Natural gas fracking well in Louisiana, (c) 2013 Daniel Foster
Transocean: Legally our rig is a ship, so this mess isn't our problem
An article in The Wall Street Journal describes one of what will likely be many interesting gaps in how the US oversees offshore oil and gas drilling operations. While computer speeds may double roughly every 18 months, the legal rules for core aspects of the country's minerals extraction regimes seem to last centuries. Hardrock mining is governed by the Mining Law of 1872, allowing widespread rights to claim public land and pay the government virtually nothing for the minerals extracted. Percentage depletion tax subsidies were enacted almost a century ago, ostensibly to help stem feared materials shortages associated with World War I. Both remain in effect today.
Transocean is the owner and operator of the rig that sunk in the Gulf of Mexico, threatening a large swathe of the US coastline. They are looking to reduce their liability and gain control of the litigation venue by using the Limitation of Liability Act of 1851 for maritime vessels. They are seeking a court order to cap their total liability to the spill at $27 million.
Mark Long and Angel Gonzalez write in the article:
Under the Limitation of Liability Act of 1851, a vessel owner is liable only for the post-accident value of the vessel and cargo, so long as the owner can show he or she had no knowledge of negligence in the accident, maritime lawyers say. The law was created in the days before modern insurance and communications technology, to help U.S. shipping businesses compete against foreign ship owners who were protected against claims. Drilling rigs count as vessels under U.S. maritime law, and since "the remains of the…Deepwater Horizon now lay sunken" about a mile deep in the federal waters of the Gulf of Mexico, the value of the rig and its cargo comes to no more than $26,764,083, Transocean claims in the filing. Before the accident, the rig was worth around $650 million.
Transocean is of course also claiming it had no knowledge of, or negligence for, the accident and spill. The Journal article continues:
Maritime lawyers said the Act very rarely helps companies limit liability. It can, however, allow a defendant to gain some control over the legal process, since a judge could place a stay on all pending litigation, which would then have to be refiled in the federal court where the limitation of liability was sought. Vessel owners routinely seek protection under the act following accidents at sea, lawyers said.