Oil Spill: Kenneth Feinberg Sees a Quick Recovery for the Gulf—So Get Your Money Now

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Back in early June, when the oil was just beginning to wash across the marshlands of southern Louisiana, then-BP CEO Tony Hayward made one of his several unfortunate PR moves. He appeared in a TV ad where he announced, with a background of fishermen and seabirds, that BP will “make this right.” At the time it seemed so absurd—the oil was still gushing under water and environmentalists warned of a long-term catastrophe for fish and other wildlife—that even South Park would end up cutting a parody of Heyward’s ad (not long after Hayward himself was fired).

But is it possible that the Gulf of Mexico on its way to a full recovery sooner than anyone would have expected? That’s the argument being made by Kenneth Feinberg, the independent lawyer who is in charge of the Gulf Coast Claims Facility, which pays out damage claims related to the oil spill. In a report that he released today (download the full PDF here), Feinberg says that the Gulf of Mexico should recover relatively quickly from the damage of the spill, making what his experts roughly agree will be a 30% recovery by the end of 2011 and a 100% recovery by the end of 2012, though oyster beds may take longer to bounce back. “There will be gradual recovery over the next two years,” Feinberg told reporters on a conference call this morning.

The report is the product of months of work by Feinberg and his team as they formulated the framework for deciding how the final settlements for spill damages and payments for future losses will be calculated. Using the estimates and predictions of a handful of marine scientists and Gulf experts, the damages paid out by the $20 billion compensation fund would be double the first year losses of most people filing claims—minus any emergency or interim payments they might have already received. Those in the oyster industry will be able to make back more—four times their documented 2010 losses. There’s also an option of taking a quick and final payment—while renouncing the right for future payments of lawsuits—that amounts to $5,000 per individual and $25,000 for businesses, very few questions asked. (About 87,000 claimants have taken the quick payments so far.) Those who have doubts can wait for up to three years, the lifetime of the fund, before opting for a final. They can also choose to sue, or appeal their settlement to the Coast Guard—which so far hasn’t disagreed with Feinberg. “Nobody has to take this,” Feinberg said. “If you think I underestimated the final account, don’t take it. Document your losses every three months and at some point you might decide that now I’m ready for a final payment.”

You can bet that Feinberg’s framework will come under criticism from Gulf residents, many of whom feel he’s been too slow with emergency payments and too hard on claimants. Louisiana Governor Bobby Jindal—who hasn’t exactly been averse to using the spill to further is own career—has asked a federal judge to oversee communications between Feinberg and spill claimants, to ensure that they are treated fairly. Jindal is particularly opposed to the requirement that any claimant accepting a final payment has to waive the right for future lawsuits, although minimizing suits is one of the main aims of the compensation fund. Meanwhile Mississippi Attorney General Jim Hood—who has been a Feinberg critic since the compensation fund was established last August—filed a motion in federal court alleging that the fund’s activities violate state and federal law:

Hood, in the filing, also argues that the waiver required in Feinberg’s system is overly broad.

“No claim should be treated as a final claim, all claims should be treated and paid as ‘interim’ claims,” the filing reads.

That’s the argument right there. Can Feinberg and his experts know enough about the damage the oil spill has done to accurately gauge and compensate the people of the Gulf not just for the damage that has already been done, but the future cost? Feinberg—who was at first criticized but eventually lauded for his role running the 9/11 compensation fund—thinks he has. “You cannot get all the scientists and biologists and marine experts to agree on the future,” he said. “But I have canvassed the universe to come up with public and private estimates and anecdotal approaches to what people think the future holds.”

According to a New York Times piece on the report, much of that estimate comes from the work of Wes Tunnell, a marine biologist at Texas A&M’s Harte Research Institute, who has long studied oil spills. While oyster beds might not recover for as much as a decade, Tunnell expects that regional 2011 catches for blue crabs, shrimp, oysters and fin fishes should be in line with pre-spill number. Not every scientist is so sure, and there’s a lot of uncertainty over the fate of the extremely valuable bluefin tuna, which is believed to spawn in the Gulf. Veterans of the Exxon Valdez spill in Alaska warn that while fish populations seemed to bounce back in the immediate wake of the disaster, Pacific herring eventually crashed, and still haven’t recovered.

Ultimately, though, would-be spill claimants might have little choice but to accept Feinberg’s money if they can get it. The deck is stacked against almost any other option, and even lawyers who had been holding out against the claims process are now signaling that they will accept it. Gulf residents don’t have much choice, as Feinberg has been telling them since I first saw him present his case to the residents of Port Sulphur in southern Louisiana back in July:

That’s why traumatized Gulf residents might be smart to listen to Feinberg. “The people of Louisiana are pretty resilient,” he said at a town-hall meeting in Port Sulphur last month. “Get a check, and move on as best you can.” It’s not fair, but for the sake of their psyches — and their children’s — it might be the best advice they are going to get.