Long fight ahead in BP oil spill trial

The most eagerly awaited moment in the first week of the trial over the 2010 Deepwater Horizon disaster was also the most anticlimactic.

Tony Hayward, chief executive of BP at the time of the accident, appeared on video in 20 minutes of clips chosen by lawyers for the plaintiffs suing BP and other companies for billions of dollars in damages.

Mr Hayward’s body language was awkward, reviving memories of his clumsy performances as he tried to reassure the people of the Gulf of Mexico coast while the oil was still gushing from BP’s well. He smiled nervously, pushed his glasses on top of his head, and rested his chin on his fist at times.

In the substance of his evidence, however, he gave nothing away. The plaintiffs aim to show that pressure from senior management to hold down costs led to BP staff cutting corners on the Macondo well, causing the fatal explosion on the Deepwater Horizon rig and the subsequent leak of an estimated 4m barrels of oil into the waters of the gulf.

Mr Hayward accepted that he had made deep cuts in costs and jobs after taking over in 2007, as he attempted to improve BP’s poor financial performance. Over the attempts of the plaintiff’s lawyer to stop him, though, he added that he had always stressed “safe and reliable operations come first, whatever the cost”.

The exchange was emblematic of the first week of the trial to determine liability for civil penalties and damages over the Deepwater Horizon spill. While BP’s adversaries – private sector plaintiffs, the US government, gulf coast states and other companies involved in the Macondo project – are getting to make their points against it, BP also has a chance to make its points in return.

As the trial began at 8am on Monday in room 268 of the federal court building in New Orleans, spectators shared a faint sense of unreality.

Many people believed the case would never come to trial, because for both BP and the US authorities there was too much at stake to take the risk of having to argue it out in court. BP agreed a settlement a year ago for tens of thousands of private sector plaintiffs, which is now expected to cost $8.5bn. Transocean, owner and operator of the Deepwater Horizon rig, in January agreed a $1.4bn settlement of the civil and criminal charges against it from the US government.

In the days leading up to the trial, there were talks under way about a possible settlement of the federal and state claims against BP, although states’ conflicting interests have been a sticking point.

A settlement is still possible, although David Uhlmann, a former environmental lawyer with the US Department of Justice, now at the University of Michigan, says that becomes less likely with every passing week.

“Settlements require compromise, and trials are not at all about compromise,” he says. “Once you get into litigation, positions tend to harden.”

The trial has only just begun; there are three months more of argument to go just in the first phase of the trial, covering the causes of the accident. There are few similar decisions to set precedents, making it particularly hard to guess how Carl Barbier, the presiding judge, might rule. (As a maritime case, the trial is held without a jury.)

By fighting in court, BP sets itself up for a year or more of uncertainty over the final cost of the spill, which it could resolve quickly by agreeing a settlement.

At the end of the first four days of statements and evidence, though, nothing has yet happened to suggest it made a mistake in opting to go to trial.

Michael Underhill, the lead lawyer for the DoJ, came out very strongly, arguing that he intended to prove “wilful misconduct”, a higher standard than gross negligence, another potential finding, which in turn is higher than the ordinary negligence that BP has admitted.

Mr Underhill alleged BP had displayed a “culture of corporate recklessness”, saying the disaster had followed “a long series of missteps and reckless decisions”.

Damning evidence about decisions made by BP staff has also been presented in court; in particular calls and emails between its supervisors and engineers on the rig and at the headquarters of its exploration and production division, on the outskirts of Houston.

Bob Bea, a veteran safety expert at the University of California Berkeley, who has worked as a consultant for BP, argued that the company’s management “knowingly ignored process safety and risk management for deepwater exploration wells” in the gulf.

Alan Huffman, another expert, was scathing about the way BP drilled the Macondo well, saying that its decision to press ahead below 18,220 feet, in the face of evidence that the rock around the well was fragile, was “beyond imprudent. It was unsafe and dangerous.”

Kevin Lacy, BP’s vice-president for drilling and completing wells in the Gulf of Mexico until 2009, testified on video: “I was never given a directive to cut corners or to deliver something not safely, but there was tremendous pressure on costs.”

The good news for BP, though, is that the worst is probably now over. It knew all the evidence, so the uncertainty was over how it would be seen by the media and the public, and it is clear that general interest is already waning.

Like a struggling Broadway show, the trial’s audience has dwindled. On Monday, the queues were snaking down the street from before 6am. By Thursday, the final day of the first week, it was possible to walk straight in and find a seat in the courtroom just before the 8am start.

The plaintiffs will have brought their best evidence out first, and from now on the arguments are likely to become increasingly technical and complex.

The two most senior BP executives to give evidence in person at the trial, Lamar McKay, the former president of BP in the US, and Mark Bly, the company’s head of safety, have between them given many hours of evidence without any glaring mistakes.

Randy Ezell, a Transocean drilling supervisor, and other people on the rig when it exploded are set to give evidence early next week, and their testimony is likely to be powerful.

Still, the other main companies involved in the Macondo project are also being criticised in court.

Jim Roy, co-lead counsel for the private sector plaintiffs, began with the first opening statement of the trial on Monday criticising Transocean, alleging it had not provided adequate training to the rig crew and describing the misinterpretation of a crucial test of the well as a “gross and extreme departure from the standards of good oilfield practice”.

For the next few weeks the agenda will continue to be dominated by the plaintiffs and the US authorities, because they get to put their cases first. But in a few weeks time – probably in the first half of April – BP will get to make its formal response.

In the meantime, it can continue to challenge the plaintiffs’ witnesses, as it has done already, querying Prof Bea’s conclusions, for example, on the grounds that he did not study Transocean and other companies nearly as closely as he had scrutinised BP.

In a courtroom full of top-tier legal talent, that cross-questioning of Prof Bea by Mike Brock of Covington was particularly impressive, according to Daniel Jacobs, another former DoJ lawyer, now a professor at American University.

“This is one of the most methodical and skilful cross-examinations I have seen since John Keker cross-examined Ollie North in one of the Iran-Contra trials in 1989,” he says.

That talent does not come cheap. BP said a year ago it expected to spend $1.73bn on legal and administrative costs resulting from the spill, and that figure is likely to have risen.

Government lawyers ranged against BP are earning fractions of the amounts earned by the private firms. Mr Underhill’s government grade would probably pay him at most about $175,000 a year.

He joked on Thursday that if the sequestration of government spending hit on Friday, he would be sent away from the trial on leave.

Yet he, too, has been an impressive performer, his voice cracking when discussing the “11 souls” who died on the rig, and the “devastation” caused to the coastline of the gulf.

It is still entirely possible that Judge Barbier will find Mr Underhill’s arguments persuasive, and rule that there was wilful misconduct, or try to split the difference between that and BP’s admission of ordinary negligence with a finding of gross negligence. Either of those two outcomes would expose BP to Clean Water Act penalties of up to $17.6bn, and many billions in punitive damages for the states and private sector.

Having come this far, there is no reason for BP to accept a settlement now that it rejected a week ago. It looks as though the company may be in for a long fight.