BP Says Spill Settlement Terms Are Too Generous

New York Times: BP Says Spill Settlement Terms Are Too Generous

In the eight months since Kenneth R. Feinberg took over the $20 billion fund to compensate victims of the Gulf of Mexico oil spill, he has been attacked by many of those filing claims and by coastal state politicians who argue that the process is opaque, arbitrary and slow. Many of them have also argued that Mr. Feinberg’s recently published estimates of future damage to those in the gulf are too optimistic, and thus his offer of compensation in a final settlement is too low.

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Patrick Semansky/Associated Press
Kenneth R. Feinberg, the administrator of the BP oil spill fund, in January at a meeting in Grand Isle, La. He has been criticized by residents, and now by BP, for his handling of the fund.

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The oil giant is arguing that if anything, Mr. Feinberg’s proposed settlements are too generous. The planned payments far exceed the extent of likely future damages because they overstate the potential for future losses, the company insists in a strongly worded 24-page document that was posted on the fund’s Web site Thursday morning.

Basing its estimates on much of the same data Mr. Feinberg used, the company concluded that there was “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.”

Mr. Feinberg released the rules that will govern final settlements this month. In general, the program announced, settlements paid out by the fund would be double the 2010 losses for most of those filing claims, less any money previously paid by the fund.

That payout plan is based on estimates of environmental and economic recovery for the region commissioned by Mr. Feinberg that were published with the new rules: while the fund stated “prediction is not an exact science,” it suggested a gulf recovery by the end of 2012.

BP argues in its filing that the Feinberg estimate vastly overstates the likely damage, which it places in the range of just 25 percent to 50 percent of a claimants’ 2010 losses. The company noted that almost all of the closed fishing grounds had reopened, and economic recovery in tourism was well under way, with hotel and sales tax revenues in the fall of 2010 similar to those from the same period in the year before.

Mr. Feinberg, appointed last June by BP and approved by the Obama administration, has given out more than $3.5 billion so far in emergency money. So far, some 100,000 people have filed for a final settlement. An additional 90,000 have opted to take a quick-pay process that settles all claims with a payment of $5,000 to individuals and $25,000 to businesses. Final payments will begin after the two-week public comment period, which ended Wednesday.

The comments can be read at www.gulfcoastclaimsfacility.com, the fund’s Web site. Many are detailed critiques of the fund methodology, while others are raw cries for aid, like the one filed on Feb. 16 that reads, in its entirety: “We need help now! We have not been paid in 8 months. I have a mortgage, car payment, utilities, and a child. I’m close to losing my home and I pray that you figure out everything before I lose everything. We are people with real lives! This has been a horror for my family.”

The BP filing says that uncertainty about the persistence of damage to the gulf could be handled through mechanisms already in place. Those who believe that Mr. Feinberg’s methodology underestimates future losses can wait and see how well or poorly the gulf recovers over time, and can continue to file for quarterly reimbursement for documented losses. BP noted that Mr. Feinberg pledged to review the likelihood of future losses on a regular basis and the ability of those filing claims to receive interim payments that “amply protect claimants against any risk that the future losses factor may ultimately turn out to have underestimated the time to full recovery.”

This very public disagreement between BP and the administrator of its fund would seem to undercut the other major attack on Mr. Feinberg. Lawyers for those suing BP have alleged that Mr. Feinberg, while claiming to be independent of BP, is actually working in the oil company’s interests.

In a response this month to a complaint filed by those lawyers, Judge Carl J. Barbier of Federal District Court in New Orleans, who is overseeing the federal suits, wrote that Mr. Feinberg should not refer to himself as fully independent of BP, that he must make clear to potential litigants that he is “acting for and on behalf of BP in fulfilling its legal obligations.” Judge Barbier called the relationship between Mr. Feinberg and the company a kind of hybrid, with Mr. Feinberg neither an employee nor fully neutral. The company, he noted, does not control evaluation of individual claims, but appointed Mr. Feinberg and pays him a flat fee. The judge did not order any substantive change in the way Mr. Feinberg conducts the fund.

And neither, in its filing, does BP. The statement gives no indication that BP plans to intercede in the process it handed off to Mr. Feinberg, and BP is expected to abide by his decision, albeit grudgingly. The company wrote that it “respectfully requests” that Mr. Feinberg revise the rules “consistent with the comments set forth above.”

A leading critic of BP in Congress reacted angrily to the news of BP’s complaint. Representative Edward J. Markey, Democrat of Massachusetts, issued a statement on Thursday that “BP made errors in judgment that led to this oil spill, and now they’ve made another error in judgment by going after the very people their spill harmed,” he said. James P. Roy, liaison counsel to the lawyers suing BP, said, “For all its bloviating, BP has clearly learned nothing from this disaster, shamelessly trying to avoid accountability at all costs.”

When asked about BP’s statement, Mr. Feinberg said, “We read every submission and take them all under advisement.”