BP Spill Compensation Revisited

Judge suspends payments to consider criteria for tracing claims directly to disaster


The blowout of BP's deep-water Macondo well off the coast of Louisiana in April 2010 killed 11 people and sent millions of barrels of oil spewing into the Gulf of Mexico. The accident sparked thousands of lawsuits against BP, as well as Transocean Ltd., owner of the Deepwater Horizon drilling rig that burned and sank, and Halliburton Co., which provided cement services for the well.

BP reached a settlement with most private plaintiffs in March 2012, just before a trial on liability for the incident was to begin. BP initially valued the economic-loss settlement at $7.8 billion. It now puts the cost at $9.2 billion, according to an Oct. 29 company regulatory filing.

The accord resolved economic-loss claims for multiple classes of businesses and property owners in Louisiana, Alabama and Mississippi and parts of Texas and Florida. It excluded claims of financial institutions, casinos, private plaintiffs in parts of Florida and Texas, and residents and businesses claiming harm from the Obama administration's moratorium on deepwater drilling prompted by the spill.

Barbier gave final approval to the settlement in Dec. 2012.

Under the settlement, the payments for claims are based on a numerical formula, primarily depending on distance from the spill, using sample periods before and after the event. Businesses that claim losses don't have to prove direct impact or a link to it, according to the claims administrator's interpretation of the settlement. They are assumed to have suffered because of the spill's general economic impact across the region, according to court filings.

The plaintiffs contend that BP agreed to this provision in its settlement negotiations, while the company says that it shouldn't pay for those not harmed.

The appeals court's order "again underscores that the implementation" of the settlement "has veered off course," Geoff Morrell, BP's spokesperson, said in an e-mail provided to the news agency. "If properly implemented by the district court, the Fifth Circuit's order will help return the settlement to its original, intended and lawful function--the compensation of claimants who sustained actual losses that are traceable to the Deepwater Horizon accident."

Morrell said the appellate order further supports BP's contention that "continued violation of the settlement agreement's clear terms" creates legal problems that "threaten to invalidate the entire settlement unless corrected."

Lawyers for spill victims have claimed in court filings that BP is trying to renegotiate a deal that is proving more costly than it intended. They contend BP is suffering from "buyer's remorse," said the report.

The appeal is BP Exploration & Production Inc. v. Deepwater Horizon Court-Supervised Settlement Program and Patrick Juneau in his official capacity, 13-30315, U.S. Court of Appeals for the Fifth Circuit (New Orleans). The lower court case is In re Oil Spill by the Oil Rig Deepwater Horizon in the Gulf of Mexico on April 20, 2010, 10-md-02179, U.S. District Court, Eastern District of Louisiana (New Orleans).