78
N
ovember
2014
Global Marketplace
Oil and gas
With two-thirds of claims for
‘Deepwater Horizon’ damages
deemed unjustified, and $11bn
paid out, BP declares an end to
the compensation bonanza
“The biggest accidental oil spill the world has ever seen began
with the explosion, in 2010, of the Deepwater Horizon [oil rig]
in the Gulf of Mexico. Thousands of businesses suffered along
an oily arc from Texas to Florida. BP, the company at fault,
started paying them compensation right away.
“BP says it wanted to do the right thing and paying victims
early bought the company some goodwill at the time that it
was facing criminal charges and billions in federal fines. But
now, four years later, BP says it’s the victim of Gulf Coast
swindlers who have the oil giant over a barrel. BP says it is
being forced to pay hundreds of millions of dollars to people
who never saw oil anywhere but on TV.”
This, from the script of “Over A Barrel,” a CBS-TV segment
which aired 4 May, introduced an interview with Kenneth
Feinberg, theAmerican lawyer who oversaw the compensation
process for London-based BP and who concurs in BP’s view
of its victimisation. Mr Feinberg told CBS that he found only a
third of Deepwater Horizon claims to be justified, out of more
than a million examined.
In response to criticism that too many claims were being
denied – and to avoid decades of court battles and
uncertainty – BP had even agreed to a more generous
compensation programme. But by midsummer 2014 the
company had decided that enough is enough. In July, Geoff
Morell, BP’s senior vice-president, asserted outright that the
company was being exploited by businesses claiming losses
not linked to the spill.
In the op-ed piece “Justice, Louisiana Style” (8 July),
New
York Times
columnist Joe Nocera, who previously wrote the
“Talking Business” feature for that newspaper, came down
strongly on BP’s side. He located the point at which “BP began
to get hosed in Louisiana” at March 2012.
L
earning
from
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xxon
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obil
By then, Mr Nocera noted, BP had paid out around $6.3bn
to some 220,000 people and businesses in the Gulf Coast
region. Mr Feinberg had required recipients of the payouts
to pledge not to sue BP, which hoped to avoid the kind of
drawn-out litigation that engaged ExxonMobil after the
Exxon
Valdez
oil spill offshore Alaska in 1989. He also required that
the claims be for real, documented harm.
“It almost goes without saying that the Louisiana plaintiffs’
bar found such a scheme offensive,” wrote Mr Nocera.
Accordingly, a group of lawyers – the Plaintiffs’ Steering
Committee – persuaded their clients to skip the Feinberg
process and sue BP.
As a condition of a March 2012 settlement with BP, the
Steering Committee stipulated that Mr Feinberg – the
seasoned administrator of the 9/11 World Trade Center
victims compensation programme – be replaced by a local
lawyer, Patrick Juneau. BP also agreed to expand the
potential universe of applicants for compensation, thus
lowering the bar for claims of having suffered economic
damage from the oil spill. As described by Mr Feinberg in
the CBS interview, some of these would be comical if they
were not so venal.
BP estimated that the settlement would cost it an additional
$7.8bn.
‘I
s
that
really what we want
?’
Given Mr Juneau’s “unique” interpretation of such concepts
as revenue and earnings, wrote the
Times
’s Mr Nocera,
businesses unaffected by the BP disaster – and which
moreover had suffered no losses of any kind – were getting
millions of dollars. Some businesses that had seen rising
profits after the oil spill still got money. Lawyers seeking clients
downplayed the necessity of tying claims to the disaster.
To no avail, BP complained to Judge Carl Barbier, the
overseer of all BP litigation in New Orleans and himself a
former plaintiffs’ lawyer and president of the Louisiana Trial
Lawyers Association. Finally, on 7 July of this year, in a federal
appeals court in New Orleans, BP – facing the prospect of
paying tens of billions more to people with no justifiable claim
to Deepwater Horizon compensation – planted its foot.
›
Whatever the ultimate outcome of the Deepwater Horizon
case, the following excerpt, lightly edited, fromMr Nocera’s
forceful defence of BP is worth pondering:
“I realise that many people don’t much care that a multinational
corporation responsible for a huge oil spill is being fleeced in
Louisiana. But they should. BP’s response has been the
opposite of the unfeeling corporation. It waived the $75mn
liability cap that US law allows. It has spent, so far, $14bn
cleaning up the Gulf and another $11bn settling claims. It
has taken its medicine willingly. Yet its efforts to do right by
the Gulf region have only emboldened those who view it as a
cash machine.
“The next time a big company has an industrial accident,
its board of directors is likely to question whether it really
makes sense to ‘do the right thing’ the way BP has tried to.
Any board comparing BP’s response to the Gulf oil spill with
ExxonMobil’s response to the
Exxon Valdez
spill is going to
come to the obvious conclusion: ExxonMobil’s litigation-to-
the-death strategy – which ultimately cost it $4bn rather than
the potential $40bn liability BP is now facing – was the right
one.”
Mr Nocera ended with a question: “Is that really what we want
as a country?”
Of related interest . . .
›
One Louisiana entity which definitely has not suffered from
the Deepwater Horizon disaster is the state’s oil and gas
