Transocean to pay $1.4B for Gulf of Mexico spill

The U.S. Justice Department has reached a $1.4 billion settlement with the owner of the drilling rig that sank after an explosion killed 11 workers and spawned the massive oil spill in 2010 in the Gulf of Mexico.

Funds will go to environmental restoration and spill-prevention research

Transocean previously said it had reserved $2 billion for paying claims related to the Deepwater Horizon disaster. (Eric Gay/Associated Press)

The U.S. Justice Department reached a $1.4 billion settlement Thursday with Transocean Ltd., the owner of the drilling rig that sank after an explosion killed 11 workers and spawned the massive 2010 oil spill in the Gulf of Mexico.

The proposed settlement resolves the department's civil and criminal probes of Transocean's role in the Deepwater Horizon rig disaster. It requires the Switzerland-based company to pay $1 billion in civil penalties and $400 million in criminal penalties and plead guilty to a misdemeanor charge of violating the Clean Water Act, according to a court filing.

The deal, which is subject to a federal judge's approval, also calls for Transocean to implement a series of operational safety and emergency response improvements on its rigs.

"This resolution of criminal allegations and civil claims against Transocean brings us one significant step closer to justice for the human, environmental and economic devastation wrought by the Deepwater Horizon disaster," Attorney General Eric Holder said in a statement. 

Transocean said it believes the settlement is in the best interest of its shareholders and employees and eliminates "much of the uncertainty associated with the accident."

"This is a positive step forward, but it is also a time to reflect on the 11 men who lost their lives aboard the Deepwater Horizon," the company said in a statement. "Their families continue to be in the thoughts and prayers of all of us at Transocean."

Much of the $1.4 billion will fund environmental restoration projects and spill-prevention research and training.

Two years to pay

The company has two years to pay the $1 billion civil penalty. Congress approved legislation that dedicates 80 percent of the civil penalty for environmental and economic recovery projects in the Gulf states.

BP PLC, which leased the rig from Transocean, already has agreed to pay a record $4.5 billion in penalties and plead guilty to manslaughter and other criminal charges related to the spill. The deal with BP doesn't resolve the federal government's civil claims against the London-based oil company.

Transocean previously announced it had reserved $2 billion for paying claims related to the Deepwater Horizon disaster.

David Uhlmann, a University of Michigan law professor and former chief of the Justice Department's environmental crimes section, said the $1 billion civil penalty is a record amount for an environmental case. But he expressed surprise that Transocean isn't paying more in criminal penalties or facing manslaughter charges of its own.

"The Justice Department clearly views BP as the most culpable party in the criminal cases," Uhlmann said. "But Transocean's negligence also is responsible for the workers' deaths and the spill."

Transocean also said in a September regulatory filing that it had rejected settlement offers last year from BP and a group of attorneys for Gulf Coast residents and businesses who blame the spill for economic damages. Those claims are still pending.

Last month, U.S. District Judge Carl Barbier in New Orleans gave final approval to a class-action settlement agreement between BP and a team of private plaintiffs' attorneys. BP estimates it will pay about $7.8 billion to resolve these claims, but the settlement isn't capped.

BP reported profits of more than $25 billion in 2011, but for Transocean the year resulted in a loss of about $5.7 billion, some of it attributed to contingencies for litigation resulting from the sinking of the Deepwater Horizon.

Crew failed to act

A series of government investigations has spread out the blame for the nation's worst offshore oil spill among BP, Transocean and other partners on the project, including cementing contractor Halliburton. 

Halliburton hasn't settled with the Justice Department, BP or Transocean.

The Deepwater Horizon was drilling in water about one and a half kilometers deep about 80 kilometers southeast of the Louisiana coast when it exploded on the night of April 20, 2010.

The Justice Department says Transocean crew members on the rig, acting at the direction of BP supervisors, failed to fully investigate clear signs that the well was not secure and that oil and gas were flowing into the well.

The rig burned for about 36 hours before sinking.

As engineers made repeated attempts to halt the flow of oil from BP's burst well, millions of gallons of crude flowed out. Marshes, beaches and fishing grounds across the northern Gulf were fouled by the oil.

Two BP employees who worked as well-site leaders on the rig were indicted in November on manslaughter charges stemming from the 11 workers' deaths. The indictment accuses Robert Kaluza and Donald Vidrine of disregarding high pressure readings that should have indicated trouble before the blowout.

No criminal charges have been filed against individual Transocean employees.

One of Kaluza's attorneys, Shaun Clarke, said the Transocean deal is part of prosecutors' efforts to "sell a fiction" about the events leading up to the explosion.

"The companies want to get on with their business. The government wants a scapegoat. Bob and Don just want to get their day in court and have the truth be told," Clarke said.