Thursday, October 13, 2011

BP (BP) (HAL) (RIG) Receive Citations

BP (NYSE:BP), Halliburton (NYSE:HAL) and Transocean (NYSE:RIG) received citations from officials for the first time, confirming the companies will ultimately be fined for the oil spill in the Gulf of Mexico.

This isn't a surprise with BP, but under normal circumstances, contractors like Halliburton and Transocean would have avoided being liable in the accident, generating consternation in the industry.

The reasoning for giving the contractors citations was a reflection of "the severity of the incident," according to the Interior Department.

BP responded to the citations against Halliburton and Transocean, which should lead to fines, saying it "makes clear that contractors, like operators, are responsible for properly conducting their deepwater drilling activities and are accountable to the U.S. government and the American public for their conduct."

What is shaking the contractor industry is that it will ultimately result in other parties claiming to be damaged to sue them, including businesses and residents in the region.

Brian Petty, an executive vice president of government affairs at the International Association of Drilling Contractors, noted it will "give a green light for others to go after them—on the same basis and on the same level."

Ultimately this could easily backfire, as insurance companies will without a doubt raise their rates, and that will be passed down across the chain, resulting in higher fuel prices for everybody.

BP has already sued Cameron International (NYSE:CAM), Transocean and Halliburton over the incident.

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