BP Oil Spill Update: Anadarko Turns on BP; Is $20 Billion Enough?

The past week has brought several new developments regarding BP's Great Oil Spill Disaster. Here are some that relate to the legal landscape surrounding the deadly Deepwater Horizon explosion and its still-unfolding environmentally devastating oil spill.

BP's Business Partner Bashes It

My favorite bit of the latest news: BP's (BP) business partner, Anadarko Petroleum (APC), has in essence teamed up with the plaintiffs suing BP. Anadarko puts the blame for the spill squarely on BP, saying, "this tragedy was preventable and the direct result of BP's reckless decisions and actions. . . . BP's behavior and actions likely represent gross negligence or willful misconduct."

Anadarko is probably right, which has many implications for BP: criminalliability, no liability cap, increased civil fines under the Clean Water Act and, most important to Anadarko, release of Anadarko from related claims. (Anadarko is on the hook for 25% of the well's costs, including legal liabilities, unless BP is guilty of gross negligence.)

As the liabilities associated with Deepwater Horizon mount, Anadarko and BP will surely square off in court to determine whether or not Anadarko has to kick in 25%. Anadarko will litigate how culpable BP was for the spill, an effort that directly aligns its interest with the plaintiffs' in all the other pending litigation. Indeed, BP is currently considering initiating that war.

However, it's more likely that Anadarko would initiate the lawsuit as it seeks to clear itself of liability. The possible liability already weighs heavily on Anadarko: Moodys just downgraded its debt.

In the same press release that condemned BP as reckless, Anadarko announced a public relations move perhaps designed to contrast its business with the gaffe-prone BP. Anadarko will donate to Gulf Coast charities and civic groups any money it gets from the oil recovered from the spill. Now that BP is gathering up some 25,000 barrels a day, Andarko could wind up donating a tidy sum.

Update: According to the partnership agreement filed with the SEC on June 21, BP and Anadarko will arbitrate this dispute. See Legal Briefing: BP-Anadarko Fight Stays Out of Court.

The $20 Billion Fund Hoopla

BP has established a $20 billion fund under the control of Kenneth Feinberg (well-known for his work running the 9/11 victims fund and performing as President Obama's executive pay czar) to pay claims and possibly stave off lawsuits. Although Obama has taken credit and blame for the fund, it apparently wasn't the just the president's idea. (Those attacking Obama nonetheless want BP to be fully accountable and for taxpayers to pay not a dime, so it seems their message is a bit confused.) The most famous of the fund-naysayers are Congressman Joe I-apologized-to-BP Barton, (R-Texas) and Rep. Michelle no-redistribution-of-wealth-fund Bachmann (R-Minn).

$20 billion may not be a lot to BP, but it may not be a lot to plaintiffs either. New litigation fronts continue to open up, and as the oil keeps spilling, the damages along the original ones grow. Beyond the claims BP hopes to settle with the fund, it also faces very large fines pegged to the amount of oil spilled, a potential total that's currently unknowable.

No wonder BP isn't stopping at $20 billion. It's reported to be seeking to raise $50 billion for spill liabilities. And who's to say that's enough? I doubt it is.

The Largest-Ever Citizen Suit Under the Clean Water Act

Why might not even $50 billion be enough? Well, in addition to the $20 billion fund, last week BP was hit a $19 billion suit to enforce the Clean Water Act. The act, which can be enforced by citizens, involves penalties that aren't counted in the $20 billion fund.

Under the act, BP can be forced to pay $1,100 per barrel of oil, and, if grossly negligent -- as Anadarko charges -- $4,300/barrel. The plaintiffs believe the total BP faces will be $19 billion on Aug. 1, approximately when relief wells are supposed to shut down the spill.

Corexit Dispersant Attracts a Class Action

The newest type of BP lawsuit is a class action filed last week over BP's use of Corexit, a dispersent so toxic it was banned in the U.K. in 1998 as harmful to the food chain. Worried about Corexit's toxicity, the U.S. EPA ordered BP to use less of it and switch to alternatives. The lawsuit calls Corexit four times more toxic than the oil itself, and it charges that BP's use of over a million gallons and counting has made the toxin a permanent part of the Gulf seabed and food chain.

As the press release notes, this lawsuit is likely just the first of many.