HOUSTON (Dow Jones Newswires), Oct. 13, 2011
The U.S. government broke precedent by issuing oil-spill citations to contractors Halliburton and Transocean in the Deepwater Horizon tragedy, along with rig operator BP.
While now facing greater scrutiny from regulators, contractors in the oil service industry have considerable liability protection to fight
Previously, U.S. regulators have held the rig operator responsible for whatever happens under its watch. The operator hired contractors, who perform drilling, seismic or cementing operations and whose contracts protected them from any liability.
That was upended by the Deepwater Horizon blowout in April 2010, which resulted in 11 deaths, the biggest accidental marine oil spill in history, and tens of billions of dollars in costs. BP said blame also falls on Halliburton, which was in charge of cementing the failed well shut, and Transocean, the drilling contractor that owned the Deepwater Horizon rig. U.S. investigations have widely cast the blame among all three companies.
The citations, issued Wednesday, set a troubling precedent for holding contractors at least partially responsible for such accidents, and may increase the contractors' exposure to civil suits from anyone claiming damages from the spill, analysts said.
The contractors have vowed the fight the accusations vigorously. Halliburton said that it is fully protected against penalties and
However, if the courts determine that the government has the right to issue a citation to oil-service contractors, there's no contract that
Still the industry is expected to bulk up its contracts even more in the wake of the regulators' action, legal experts say, to get as much
"They will probably review their contracts," said Owen Anderson, a professor of law specializing in energy at the University of Oklahoma.
The contractors currently have considerable bargaining power to win such new concessions from rig operators on contract protection.
"When oil prices are high and there's lots of activity, service contractors can drive a very hard bargain," Anderson said.
Copyright (c) 2011 Dow Jones & Company, Inc.
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