Why It Matters

At one level, probably most of us don’t care whether BP or another company most of us had never heard of before, Anadarko, has to pay for the damages from the Gulf Oil spill. But there’s one dimension of this that matters quite a lot in terms of finding out what really happened.As we note in this article, BP owns 65% of the lease at the Deepwater Horizon drill. Anadarko owns 25% and another company, Mitsui, owns 10%. The percentages are different but the nature of the ownership is the same. So by definition, Anadarko owns 25% of the liability, however it ends up being judged. Unless — and this is the big key — Anadarko can show that BP exercised “gross negligence or willful misconduct” in running the rig. The key here is that BP was actually running the rig, notwithstanding not being the full owner. So if Anadarko can demonstrate that level of negligence they can diminish or do away with entirely their liability. And given that 25% of the liability will certainly run into multiple billions of dollars, you can bet that it’s going to be the litigation of all litigations because so much is at stake.

So we can probably look forward to a lengthy and intense litigation in which BP’s conduct is thoroughly scrutinized.

My error on this last point. Yes, it’ll get thoroughly scrutinized. But the two companies have an agreement to settle issues through arbitration where there’s no public record.