May 28, 2010 / 10:09 PM / 9 years ago

U.S. pressure leads Transocean to revise liability bid

WASHINGTON (Reuters) - The Obama administration told Transocean Ltd. in a letter this week it was “simply unconscionable” for the drilling firm to try to limit its liability in the Gulf of Mexico oil spill accident, prompting the company to revise its court petition.

Transocean (RIGN.S) asked a U.S. court in Houston on May 13 to limit its liability to just under $27 million. That sparked outrage by the Obama administration, which is grappling with the consequences of oil spurting into the Gulf and ruining the fragile ecosystem.

Transocean cited the 1851 Limitation of Liability Law in its petition, infamously used by the owners of the luxury cruise liner Titanic to protect them from claims by the ship’s survivors and families of those who perished on the vessel.

In a scathing May 24 letter to the company, obtained by Reuters under a Freedom of Information Act request, the Justice Department demanded Transocean exclude from its request expected liability claims by federal and state governments that could reach billions of dollars.

“It is simply unconscionable, in the circumstances of this case, that Transocean is attempting to use this same shield of liability (used in the Titanic case), potentially leaving thousands of people who have been damaged by your clients’ actions with no remedy,” wrote Tony West, assistant attorney general for the Justice Department’s civil division.

He said the Oil Pollution Act of 1990 — passed in the wake of the Exxon Valdez spill — and subsequent case law excluded oil spills from the 1851 Limitation of Liability Law.

“Given the foregoing, we ask that you agree to modify the court’s monition to the extent that it could be construed to cover the claims of the United States or the States,” he said.

TRANSOCEAN SAYS HAS CLARIFIED POSITION

Transocean’s lawyers filed a letter with the court the day after West’s letter and the company reiterated on Friday that did not intend to block claims under the 1990 law.

“We have clarified that to the ... court and to the Department of Justice,” the company said in a statement. Other claims that could be pursued include those by workers injured on the rig or by the families of those killed.

While the Coast Guard has designated Transocean as a responsible party under the 1990 oil spill law, a Transocean official told the U.S. Congress this week the company has only accepted responsibility for contamination from the drilling rig.

The April 20 explosion aboard the Transocean Deepwater Horizon rig killed 11 workers and injured 17 others. The well has been spewing oil and gas for weeks despite efforts by BP to cap it.

West also lambasted Transocean for moving forward with a $1 billion payout of dividends to shareholders, saying that it added “insult to injury.”

The company said earlier this week in a statement that the dividend had been proposed before the Deepwater Horizon accident and “will not impact the company’s ability to meet its legal obligations relating to the Deepwater Horizon accident.”

A Justice Department spokesman declined to comment on Transocean’s subsequent clarifications.

The Justice Department has already demanded that the owner of the well, BP Plc (BP.L), as well as those who helped drill it, Transocean and Halliburton (HAL.N), preserve documents related to the disaster ahead of a possible government investigation.

Legal experts have said they expect the Justice Department to launch a criminal probe soon.

Editing by David Alexander and Sandra Maler

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