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On Wednesday, December 15, the U.S. Department of Justice (DOJ) filed its initial action in response to the Macondo-1 Well blowout on April 20 and the subsequent oil spill in the Gulf of Mexico. This marks the real beginning in a series of court challenges that will unfold over the next several years.

With this initial filing, the DOJ needed to do two things: 1) set the dimensions of the primary legal battle to follow; and 2) provide some focus, on a national level, to the 77 court actions and more than 200 damage suits lodged to date.

The government's move had certainly been anticipated – and it may not be the last.

The Lawsuit Answers Four Major Questions

First, we now know the defendants answering the charges, at least in this initial filing. (The DOJ can always add defendants and charges later, in amendments to the complaint, or file new suits altogether.)

Defendants are BP (NYSE:BP), as operating company for the project, hardly a surprise; minority partners Anadarko Petroleum Corp. (NYSE:APC) and Mitsubishi (OTCPK:MSBHY), through its untraded unit, MOEX Offshore 2007; rig owner Transocean Ltd. (NYSE:RIG); the asset holder of the Deepwater Horizon drilling rig, Swiss private Triton Asset Leasing; along with the insurer, QBE Underwriting of Lloyd's Syndicate 1036.

Second, we know the government will be pursuing both criminal and civil penalties. Remember, the explosion on the rig killed 11 people.

By deciding to pursue a criminal as well as a civil case, the DOJ will need to be careful that procedures in the civil action do not prejudice the criminal proceedings. But it also potentially increases the consequences for those found guilty, either under this complaint or later ones.

Third, the DOJ is asking for financial liability without limitation.

However, Lloyd's liability is capped by its Certificate of Financial Responsibility, which spells out the maximum coverage provided by the insurer. Also, the suit does not include Lloyd's, along with the other companies charged, with failure to exercise necessary precautions and lax monitoring of the drilling process.

And fourth, we now know that the financial penalties sought are going to be heavy.

The government is seeking $1,100 per barrel of oil leaked, a figure that rises to $4,300 if one or more of the defendants is found to have acted with gross negligence.

Word I am hearing is that the government will employ a figure of 4.9 to 5 million barrels as the total leak volume. That translates into a judgment – only under the EPA's Clean Water Act – of $5.5 billion (ordinary negligence) or $21.5 billion (gross negligence) against each company, without limiting liability under any other provision or other suit.

BP clearly will be the center of attention in this matter, as the most visible project participant, holder of the lease, and the company in the crosshairs of both government and public attention throughout the crisis and the cleanup. APC has flatly denied any liability, and RIG has claimed that the disaster is a result of BP's lack of adequate operational management.

What It Will Mean to Share Value

Let's outline how the announcement of the DOJ's lawsuit is affecting the investor's approach to the publicly traded companies involved.

The impact will obviously extend out as the case develops. But the initial results were only modest drops for BP and APC – both down less than 0.02% in trading Thursday.

RIG, on the other hand, is again under pressure. When the blowout first occurred, RIG was hit hardest. Yesterday, while the two publicly traded production companies were showing only modest losses, RIG declined by more than 3.5 percent.

Of interest, as well, are several companies not named in the DOJ filing.

Halliburton Co. (NYSE:HAL), whose cementing job came under fire in both the BP spill report and in material leaked from the spill commission, was not named. Neither was Cameron International Corp. (NYSE:CAM), the manufacturer of the blowout preventer (BOP) that was of major interest throughout the spill episode. Both HAL and CAM saw share values increase yesterday, by more than 1 percent.

These two companies could still be added onto this complaint or become the subjects of new ones. But the DOJ seems intent, at this point, on establishing who is liable for procedural and managerial shortcomings on the drilling rig itself.

This is only round one in a multi-year legal battle between the government and the companies. It is also virtually certain that, as the liability discussion becomes more protracted, BP, Transocean, and Andarko will end up embroiled in their own cross-suits.

BP is likely to remain on the defensive in these actions, because the overall tenor of the liability issue will have been structured by the DOJ complaint filed Wednesday.

And BP clearly remains the primary target of the government.

Disclosure: None

Source: Who's Under Fire in DOJ Gulf Oil Spill Lawsuit