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BP cannot hand share of clean-up costs to Halliburton, rules judge

Carl Barbier said that the oil company must indemnify their partner under the terms of their drilling contract

BP will not be able to hand off a share of the bn (£25.3bn) in clean-up costs and economic losses from the Gulf of Mexico oil disaster to Halliburton, a judge in New Orleans has ruled.

The decision, from US district judge Carl Barbier who will hear the main case for damages against BP next month, quashes the oil company’s hopes of collecting a share of the clean-up costs from Halliburton.

A White House investigation found Halliburton had used flawed cement in constructing the BP well, leading to the April 2010 blow-out which killed 11 men on the Deepwater Horizon oil rig and spewed 4.9m barrels of crude into the Gulf.

However, Barbier wrote in his decision that BP must indemnify Halliburton from damage claims under the terms of its drilling contract. Halliburton is still on the hook for fines, however.

“BP is required to indemnify Halliburton for third-party compensatory claims that arise from pollution or contamination that did not originate from the property or equipment of Halliburton located above the surface of the land or water, even if Halliburton’s gross negligence caused the pollution,” Barbier wrote.

The decision on Tuesday was the second blow to BP’s efforts to spread the financial burden of the oil spill clean-up to other partners in the Macondo well. A ruling from Barbier last Thursday also blocked the oil company from trying to collect from Transocean, owner of the Deepwater Horizon rig.

However, as he did last Thursday, Barbier did go on to insulate BP from any punitive damages or fines under the clean water act levied against Halliburton, saying those would not have to be covered by BP.

BP, responding in a company statement, claimed its efforts to collect a share of the costs from Halliburton had been vindicated, choosing to focus on the court’s decision to continue holding the company accountable under the Clean Water act. “Today’s ruling … is a strong signal that contractors involved in critical well operations will be held accountable for their actions under the law,” the statement from BP said.

The decisions represent only the most preliminary stages of the long legal saga ahead for BP, Halliburton and Transocean. The main event, the trial to determine how BP and the other companies will share the blame for the oil spill, is scheduled to get underway in New Orleans on 27 February.

In addition to the wrangling over economic losses and clean-up costs – which BP estimates at bn – the companies face civil penalties under environmental regulations.

The justice department is seeking penalties under the clean water act that could reach as high as ,300 a barrel – if gross negligence is proven. That could potentially put the companies on the hook for close to bn.

The companies involved in the disaster are also fighting among themselves.

Meanwhile, BP has been accused of trying to scrub evidence from the record ahead of the trial – including information from disasters, such as the fatal 2005 explosion at the company’s refinery in Texas City.

BP has argued in court that the companies are trying to smear its reputation. The other companies have also tried to exclude evidence.

However, BP did reach a 0m settlement with another contractor, Cameron International, which built the rig’s failed blow-out preventer, and has achieved settlements with other smaller partners.

In terms of the Halliburton-BP feud, BP first sought to recover clean-up costs and damages claims from Halliburton in April last year. Six months later, Halliburton struck back, asking Barbier for legal immunity from any claims arising from its cementing job under the terms of its drilling contract with BP.

BP argued at the time that granting legal immunity – given the investigation findings into Halliburton’s cementing job – were “fatally premature”. Meanwhile, BP went after Halliburton to cover a share of the clean-up costs and damages proportional to its fault in causing the oil spill. © 2012 Guardian News and Media Limited or its affiliated companies. All rights reserved. | Use of this content is subject to our Terms & Conditions | More Feeds