Don’t go near the water

[ MAY 27, 2010 - OKLAHOMA CITY, OK ] - Unless you just exited a Siberian cave, you know that on April 20 British Petroleum’s offshore well, Macondo, blew out and probably – at least for the foreseeable future – altered the Gulf of Mexico, its environment and the people who live and work there. Somewhat forgotten in the unfolding story are the 11 missing rig workers now presumed dead and the 17 others injured in the explosion.

Many experts anticipate discharge levels to be higher than any oil spill in U.S. history, including the 1989 Exxon Valdez disaster. Though ocean currents make predicting the ultimate outcome difficult, the states of Alabama, Florida, Mississippi, Louisiana and possibly those along the East Coast are bracing for a seismic impact on the tourism, fishing, shrimp and oyster industries.

So, what is the legal and damages exposure facing well operator BP and the other companies involved in this catastrophe?

Though federal law generally limits the company’s liability to removal costs plus $75 million, BP executives say it will be responsible for whatever it costs to clean up the mess.

Since the spill, legislation has been introduced in Washington, D.C., to raise the limit to $10 billion, but it is unlikely to have a retroactive effect.

Recent estimates indicate the London-based BP has received about 6,000 claims, with the average payment reported to be $4,600 – made mostly to fishermen for lost income. BP can expect other lawsuits. Many others – from commercial fishing groups, travel agencies, and beachfront property owners to coastal cities that experience loss of tourism revenue – are expected to file claims. Already there are widespread reports of travel cancellations along the Atlantic and Gulf Coast regions.

And there has been at least one shareholder lawsuit filed accusing a group of BP executives, led by Chief Executive Anthony Hayward, of ignoring previous safety issues related to the Deepwater Horizon oil rig. The suit claims that BP cut costs related to safety while lobbying government agencies to decrease safety regulations. The accident and oil spill, it said, will ultimately cost BP “tens of billions of dollars,” and has resulted thus far in a more than 12-percent drop in the company’s stock.

Other defendants in the shareholder lawsuit include Transocean, owner and operator of the Deepwater Horizon drilling rig; Cameron International, manufacturer of the blowout preventer that allegedly failed; and Halliburton, subcontractor conducting cementing operations at the time of the blowout.

As you might imagine, BP’s problems have not escaped the attention of industrious class-action attorneys, who claim to have devised a strategy for resolving virtually all spill-related litigation within three months. We shall see.

Certainly the economic impact is not limited to the primary defendants, but will also be felt by their insurers. It’s been said before and will be said again, but the only true winners in this multifaceted disaster will be the attorneys.

The BP spill and related damage to the environment, commerce and life reminds me of what the Beach Boys said a few years ago when they warned, Don’t Go Near the Water (by Mike Love and Al Jardine):

Don’t go near the water

Don’t you think it’s sad

What’s happened to the water

Our water’s going bad

Oceans, rivers, lakes and streams

Have all been touched by man

The poison floating out to sea

Now threatens life on land

Tom Wolfe is a civil litigator who serves as president and managing partner of Phillips Murrah P.C. in Oklahoma City.