Transocean pleads for Barbier to enforce indemnity provisions with BP

By Steve Korris | Nov 15, 2011


NEW ORLEANS – Deepwater Horizon rig owner Transocean launched an emotional attack on rig operator BP on Nov. 3, as its lawyers called on U.S. District Judge Carl Barbier to enforce indemnity provisions in a drilling contract with BP.

"Transocean honors its contractual obligations," Transocean lawyers wrote.

"Why can BP not do the same? If BP, a major oil company with legions of attorneys, is allowed to simply ignore contracts which have been in existence for decades, what does this say about our legal system?

"What does this bode for the thousands of contractors working throughout the Gulf Coast?"

BP and Transocean entered into a contract in 1998.

"They contractually agreed or promised to indemnify one another without limit and without regard to the cause or causes of the incident," the lawyers wrote.

"BP's promise to Transocean also expressly included indemnity for fines and penalties.

"Transocean promised to defend and pay claims for injury or death of Transocean employees, which it has agreed to do, and for pollution emanating from the rig or originating above the surface of the water, which it has said repeatedly it would do."

They wrote that Transcoean agreed to indemnify BP for loss or damage to third parties caused by the drilling unit, up to $15 million per occurrence.

"Transocean and other Macondo contractors chose, to the extent they could, to insure this risk in the public insurance market," they wrote.

"BP chose not to insure its own risks."

They wrote that BP selected and supervised all contractors at the well.

They wrote that BP mandated specifications for drilling equipment, and that it directed mud, spacer, and casing programs.

They wrote that BP decided what information to share with contractors.

They branded as absurd a suggestion that contracts minimized incentives for contractors to conduct safe operations.

They wrote that the suggestion was belied by loss of Transocean employees, injuries to employees, loss of the rig, and the realities of the current litigation.

"Does BP seriously contend that it alone has suffered the consequences of this tragic event?" they wrote.

They called the contract a standard oil patch agreement, writing that Transocean and BP made similar promises before and after the explosion.

"Indeed, BP and Transocean have entered into similar agreements with each other since the Macondo blowout," they wrote.

"So we ask BP, why the broken promises to your Macondo contractors?"

"Why have you signed so many contracts, reviewed by an army of your lawyers and businessmen, that you have no intention of honoring?

"The answer is simple: money.

"BP sacrificed quality and failed to implement risk management and mitigation processes to ensure overall safety and success of the operations at Macondo just to save costs on a project that was well above budget.

"BP goes so far as to argue that Transocean and its underwriters intended to and did insure BP for environmental risks BP says it cannot afford to insure itself."

They asked if BP could expect contractors to insure for underwater blowouts if BP couldn't afford to do so.

They wrote that BP continues to enter into contracts it does not intend to honor.

"While Transocean has never contested its obligations, BP has never acknowledged its promises," they wrote.

They wrote that BP personnel on the rig reported no unsafe conditions to management.

They wrote that BP well site leader Ronnie Sepulvado, who had been assigned to the rig for eight years, testified that the crew wouldn't hide safety issues.

"He worked with many of the men who lost their lives on April 20, 2010, and felt the drilling crew was both competent and committed to safety," they wrote.

They wrote that BP vice president Pat O'Bryan, who was on the rig when it exploded, testified it was the best performer in BP's fleet for safety and operations.

"He was anxious to visit the rig to observe 'what good looks like' from a safety and performance perspective and to apply those practices on other BP rigs," they wrote.

"The Deepwater Horizon was the rig to which many BP well site leaders wanted to be assigned.

"BP has not simply failed to defend Transocean.

"Its lawyers are actively prosecuting Transocean, accusing it, and, most shamefully, the rig's crew of negligence and gross negligence."

They wrote that BP joined plaintiffs in trying to prove Transocean's negligence.

"As a result, Transocean's defense costs continue to mount and are projected to exceed hundreds of millions of dollars," they wrote.

Kerry Miller, of Frilot law firm in New Orleans, signed the brief.

Steven Roberts, Rachel Clingman, and Kent Sullivan, all of Sutherland Asbill and Brennan in Houston, worked on the brief.

So did Brad Brian and Allen Katz, of Munger Tolles and Olson in Los Angeles.

So did Edwin Preis and Richard Hymel, of Preis and Roy in Lafayette, Louisiana.

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