the five Gulf states and local governments. Taken together this global resolution of civil claims is worth $20.8 billion.” The DOJ failed to point out that BP is able to deduct $15.3 billion of this $20.8 billion on its U.S. tax return. In short, this “global settlement” requires U.S. taxpayers to pay $15.3 billion and BP is only required to pay $5.5 billion. BP also wrote off the cost of its $32 billion cleanup effort after the spill, costing U.S. taxpayers roughly $10 billion.

The U.S. federal judicial system and the U.S. government did not hold BP accountable. Similarly, it is safe to assume the U.S. federal judicial system and the U.S. government will not hold Norfolk Southern accountable.