BP Opposes Using Spill Settlement to Pay Drilling Moratorium Losses

By and | September 11, 2013

BP Plc’s oil-spill claims administrator shouldn’t be allowed to extend a settlement to cover the claims of losses caused by the Obama administration’s deep-water drilling ban, the company told a court.

Lawyers for businesses claiming harm from the 2010 spill made a proposal last month to use damage formulas set out in BP’s settlement of economic-loss claims to compensate additional enterprises for losses stemming from the government’s post-spill suspension of deep-water drilling in the Gulf of Mexico.

The company opposed the idea in court papers filed today in U.S. District Court in New Orleans.

“Principles of substantive contract law preclude the claims administrator or the court from contradicting or re- writing the settlement, which requires the parties’ concurrence on how to handle these moratoria-related issues,” BP said. Such losses “were expressly excluded from the settlement.”

BP has consistently denied having any liability for billions of dollars in losses the Gulf Coast economy suffered from the drilling ban, even as the company accepted responsibility for losses caused directly by the spill.

“BP and the plaintiffs’ steering committee (PSC) explicitly agreed to exclude moratoria losses from the settlement agreement and to jointly develop guidance governing how to differentiate between covered losses and such excluded moratoria losses,” Geoff Morrell, a spokesman for the London- based company, said in an e-mailed statement.

‘Better Deal’

“The PSC now seems to think it can bypass the agreement and get a better deal by appealing directly to the claims administrator to implement a policy on moratoria losses,” Morrell said.

The lead attorneys for the PSC said the plaintiffs weren’t seeking to push BP to pay claims it hadn’t agreed to settle.

“We were simply asking the Claims Administrator if he could come up with a proposal for how to decipher what portion of a given claimant’s loss was moratorium related, and how much was not,” James Roy and Steve Herman said today in an e-mailed statement. The company’s filing “is just another effort by BP to delay the payment of compensation to deserving victims,” they said.

The oil company said in its court filing that the proposed compensation formulas for losses caused by the moratorium were created by individuals singled out in a recent ethics probe as having engaged in improper conduct.

Preliminary Investigation

Former Federal Bureau of Investigation director Louis Freeh completed a preliminary investigation into allegations of fraud and misconduct at the court-supervised claims settlement program last week. He cleared Patrick Juneau, the claims administrator, of wrongdoing while detailing ethical violations and potentially criminal conduct by several senior lawyers in the program.

U.S. District Judge Carl Barbier, who is overseeing thousands of spill-damages suits, asked BP to respond to the proposal to extend its settlement to moratorium claims. The extension was jointly proposed by lawyers leading the spill litigation and BP’s claims administrator after negotiations between BP and the lawyers broke down in mid-August, according to the filing.

BP has fought the claims administrator for months, saying Juneau’s misinterpretation of settlement terms is costing it billions of dollars in payments to businesses that weren’t directly harmed by the spill.

Costs Soar

As a result, the estimated cost of the spill-claims accord has swollen to at least $9.6 billion from $7.8 billion in mid- 2012, BP said in recent regulatory filings. The offshore oil spill was the worst in U.S. history.

Barbier has repeatedly refused to suspend claims payments while BP appeals Juneau’s interpretation and Freeh continues to investigate the program.

An appeals court in New Orleans heard arguments in the Juneau dispute in July. It hasn’t ruled.

The case is In Re Oil Spill by the Oil Rig Deepwater Horizon in the Gulf of Mexico on April 20, 2010, MDL-2179, U.S. District Court, Eastern District of Louisiana (New Orleans).

With assistance from William Barlow in New York. Editors: Charles Carter, Fred Strasser

Topics USA Claims Profit Loss Energy Oil Gas

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