Judge Accepts Transocean Settlement in Gulf Oil Spill

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A federal judge on Thursday accepted a guilty plea by rig contractor Transocean Ltd. for violating the U.S. Clean Water Act along with a $400 million criminal fine for its role in the 2010 disaster at BP Plc’s Macondo well.

The overall settlement by Transocean Ltd., unveiled last month by the U.S. Department of Justice (DOJ), included $1 billion in civil penalties, in addition to the $400 million in criminal penalties.After a hearing in New Orleans lasting less than an hour, U.S. District Judge Jane Triche Milazzo accepted the Transocean plea.

Her ruling is yet another legal hurdle cleared ahead of a trial due to start this month in the city to sort out the remaining civil claims related to the Gulf of Mexico spill. Transocean’s Deepwater Horizon rig, under contract with BP, had been drilling a mile-deep well on April 20, 2010, when a surge of gas caused a blowout that killed 11 workers. The well then spewed 4.9 million barrels of oil over 87 straight days, fouling the shores of Gulf Coast states and eclipsing the 1989 Exxon Valdez spill in Alaska in severity.

Milazzo, of the U.S. District Court for the Eastern District of Louisiana, cited the resulting large fine as a good example of the “deterrent effect of the plea process” when compared with Exxon’s comparatively smaller fine for the Valdez: a $25 million criminal fine and $100 million for restitution.

The Macondo accident led to a months-long U.S. deepwater ban and intense scrutiny of the offshore drilling industry, which is now booming worldwide despite lingering public concerns.

Transocean, employer of nine of the 11 workers killed, had set aside $1.5 billion for the DOJ out of a $1.95 billion loss provision for the disaster.

Transocean must still seek a settlement with the plaintiffs committee representing more than 100,000 individuals and business owners claiming economic and medical damages, so the ultimate cost of Macondo to Transocean could end up being higher.

Milazzo said on Thursday that Transocean had already settled 98 of 99 personal injury claims.

BP agreed in November to a U.S. federal settlement of its own that was worth $4.5 billion, including the largest criminal fine ever at $1.256 billion. The company also pleaded guilty to obstruction of Congress, a felony; a judge approved that criminal settlement late last month.

Weighing the relative size of Transocean’s criminal fine, Milazzo noted BP was a far larger company and cited BP’s role as operator of the well.

“Transocean carried out the work under the supervision of BP,” she said.

Of the $400 million in Transocean criminal fines, $150 million will help protect and restore the Gulf of Mexico, while another $150 million will fund spill prevention and response efforts there. Transocean must also implement court-enforceable measures to improve safety and emergency response on U.S. rigs.

The National Fish and Wildlife Federation told the court it would manage the distribution of the $150 million for Gulf Coast environmental restoration through a new Baton Rouge office. The plea mandates that Louisiana gets half of the funds for restoration of barrier islands off the coast and river diversion projects to help build critical marshlands, the NFWF said. The other half will be split among Florida, Alabama, Mississippi and Texas, according to a fixed formula in the settlement documents.

Attention now turns to any other possible settlements ahead of the trial in New Orleans starting Feb. 25, including for Clean Water Act violations that may cost BP $21 billion if it is found grossly negligent. The Gulf coast states are also