The United States and BP lodged their proposed settlement of the remaining claims by the US in connection with the Deepwater Horizon explosion and spill with the US District Court today. Comments to the Justice Department are due by Friday, December 4, 2015. The details of the proposed settlement, which includes the largest Clean Water Act penalty in US history, had been earlier announced in the press, and are summarized on the Proposed Consent Decree Fact Sheet.

One aspect of the Deepwater Horizon litigation has not been the subject of any press. The penalty claims under the CWA were brought not only against BP and Transocean, which operated the Deepwater Horizon platform, but also against two minority owners of the BP lease, MOEX (10%) and Anadarko Petroleum (25%). Prior to Deepwater Horizon, naming non-operating owners in oil spill situations was almost unprecedented. The only other occasion that had occurred was with respect to an oil pipeline explosion in the Northwest, where both Shell Oil, an investor, and the pipeline operator had entered consent decrees, apparently because the operator had limited funds. In the Deepwater Horizon litigation, MOEX settled its CWA liability early on for approximately $90MM, at that point the largest CWA penalty settlement. After that, Transocean settled for approximately $1B. Anadarko and BP did not settle prior to the completion of the CWA penalty phase of the multi-phase trial in the district court.

Now while BP has settled its CWA penalty liability before the district court ruled, Anadarko has not, and is awaiting a decision by the district court. The US is seeking a penalty somewhere between the $1B settlement with Transocean and the $5B settlement with BP. The outcome of the trial should be very instructive, both about the risks for both sides in litigating rather than settling CWA penalty claims, and, assuming the US continues to target non-operating owners, the risks taken on by passive investors in oilfield ventures.