Taylor Energy Liquidates All Assets to Settle Suit Over Giant Spill

settlement on longest running Gulf of Mexico oil spill
Oil sheen coming from the former Taylor site in the Gulf of Mexico (file image courtesy USCG)

Published Dec 22, 2021 7:58 PM by The Maritime Executive

The U.S. Department of Justice announced a proposed resolution to lawsuits related to the country’s longest-running oil spill, which began in 2004 and continues to leak oil to this day. The United States filed a civil complaint against Taylor Energy in the U.S. District Court in New Orleans in 2020 seeking removal costs, civil penalties, and natural resource damages under the Oil Pollution and Clean Water Acts arising from the discharge of oil from the company’s former oil production facility offshore in the Gulf of Mexico. The proposed settlement would resolve that case as well as several brought by Taylor Energy.

Under the proposed consent decree, Taylor Energy will transfer to the Department of the Interior (DOI) a $432 million trust fund dedicated to plugging the subsea oil wells, permanently decommissioning the facility, and remediating contaminated soil. The consent decree further requires Taylor Energy to pay over $43 million for civil penalties, removal costs, and natural resource damages (NRD). The State of Louisiana is a co-trustee for natural resources impacted by the spill and the NRD money is a joint recovery by the federal and state trustees.

“Offshore operators cannot allow oil to spill into our nation’s waters,” said Assistant Attorney General Todd Kim for the Justice Department’s Environment and Natural Resources Division. “If an oil spill occurs, the responsible party must cooperate with the government to timely address the problem and pay for the cleanup. Holding offshore operators to account is vital to protecting our environment and ensuring a level industry playing field.”

The spill began in 2004, when a Taylor Energy production platform located in the Gulf of Mexico about 10 miles off the coast of Louisiana collapsed during Hurricane Ivan, resulting in an ongoing oil discharge that continues to this day. Since April 2019, the vast majority of the leaking oil has been successfully captured by a containment system installed and operated by the U.S. Coast Guard through a contractor. 

“For the last three years, the Coast Guard, along with our federal partners, have committed to the challenging mission of containing and removing more than 800,000 gallons of oil discharging into the Gulf of Mexico,” said Captain Will Watson, Sector Commander of the Coast Guard New Orleans. “This settlement will provide significant financial resources for the Bureau of Safety and Environmental Enforcement, Bureau of Ocean Energy Management, National Oceanic and Atmospheric Administration (NOAA), and the Coast Guard to permanently secure the wells.”

Under the settlement, Taylor Energy will pay over $43 million — all the company’s available remaining assets — allocated as follows: $15 million as a civil penalty, $16.5 million for NRD, and over $12 million for Coast Guard removal costs. Taylor Energy also will transfer to DOI’s Bureau of Ocean and Energy Management (BOEM) $432 million currently held in a trust for decommissioning the Mississippi Canyon (MC)-20 site, and the company will be barred from interfering in any way with the Bureau of Safety and Environmental Enforcement’s (BSEE’s) decommissioning work. 

The settlement also requires the company to dismiss three lawsuits it filed against the United States. Between 2016 and 2020, Taylor Energy filed several lawsuits against the United States, including challenging the Coast Guard’s decision to install a spill containment system and appealing the Coast Guard’s denial of Taylor Energy’s $353 million spill-cost reimbursement claim submitted to the U.S. Oil Spill Liability Trust Fund. The settlement resolves the United States’ environmental enforcement claims against Taylor Energy and requires the company to drop its remaining lawsuits against the United States.

In addition, Taylor Energy may not interfere with the Coast Guard’s oil containment and removal actions. Taylor Energy will turn over to DOI and the Coast Guard all documents relating to the site to assist in the decommissioning and response efforts. When Taylor Energy liquidates after court approval of the settlement, it will make a final payment to the United States of the value of its remaining assets.