* Plaintiffs say BP "co-authored" terms
* BP gives examples of "absurd" payouts
* Says they could cost it billions more
By Andrew Callus
March 15 BP launched its promised appeal
against "fictitious" and "absurd" oil spill compensation payouts
on Friday and asked a judge to temporarily halt those made on a
so-called business economic loss basis.
In a New Orleans court filing, BP gave examples of
businesses in industries far from the spill and unconnected with
the coastline that enjoyed strengthened earnings in the spill
year of 2010 and yet had received millions in spill
The British oil and gas group, which has already sold a
susbtantial part of its business to pay reparations and fines
for the disaster, said it could be "irreparably harmed" by the
payouts without relief from the court, because they could cost
it "billions" more than it budgeted for when it agreed to a
settlement in April 2012.
BP was appealing a March 5 ruling, which upheld the way the
compensation was being paid to business claimants wanting
The ruling, by the same U.S. District Judge Carl Barbier who
presides over BP's ongoing trial on separate civil charges,
reopened a part of the saga that appeared to have been settled
almost a year ago when BP agreed terms on economic, property and
medical compensation for more than 100,000 individuals and
businesses who had filed a class action suit.
At the time of the settlement, BP estimated the bill would
be $7.8 billion - already making it one of the biggest
settlements of its kind in U.S. history.
The actual amount is uncapped, and dependent on decisions
made by Patrick Juneau, a lawyer from Louisiana who administers
the payments under a complex set of rules set out by the
As the payments started to flow out, BP realized that the
funds it had set aside would be insufficient. At first, it added
more, reaching $8.5 billion by the end of 2012, while
complaining that the payments to businesses were too generous
and the terms of the settlement were being misinterpreted.
On March 5, Judge Barbier upheld Juneau's methods.
Two days later, BP said it would appeal, and it reduced the
sum earmarked for payments back to $7.7 billion to underline its
"The BEL (Business Economic Losses) policy decisions rewrite
the agreement's express terms, and contradict its purpose, plain
text, and underlying principles by authorizing compensation
awards for claimants seeking to recover for non-existent
'losses.'" BP's Friday filing said.
"BP did not agree to pay what is already hundreds of
millions of dollars, and potentially billions, to claimants with
'losses' that do not exist in reality, but result solely from
the claims administrator's rewriting of the agreement."
The April 2010 spill happened when the Macondo well ruptured
and the Deepwater Horizon rig that was working on it exploded
and sank. The accident killed 11 men and spouted 4 million
barrels of oil into the Gulf of Mexico in the United States'
worst offshore oil spill.
In its filing, among the examples BP offered of "absurd"
claims, the British company referred to a $21 million payment
made to a rice mill in Louisiana situated some 40 miles (64.4
kms) from the coast that earned more revenue than in spill year
of 2010 than in 2007, 2008, or 2009.
It also cited a $9.7 million recompense for a highway,
street and bridge construction company in northern Alabama,
almost 200 miles (322 kms) from the Gulf, and which does no
business in the region, and for which 2010 was its best year on
BP also referred to a digital printing business and a law
firm that had been compensated despite strong profits.
All were unnamed.
Lawyers for the Plaintiff Steering Committee (PSC), with
which BP agreed the settlement, and which is a plaintiff in the
ongoing trial along with the Department of Justice, said BP had
no case for appeal.
"This court has already affirmed Mr. Juneau's independent
interpretation of the settlement agreement..., terms which were
negotiated, co-authored and expressly agreed to by BP," said
co-lead counsels Steve Herman and Jim Roy.
"Simply put, BP undervalued the settlement and
underestimated the number of people and businesses that qualify
under the objective formulas that BP agreed to."
Yet Internet advertisements from lawyers boast of the ease
with which payments far in excess of actual losses can be
One describes the experience of a Florida bicycle retailer
it represented. The shop enjoyed an increase in spill year
revenue to $2.5 million from $1.9 million in 2009, and yet
managed to win a payout of "almost one million dollars," the
Another explains how under one of the tests involved,
claimants can demonstrate a loss by choosing to compare "any
consecutive three months from 2010" with "a large combination of
months going back to January 2007."
BP's appeal covers just one area of a raft of costs and
potential costs it faces as the third anniversary of the spill
approaches on April 20.
Its accounting provisions for the spill total around $42
billion - equivalent to about 30 percent of its stock market
value. Almost matching that it has sold assets worth $38 billion
to finance compensation, clean-ups and fines, and it has paid,
or committed to pay, $37 billion. The actions have sliced $5
billion a year, or 14 percent, off its cash flow - a basic
measure of its ability to make money.
Some $4 billion in criminal claims - which are capped - have
been settled, and are included in the above amounts, but civil
claims under the Clean Water Act covered by the trial that began
in February could add another $17.5 billion.
Billions more could be piled on in economic damage claims
from Gulf Coast states. A third set of claims, for natural
resource damage, have yet to be quantified.