"Oil"

Efficient Compensation of Class Members Suffering from the BP Oil Spill


By: Ashley Addo, Staff Member

On April20, 2010, our country experienced a devastating tragedy, the BP oil spill. This catastrophic event affected thousands of fishermen, business owners, real estate workers, property owners, shareholders, and more. The spill was a result of an explosion and fire at the Deepwater Horizon oil rig, which was located 130 miles southeast of New Orleans and approximately 50 miles from the Mississippi Delta.[1]The burning lasted for approximately two days before the oil rig tipped into the sea. The leak was finally capped on July 15, 2010, but the overwhelming damages remained.[2]Eleven platform workers were killed during the drilling process, and aquatic life was substantially affected. Consequently, these damages induced hundreds of class action lawsuits against BP and Transocean, the company that owned the oil rig.[3]

While the various classes assert different claims against BP and Transocean, one common claim exists amongst the class action complaints: BP was negligent in the design, maintenance, manufacture, and operation of the oil rig.[4]Accordingly, the plaintiffs in these classes desire recovery from the aforementioned defendants. The question is: with hundreds of class action suits pending against these companies, how quickly will these class members be compensated?

Rule 23of the Federal Rules of Civil Procedure governs the different ways in which a class can be certified.[5]One reason a class can be certified is if predominant issues preside amongst the class as a whole.[6]Once a class is certified, Rule 23(a)(5) permits the creation of subclasses amongst a larger class if needed.[7]In the recent Randleman v. Fidelity National Title Insurance Co. case, the court addressed a circuit split regarding bifurcation and the creation of subclasses in order to remedy a lack of predominance amongst a class.[8]The 4th, 5th, and 11th circuit’s state that a class should not be certified with subclasses if predominant issues do not exist amongst the class.[9]Conversely, the 2nd and 9th Circuits hold that subclasses are permissible, despite a lack of predominant issues amongst the class.[10]

If all of the circuits accepted the minority viewpoint towards class certification,the lawsuits against BP could be substantially expedited. There are hundreds of class action lawsuits pending against BP and Transocean and, although the classes are pleading distinct issues, the overarching commonality is BP’s negligence.[11]Several of these classes could be joined together, and multiple subclasses could be created amongst the class. For example, a class of BP shareholders,property owners, and real estate owners could be certified as one class, with multiple subclasses created amongst the class for the disparate claims.

In response to the oil spill, BP implemented many programs to avoid reoccurrence of the oil spill. Specifically, BP has acknowledged that they“ regret the damage caused to the environment and the livelihood of those in the communities affected” and that they are “putting in place measures to help ensure it does not happen again.”[12] While these strides are critical, BP’s ultimate goal should be compensation of the thousands of injured parties. The livelihood of these class members was radically altered by the oil spill; these individuals relied on the preservation of the Gulf of Mexico as a means of survival. BP has discussed its efforts in compensating individual claims,however, the Company has not publicly addressed how it will handle the hundreds of class action suits.[13]Consolidation of classes and the use of subclasses could reduce the amount of pleadings, hearings, discovery review, and trials that would accompany each suit. Additionally, this approach could reduce potential inconsistent judgments and appeals.

[1] Complaint at §2, Cajun Maid, LLC v. B.P., No.1:10-CV-176 HS0-JMR, (S.D.Miss. May 6, 2010).

[2]Id.

[3]Id.

[4]Id.

[5] fed. r.civ. 23.

[6] fed.r. civ. 23(b)(3).

[7] fed. r.civ. 23(a)(5).

[8]Randlemanv. Fidelty, 646 F.3d 347 (6th Cir. 2011).

[9]Id.at 356

[10] Id.

[11] Complaint, supra note 1, at §73

[12] Deepwater Horizon Accident, bp, http://www.bp.com/sectiongenericarticle800.do?categoryId=9036575&contentId=7067541

[13] Compensating the people and communitiesaffected, bp, http://www.bp.com/sectiongenericarticle800.do?categoryId=9036584&contentId=7067605

Is Bankruptcy an excuse for neglect?

By Ena Viteskic, Staff Member

Following the massive BP oil spill in mid-2010, uproar ensued among the political branches and communities throughout the United States. On one side, individuals were voicing their revulsion for BP while on the other side, individuals were angry at the government for insufficient regulation in the oil refinery business. Conservatives, who advocate the “hands off” approach to government, were contending that the government did not reasonably regulate the oil refineries. The question of what should be done dominated the American media and the hearts and minds of ordinary Americans. Oil companies in the past have raised several defenses as to why they should not clean up their own oil spills and messes. Some oil companies have even claimed that they are protected under bankruptcy law; therefore, negating their responsibility to perform any clean-ups.

On August 25, 2009, the United States Court of Appeals for the Seventh Circuit issued a decision that affected companies facing environmental clean-up responsibilities who file for bankruptcy protection. In United States v. Apex Oil, 579 F.3d 734 (7th Cir. 2009), the United States sought injunctive relief requiring Apex Oil Co. to stop a petroleum plume at an oil refinery owned by Apex. The main issue in this case was whether the government’s claim had been discharged in bankruptcy—the court answered in the negative.

United States v. Apex Oil Company: Bankruptcy Does Not Discharge RCRA Injunctive Claims

, Beveridge & Diamond, P.C., March 22, 2010, http://bdlaw.com/news-833.html. When the Apex disaster happened, over one million gallons of gasoline and other petroleum products from a plume beneath Hartford, Illinois were floating on the groundwater table and enmeshed in sub-surface soils. This caused severe consequences to humans and buildings. The petroleum fumes and thereby caused hundreds of odor complaints, health complaints, and even some fires.

Id

.

More recently, On October 4, 2010, the Supreme Court of the United States refused to hear the appeal from Apex Oil. Apex Oil Co. v. United States, 2010 U.S. LEXIS 6286 (US 2010). Apex still argued that its duty to clean up the site was discharged with its other debts during the bankruptcy proceedings.

Court won’t spare Apex from oil spill clean up

, WTOP Radio Network, October 4, 2010, http://www.wtop.com/?nid=858&sid=2069538. However, the Supreme Court simply did not side with Apex Oil Co.

The decision by the Supreme Court of the United States not to hear the appeal by Apex Oil Co. sends an important message to other oil companies—clean up your mess! Although it is only one small decision regarding a big problem, it is a step in the right direction. Regardless of what kind of defense or excuse an oil company may claim, it is clear that the Supreme Court will not tolerate any neglect or irresponsibility on behalf of these oil companies.

How Effective will the Proposed Plan to Facilitate Domestic Drilling for Offshore Oil Be?

By: Andrew Leung, Staff Member

Disclaimer: The following post reflects the views of the author and not necessarily that of KJEANRL.

Environmental preservationists and proponents of developmental interests have been engaged in an ongoing struggle to influence American policy to facilitate the adoption and spread of their respective agendas. Environmental preservationists often wish to proscribe or severely curtail any human activities with the potential to have a significant adverse impact on the environment. The environmentalist stance necessarily defaults to a position in opposition to intrusive, irreversible changes to our environment, such as the destructive harvesting of natural resources whose reserves take millions of years to regenerate.

Developmentalists, in the form of corporations peddling natural resources, are diametrically opposed to the environmentalists' stance. Their mentality to exploit natural resources as quickly as possible allows company coffers to be filled at the cost of environmental security. Each time a coal mine is opened or an oil well drilled the probability of toxic contamination rises greatly. Oil and coal magnates would argue that they serve an essential function to society, that they mobilize the world populace. While this is indisputably true, it is just another way for such companies to add to the pollution carelessly being released.

A recent plan to permit offshore prospecting and drilling for oil and natural gas announced by President Obama seems in direct contrast with an environmentalist agenda. The plan "would allow drilling along the Atlantic coastline, the eastern Gulf of Mexico and the north coast of Alaska." John M. Broder, Obama Oil Drilling Plan Draws Critics, New York Times, March 31, 2010, available athttp://www.nytimes.com/2010/04/01/science/earth/01energy.html?pagewanted=1.

While the President's proposal has enraged environmental interest groups, oil companies are pushing for more concessions. One would think that the 167 million acres of the Atlantic Ocean from which a moratorium on exploration has been lifted should suffice to appease oil companies. However, they push for more pristine environment to taint, specifically drilling rights to the pristine Bristol Bay in Alaska. It seems the oil companies have already decided the fate of the 130 million acres of Alaskan water to be made eligible for exploration and drilling.

One might argue that the entire oil debate is a matter of politics, as many environmentalists seem to be Democrats while Republicans draw support from coal and oil companies. However, this is not the case. In actuality, the dispute over permitting offshore drilling is a matter of numbers. President Obama concedes that Americans use approximately 20% of the world's oil supply while possessing only 2% of the world's reserves within its territorial limits. John M. Broder, Obama Oil Drilling Plan Draws Critics, New York Times, March 31, 2010, available athttp://www.nytimes.com/2010/04/01/science/earth/01energy.html?pagewanted=1. Even if the oil companies are permitted to run roughshod over environmental policy and harvest every drop of oil within the United States' jurisdiction – as seems to be their unstated goal – it would not be enough to satiate the American thirst.

Gregory A. Napier, “Got Gas? A Comment on Shell Petroleum, Inc. v. United States.” JNREL Vol. 19, No.2

Comment By: Gregory A. Napier, Former Staff Member; Comment originally appeared in JNREL Vol. 19, No. 2.


Abstract by: Stephanie Wurdock, Staff Member


In 2004 the United States of America faced skyrocketing prices at the gasoline pumps for the second time in decades. The country first dealt with such monolithic price hikes during the 1973 oil embargo which placed stringent restrictions on gasoline distribution and usage. President Carter's administration began to phase such controls out in 1979 which led to Congress's enactment of the "Crude Oil Windfall Profit Tax Act of 1980" (COWPTA or Act). One of the Act's main tools was a tax credit for the use of shale and tar sand oils as alternatives sources of energy. However, the definition of those substances eluded documentation and resulted in a trilogy of cases involving Shell Petroleum, Inc. ("Shell") and the United States. The most recent of which being Shell Petroleum, Inc. v. United States, 319 F.3d 1334 (Fed. Cir. 2003).


When Shell was denied tax credit for oil it produced in California during 1983 and 1984, it filed suit against the United States and was defeated both in trial and on appeal. Strike one. The company made a second attempt in 1989 and was again denied the credit. In its opinion, the Shell II court mandated that in order to qualify for the credit, a company must physically inject new technology into the oil well or otherwise use that technology to remove the highly viscous hydrocarbons from the well. Strike two. Unfazed by the court's ruling, Shell moved forward with its third suit, unsuccessfully arguing that the court's previous definitions of shale oil and tar sand oil were erroneous. Strike three. And Shell is out.


So who is right? The main question of these ground-breaking cases is whether or not Congress intended to exclude from tax credit eligibility technologies that already existed in 1980 at the time of the Act. The courts in the Shell series relied upon public policy and congressional intent to support their rulings that it did. However, a closer look at those same sources reveals that Congress may have intended to do no such thing. In fact, the Shell definitions not only seem to sacrifice any semblance of a scientific basis, but also undermine the overarching intent of Congress in creating tax incentives – to encourage domestic oil.


The impact of the Shell decisions is not a gentle one. It has numerous negative implications for the industry and the state of Alaska – the new target for large-scale drilling. The credit also creates opportunities for abuse in both direct and indirect ways. Finally, in setting such a high standard to receive the tax credit, these decisions fail to encourage or achieve domestic tar sand oil productions.


Perhaps, though the court set a couple things right by getting a lot of things wrong. Realizing that the tax credit offered potential for abuse and little else, the court preened its applicability to avoid its ineffectiveness thereby preventing such abuses.


U.S. Control Over Extraterritorial Water Pollution: The Interplay Between International and Domestic Law

This comment written by staff member Kathryn Martin appeared in JNREL Vol. 22 No.2. The abstract was written by staff member Meghan Jackson.


As a result of today's ever-growing global economy, lawmakers are faced with the challenge of effectively regulating the activities of international businesses and adequately enforcing international laws without overstepping their respective jurisdictional boundaries. In an effort to ensure compliance with the International Convention for the Prevention of Pollution from Ships and the Protocol of 1978 Relating to the International Convention for the Prevention of Pollution from Ships (collectively MARPOL), the United States established the Act to Prevent Pollution from Ships (the APPS). The APPS requires ships entering U.S. territories to keep accurate oil record books, which are subject to inspection by U.S. authorities upon entering a U.S. port.

In United States v. Ionia Mgmt. S.A., 498 F.Supp.2d 477 (D.Conn. 2007), the United States District Court for the District of Connecticut upheld the authority of the United States to impose criminal penalties for violating the APPS. The defendant argued that according to the "law of the flag" doctrine, the United States was without jurisdictional authority to impose such penalties as the defendant flew a Greek flag. However, the court determined that since the violations (presenting false oil record books) occurred in a U.S. port, the United States had the jurisdictional authority to prosecute them regardless of where the actual oil discharges took place.

Ionia Mgmt. is an important decision as it impacts both environmental law and international law. First, it illustrates a growing trend among U.S. courts to view U.S. law and international law as working with each other, not against each other. In addition, it sends the message that U.S. courts are serious about enforcing the APPS and preventing environmental harm.