Potential $1.5B Settlement for Gulf Oil Spill Claims

The latest regulatory filings by Transocean, Ltd. reveal some details of ongoing discussions between the offshore drilling giant and the U.S. government.

Transocean, Ltd., based in Vernier, Switzerland, was the owner of the Deepwater Horizon drilling rig. The rig was the site of an explosion in April of 2010 which caused the death of 11 oil rig workers. The explosion was triggered by the blowout of the BP-owned Macondo well, and led to the 2010 Gulf of Mexico oil spill disaster.

Discussions of Settlement Amounts are Ongoing

Lawsuits have ensued against BP and Transocean with the federal government suing Transocean in 2010, stating that they allegedly violated U.S. government pollution laws. The $1.5 billion settlement in discussion would be aimed at resolving all federal, criminal and civil claims against Transocean.

Earlier this year the company rejected a settlement offer from BP and plaintiffs’ attorneys stating that the amount requested was excessive. The private attorneys represented Gulf Coast businesses and residents who claim economic damages due to the oil spill.

Previously, Transocean has stated that it had set aside $2 billion to cover anticipated claims stemming from the Deepwater Horizon explosion.

This is in contrast to BP which estimates it will end up paying approximately $7.8 billion to cover claims related to its role in the spill. Litigation continues and in May, a U.S. District Judge in New Orleans provided preliminary approval for a proposed class action settlement agreement between plaintiffs and BP.

Settlement Talks Still Have Outstanding Issues

In its filing with the Securities and Exchange Commission, Transocean said, “There can be no assurance that the parties will enter into agreements on the terms described or at all.”

In its regulatory filing, Transocean notes that there are still several issues to be resolved before an agreement can be reached, including:

  • The exact wording of the agreement
  • The time period provided to Transocean for payment
  • Whether claims of environmental damage, covered under the Oil Pollution Act of 1990, would be included

Meanwhile, Transocean continues to lead the way in deep water oil exploration. In April 2011, in 10,194 feet of water off the coast of India, Transocean set the record for the deepest fossil fuel well. The company also plans to fund the construction of two new drilling ships. These rigs will be able to drill in water depths of up to 12,000 feet with wells extending up to 40,000 feet.

A complicated web of litigation relating to the oil spill still remains between Transocean, BP, the federal government and private parties. A January 14, 2013 trial date has been set to continue the legal process for any unsettled litigation.