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TheStreet Open House

Obama Launches BP Oil-Spill Lawsuit

(BP oil spill lawsuit story updated and corrected for fact that Lloyd's of London is not defendent)

NEW YORK (TheStreet) -- The Justice Department has launched what's expected to be a multi-year legal battle over the BP (BP) oil spill, filing a case with the federal district court in New Orleans on Wednesday.

The companies names in the Obama administration suit include BP, Macondo well minority owner Anadarko Petroleum (APC), Deepwater Horizon rig operator Transocean (RIG), and Japanese company Mitsui, and its affiliate MOEX, which owned a small stake in the well.

The Justice Department lawsuit is pursuing damages against all of the oil spill companies and asks the court to waive the Oil Pollution Act liability cap of $75 million.

Lloyd's of London, which had been originally reported as among the companies named in the suit, is not a defendent, as BP self-insures all of its assets. Transocean's insurer, QBE Underwriting Ltd./Lloyd's Syndicate 1036, was named as a defendant in the suit, though it is not subject a waiver of the oil spill liability cap. Lloyd's is a marketplace and individual syndicates write the insurance in the market.

All the oil spill stocks declined after the lawsuit was filed on Wednesday -- although the energy sector as a whole was down by more than 1% also.

BP and Transocean shares closed no lower than the energy sector decline of 1% on Wednesday, while Anadarko shares fell by a little more than 2%.

All of the oil spill companies have been on the comeback trail since the well was capped in July, and as the markets, and the price of crude oil, have rallied. BP and the other companies involved in the oil spill have gained between 40% and 50% in share price since the oil spill low water marks in market value.

The liability cap waiver request is likely more of an issue for Anadarko, Transocean and other companies named in the suit, as opposed to an issue for BP. BP stated earlier in the oil spill crisis that it would voluntarily agree to waive the $75 million cap. BP took a $32 billion charge against its second quarter earnings to cover oil spill liabilities.

Meanwhile, Anadarko has maintained all along that BP was grossly negligent in the oil spill, providing them with cover from any liabilities.

The Obama administration oil spill lawsuit excludes insurer Lloyd's from the group of companies that would be subject to an unlimited liability.

While the filing of the lawsuit and the request for the liability cap waiver is a headline event, an environmental lawyer with whom TheStreet spoke said the Justice Department suit shouldn't be a surprise to anyone following the oil spill.

"It's a step that has to be taken," said Nathan Richardson, a resident scholar at environmental resource and economics non-profit Resources for the Future (RFF). "The government spent lots of money cleaning up the spill and the law gives them the ability to recover the money and they need to do it formally," the environmental lawyer said, noting that BP had already agreed to not use the liability cap as a legal shield.

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