BP Trial’s Last Phase Begins, Will Determine Penalty For 2010 Oil Spill

BP Trial’s Last Phase Begins, Will Determine Penalty For 2010 Oil Spill

By Julie Cart, Los Angeles Times (TNS)

The slowly unwinding Deepwater Horizon oil spill trial began its final phase Tuesday as a judge in New Orleans considers the record fine that oil giant BP must pay for the well blowout five years ago that killed 11 men and spawned the worst environmental disaster in American history.

U.S. District Judge Carl Barbier heard arguments from government lawyers and BP, which is liable for fines of up to $13.7 billion for violating the federal Clean Water Act as a result of the April 20, 2010, explosion in the deep waters of the Gulf of Mexico.

The accident and BP’s efforts to mitigate its effects transfixed a worldwide audience, starting with fireboats, helicopters and an armada of civilian and military vessels mounting a frenzied effort to save a crippled drilling rig that eventually pumped millions of barrels of crude oil into the gulf.

Tar balls washed up on beaches in an arc from Texas to Florida, and Louisiana’s already fragile wetlands were devastated. Untold wildlife deaths were symbolized by photographs of oil-drenched pelicans. Commercial fishing, tourism and public health suffered — most of those costs have been laid at BP’s door.

The Britain-based energy company has aggressively challenged the federal government and often portrayed itself as being victimized by the legal aftermath, complaining that its deep pockets have been drained by false claims.

In other proceedings, BP reached a $4.5 billion criminal settlement with the Justice Department in 2012. That included $525 million paid to the Securities and Exchange Commission for charges the company lied to investors during the spill.

The trial taking place in an elegant federal courthouse is being tried under maritime law with no jury. The judge has wide latitude to structure the proceedings as he wishes. The hugely complex trial has played out in three phases over two years, with each phase focusing on a central issue.

The first phase determined who was to blame for the blowout. The second, highly technical phase attempted to quantify the amount of oil that billowed up from the well bore.

Edward F. Sherman, a law professor at Tulane University, called the spill trial “the most complex court case in modern history.”

From the start, Barbier has kept a tight rein on a case with dozens of moving parts. “The large number of different claimants, death and personal injury, widespread economic loss to whole industries, injuries to landowners _ there a lot going on,” Sherman said. “He’s had a heavy thumb on the case and he’s done a terrific job.”

Over the course of the next three weeks, Barbier will consider a number of factors that apply to the Clean Water Act, including the severity of the spill, who was to blame, the amount of fines the company has already paid, BP’s safety history, and what mitigation efforts it undertook.

In pretrial filings, BP foreshadowed its approach, emphasizing the immensity of the $14 billion cleanup efforts, which included hiring thousands of boats to skim oil from the gulf and thousands more people to rake tar off beaches.

The company said it reserved $43 billion for spill-related costs, which covers an array of associated lawsuits.

Last week, Barbier ruled that 3.19 million barrels of oil poured out of the Macondo well, an estimate that was substantially lower than the government’s and somewhat more than BP claimed.

The figure is crucial to BP because it sets the formula for the fine, which carries a maximum of $4,300 per barrel.

Barbier had ruled that BP had acted with “gross negligence and willful misconduct” in its actions leading up to the explosion, making it liable for the maximum fine.

Whatever fine Barbier levies, it will be the largest environmental penalty ever, and perhaps the largest of any kind. The previous record was $1 billion paid in 2013 by Transocean Ltd., which owned the Deepwater Horizon.

Even though the court case is winding down, legal observers expect BP to appeal whatever decision emerges, likely tacking five more years to the proceedings.

The company still faces scores of claims from private parties and has yet to settle another federal environmental damage claim, which is still being assessed.

Photo: ideum via Flickr

Tiny California County Provides Template For Anti-Fracking Campaigns

Tiny California County Provides Template For Anti-Fracking Campaigns

By Julie Cart, Los Angeles Times (TNS)

SAN JUAN BAUTISTA, Calif. — If you were plotting the epicenter of a daring trend or gathering the vanguard for a revolutionary charge, San Benito County might not be the first place you’d start.

One of the state’s smallest counties, it’s a retro snapshot of turn-of-the-century rural California: agrarian, stoic, striving.

But after a stunning election victory, residents of this farming region find themselves on the sharp edge of a growing movement to ban hydraulic fracturing via local voter initiatives.

Fracking opponents here were vastly outspent by oil companies that fought a measure to ban well stimulation techniques such as fracking, acidizing and steam injection, along with conventional drilling in some areas. With just $130,000, the homegrown campaign managed to draw 57 percent of San Benito County voters to the polls in a low-excitement midterm election. They held off oil companies that spent nearly $2 million opposing the initiative.

“This little, tiny county managed to give big oil a black eye,” said Kate Woods, a local landowner who supported the ban, which takes effect Jan. 1. “This is going to be something that spreads.”

Some would argue it already is spreading. Mendocino County approved a fracking ban last month. And in Santa Barbara, opponents of a ban poured $6 million into a successful effort that turned back a similar initiative.

The bare-knuckle campaign in San Benito County opened divisions here, pitting neighbors and friends against one another. Election shenanigans reportedly ranged from midnight runs to tear down opponents’ signs to alleged voter intimidation and physical altercations.

Supporters of the ban said energy industrialization would indelibly alter the region’s bucolic way of life and imperil water sources.

Opponents argued that fracking wasn’t even occurring in the county, and they worried that outlawing other extraction techniques would forever restrict economic growth in the financially depressed county.

Despite pending state fracking regulations that California officials say are the nation’s toughest, analysts expect other municipalities to fashion their own rules under the framework of zoning. Santa Cruz County already has a ban, as does Beverly Hills. The L.A. City Council approved a moratorium on fracking but has yet to draft an ordinance.

A measure banning fracking in city of La Habra Heights has qualified for the March 2015 ballot, and Butte County will take up the question in the 2016 elections.

The strategy of outlawing fracking by enacting local ordinances has been working its way west from New York, where 200 local governments in the midst of a shale oil and gas boom have instituted bans. In November, Denton, Texas — the birthplace of hydraulic fracturing — imposed a ban on the practice inside city limits, as did Athens, Ohio.

Supporters of the ban in San Benito and elsewhere cast it as an issue of self-determination.

“I’m concerned about quality-of-life issues,” said Robert Rivas, a county supervisor. “We need to be in control of our growth, not the oil and gas industry.”

Some energy companies, though, consider the spate of ordinances an annoying fad. Craig Moyer, a lawyer with Manatt, Phelps & Phillips and counsel for the California Independent Petroleum Association, said the initiatives are unnecessary because of comprehensive fracking regulations that lawmakers approved earlier this year, which are expected to be fully implemented in 2015.

“The state has addressed it,” Moyer said. “I’m kind of amazed that it has gotten to be as much of an issue as it has. I’m hopeful that it will fade away and people will move on.”

Judging by the passions still roiling here, there seems little chance of that.

San Benito County is on the edge of alluring places — the lush Monterey Peninsula is 40 miles to the west, and the wealth centers of San Francisco Bay and Silicon Valley are little more than an hour’s drive north.

But the rural way of life perseveres here. More than 80 percent of land in the county is devoted to farming or ranching, numbers that have held steady even as subdivisions spill across the town of Hollister and big-box stores crowd out local shops.

The county, home to 56,000 residents, sees its future in agritourism driven by destination wineries, organic farms and quaint inns overlooking pasturing cattle. Bustling oil and gas operations don’t fit in the picture.

In the 1950s, hundreds of pump jacks and drilling rigs dotted this rolling landscape that sits astride the Monterey Shale formation. Today, fewer than 50 are operating, and only two companies are actively seeking to explore.

The Farm Bureau recently commissioned an analysis of the economic benefits to the county from the energy industry. At the moment, San Benito County’s annual tax revenue from oil operations totals $1,162.

Those revenues could have skyrocketed if energy companies resurrected old wells by employing modern well stimulation methods: fracking, injecting a slurry of water and chemicals into subterranean formations to free oil and gas; acidizing, shooting a mix of highly caustic chemicals down a well bore to dissolve rock or other debris; and cyclic steam injection, pumping superheated steam into underground seams to loosen and liquefy viscous crude oil.

Concerns about Citadel Exploration’s “Project Indian” steam injection well near Pinnacles National Park prompted the San Benito ballot measure. The exploratory well went in on a working ranch where the mineral rights were held by Occidental Petroleum.

Newport Beach-based Citadel leased the site from Occidental, and the county approved the work. The Center for Biological Diversity sued, alleging there was insufficient environmental review and bringing work at the site to a halt.

Armin Nahabedian, Citadel’s CEO and a fourth-generation oil driller, lashed out against the ban, known as Measure J, and at “outsiders,” who he said were agitating county residents.

“In a fair world, these people would be dragged out into the courtyard and dealt with accordingly,” Nahabedian told the Santa Cruz Sentinel newspaper. “These people are stirring up a lot of bad publicity, and they’re causing some decisions to be made by using tactics of fear-mongering.”

The county’s Farm Bureau and Cattlemen’s’ Association called the ban unnecessary, extreme and “hatched by activists and lawyers from outside San Benito to serve their own political agendas.”

In what became a superheated campaign, ban supporters were called ‘jihadists’ and environmental extremists.

One Hollister man detected a more nefarious agenda behind the ban, concluding in a letter to the local newspaper that a vote for the measure was a vote for terrorism.

“If Measure J passes, jobs will be lost, people will suffer, and revenue to the county and to the state will be reduced. Further, ISIS will revel in the knowledge that they have achieved a foothold in their quest for additional funds to do their dirty work,” wrote Philip Schipsi.

Nahabedian of Citadel Exploration declined an interview request but in an email statement said he considered the ordinance an illegal “taking” that prevents him from using his property. Three days after the election, Nahabedian sent a letter to county supervisors demanding $1.2 billion in restitution for loss of future income he could have derived from the land.

Supporters of the ban rejected the notion that their campaign was led by interlopers from outside San Benito County. The real outsiders, they said, were the oil companies fighting the ban. The campaign was successful, locals said, because it was spearheaded by teachers, farmers and ranchers with roots in the community.

Third-generation cattle rancher Joe Morris is a longtime member of the Farm Bureau, the Cattlemen’s Association and the Chamber of Commerce. He split with all those groups in his support of Measure J.

“They were pounding away with lie after lie after lie about the initiative itself. That seemed unconscionable,” Morris said.

Paul Hain, an organic farmer and a Republican, said he has been in the Farm Bureau for years, but he didn’t agree with its support for drilling. “I told the board, ‘You guys are a bunch of stooges for big oil.’ I’m not real popular right now. They hitched their horse to the wrong wagon here.”

Catherine Engberg, a San Francisco lawyer who had a hand in crafting Measure J, said she will be surprised if it isn’t challenged in court. But she doesn’t think those lawsuits will be successful.

If this is the template for how future anti-fracking campaigns play out across California, local officials here warn that other counties should prepare for battle.

“We are not going to be pushed around by oil companies,” said County Supervisor Anthony Botelho, a Republican. “The fight’s just begun.”

Photo: Margaret Rebecchi and her son Tomas pose for a portrait in front of a campaign poster still hanging in their neighborhood on Nov. 11, 2014 in Hollister, Calif. Rebecchi and her son were instrumental in getting the Latino voters to support measure J to ban fracking. (Gina Ferazzi/Los Angeles Times/TNS)