The Deepwater Horizon Incident

(Also known as the BP Gulf Oil Disaster)

A lesson in contracts, torts, insurance, and lots of other legal
concepts...
1. Background and Summary1
The Macondo prospect exploration rights were acquired by BP in 2009, with the prospect jointly
owned by BP (65%), Anadarko (25%) and MOEX Offshore 2007, a wholly-owned subsidiary of
Mitsuit Corp. (10%).
BP was the Operator of the prospect, pursuant to an Operating Agreement which provided, in
part, that the working interest owners would indemnify BP for their share of costs, losses and
liabilities for the project. The parties were therefore jointly liable for any liabilities on the
project, except actions of the Operator that amount to gross negligence or willful
misconduct in the operation of the project. It can be assumed there was a force majeure
clause in the operating agreement.
Before operations could begin, BP had to prepare and submit to the US Minerals Management
Service (MMS) detailed plans specifying where and how a well was to be drilled, cased,
cemented and completed based on its interpretation of proprietary data, including geologic data
from seismic surveys. Once the plans were approved, permits were issued and work began,
the Operator served as the general contractor that managed all of the work that is performed on
its lease. The Operator selected the contractors, including a driller (in this case, Transocean)
which provides the rig from which drilling operations are performed. The driller was responsible
for drilling and supplies most of the crew and equipment on the rig. The Operators well plan
indicated the manner in which the drilling was to occur, including the location, the path, the
depth, the process and the testing. The drill bits were selected by the Operator, but were
supplied by a different subcontractor.
BP self-insured its property and liability risks through its captive insurer, Jupiter Insurance Ltd.2
The policy limit was $700M. The claims for which BP had coverage included marine hull,
marine liability, general liability, environmental/pollution liability, control of well, business
interruption, drilling and operating liability, and workers compensation coverage. (By selfinsuring, this substantially reduces the exposure of the commercial insurance industry as a
whole to an event.)
The Deepwater Horizon drilling rig was leased from Transocean by BP in 2001. In February
2010, the rig commenced drilling an exploratory well at the Macondo Prospect, about 66 km off
the southeast coast of Louisiana, at a water depth of approximately 1,500 m. On April 20, 2010,
the well was in its final stages of completion at the time its cement casing was injected and
hardening, and the rig was due to move shortly to its next location. The exploratory work was
described as concluded and permission had already been requested from MMS to terminate
operations at the Macondo site.
On 20th April 2010, Transoceans Deepwater Horizon oil rig burst into flames, and thus began
the worst oil spill in the history of the U.S. oil and gas industry. The leak causing the oil to
spread took months to stop and an estimated 200 million gallons of oil spewed into the Gulf of
Mexico.
1

Sources of text and information for this discussion scenario include the following: http://www.bbc.co.uk/news/world-us-canada-13172977;
http://en.wikipedia.org/wiki/Timeline_of_the_Deepwater_Horizon_oil_spill.
2

Captive insurance companies are insurance companies established with the specific objective of insuring risks emanating from their parent
group or groups, but they sometimes also insure risks of the group's customers. (http://en.wikipedia.org/wiki/Captive_insurance)

The Deepwater Horizon prior to the explosion on

April 20, 2010.

Four important technical issues:

Cement job failed to seal off the producing reservoir. Basically, the casing seal, which
was designed and processed by Halliburton, failed.
Hydrocarbon inflow was not recognized and hydrocarbons entered riser.

Gas ignited the rig, causing fire and loss of power (therefore the rig started to drift).

Blowout preventer, provided by Cameron International, also failed to seal the well.

2. Some of the Parties involved:

British Petroleum operator under the joint operating agreement.

Halliburton cement manufacturer and designer of the cement casing seal.
Transocean owner of the Deepwater Horizon oil rig
Cameron International - Houston company that supplied the blowout preventer for the
Deepwater Horizon.
US Regulatory Agencies (e.g. Minerals Management Service, or MMS, now Bureau of Ocean
Energy Management, or BOEM)
Fisherman and small businesses along the Gulf Coast
Rig crew (mostly supplied by Transocean under contract to BP).
Kurt Mix, Drilling and Completions Project Engineer, BP
Joseph Kaminski engineer who designed the solution to stop the oil flow
Various insurance companies

3.EAM Terminology to be Discussed in the Context of this Disaster

Risk management, due diligence, offer and acceptance, breach of contract, consensus, consideration,
capacity, intent to create legal relations, precedents, damages (compensatory, liquidated, punitive, nominal),
indemnities, representations and warranties, privity of contract, termination of contractual relationship,
insurance, statute of limitations, torts, negligence.
4. News release: US oil spill: Transocean 'contributed' to Gulf disaster (April 22, 2011) 3
A lax safety culture and poorly working kit aboard the Deepwater Horizon oil rig contributed to last year's explosion,
the US Coast Guard says.
In a report on the incident, which killed 11 and caused a massive spill, the agency criticised the practices and training
of rig owner Transocean.

http://www.bbc.co.uk/news/world-us-canada-13172977

It said equipment was poorly maintained and alarms and automatic shutdown systems did not work properly.
A Transocean spokesman on Friday rejected the findings.
In a 288-page report released just over a year after the accident, the Coast Guard found actions by Transocean and
the oil rig crew hindered their ability to prevent or contain the disaster.
"Deepwater Horizon and its owner, Transocean, had serious safety management system failures and a poor safety
culture," the report said. "Collectively, this record raises serious questions whether Transocean's safety culture was a
factor that contributed to the disaster."
'Lax oversight'
Transocean spokesman Brian Kennedy told the Associated Press that the Coast Guard had inspected the Deepwater
Horizon seven months before the blowout and deemed it in compliance with safety standards.
"We strongly disagree with - and documentary evidence in the Coast Guard's possession refutes - key findings in this
report," he said in a statement.
Overnight on 20 April 2010, Transocean's Deepwater Horizon burst into flames while drilling a well for BP.
In the months that followed, more than 200 million gallons (780 million litres) of oil flowed in the Gulf of Mexico from
the well, soiling hundreds of miles of coastline in the worst US oil spill in history.
The Coast Guard also cited lax oversight by the Republic of the Marshall Islands, the nation in the Pacific where
Transocean had registered the rig.
It said national regulators had effectively "abdicated" their inspection responsibilities by contracting them out to third
parties.
Crew 'complacent'
The Coast Guard report said evidence indicated the explosion occurred when electrical equipment ignited a cloud of
flammable gas that had flowed up from the well.
It said electrical equipment may have been incapable of preventing ignition, and cited a 2010 inspection audit that
found some equipment on board was in "bad condition" and was "seriously corroded".
"Because of these deficiencies, there is no assurance that the electrical equipment was safe and could not have
caused the explosions," the Coast Guard said.
Among other contributing shortcomings, the report found:
Gas detectors on the oil rig were not set up to shut down the flow from the well automatically in an
emergency, nor to shut down the air flow into the rig's engine room
Audible alarms on some gas detectors had been turned off to avoid disturbing the crew with false alarms
The rig's fire-fighting system depended on electricity to power water pumps and was rendered useless when
the explosions caused a loss of power
Rig crew had become complacent following routine fire drills from which drilling crew were sometimes
excused
The crew had not held training drills on how to respond to a well blowout requiring rig evacuation
On Wednesday, the first anniversary of the explosion, BP sued Transocean for $40B (24.37bn) in damages in an
attempt to defray the oil firm's tens of billions of dollars in liabilities associated with clean-up and compensation.
In federal court in New Orleans, BP said safety systems on Transocean's Deepwater Horizon rig had failed. BP also
sued the maker of the rig's blowout preventer, alleging the device failed to stop the huge oil spill that followed the
explosion.
Transocean has also demanded court judgements against BP and other companies.

5.Timeline of the Disaster

2008

March 2008 The mineral rights to drill for oil at the Macondo well, located in Mississippi
Canyon Block 252 in the United States sector of the Gulf of Mexico about 41 miles
(66 km) off the Louisiana coast, were purchased by BP at the Minerals Management
Service's (MMS) Lease Sale No. 206, held in New Orleans.

2009

February BP files a 52 page exploration and environmental impact plan for the
Macondo well with the MMS. The plan stated that it was "unlikely that an accidental
surface or subsurface oil spill would occur from the proposed activities". In the event an
accident did take place the plan stated that due to the well being 48 miles (77 km) from
shore and the response capabilities that would be implemented, no significant adverse
impacts would be expected.

April 6 The Department of the Interior exempted BP's Gulf of Mexico drilling operation
from a detailed environmental impact study after concluding that a massive oil spill was
unlikely.

June 22 Mark E. Hafle, a senior drilling engineer at BP, warns that the metal casing for
the blowout preventer might collapse under high pressure.

October 7 The Transocean Marianas semi-submersible rig begins drilling the Macondo
well.

November 9 Hurricane Ida damages Transocean Marianas enough that it has to be

replaced.

2010
February

February 15, 2010 Deepwater Horizon drilling rig, owned by Transocean, begins
drilling on the Macondo Prospect. The planned well was to be drilled to 18,000 feet
(5,500 m) below sea level, and was to be plugged and suspended for subsequent
completion as a subsea producer.

March

March 8 Target date for the completion of the well which had been budgeted to cost
$96 million.

March 17 BP Chief Tony Hayward sells one third of his BP stock (223,288 shares).
Closing BP price on March 17 on the New York Stock Exchange is $58.15.

March ? An accident damages a gasket on the blowout preventer on the rig.

April

April 1 Halliburton employee Marvin Volek warns that BP's use of cement "was against
our best practices." (The terms of Halliburton's contract with BP indemnifies Halliburton
from liability for spill damages, unless Halliburton is found to have been grossly
negligent.)

April 6 MMS issues permit to BP for the well with the notation, "Exercise caution while
drilling due to indications of shallow gas and possible water flow."

April 9 BP drills last section with the wellbore 18,360 feet (5,600 m) below sea level but
the last 1,192 feet (363 m) need casing. Halliburton recommends liner/tieback casing
that will provide 4 redundant barriers to flow. BP chooses to do a single liner with fewer
barriers that is faster to install and cheaper ($7 to $10 million).

April 14 Brian Morel, a BP drilling engineer, emails a colleague "this has been a
nightmare well which has everyone all over the place."

April 15 Morel informs Halliburton executive Jesse Gagliano that they plan to use
6 centralizers. Gagliano says they should use 21. Morel replies in an email, "it's too late
to get any more product on the rig, our only option is to rearrange placement of these
centralizers." Gagliano also recommends to circulate the drilling mud from the bottom of
the well all the way up to the surface to remove air pockets and debris which can
contaminate the cement, saying in an email, "at least circulate one bottoms up on the
well before doing a cement job." Despite this recommendation, BP cycles only 261
barrels (41.5 m3) of mud, a fraction of the total mud used in the well.

April 15 MMS approves amended permit for BP to use a single liner with fewer
barriers.

April 16 Brett Cocales, BP's Operations Drilling Engineer, emails Morel confirming the
6 centralizer approach.

April 17 Deepwater Horizon completes its drilling and the well is being prepared to be
cemented so that another rig will retrieve the oil. The blowout preventer is tested and
found to be "functional." Gagliano now reports that using only 6 centralizers "would likely
produce channeling and a failure of the cement job."

April 18 Gagliano's report says "well is considered to have a severe gas flow problem."
Schlumberger flies a crew to conduct a cement bond log to determine whether the
cement has bonded to the casing and surrounding formations.

April 19 Halliburton completes cementing of the final production casing string.

Halliburton conducted four tests on the cement to be used on the Deepwater Horizon rig.
Only one showed the mix would hold.
Halliburton, which has blamed BP's well design and operational decisions for the disaster,
acknowledged it never tested the final mixture of cement for stability after BP made a lastminute change to the mix.

April 20

7 am BP cancels a recommended cement bond log test. Conducting the test

would have taken 912 hours and $128,000. By canceling the cement test BP
paid only $10,000. Crew leaves on 11:15 am flight. BP officials gather on the
platform to celebrate seven years without an injury on the rig. The planned

moving of the Deepwater Horizon to another location was 43 days past due and
the delay had cost BP $21 million.

April 20, 2010 21:49 (CDT), Block 252, Mississippi Canyon Andrea Fleyras had
been monitoring the dynamic positioning system on the bridge of the Horizon
when she felt a jolt. Before she could make sense of it, a rig shaking shock came
out of nowhere and magenta warnings began flashing on her screen. Magenta
meant the most dangerous level of combustible gas intrusion.

9:45 pm CDT Gas, oil and concrete from the Deepwater Horizon explode
up the wellbore onto the deck and then catches fire. The explosion kills
11 platform workers and injures 17 others; another 98 people survive
without serious physical injury.

A relief well was the only source control option mentioned by name in Defendants' Initial
Exploration Plan for the area that included the Macondo well. Other than the lengthy
process (at least 100 days) of drilling a relief well, Defendants had no available, tested
technique to control or stop a deepwater blowout in the event of a failure of the blowout
preventer ("BOP") to properly function.

April 21 Coast Guard rear admiral Mary Landry named Federal On Scene Coordinator.
Coast Guard log reports Potential environmental threat is 700,000 gallons of diesel on
board the Deepwater Horizon and estimated potential of 8,000 barrels per day of crude
oil, if the well were to completely blowout. Most of the current pollution has been
mitigated by the fire. There is some surface sheening extending up to 2 miles from the
source. The log also reports that two attempts to shut the BOP using an ROV have
failed.

April 22 10:21 am Rig sinks. CNN quote Coast Guard Petty Officer Ashley Butler as
saying that "oil was leaking from the rig at the rate of about 8,000 barrels (340,000 US
gallons; 1,300 cubic metres) of crude per day." 100,000 US gallons (380,000 litres) of
dispersants are pre-authorized by the United States Environmental Protection Agency
(EPA) and placed in position even though there is no sign of a leak. Three Norwegian
crews from Ocean Intervention III from Oceaneering International, Skandi Neptune from
DOF ASA, and Boa Sub C (from Boa International) begin using remotely operated
underwater vehicles (ROV) to map the seabed and assess the damage to the wreck.
The crews report "large amounts of oil that flowed out."

April 23 Coast Guard Rear Adm. Mary Landry tells CBS "At this time, there is no crude
emanating from that wellhead at the ocean surface, er, at the ocean floor...There is not
oil emanating from the riser either." Unified Command begins operating out of the Royal
Dutch Shell Training and Conference Center in Robert, Louisiana. Search and rescue
suspended at 5 pm. Eleven of the 126 people on the rig have perished. Coast Guard log
reports, BP will establish an ICP at Houma, Louisiana today to monitor the response
and prepare for potential release estimated potential of 64,000- 110,000 bbls (2 ,
688,000- 4,620,000 gal) per day of crude oil if the well were to completely blowout.

April 24 In accordance with the existing in situ burn plans, the OSC determined in situ
burning was a viable response method for several reasons. First, weather and sea-state
did not allow continuous skimming and alternatives were needed. Second, skimmers
and dispersants could not completely remove the oil being released from the well.
Finally, the OSC determined in situ burning (ISB) was a safe and effective way to
remove large volumes of oil from the ocean surface, based on data for in situ burns from
previous spills. BP reports a leak 1,000 barrels (42,000 US gallons; 160 cubic metres) a
day.

April 25 Oil sheen seen covering 580 square miles (1,500 km2) and is 70 miles
(110 km) south of Mississippi and Alabama coastlines and was 31 miles (50 km) from

the ecologically sensitive Chandeleur Islands. BP begins process to establish two relief
wells.

April 26 Oil reported 36 miles (58 km) southeast of Louisiana. Booms set up to keep oil
from washing ashore. A huge containment chamber is moved to Superior Energy
Services subsidiary Wild Well Control in Port Fourchon, Louisiana. BP closing stock
price 57.91 Coast Guard log reports attempts to actuate the blow preventer (BOP)
middle rams and blind shears were ineffective due to a hydraulic leak on the valve.
Repairs are being worked overnight. The well head continues to discharge
approximately 1,000 barrels/day.

April 27 Slick grows to 100 miles (160 km) across and 20 miles (32 km) from Louisiana
coast.

April 28, the National Oceanic and Atmospheric Administration estimated that the leak
was likely 5,000 barrels (210,000 US gallons; 790 cubic metres) a day, five times larger
than initially estimated by BP. BP announces controlled test to burn oil off the surface
was successful. Oil is 20 miles (32 km) east of the mouth of the Mississippi River. MMS
postpones 2010 Offshore Industry Safety Awards scheduled to be May 3.

April 29 Louisiana Governor Bobby Jindal declares a state of emergency. 100,000 feet
(30 km) of containment booms were deployed along the coast. By the next day, this
nearly doubled to 180,000 feet (55 km) of deployed booms, with an additional 300,000
feet (91 km) staged or being deployed.

April 30 Oil washes ashore at Venice, Louisiana. President Barack Obama halts new
offshore drilling unless safeguards are in place. Coast Guard issues subpoena to
Transocean "to maintain the blowout preventer and to not allow anyone or anything to
tamper with it" without the Guard's permission. EPA establishes its website epa.gov/
bpspill for its response. Sanford Bernstein estimates capping the leaks and cleaning up
the spill may cost $12.5 billion. Innocentive launches a website asking people to submit
their solutions to the crisis by June 30. On April 30, the United States House Committee
on Energy and Commerce asked Halliburton to brief it as well as provide any documents
it might have related to its work on the Macondo well.

May

May 2 Obama meets with fishermen and Coast Guard in Venice, Louisiana. Oil
discovered in the South Pass. Transocean's Development Driller III starts drilling a first
relief well.

May 3 Shares of Nalco Holding Company jump 18% in one day after it is revealed that
its dispersant products are being used for the cleanup.

May 5 BP announces that the smallest of three known leaks had been capped allowing
the repair group to focus their efforts on the remaining leaks.

May 7 A 125-tonne (280,000 lb) container dome is lowered over the largest of the well
leaks and pipes the oil to a storage vessel on the surface.

May 8 BP reports that methane is freezing at the top of the dome making it ineffective.

May 10 After failed containment dome BP announces plans to apply five feet in
diameter containment vessel nicknamed "top hat". BP announces strategy of trying to
push mud and debris down the tube to clog it. The strategy is nicknamed "junk shot."

May 11 BP, Transocean and Halliburton officials testify before Congress blaming each
other for the incident. MMS and Coast Guard Joint Investigation Team chaired by USCG
Capt. Hung Nguyen and MMS employee David Dykes begin a Joint Marine Board of
Investigation into the accident holding the first hearings at the Crowne Plaza Hotel in
Kenner, Louisiana where they interview survivors.

May 11 - Mr. Kaminski telephones the BP Help Hotline and offers to assist BP in its
efforts to control the source of the oil spill resulting from the blowout. The BP
Help Hotline technical support team representative was so impressed with Mr.
Kaminski's solutions that he requested Mr. Kaminski to submit his ideas in writing
to the Horizon Support Team.

May 12 BP releases first public video of leak and others say the leak is significantly
higher than what BP has been saying. One estimate says it could to be 20,000100,000
barrels (840,0004,200,000 US gallons; 3,20016,000 cubic metres) a day.

May 13 Tony Hayward calls the oil spill "relatively tiny" in comparison with the size of
the "ocean." Transocean files in the U.S. District Court for the Southern District of Texas
to limit its liability under the Limitation of Shipowner's Liability Act to just its interest in the
Deepwater Horizon which it values at $26,764,083.

On May 13, 2010, during a conference call with BP representatives organized by

Ms. Elizabeth Hittos, Legislative Counsel for U.S. Congressman Gus Bilirakis, Mr.
Kaminski again explained his ideas and answered questions from BP
representatives. Ms. Hittos was asked questions by BP representatives on the line
and conveyed the questions to Mr. Kaminski who provided detailed and specific
answers to the questions being asked by the BP representatives.

On May 14, 2010, Mr. Kaminski received an email from Ms. Hittos wherein she
requests Mr. Kaminski's further assistance. In her email, Ms. Hittos states,
"Joseph, I'd like to forward you a slide show of BP's plan. Take a look and
specifically tell me where they are going wrong. I would like to point out their
inherent mistakes in our next conference call. Thanks."

May 14 BP inserts 4-inch (100 mm) wide riser into the 21-inch-wide burst pipe. It is
initially dislodged when an underwater robot collides with the pipe.

May 15 Coast Guard and EPA authorize use dispersants underwater, at the source of
the Deepwater Horizon leak.

May 16 GSF Development Driller II starts drilling second relief well.

May 17 BP begins burning off gas with the Discoverer Enterprise. BP says it will
release a live feed of the leak hours after receiving a request from Congressman Edward
Markey. Supporting his position is Steve Wereley from Purdue University who says the
leak may be 70,000 barrels (2,900,000 US gallons; 11,000,000 litres) a day. Chris
Oynes, offshore drilling director for the MMS, announces a hurried retirement.

May 19 Oil washes ashore on mainland Louisiana.

May 21 BP begins live underwater video broadcasts of the leak. Flow Rate Technical
Group established for "scientifically validated information about the amount of oil flowing
from BP s leaking oil well." The average daily oil collection rates is 2,000 barrels (84,000
US gallons; 320,000 litres) a day.

May 23 BP rebuffs EPA order to change its dispersants. BP says that if oil reaches the
shore, it would do more environmental harm than if it were dispersed off the coast. It
notes that Corexit is the only product that is available in sufficient quantities to deal with
the spill.

May 26 BP announces plan to force feed heavy drilling mud in a project called "top
kill". Doug Brown, the chief mechanic on the Deepwater Horizon, testifies at the joint
U.S. Coast Guard and Minerals Management Service hearing that a BP representative
overruled Transocean employees and insisted on displacing protective drilling mud with
seawater just hours before the explosion.
8

May 27 Obama announces a six-month moratorium on new deepwater oil drilling

permits in 500 feet (150 m) of water or more. Based on the oil flow estimates by the Flow
Rate Technical Group, the United States government increased its estimate at 12,000 to
19,000 barrels (500,000 to 800,000 US gallons; 1,900,000 to 3,000,000 litres) per day.
Elizabeth Birnbaum resigns from MMS.

May 29 BP declares Top Kill is a failure and moves on to their next contingency option,
the Lower Marine Riser Package (LMRP) Cap Containment System.

May 31 BP announces plan to slice the leaking pipe, placing a cap on it and
channeling the oil to surface ships.

June

June 1 Oil began washing up on the beaches of Gulf Islands National Seashore.

June 4 Tar balls arrive on beaches in Pensacola, Florida.

June 6 BP abandons plans to close three remaining vents on the containment cap
noting that with one vent it is capturing as much oil as it can handle.

June 8 BP releases the requested high resolution images of the leak.

June 9 BP's chief operating officer Doug Suttles says the undewater plume is "in very
minute quantities."

June 11 Flow Rate Technical Group says the leak could be 20,000 to 40,000 barrels
(840,000 to 1,700,000 US gallons; 3,200,000 to 6,400,000 litres) of oil a day.

June 23 Oil appeared on Pensacola Beach and in Gulf Islands National Seashore, and
officials warned against swimming for 33 miles (53 km) east of the Alabama line.

June 25 Hurricane Alex (2010) causes relief rigs to disconnect and let the oil spill
unchecked into the ocean.

July

July 1 The supertanker A Whale begins skimming tests at Boothville, Louisiana.

On July 1, 2010, Mr. Kaminski received a "Thank you" email from Congressman
Bilirakis. This email states: "Dear Joseph: Thank you for sharing your creative
solution in the hopes of plugging the leak to the continuous flow of oil in the Gulf
of Mexico. . . . I appreciate you sharing your ideas on how to quickly and safely
resolve the oil spill in the Gulf of Mexico. I will also share your ideas and
suggestions with my House colleagues. I am certain they will benefit from your
views."

July 2 National Oceanic and Atmospheric Administration issues models of the

probability of oil coming ashore based on historical winds and currents noting that oil
may come ashore in the Keys and Miami.

July 8 United States Court of Appeals for the Fifth Circuit in 21 vote refuses to
overturn oil drilling moratorium in Hornbeck Offshore Services LLC v. Salazar.
Administration says it will issue a new moratorium.

July 10 Old cap removed from well at 12:37 pm CDT in preparation for a new cap. Oil
is expected to flow unabated into the Gulf for 48 hours.

July 12

Three ram capping stack installed on the Deep Water Horizon LMRP at 7 pm
CDT (0000 GMT). The stack completes the installation of the new 40-ton
containment device sealing cap. Tests begin on testing well integrity.

Salazar issues a new moratorium until November 30 on deepwater wells that use
a blowout preventer.

National Commission on the BP Deepwater Horizon Oil Spill and Offshore Drilling
begins two days of hearings at the Hilton New Orleans Riverside

July 15 BP test cuts off all oil pouring into the Gulf at 2:25 pm. However, Thad Allen
cautions that it is likely that containment operations will resume following the test.

July 16 A Whale will not join the containment process after tests show that its
skimming operations were "negligible" in comparison to the much smaller and more
nimble skimmers.

July 18 Allen sends Dudley a letter to provide "written procedure for opening the choke
valve as quickly as possible" noting tests have "detected seep a distance from the well
and undetermined anomalies at the well."

July 19

Kent Wells says BP is considering a "static kill" of the well using heavy mud
bumped through the new cap in a process known as bullheading.

Donald Vidrine, who was the ranking BP representative on Deepwater Horizon,

citing ill health, refuses to testify at Coast Guard hearing into the accident.

July 24

July 27

BP says an internal investigation has cleared itself of gross negligence in the spill
and will publish the findings in the next month.
BP board formally announces that Bob Dudley will replace Tony Hayward as BP
CEO effective October 1.

From approximately May 11, 2010 through July, 2010, Mr. Kaminski, at the request
of BP, provided his engineering ideas, designs, and services to BP both directly
and indirectly via the office of Congressman Bilirakis. During this period, Mr.
Kaminski conceived, invented, and designed the novel, unique, and concrete
insertion pipe idea and the novel, unique, and concrete "Top Hat" with thermal
lifting action idea. Using the detailed LMRP/BOP diagrams sent to him, Mr.
Kaminski also: (a) devised a stint pipe, later called the "Riser Spool" by BP; and
(b) provided plans to BP for the purpose of installing two (2) pins (one long & one
short) in the riser spool to allow it to be mated to the old riser pipe adapter plate.
The ROVs guided the first pin (the long pin) to a hole on the plate, then rotated the
pipe on that pin to align the second pin as it is lowered. Mr. Kaminski's two-pin
design for riser spool flange alignment allowed for the error-free and expedient
installation of a BOP on top.

August

August 2

Flow Rate Technical Group reports that the well initially was dumping 62,000
barrels of oil per day initially after the spill and that it dwindled to 53,000 barrels
when it was capped as the well was depleted. This means that 4.9 million barrels
were leaked into the Gulf.

Environmental Protection Agency releases a study of eight dispersants which

concludes that Corexit 9500 "is generally no more or less toxic than mixtures with
the other available alternatives" and that "dispersant-oil mixtures are generally no
more toxic to the aquatic test species than oil alone."
10

August 4 BP reports that the well achieved static condition shortly after midnight after
drilling mud is said to now fill the well.

Mr. Kaminski was instrumental in helping to control and eventually cap the
Macondo well blowout. By taking on this task, Mr. Kaminski saved BP billions of
dollars in damages and fines under the Oil Pollution Act of 1990 and the Clean
Water Act.

September

September 29 Andy Inglis, who headed deepwater drilling operations in the Gulf of
Mexico at the time of the spill, steps down as head of the upstream business.

September 30 Dudley tells the Houston Chronicle, "We don't believe we have been
grossly negligent in anything we've seen in any of the investigations." Dudley also
announces BP will create a stronger safety division.

11

October

October 1 Allen steps down.

The FBI stated in a press release that Kurt Mix (drilling and completions project engineer
for BP) worked on internal company efforts to estimate the amount of oil leaking from the
well. Mix was also involved in various efforts to help stop the leak, including Top Kill, in
which BP unsuccessfully attempted to pump heavy mud into the blown-out wellhead to
try to stop the flow of oil. The Justice Department acknowledged that BP informed Mix
that he was to retain all information concerning oil flow from the Macondo well, including
his text messages.
According the FBIs press release, Mix deleted more than 200 text messages from his
phone on or about Oct. 4, 2010, after learning that his electronic files were being
collected by a vendor working for BP. Some of the texts were recovered forensically and
included communications exchanged between Mix and other BP employees during the
Top Kill operation that indicated that the effort was failing.
In one of the text messages that was recovered, Mix stated that roughly 15,000 barrels
of oil per day (BOPD) were leaking from the Macondo well and that he and other BP
employees knew that Top Kill would not be successful if the flow rate was that high. The
Justice Department pointed out that BP estimated that the flow rate was 5,000 BOPD.

April 20, 2011

The first anniversary was the deadline for filing lawsuits in relation to the disaster.

The criminal charge against Kurt Mix was filed April 23 in the U.S. District Court for the
Eastern District of Louisiana. If convicted, Mix could face up to 20 years in prison and a
fine of up to $250,000 for each count.
A Few Insurance facts

6.

Transocean Ltd.s excess insurers filed a complaint for declaratory judgment in a Texas
federal court, seeking a ruling that no additional insured coverage is owed to BP with
respect to pollution claims arising out of the explosion of BPs oil well in the Gulf of
Mexico (Certain Underwriters at Lloyds, London, et al. v. BP plc. et al., No. 10-01823,
S.D. Texas).
The complaint, filed in the U.S. District Court for the Southern District of Texas by
Certain Underwriters of Lloyds, London, alleges that BP is not entitled to coverage as
an additional insured because the release of oil on April 20 emanated from BPs well
and not Transoceans oil rig.
Pursuant to the drilling contract, BP was named as an additional insured under
Transoceans excess policies issued by certain underwriters. On May 14, BP filed a
claim for coverage with Transoceans excess insurers. In response, the insurers filed
the suit.
The insurers maintain that the policies provide coverage to BP only for surface
pollution from substances in Transoceans possession and liabilities that originate
above land and water. Because liabilities BP faces for pollution emanating from BPs
well are from below the surface and from BPs well, those liabilities are not within the
scope of the additional insured protection, the insurers claim.
In its current location on the floor of the Gulf of Mexico, the value of the Deepwater
Horizon is estimated to be $US 26.7M. Transocean carried insurance coverage for the
rig, including insurance for the fair market value of the rig at the time of the accident.
Transocean has also publically stated that other insurance was in place for claims that
were asserted following the April 20 accident. Swiss Reinsurance Company of Zurich
estimates the insured market loss for the rig blast and subsequent natural disaster to

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range somewhere between US$1.5B to US$3.5B. The rig was insured for US$560M, of
which Transocean had collected $481M as of May 26, 2010.
7.

A Few Facts about the Litigation (could also be called The Blame Game)

British Petroleum is suing Transocean, Halliburton and Cameron for $42B

Halliburton is suing BP for negligent misrepresentation, business disparagement,
defamation and fraud
BP has been sued by its partners in the well (Anadarko Petroleum Corp and Mitsui)
Transocean has also requested court judgments against BP, Cameron and others.
Cameron International filed counter-claims against various other parties and defended the
integrity of its products.
Mr. Kaminski seeks economic and compensatory damages, in amounts to be
determined at trial, and punitive damages.

The class will be divided into seven groups, each representing a different organization or interest
group.
1.
2.
3.
4.
5.
6.
7.
8.

Halliburton
BP
Transocean
Insurance companies for Halliburton, BP, Transocean, and the People of the Gulf Coast
Mines and Minerals Service (US Government)
People of the Gulf Coast
Mr. Kaminski
Judges of the U.S. Federal Court

Assignment (Some questions have been provided to help you understand what you need to
cover)

If you are BP, Halliburton, or Transocean, your job is to deflect responsibility and seek, on the
basis of contract or torts law, damages from other parties, and/or coverage under your
insurance policy. What kind of remedy (specific performance or damages - compensatory,
punitive, liquidated or nominal) would you be seeking from the other parties, and under what
basis (breach of contract or tort)? What types of insurance might you have that may or may
not cover the costs relating to the incident? Assume that the CAPL Operating Procedure is
the procedure under which BP was operating, and that litigation is the form of dispute
resolution that will apply. (5-6 person team for each company)

If you are the insurance company, your job is to identify the types of insurance that each
party may have, what you are prepared to pay for or what you are not prepared to pay for,
and why the insurers for the other parties should also be contributing to the insurance
payout. In the context of this situation, what would it mean to subrogate the claim against
BP, Halliburton, or Transocean? (2 person team)

If you are the people of the Gulf Coast, your job is to recover damages (compensatory,
punitive, nominal or liquidated) from any party that owed you a duty of reasonable care
(including the MMS). Who owed you a duty of care? Was this duty breached? How? Are
there any contracts in place under which you could sue for breach of contract? (2-3 person
team)

If you are the MMS, you need to justify why you were not negligent, and if you were, what
kind of damages you should be paying to which party. Consider how the other parties will
try to prove that you were negligent, and why, under tort law, you should be responsible for

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compensating anyone that may have a claim against you. Would there be any contracts in
place between you and any of the other parties to this dispute? (2-3 person team)

If you are Mr. Kaminski, explain on what basis you should receive compensation for your
contribution to the solution. Was there a contract in place? If so, with who? If not, on what
other basis could you receive compensation? (1 person job)

you are the judges, you must decide, on the basis of the information given to you, who
Ifshould
pay who what, on what grounds (breach of contract or tort) and the reasons why.

I
suggest that you do some prework re understanding the legal concepts involved as you will
not have much time to prepare your decision. See if you can, incorporate some of the
clauses from the CAPL operating agreement in your your decision. NOTE: The judges
decision will be due at the beginning of class on October 15.

NOTE: For the purposes of this assignment, MMS = Canadian National Energy Board with and
mandate similar to REDA and the AER.
2 Hard copies of your court brief is due and will be presented on October 8th, should be no more
than four pages long and organized into the following:
1. Date
2. Your groups name
3. Your claim (e.g. breach of contract, negligence, or compensation from insurance companies
use the questions above to help guide your claim)
4. The party or parties from who you are claiming (defendant)
5. The remedy or damages that you seek (again, use the questions above to help you)
6. The facts that support your claim
7. Conclusion
All of the following concepts are relevant to this scenario... try to incorporate them into your
brief!

Due diligence (or lack thereof)

Competency or incompetency
Offer and acceptance
Breach of contract
Consensus
Contractual Consideration
Capacity to contract
Intent to create legal relations
Precedents
Limitation period
Negligence and/or gross negligence
Tort
Damages
Representations and Warranties

Privity of contract
Events that would cause termination of
contract (force majeure)
Liability and vicarious liability
Subrogation
Remedy
Remoteness of damages
Indemnification
Regulatory agency
Court
Types of insurance that would be relevant in
this situation
Utmost good faith
Insurable interest
Vicarious liability

Total possible marks: 12 (critical thinking and problem solving applying what youve learned in
BLAW and the legal concepts to the situation at hand) + 8 (communicating effectively and logically
from a written perspective=5 &verbal presentation 3) for a total of 20 possible points.

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