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November 18, 2016 Articles

Which Came First, the Incident or the Oil? The BP Moratorium and OPA Causation

The inequitable application of the OPA as is seen in the moratorium claims contradicts public policy and should not stand as binding precedent.

By Allan Kanner – November 18, 2016

Following the Deepwater Horizon disaster, the U.S. government issued a six-month drilling moratorium and “permatorium” in the Gulf of Mexico in an effort to ensure that all available resources were dedicated to cleaning up the unprecedented disaster and that such a disaster never happened again. In re: Oil Spill by the Oil Rig “Deepwater Horizon” in the Gulf of Mexico, on April 20, 2010, 168 F.Supp.3d 908 (E.D. La. 2016). Known simply as the moratorium, this suspension was the center of extensive litigation as companies affected by it attempted to recoup their lost profits. On March 10, 2016 Judge Barbier of the Eastern District of Louisiana held that the moratorium losses do not fall within the scope of the Oil Pollution Act (OPA) (33 U.S.C. § 2701 et seq.) and as such, the companies that suffered economic loss may not recover. 168 F.Supp.3d. 908. Such a reading is overly narrow and contrary to the purpose of the OPA.

Though the court did not specifically address the causation standard under the OPA, and in fact stated “[t]he Court makes clear that it need not and does not decide whether or not § 2702(a) and/or § 2702(b)(2)(E) incorporates a proximate causation standard, etc.,”it did so implicitly by analyzing the wording of the statute and excluding economic damages arising from the moratorium. Barbier articulated the following two-step proximate cause-like liability standard:

Reading § 2702(a) and § 2702(b)(2)(E) together, Plaintiffs must establish that their economic losses were “due to” the injury, destruction, or loss of property or natural resources that “resulted from” the discharge or threatened discharge of oil from the HORIZON/Macondo well (i.e. the incident).

Id. at 916.

The OPA is a strict-liability statute designed to restore natural resources to pre-incident baselines as well as compensate the public and private parties for losses that they suffered, whether they be actual property damage or purely economic damages. The sections outlining this purpose read as follows:

Section 2702(a):

[E]ach responsible party for a vessel or a facility from which oil is discharged, or which poses the substantial threat of a discharge of oil, into or upon the navigable waters . . . is liable for the removal costs and damages specified in subsection (b) of this section that results from such incident.

Section 2702(b)(2)(E):

Profits and earning capacity – Damages equal to the loss of profits or impairment of earning capacity due to the injury, destruction, or loss of real property, personal property, or natural resources, which shall be recoverable by any claimant. 33 U.S.C. §§ 2702(a); 2702(b)(2)(E).

This ruling confounds the “result from” and “due to” language in deciding whether or not the moratorium stemmed from the Deepwater Horizon spill. If the OPA is read in the manner Congress intended, moratorium claims should be recoverable as they fall well within the class of damages contemplated by section 2702(b)(2)(E).

The causation standard has been a point of contention for courts interpreting the OPA since it was adopted in 1990. As it does not use traditional common-law terms in its liability provisions, courts have had difficulty interpreting the phrases “result from” and “due to” without applying traditional maritime and common-law structures. Generally, there is disagreement about whether or not Congress intended for a proximate-cause standard to be used when evaluating damage claims. The proximate-cause standard is indeed used in OPA, but in the section dedicated to limiting liability. 33 U.S.C. § 2704(c)(1). Legal canon holds that “[w]here Congress includes particular language in one section of a statute but omits it in another section of the same Act, it is generally presumed that Congress acts intentionally and purposely in the disparate inclusion or exclusion.” Russello v. United States, 104 S. Ct. 296, 301 (1983). So it follows that the liability provisions of the OPA do not include a proximate-cause standard. Though the OPA causation standard likely lies somewhere between proximate cause and but-for causation, it is far closer to a but-for standard, which aligns with the statutory purpose of the OPA—a purpose that clearly contemplated economic losses akin to those experienced as a result of the moratorium.

When the Exxon Valdez ran aground in Prince William Sound off the coast of Alaska on March 24, 1989, Congress was supplied with a much-needed catalyst for change in oil-spill law. There, just as in all of the oil-spill cases before it, the famously restrictive Robins/TESTBANK rule and federal maritime law limited recovery to commercial fishermen and those who could prove physical damage, and as such, countless individuals, businesses, and communities could not recover for the losses they suffered. Robins Dry Dock & Repair Co. v. Flint, 275 U.S. 303 (1927); State of La., ex. Rel. Guste v. M/V TESTBANK, 752 F.2d 1019 (5th Cir. 1985). Congress had been attempting for years to reform oil-spill liability and the Exxon Valdez spill provided an impetus for new legislation. David W. Robertson, “The Oil Pollution Act’s Provisions on Damages for Economic Loss,” 30 Miss. C. L. Rev. 157, 158. Many Congressmen lamented the “poor people in Alaska who have lost their jobs, their livelihood, their homes, and the beautiful area in which they live.” 135 Cong. Rec. S9921 (daily ed. Aug. 3, 1989) (statement of Sen. Metzenbaum). When Congress drafted the OPA, it sought to ensure that such devastation never happened again by deliberately removing many hurdles found in typical litigation, allowing victims to receive fair compensation promptly. One Senate report noted that “[t]hese provisions are intended to provide compensation for a wide range of injuries and are not so narrowly focused as to prevent victims of an oil spill from receiving reasonable compensation.” S. Rep. No. 101-94. Congress repeatedly stated that the OPA would cover more victims and ensure speedy economic recovery for all those affected.

Despite this, responsible parties continue to attempt to limit their responsibility based on vestiges of the pre-Exxon Valdez law. Much of the confusion comes from the failure to give section 2702(a) its intended meaning. That provision states that a responsible party is liable for injuries that “result from such incident.” It is imperative that the proper emphasis be placed on the “incident” itself, rather than the discharge of oil. For example, in the Deepwater Horizon litigation, Transocean argued that “incident” for purposes of section 2702(a) is synonymous with “the discharge or threatened discharge of oil,” when in fact the statute defines “incident” in section 2701(14) as “any occurrence or series of occurrences having the same origin, involving one or more vessels, facilities, or any combination thereof, resulting in the discharge or substantial threat of discharge of oil.” Transocean’s Rule 12(b)(6) Motion to Dismiss The State of Louisiana’s First Amended Complaint at 32, In Re: Oil Spill by the Oil Rig Deepwater Horizon in the Gulf of Mexico, of April 20, 2010, (No. 2656-1); 33 U.S.C. § 2701(14). Read properly, it means that it is the events leading up to the discharge of oil that constitute the incident, not the discharge of oil itself. Liability attaches to the incident under section 2702(a), which holds that the responsible party is “liable for the removal costs and damages specified in subsection (b) of this section that result from such incident.” 33 U.S.C. § 2702(a). As such the economic damages, such as the moratorium losses, that fall under section 2702(b)(2)(E) would simply have to arise from the incident. The announcement of the moratorium complied in and of itself with this definition: “as a result of the Deepwater Horizon explosion and spill . . . no applications for drilling permits [would] go forward for any new offshore drilling activity.”

After setting forth a proximate-causation standard, the opinion goes on to state that “[t]here can be no doubt that the Government would not have imposed the Moratorium had the HORIZON/Macondo blowout and oil spill not occurred.” In effect, this actually confirms causation, while avoiding using the statutory terms Secretary Salazar employed in the moratorium; however, the Court then incorrectly parses the words of the moratorium and emphasizes the fact that the secretary was concerned for the “possible future blowouts and oil spills from wells other than Macondo.” It states “the perceived threats of discharge from other wells are different OPA “incidents” (if these are OPA incidents at all) than the HORIZON/Macondo incident for which BP is a responsible party.” When analyzing the moratorium, the use of the incorrect two-step proximate-causation standard acts to deny the plaintiffs their recovery. The court uses the “result from” language to incorrectly find that the moratorium did not result from the incident, and following this conclusion, brushes aside the plaintiff’s valid claims. In direct contradiction of its own definition of liability, namely that there must be damage to natural resources, the court states:

In OPA terms, then—and putting aside the question of whether plaintiffs’ claims are due to the injury, destruction, or loss of property or natural resources—the OPA Test Case Plaintiffs’ losses did not result from the discharge or substantial threat of discharge of oil from the Macondo Well; they resulted from the perceived threat (whether substantial or not) of discharge from other wells.

If read together, the true definition of “incident” is employed only in the first step of the court’s analysis. The definition then changes to mean only the discharge in the second step, precluding recovery by the plaintiffs. Once again, the liability provisions of the OPA contemplate damages that “result from such incident.” 33 U.S.C. § 2702(a). The incident is not defined by the discharge; rather the discharge is defined by the incident. The incident is the series of occurrences leading up to the discharge or threat of discharge; the actual punishable actions of the responsible party. To read it as the former would create a narrow loophole for possible responsible parties to use to avoid liability for wrongful actions as it implies that the damages have to arise from oil reaching navigable waters, precluding any economic recovery. The incident in the immediate case is the blowout, explosion, subsequent fire, and sinking of the Deepwater Horizon, which most certainly resulted in the discharge of oil. The moratorium was expressly issued as a result of this incident. Regardless of whether or not the secretary enumerated other reasons for the moratorium, namely that there were not enough response vessels in case of another spill and there was general concern for the safety practices of the industry, the fact remains that the moratorium resulted from the incident, the blowout, explosion, and fire. See 168 F.Supp.3d 908, 915 (E.D. La. 2016). All of the secretary’s enumerated reasons for the moratorium can be, and necessarily are, linked to the blowout.

The coast guard declared the Deepwater Horizon disaster a “Spill of National Significance” under the National Contingency Plan, the first in U.S. history. Such a spill may be declared when it is “so complex that it requires extraordinary coordination of federal, state, local, and responsible party resources to contain and clean up the discharge.” Id. citing 40 C.F.R. § 300.5. It is no wonder then that the secretary had concerns about the number of response vessels necessary to attend to the Deepwater Horizon, thus leaving serious gaps in the resources available to respond to other spills. But it is clear that the response vessels were all deployed as a result of the incident. Further still, the “perceived weakness of industry-wide safety measures,” was not realized until the incident occurred and as such is also a result of the incident. In sum, and as the court acknowledged, “[t]here can be no doubt that the Government would not have imposed the Moratorium [with all of its enumerated factors] had the HORIZON/Macondo blowout and oil spill not occurred.” Id. (sic).

In the future, courts should aim to adhere to statutory cannon: “[i]n construing a statute, the court is ‘guided not by a single sentence or member of a sentence, but [must] look to the provisions of the whole law, and to its object and policy.” Dole v. United Steelworkers of Am., 494 U.S. 26 110 (1990). The OPA’s very apparent policy, as iterated by numerous House and Senate reports, was to ensure that all those adversely affected by a catastrophic oil spill could recover. Its causation standard, as evidenced by its “result from” and “due to” language and illuminating “incident” definition, is not the two-step proximate-causation standard championed by Judge Barbier, but rather a nexus standard that fulfills the intention of Congress to expand recovery beyond Robins/TESTBANK. The OPA was and is still driven by strong public policy. The inequitable application of the OPA as is seen in the moratorium claims contradicts such public policy and should not stand as binding precedent. On August 10, 2016, the parties to the moratorium case stipulated the dismissal of the plaintiff’s appeal. Precedent that reads the statute narrowly and inadvertently creates loopholes will only serve to harm an already economically disadvantaged region that suffers over and over from industry accidents, and fails to create robust incentives for industry to avoid future oil spills.

Note: Allan Kanner and his firm, Kanner & Whiteley, LLC, represented the State of Louisiana, which lost tax and royalty revenues during the moratorium, and was of the belief that the OPA was drafted broadly to include such harms. Louisiana settled its economic-loss claims without a ruling on the issue and prior to this dismissal.

Keywords: environmental litigation, energy, Deepwater Horizon, oil spill, OPA, Oil Pollution Act

Allan Kanner is named partner of Kanner & Whiteley, LLC in New Orleans, Louisiana.

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