U.S. Asks Court to Reject Transocean $27 Million Liability Cap

The U.S. government asked a federal judge to reject Transocean Ltd.’s bid to use a 159-year-old law to cap its liability at $27 million for environmental claims tied to the Deepwater Horizon oil spill.

The filing came the same day the Justice Department announced an investigation of whether any criminal or civil laws were violated in the BP Plc oil disaster in the Gulf of Mexico, the biggest U.S. spill on record. The government is reviewing whether there were violations of the Clean Water Act and the Oil Pollution Act of 1990.

The U.S. filed the motion yesterday in Houston federal court to “make clear” it’s entitled to pursue claims “for pollution response costs, environmental damages and other injuries stemming from the oil spill,’’ Assistant U.S. Attorney General Tony West wrote.

“It is simply unconscionable, in the circumstances of this case, that Transocean is attempting to use this” law to avoid paying states or the U.S. for damages caused by the rig explosion, West said in a May 24 letter to Transocean’s lawyers.

The spill began after an April 20 fire aboard the Deepwater Horizon rig, which London-based BP leased from Switzerland-based Transocean to drill its Macondo well in the Gulf.

1851 Law

The law cited by Transocean, the Limitation of Liability Act of 1851, is pre-empted by the Oil Pollution Act of 1990, the U.S. said. The claims of state governments are also “not subject to the limitation act,” West wrote.

The Limitation act is “wholly inapplicable to other causes of action that the U.S. may assert as a result of the oil spill and environmental damage,” according to the government filing.

Mike Geczi, a spokesman for Transocean, declined to comment on the U.S. motion. Transocean said in an earlier statement that it will cooperate with authorities in their investigation.

U.S. Attorney General Eric Holder announced the criminal probe at a news conference in New Orleans. President Barack Obama yesterday called the spill “the greatest environmental disaster of its kind in our history.”

“We will prosecute to the fullest extent of the law, anyone who has violated the law,” said Holder. “This disaster is nothing less than a tragedy.”

The Justice Department will ensure that taxpayer money will be repaid and that damage to the environment and wildlife will be reimbursed, Holder said. The government already has told “all relevant parties” to preserve documents that may “shed light on the facts surrounding this disaster,” he said.

BP will cooperate with the Justice Department, said Jon Pack, a company spokesman, in an interview.

The case is In Re the Complaint and Petition of Triton Asset Leasing GmbH, Transocean Holdings LLC, 10-01721, U.S. District Court for the Southern District of Texas (Houston).