Anadarko argues against $1B penalty in 2010 Gulf oil spill

NEW ORLEANS (AP) – Lawyers for Anadarko Petroleum Corp., a minority partner with BP in the ill-fated Macondo offshore well, began making their case in court Monday that Anadarko should not face steep federal Clean Water Act penalties for the 2010 Gulf of Mexico oil spill.

The government has suggested a penalty of more $1 billion for Anadarko, and a penalty of up to $13.7 billion for BP. The penalty trial is entering its third week.

Anadarko lawyers have focused on the fact that Anadarko was not involved in operations on the Deepwater Horizon rig, where an explosion killed 11 workers and sent oil spewing into the Gulf for 87 days.

They are trying to convince U.S. District Judge Carl Barbier that a stiff Clean Water Act penalty would have unintended consequences: giving investors who don’t have a hands-on operating role in a venture an incentive to interfere with operators’ safety decisions. To bolster their case, they called Kenneth Arnold, an engineer and oil industry safety expert, who testified that forcing non-operators in a well project into a role where they contribute to safety decisions can lead to confused roles and unsafe practices.

The penalty trial resumed Monday after two weeks of conflicting testimony by witnesses for the Justice Department and BP. Government lawyers want a penalty against BP at or near an estimated $13.7 billion maximum, citing demonstrated and potential harm to the economy, environment and social fabric of Gulf communities.

BP is arguing for a much lower penalty. Its witnesses testified about the corporation’s response to the initial disaster, efforts to aid the coast and evidence of a strong recovery in the five years since the spill.  They have also argued that BP has already run up $42 billion in spill-associated costs and that a high penalty would place a dangerous financial burden on BP Exploration and Production, the subsidiary responsible for the Macondo well.

Until Monday, Anadarko attorneys had a low profile in the trial, which is expected to wrap up this week.

Their first witness, Darrell Hollek, a vice president for Anadarko, said Anadarko offered BP firefighting assistance and experts for numerous aspects of the response to the 2010 disaster.

Under cross examination by a government attorney, he acknowledged that Anadarko never paid directly for response or cleanup costs.

His testimony at times touched on a $4 billion payment Anadarko made to BP to settle a dispute after the spill.

Anadarko has argued in court briefs that in weighing Anadarko’s penalty, the judge should consider the $4 billion it has already paid to BP.

The dispute arose from the BP operating agreement with Anadarko. Hollek said BP wanted reimbursement of some $6 billion in spill expenses but that Anadarko said the reimbursement was not called for under the operating agreement because of BP’s “gross negligence” in the disaster. The settlement called for a $4 billion payment by Anadarko to BP, with a condition that the money go to aid victims of the explosion and spill.