BP Trial Delayed, U.S.-Mexico Drilling Accord, EU Airline Cap & Trade Opposed, PPL Montana Decision (by Bob Percival)

Tomorrow was supposed to have been the start of of the trial of claims for compensation for the 2010 Gulf oil spill in a federal courtroom in New Orleans. However, late Sunday the trial of the more than 500 cases that have been consolidated before federal district judge Carl J. Barbier was postponed for one week to facilitate continuing settlement discussions. The defendants include BP, Transocean (owner of the Deepwater Horizon oil drilling platform), Halliburton (which poured the concrete that lined the well), and Cameron International (which made the blowout preventer). Plaintiffs include the U.S. government, the states of Louisiana, Alabama and Mississippi, and more than 100,000 private parties. BP estimates that the spill will cost it $37.2 billion, $26.6 billion of which it already has paid. It estimates that its legal fees and administrative costs incurred to operate the Gulf Claims Facility will total $1.73 billion. Ed Crooks, BP Braced for $1.73bn Legal Bill as Deepwater Horizon Trial Begins, Financial Times, Feb. 25-26, 2012, at 10. BP’s estimates apparently assume that it will not be found grossly negligent, which could subject it to an additional $14 billion in penalties.

Settlements covering significant parts of the claims are expected. Last week Moex Offshore, which owned a 10% interest in the Macondo well, but did not operate it, settled with the federal and state governments for $90 million, including $70 million in civil penalties. Last week I was interviewed about the upcoming trial by Reuters (http://www.chicagotribune.com/business/sns-rt-us-bp-trialtre81m1w5-20120223,0,4587470.story) and the BBC. On Friday I taped an interview with Bloomberg TV at their DC studios, which will air tomorrow morning. Tomorrow I am doing TV interviews about the trial on Canada’s Business News Network and Al Jazeera’s “Inside Story” program.

On February 21, the U.S. and Mexico agreed to coordinate their supervision of deepwater oil drilling in area of the Gulf of Mexico along the two nations’ maritime border. The Transboundary Agreement, signed in Los Cabos by U.S. Secretary of State Hillary Clinton and Mexican Foreign Minister Patricia Espinosa, provides for joint inspections by the two countries of oil rigs in the area and measures to coordinate compliance with both countries’ regulations. The agreement may help to address concerns voiced the week before by Mexican oil regulators that their National Hydrocarbon Commission lacks resources to provide effective oversight over deepwater drilling. (See February 19, 2012 blog post). The agreement also frees up 1.5 million previously-disputed acres of offshore territory to drilling by the U.S. John M. Broder & Clifford Krauss, U.S. in Accord With Mexico on Drilling, N.Y. Times, Feb. 21, 2012, at A4.

Last week representatives of 23 countries opposed to the EU’s cap-and-trade program for emissions of greenhouse gases (GHGs) from airlines met in Moscow for two days to coordinate their opposition. They agreed to consider eight measures to retaliate against the EU for applying its program to all flights to and from the EU that are not covered by other GHG controls. These measures include taxes on EU airlines and the suspension of talks to broaden EU aviation rights. The group retreated from proposals to reopen existing trade agreements with the EU. EU Climate Commissioner Connie Hedegaard chided the countries by stating, “Unfortunately, our question for Moscow meeting participants remains unanswered: what’s your concrete, constructive, alternative?” Pilita Clark & Catherine Belton, Russia Threatens to Limit EU Flights Over Siberia, Financial Times, Feb. 22, 2012.

On February 22 the U.S. Supreme Court unanimously reversed a decision by the Montana Supreme Court which had held that the State of Montana owns the riverbeds under multiple hydropower facilities on the upper Missouri, Madison, and Clark Fork rivers. Under the equal footing doctrine states acquire title to the beds of rivers that were navigable in fact at the time of statehood.  In a decision written by Justice Kennedy the Court found that the Montana court had erred in how it determined navigability for title purposes. The Montana court had held that the need to make portages did not necessarily defeat navigability. The U.S. Supreme Court ruled that evidence that portages were necessary is sufficient in most cases to defeat a finding of navigability for title purposes.  This decision is unlikely to have significant environmental consequences because it addresses only the test of navigability for title purposes and not the test of navigability for purposes of determining the reach of federal regulatory power under the Clean Water Act.  The Court rejected Montana’s argument that denying the State title to the riverbeds would undermine the public trust doctrine, noting that the latter “remains a matter of state law,” subject to federal regulatory power. Thus, states “retain residual power to determine the scope of the public trust over waters within their borders.”