November 10, 2013 6:08 pm

BP in fresh attempt to curb oil spill payouts

A clinic where the main doctor had his licence revoked, a mobile phone shop closed by a fire, and a car dealership that sold a discontinued marque are among businesses that successfully claimed compensation from BP for its 2010 oil spill in the Gulf of Mexico, according to court documents filed by the company late last week.

BP cited the cases as it made a fresh attempt to limit the cost of its compensation settlement for the Deepwater Horizon disaster, trying for the first time to challenge directly payments for losses not caused by the spill.

Until now, its arguments in court have centred on the method used to calculate the size of loss, rather than the issue of causation.

In its filing at the US District Court in New Orleans, BP said its lawyers had found compensation payments of $76m had been paid for claims where it was “clear” that the losses were not caused by the oil spill, and at least $546m more where any “reasonable observer” would conclude that the losses were not related to the spill.

Lawyers representing claimants said BP had already agreed to the tests used to decide whether losses were eligible for compensation, and could not now go back and argue against a position that it had previously defended in court.

Under the settlement that BP agreed with claimants’ lawyers last year, in an attempt to forestall a protracted court battle over damages, there is a two-stage process for determining compensation awards.

First, businesses must past an eligibility test, in effect a rough-and-ready assessment of whether they suffered losses related to the spill, based on their location, their industry, and sometimes the shape of their revenues after the spill.

If they pass that, then there are formulas for calculating the size of their compensation.

The company says that process has led to compensation awards for many businesses’ losses unrelated to the spill, including farms that decided not to grow a crop in 2010, companies that worked on restoration after hurricanes, which suffered a slowdown because no large storms hit land that year, and a mobile home park that was foreclosed by its creditors two weeks before the disaster.

As it became clear that the cost of the settlement was on course to soar far beyond the $7.8bn that BP originally predicted, the company originally focused only on the second stage of the process, challenging Patrick Juneau, the court-appointed claims administrator, over the way he has been calculating business losses.

However, as BP has fought this case through the courts, a three-judge panel of the Fifth Circuit appeals court in New Orleans delivered a ruling last month in which one judge said that if the settlement led to compensation going to businesses that have not suffered losses caused by the spill it would be “unlawful”. A second judge said the issue should be looked at again by the district court.

BP argues that ruling justifies its move to raise the issue of causation now.

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