Oil

BP Doesn’t Want to Pay Full Price for Oil Spill Damages

By Bryan Walsh | @bryanrwalsh | February 17, 2011 | +

You may remember, back when the oil was still gushing into the Gulf of Mexico in June, that then BP-CEO Tony Hayward apologized for the oil spill and promised that the company would “make this right.” Actually, you don’t have to remember—they made a TV ad about it:

Wait, sorry, wrong one. Try this:

Yet as it turns out, when BP said they would “make this right,” apparently they actually mean that they would “make this right, as long as it doesn’t cost too much.” In a move first reported by the New York Times, BP is arguing that the settlement terms for oil spill victims being negotiated by Kenneth Feinberg from the $20 billion compensation fund are too generous, given the actual damage from the disaster. Feinberg has based his damage claims on the assumption that the recovery from the spill will be relatively quick, so that most claimants would get double their 2010 damages. He’s  been heavily criticized by many Gulf residents and politicians for understating the possible extent of the oil spill damage, but BP thinks he’s being too generous. In a detailed filing with the Gulf Coast Claims Facility, BP argues that the planned payments exceed the likely future damages because they overstate the potential for future losses:

There is, therefore, no credible support for adopting an artificially high future loss factor based purely on the inherent degree of uncertainty in predicting the future and on the mere
possibility that future harm might occur. That is particularly true where, as here, the Proposed GCCF Methodology provides claimants with choices that permit claimants to protect themselves against any such risk. Every claimant has the unilateral option to choose between a final offer and an interim offer. Accordingly, any claimants who believe their future losses are likely to be greater than those predicted by the GCCF’s future loss factor can choose to decline a final payment offer at this time and, instead, to receive interim payments as provided by OPA. Moreover, the proposed future loss factor is subject to revision if that is warranted by new data. The GCCF plans to review the future loss factor every four months in light of new data and to revise it if necessary.

BP suggests instead that damages should be closer to 25 to 50% of claimants’ 2010 losses—significantly smaller than Feinberg’s terms.

Ultimately, as the administrator of the independent fund, Feinberg has control over the claims—and having met the man, I don’t think he’ll take kindly to being publicly repudiated by BP. (We can put to rest those rumors that Feinberg is secretly working for the oil company.) But that’s not all. In a wonderful little coincidence of timing, BP’s comments came to light on the same day that the oil spill commission released its final staff report—which included the news that BP had been aware years before the accident that there were problems with Halliburton, the company that performed the faulty cementing job on the Deepwater Horizon. “The sad fact is that this was an entirely preventable disaster,” the commission’s chief counsel, Fred Bartlit, said in a statement. “Poor decisions by management were the real cause.”

At the same time, BP is trying to get off the hook for paying damages from that very spill. It’s certainly a different tune than BP was singing back in June, when the company agreed to the $20 billion fund, and BP Chairman Carl-Henric Svanberg famously said this:

We care about the small people. I hear comments sometimes that large oil companies or greedy companies that don’t care, but that is not the case at BP. We care about the small people

There’s a Yiddish legal term for all this: “chutzpah.”

Related Topics: BP, claims fund, Deepwater Horizon, Feinberg, Gulf of Mexico, oil spill, oil spill commission, Tony Hayward, Oil

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  • drsfg

    And who was part of Halliburton: ex Vice-President Dick Cheney.

    I’m starting to get numb from THIS CONTINUING BARRAGE OF SCANDAL.

    DrG

  • jlperkins2004

    Chutzpah is a writer who has done no research before writing his article. Chutzpah is attempting to make it appear that BP has no legitimate reason to question the amount of money demanded.

    Unlike almost any other large corporation I have heard of in the 70 plus years I have lived, BP has from the very start attempted to make right the damages from the oil spill. It has done so prior to a court order requiring it to do so. It brought thousands of workers to the Gulf area to provide aid to those injured, to seek to eradicate the oil on the shorelines and in the Gulf, to provide sources of income for those whose livelihood had been reduced or eliminated – it has paid out millions of dollars to victims, for wildlife rehabilitation, for wetlands restoration – Has it done enough? Probably not enough to repair all the damage – but it has done far more on its own initiative than any other large business during my lifetime – and it intends to do more – Yet it is understandable that it wishes reparations be for damages done and not a windfall for grasping hands. Since the spill all of the news has been negative – the good done by the company has gone almost totally unnoticed – I do not write because I am taking sides on the question of whether BP or Feinberg are right on the specific issue – I object to the cavalier attitude exhibited by Walsh and others like him.

    As to the findings of the Oil Spill commission, were you aware Mr. Walsh that those findings are very close to being the same as those arrived at by an internal investigation done at BP, an investigation done before the Oil Commission had completed its findings? Are you aware that the findings of the internal investigation were made available to the Oil Commission without pre-conditions? Are you aware that Mr. Bartlett has specifically stated that the Oil Commission agrees with 90% of the findings of that internal investigation? BP did not have to provide its findings to the Commission – yet it did – and the Oil Commission appears to have relied to a substantial degree on the internal investigation report – Oh, wait – for many that probably means the Commission really was in BP’s pocket, doesn’t it?

    The spill was tragic – but it was an accident people – it was due to human error and, according to the Commission, poor management – Get off of BP’s back and pray that all sides can come to a reasonable settlement but stop trying to make BP into a Monster – People run it, people make mistakes and sometimes mistakes have bad consequences – there is no other explanation – notably the commission also specifically found no evidence that any decisions made by BP engineers or rig personnel were made with the monetary cost in mind –

    Grow up Walsh!

  • http://blill0420.wordpress.com blill0420

    Do you work for BP? Have you been to the beaches? I live in Panama City Beach. I have firsthand seen oil, tar balls, lazy cleanup crews. All BP is doing is trying to get all of us to sign away our rights to sue as fast as possible. The ruined the gulf for generations to come. BP’s solution was to cover us in chemicals that cause cancer to sink the oil, out of site out of mind, I saw a dead dolphin on the sand yesterday when I went for a walk on the beach, know what i didnt see? People, tourists. I totally agree that this was an accident, but they have to fix it. The money cannot replace my home, the food i eat, the water I swim in or the disease I will get from the dispersant they used. Money wont make the millions of gallons of oil sitting on the bottom go away. Money wont make people come to our town and be tourists. Its not about the money, its abut the fact that BP messed up, bad. Now they dont want to fix it. You say they have spent enough,wrong buddy, not till it is fixed 100% have they spent enough.

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