Transocean to Pay More Than $1.4 Billion in Spill Settlement

So Transocean is settled and done but BP is still on the hot seat…

[B]Transocean to Pay More Than $1.4 Billion in Spill Settlement

Margaret Cronin Fisk, ©2013 Bloomberg News

Jan. 3 (Bloomberg) – Transocean Ltd. 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 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, based in Vernier, Switzerland, will pay $1 billion plus interest in civil penalties, according to the filing.

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’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., which provided cementing services.