COSCO and MSC Agree to Pay $96.5M to Settle Oil Spill Lawsuit

California pipeline lawsuit settlement
Owners, charters, and operators of two containerships accused of damaging a California pipeline have agreed to pay nearly $150 million in settlements (USCG photo)

Published Mar 1, 2023 3:07 PM by The Maritime Executive

The shipping companies that owned, chartered, and operated two containerships that were believed to have contributed to the October 2021 oil spill off Southern California have agreed to pay the pipeline operator $95.6 million to settle a lawsuit that was due to go to trial in April 2023. The settlement comes after a previous agreement to pay an additional $45 million to compensate fishermen, residents, and local businesses in Orange Country, California that were damaged by the release of 25,000 gallons of oil. A separate non-financial settlement agreement has also been reached with the Marine Exchange of Southern California.

Amplify Energy Corp. operators of the offshore oil pipeline that leaked had sued the owners and operators of the MSC Danit (165,500 dwt) and the Beijing (107,500 dwt) containerships alleging that the vessels failed to take proper precautions during a winter storm in January 2021 causing them to drag their anchors damaging the subsea pipeline. While many ships elected to head out to sea to ride out the winter storm, these two boxships along with others remained in the anchorage off the San Pedro ports. Amplify Energy charged that the ships were anchored in a restricted area and failed to notify the authorities after they dragged their anchors across the pipeline.

The suit also named the Marine Exchange for its role in overseeing the movement of containerships into and out of the anchorage and ports. The pipeline operator cited the lack of notification saying if it had been advised of the incident it would have inspected the pipeline months before the leak. When the pipeline was inspected after the leak it was found to have been displaced and the covering was cracked which the US Coast Guard has theorized contributed to the leak.

Despite its agreement to enter into the settlement, MSC nonetheless maintains that the responsibility for the October 2021 oil spill lies with Amplify. MSC defends the navigation of the MSC Danit saying the ship acted in a reasonable and prudent manner and kept the authorities informed during the storm. MSC contended that its “investigation has revealed that the pipeline did not comply with its original permit to be built sufficiently away from the federal anchorage zone in which the MSC Danit and other ships were anchored, and that the negligent conduct of Amplify Energy including its repeated failure to take reasonable preventative steps to better protect its pipeline and detect latent damage was the true cause of the oil spill.”

The settlement announced today is with the two containerships, their operators MSC and COSCO, and the registered owners of the vessel which were listed as Capetanissa Maritime Corp., and Dordellas Finance Corp., along with their affiliates. The Marine Exchange has also agreed to non-monetary terms in this settlement. The resolution includes subrogation claims by Amplify’s property damage and loss of production insurers. Amplify said it will ultimately receive a net payment of approximately $85 million. Investors welcomed the news driving the price of the company’s stock up 18 percent in mid-day trading.

According to Amplify, the parties are working to finalize the settlement agreement documentation, which will resolve Amplify’s affirmative claims related to the 2021 Southern California Pipeline Incident. As part of the settlement, after payment is made, Amplify will dismiss all of its legal claims against those parties. There, however, are remaining claims from Amplify's insurance companies filed against MSC and the other shipping companies which are not resolved by this settlement.

“The resolution of Amplify’s claims against the vessels and their affiliated entities concludes our involvement in the litigation related to the 2021 pipeline incident,” said Martyn Willsher, Amplify’s President and Chief Executive Officer. “We are eager to move forward and turn the page on this unfortunate and preventable event and to dedicate all of our attention to operations at Beta, our business as a whole and the strategic direction of the company.”

Amplify previously had also agreed to pay $50 million to the residents and businesses impacted by the 2021 oil spill. The company also pleaded no contest to state environmental charges and paid $4.9 million in fines and penalties and also agreed to pay nearly $13 million as part of a guilty plea to federal environmental charges. Amplify agreed to improve its monitoring of the pipelines and improve training after allegations that the company was slow to take responsibility for the oil leak and shut down the damaged pipeline.