BP: Oil Disaster Settlement Process Proving Unfair

Earlier this month a federal court heard arguments from BP that the settlement process for claims following the Gulf of Mexico oil spill in 2010 has become unfair, allowing claims from unaffected parties to be processed. The expedited appeal was filed by BP in April and taken up by the Court of Appeal for the Fifth Circuit.

In what is sure to be a lengthy and costly claims process, the needs of those affected by the devastating spill must eventually be weighed against the costs to BP’s business.

The settlement process agreed to in May 2012 is designed to award settlements to businesses and individuals who were affected by the spill. However, BP now claims that the process is providing settlements that are both more than claimants deserve, and in some cases awards settlements to those completely unaffected by the disaster. Lawyers for BP argued before the court that the interpretation of the settlement process has been changed without BP’s knowledge. Although there is no cap on claims, the company had estimated $7.8 billion would go to plaintiffs. Under the current interpretation of the process, however, the company now expects the cost to rise significantly.

The interpretation under fire by BP is, allegedly, one approved by the administrator that does not take inflated income from variable profits into account, meaning that businesses who experience a burst of business in a short time continue to qualify for increased settlement payments. The company also pointed to certain businesses receiving settlements via the administrator despite not having been directly affected by the spill, in the company’s view.

Attorneys for the plaintiffs defended the inclusion of those who may not seem to be directly affected by the spill, claiming that the details were approved by BP and were the company’s preferred option. BP’s response was clear: their approval didn’t matter if the interpretation of the agreement remained flawed.

This all comes despite U.S. District Judge Carl Barbier’s order that BP not appeal the settlements, and his refusal to grant an emergency stop to the claims process.

An attorney for the administrator also appeared in court, defending the practice so far and reporting that BP’s claims of excessive payments only began in December 2012, while previous claims had been approved. He also, however, reiterated that Patrick Juneau, the administrator, remains impartial and outside of deal negotiations, and will follow any court decision.

For BP, it seems, it’s a matter of legality – and the current system trumps, in the company’s view, any previous acquiescence. For plaintiffs and the administrator, it may well seem that BP is back peddling after the true cost of the payments was brought into focus.

In what is sure to be a lengthy and costly claims process, the needs of those affected by the devastating spill must eventually be weighed against the costs to BP’s business. The decision, for now, rests with the courts.