Transocean is the owner of the Deepwater Horizon. Today, it took legal action in a Texas federal district court to limit its liability for the damages arising out of the well blowout. The rig was worth somewhere in the neighborhood of $650 million before it sunk to the bottom of the Gulf. Transocean claims it's now worth about $27 million.

Why does the value of the rig matter? Because the Limitation of Liability Act, under certain circumstances, caps a vessel owner's total liability at the value of the vessel at the conclusion of its voyage.

Whether Transocean will be successful remains to be seen, but it appears the case law is not on its side. The case of In re JAHRE SPRAY, 1996 U.S. Dist. LEXIS 11594 (D. N.J. 1996) arose from the discharge of oil into the Delaware River. Some of the oil came from the M/V Jahre Spray, leading the vessel owner to file a limitation of liability action. Several parties answered the complaint, and argued that the Limitation of Liability Act of 1851 should not apply in oil spill cases. The court agreed.

Numerous courts have favorably cited the In re JAHRE SPRAY action since it was decided in 1996. Here's hoping the Texas federal district court joins the crowd.


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