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

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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.”