On April 20, 2010, the Deepwater Horizon disaster occurred. Starting with an explosion on a oil drilling platform out in the Gulf of Mexico, the Deepwater Horizon explosion caused an oil spill that eventually became the largest oil spill in the history of the United States.
Though the extent of the damage is unclear and controversial, studies suggest that the damage may have been extensive. According to a study that was released in 2016, the oil spill damaged shoreline from Louisiana to Florida and the damage to salt marshes in the area may be so severe that the salt marshes may never grow back. That would be, if accurate, damage to over 1200 miles of shoreline. Regardless of the extent of the damage, the story was big news and it damaged BP gas, the sponsor of the oil drilling.
As a result, Tobatex Inc and MRM Energy, two operators of gas stations in Georgia that sell their gas under the BP logo, sued BP for damages that they claim harmed their interests. This case is still in federal court and demonstrates how complex the legal issues associated with Deepwater Horizon can be.
Issues Related to the Ban
In the aftermath of the Deepwater Horizon accident, President Obama directed the US Department of the Interior to ban offshore drilling. This resulted in losses for companies the produce oil in the Gulf of Mexico. One such company was Seahawk Drilling, which claimed that the ban on its ability to drill for oil in the Gulf effectively destroyed its business, causing it over $175 million in damages.
Seahawk Drilling sued BP in United States Federal Court, claiming that BP’s negligence with respect to the Deepwater Horizon drilling platform destroyed its business. A significant factor in a tort claim of negligence is that the party alleging negligence must demonstrate that it suffered damages as a result of the tortfeasor’s actions. It is safe to say that if not for the actions of BP with regard to Deepwater Horizon, the Department of the Interior would still allow for drilling in the Gulf and its business would still be profitable. In legal speak, this is referred to as the “but for” test, meaning but for BP’s negligence with respect to Deepwater Horizon, the Department of the Interior would still allow for oil drilling and exploration in the Gulf.
In a case before the United States District Court for the District of Eastern Louisiana, Judge Carl Barbier ruled in favor of BP, reasoning that the Oil Pollution Act of 1990 limits liability to economic loss that result from the spill itself. As such, Seahawk Drilling’s economic loss, according to this, is not from the oil spill itself; rather, it is from government action, which is an unaffiliated third party. Therefore, BP was not responsible for the economic loss.
This ruling set precedent and was subsequently used by BP when facing similar lawsuits.
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