Transocean to Pay $1.4 Billion to Settle Oil Spill Claims

Transocean Ltd. (RIG) will pay more than $1.4 billion, including a $400 million criminal penalty, to settle federal claims arising from the 2010 Gulf of Mexico oil spill, according to a court filing.

Transocean will plead guilty to one misdemeanor count of violating the Clean Water Act and agree to five years probation, the U.S. said in a filing in federal court in New Orleans today. Transocean will appear for arraignment on the charge Jan. 9, U.S. Magistrate Judge Karen Wells Roby said in a one-page order today.

Transocean, based in Vernier, Switzerland, will pay $1 billion plus interest in civil penalties, according to a separate filing in the New Orleans court. The U.S. sued Transocean in 2010, alleging violations of federal pollution law.

Transocean was the owner and operator of the Deepwater Horizon oil rig, which burned and sank in the Gulf of Mexico in April 2010 after BP Plc (BP/)’s Macondo well exploded, setting off the largest offshore oil spill in U.S. history. Under the agreement, Transocean must establish a technology innovation group to focus on drilling safety, devoting a minimum of $10 million to this effort.

“This agreement holds Transocean criminally responsible for its conduct,” U.S. Attorney General Eric Holder said today in a statement. “This resolution of criminal allegations and civil claims against Transocean brings us one significant step closer to justice for the human, environmental and economic devastation wrought by the Deepwater Horizon disaster.”

Loss Contingency

The settlement will end the Justice Department’s criminal investigation of Transocean, the company said in a statement. Transocean said it had accrued an estimated loss contingency of $1.5 billion for Justice Department claims as of Sept. 30. The settlement payments and interest aren’t deductible for tax purposes, the company said.

The civil and criminal agreements, “which the company believes to be in the best interest of its shareholders and employees, remove much of the uncertainty associated with the accident,” Transocean said in the statement.

Transocean rose $2.96, or 6.4 percent, to $49.20 in New York Stock Exchange composite trading.

Possible Suspension

By pleading guilty to a violation of the Clean Water Act, Transocean and its affiliates “may be subject to suspension and debarment from obtaining future U.S. government contracts,” the company said in an SEC filing today. If suspended, Transocean said it “may be prohibited from serving as contractors” to companies holding U.S. Interior Department leases for offshore drilling.

“I’m glad they’re holding accountable not just BP, but everybody who was responsible for the oil spill,” U.S. Senator Bill Nelson said in an e-mailed statement. “The folks along the Gulf Coast deserve no less.” Nelson, a Florida Democrat, co- authored the RESTORE Act, which directs the lion’s share of civil fines collected as a result of the spill directly back to Gulf Coast communities for environmental and economic restoration.

The agreement doesn’t cover costs to Transocean for natural-resources damage under the Oil Pollution Act of 1990, the company said. That requires responsible parties to reimburse governments for the cost of restoring natural resources to pre- incident conditions.

Pollution Act

The U.S. District Court overseeing spill litigation previously determined that Transocean wouldn’t be liable “under the Oil Pollution Act for damages caused by subsurface discharge from the Macondo well,” the company said in today’s statement. This decision, if upheld, would limit Transocean’s liability for such damages, the company said.

The blowout and explosion aboard Transocean’s drilling rig killed 11 workers and sent millions of barrels of crude leaking into the gulf. The accident prompted hundreds of lawsuits against Transocean, London-based BP, the well’s owner, and Houston-based Halliburton Co. (HAL), which provided cementing services.

“Halliburton remains confident that all the work it performed with respect to the Macondo well was completed in accordance with BP’s specifications for its well construction plan and instructions,” Beverly Stafford, a company spokeswoman, said in an e-mail.

“We continue to believe that we have substantial legal arguments and defenses against any liability and that BP’s indemnity obligation protects us,” she said.

Compensatory Damage

BP has to indemnify Halliburton for compensatory damage claims under its drilling contract, U.S. District Judge Carl Barbier in New Orleans, who is overseeing litigation stemming from the spill, ruled last year. Any punitive damages awarded or civil penalties imposed under the Clean Water Act against Halliburton don’t have to be paid by BP, the judge said in January 2011.

While Halliburton has been sued by private plaintiffs, the U.S. didn’t name Halliburton as a defendant in the oil pollution suit.

BP previously agreed to pay $4 billion to the Justice Department to resolve charges connected to the spill and $525 million to settle the U.S. Securities and Exchange Commission’s claim that the company misled investors about the rate of oil flowing into the gulf.

BP announced Nov. 15 that it reached a deal with the U.S. Justice Department to plead guilty to 14 counts, including 11 for felony seaman’s manslaughter. U.S. District Judge Sarah S. Vance said last month she would determine at a Jan. 29 hearing whether to accept BP’s plea.

BP Settlement

BP has also agreed to pay an estimated $7.8 billion to settle most private plaintiffs’ claims related to the explosion of the Deepwater Horizon and subsequent spill.

Barbier granted final approval to the economic-loss and property-damage portion of the settlement last month. He hasn’t ruled on the medical benefits part of the agreement.

The proposed partial settlement of private claims was reached March 2, days before a trial on liability for the spill was set to begin. While BP estimates the accord to be worth at least $7.8 billion, it doesn’t have a cap on potential settlement claims.

Today’s settlement “means a great deal to Transocean in terms of removing the overhanging cloud, and getting back to business,” said Anthony Sabino, a law professor at St. John’s University in New York who specializes in complex litigation. “Since BP settled a little while ago, Transocean had moved to the unenviable spotlight as being one of the last major players here, a very undesirable status,” Sabino said in an interview.

Fault Trial

Barbier has set Feb. 25 for a nonjury trial to apportion fault for the incident.

The BP settlement excludes claims of financial institutions, casinos, private plaintiffs in parts of Florida and Texas, and residents and businesses claiming harm from the Obama administration’s moratorium on deep-water drilling prompted by the spill. It also doesn’t cover federal government civil claims and those of Gulf Coast states Louisiana and Alabama, or lawsuits against co-defendants.

“Today’s settlement between Transocean and the U.S. underscores what every official investigation has found: that the Deepwater Horizon accident resulted from multiple causes, involving multiple parties,” Geoff Morrell, a BP spokesman, said today. “Transocean has acknowledged that it played a significant role and has responsibility for the accident.”

The Transocean settlement with the U.S. doesn’t change the case brought by spill victims against the company and other defendants, said attorneys Steve Herman and Jim Roy, the co-lead counsel for the plaintiffs.

‘Grossly Negligent’

“We’ve been ready for trial for more than a year, and firmly believe that Transocean -- along with BP and Halliburton -- will be found grossly negligent for their roles in the Deepwater Horizon tragedy,” they said today in an e-mailed statement.

The criminal case is U.S. v. Transocean Deepwater Inc., 13- cr-001, U.S. District Court, Eastern District of Louisiana (New Orleans).

To contact the reporter on this story: Margaret Cronin Fisk in Detroit at mcfisk@bloomberg.net

To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net

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Transocean to Pay More Than $1.4 Billion in U.S. Spill Deal

Derick E. Hingle/Bloomberg

Transocean will plead guilty to a single count of violating the Clean Water Act, according to a consent decree between the company and the U.S. filed today in federal court in New Orleans.

Transocean will plead guilty to a single count of violating the Clean Water Act, according to a consent decree between the company and the U.S. filed today in federal court in New Orleans. Photographer: Derick E. Hingle/Bloomberg