Alabama says BP denies its claim over oil spill

Contract workers shovel oil from a beach impacted by the Deepwater Horizon oil spill in Gulf Shores, Alabama June 16, 2010.

ATLANTA (Reuters) - BP Plc has turned down Alabama's claim for $148 million in lost government revenue due to the worst oil spill in U.S. history, the state's attorney general, Troy King, said on Friday.

BP denied the claim because it said there was ongoing litigation but in fact the energy giant was "playing games" with Alabama and other states on the Gulf of Mexico coast, King said in an interview.

"They (BP) said they wouldn't discuss it (the claim) because there is litigation. They are playing games in my opinion. BP is taking advantage of the fact that states are in a budget crisis and they are doing a masterful job," King said.

BP later said it was evaluating the state's claim and was in discussion with King over the lawsuit.

"These overlapping discussions have added to the complexity of the matter and make immediate resolution unachievable at this time," said BP spokesman Justin Saia in an email. He said BP has made more than $350 million in payments and investments in Alabama since the start of the spill in April.

King's comments form part of a growing dispute over how states, individuals and businesses in Louisiana, Mississippi, Alabama and Florida should be compensated for losses suffered as a result of the spill.

BP has set up a $20 billion compensation fund administered by lawyer Kenneth Feinberg to handle claims but a large number of lawsuits also have been filed against the company.

Alabama's losses stem from diminished sales, lodging and fuel tax revenues as tourists avoided the state's coast this summer because of the spill that spewed millions of gallons of oil into the Gulf.

The well was capped in July and is due to be finally killed this weekend.

DISPUTE

Total losses will eventually amount to much more than $148 million and, when compared with calculations other coastal states made about their own losses, Alabama's claim was inadequate, said King.

King claimed damages in August from BP in a lawsuit that will be added to the multi-district litigation that has been consolidated in federal court in New Orleans, he said.

But King's decision over the suit sparked a clash with Alabama Governor Bob Riley who disputes the need for litigation at this point as a means to rectify the state's losses.

In claiming damages, "Governor Riley embarked on a process that was doomed to fail. I don't know why anybody is surprised that BP strung him along and refused to pay his claim," King said.

For his part, Riley blamed King's lawsuit for BP's decision on Thursday to turn down the claim and said that as a direct consequence he was forced to increase proration for the education budget by 2 percent.

Some $116 million of the $148 million claimed was earmarked for the state's Education Trust Fund in order to prevent the need for $113 million in spending cuts, but now those cuts would take place, Riley said.

"Troy King filed this lawsuit without consulting me or local officials on our coast or apparently anyone else but the lawyers who hope to reap millions of dollars off this disaster," Riley said in a statement on Friday.

"BP said it is not paying the state's initial claim because of his lawsuit," he said, adding that the company should have lived up to its obligation as the responsible party. A suit against BP was premature but should remain an option, he said.

(Reporting by Matthew Bigg, editing by Carol Bishopric)