Transocean Ltd. RIG today announced that
it has reached an agreement with the U.S. Department of Justice to resolve
certain outstanding civil and potential criminal claims against the company
arising from the April 20, 2010, accident involving the Deepwater Horizon in
the Gulf of Mexico.
As part of this resolution, a Transocean subsidiary has agreed to plead guilty
to one misdemeanor violation of the Clean Water Act (CWA) for negligent
discharge of oil into the Gulf of Mexico and pay $1.4 billion in fines,
recoveries and penalties, excluding interest. This resolution will result in
the Department of Justice concluding its criminal investigation of Transocean
and settling its claims for civil penalties against the company relating to
the spill from BP's Macondo well. The company intends to satisfy its payment
obligations over a period of five years, using cash on hand and cash flow from
operations. At September 30, 2012, Transocean had accrued an estimated loss
contingency of $1.5 billion associated with claims made by the Department of
Justice.
These important agreements, which the company believes to be in the best
interest of its shareholders and employees, remove much of the uncertainty
associated with the accident. This is a positive step forward, but it is also
a time to reflect on the 11 men who lost their lives aboard the Deepwater
Horizon. Their families continue to be in the thoughts and prayers of all of
us at Transocean.
Terms of the Agreement
A Transocean subsidiary has agreed to plead guilty to a single misdemeanor
violation of the CWA for negligent discharge of oil into the Gulf of Mexico.
This violation pertains to well monitoring in connection with specific
operations during the temporary abandonment procedure on April 20, 2010.
Pursuant to the agreement, Transocean will pay a fine in the amount of $100
million within 60 days of this agreement receiving U.S. federal court
approval. The Transocean subsidiary will also be subject to a
statutory-maximum term of five years of probation.
Additionally, Transocean will pay $150 million to the National Academy of
Sciences (NAS) over a five-year period, and $150 million to the National Fish
and Wildlife Foundation (NFWF) over a three-year period. The funds paid to
the NAS will be for the purposes of oil spill prevention and response in the
Gulf of Mexico; funds paid to the NFWF will be directed to natural resource
restoration projects and coastal habitat restoration, including restoration of
the barrier islands off the coast of Louisiana and diversion projects on the
Mississippi and Atchafalaya Rivers.
To address the government's pending civil claims, Transocean has agreed to pay
$1 billion in CWA civil penalties over a period of three years. Additionally,
the company has agreed to implement certain measures to prevent a recurrence
of an uncontrolled discharge of hydrocarbons. Transocean has agreed to
consult with the United States in preparing a performance plan for these
improvement measures, which must be submitted for the government's approval
within 120 days of this agreement taking effect.
Any potential claims associated with the Natural Resources Damage Assessment
(NRDA) process are excluded from the agreement with the Department of Justice.
However, the district court previously held that Transocean is not liable
under the Oil Pollution Act for damages caused by subsurface discharge from
the Macondo well. Assuming that this ruling is upheld on appeal, Transocean's
NRDA liability would be limited to any such damages arising from the
above-surface discharge.
The Department of Justice has agreed that it will not pursue further
prosecution of Transocean Ltd. and certain of its subsidiaries for any conduct
regarding any matters under investigation by the Deepwater Horizon Task Force
relating to or arising out of the Macondo well blowout, explosion, spill or
response. Transocean has agreed to continue to operate with the Deepwater
Horizon Task Force in any ongoing investigation related to or arising from the
accident. The civil and criminal agreements are subject to court approval
and, in the case of the civil agreement, public notice and comment.
Timing of Payments
Pursuant to the agreements, Transocean will pay fines, penalties and
recoveries totaling $1.4 billion over a five-year period according to the
following schedule:
o 2013 - payments totaling $560 million
o 2014 - payments totaling $460 million
o 2015 - payments totaling $260 million
o 2016 - payments totaling $60 million
o 2017 - payments totaling $60 million
In addition, civil penalties will bear interest from the date that the consent
decree is lodged with the court. Neither settlement payments nor accrued
interest are deductible for tax purposes.
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