BP Objects to Oil Spill Price Tag Sought by States

BP has tallied up claims made by states and local governments on the U.S. Gulf Coast for economic and property damages from the Macondo oil spill, and come up with a figure of $34 billion, which it deems “substantially” overstated.

The company has struggled with political, financial and legal fallout ever since the April 2010 explosion, which caused the worst offshore oil spill in U.S. history.

The $34 billion total, provided for disclosure reasons with the company’s financial results on Tuesday, is based on claims made last month by Alabama, Mississippi and Florida as well as claims made by Louisiana and others from local governments, BP said.

Citing the Oil Pollution Act (OPA) underpinning the claims, the company said it considers the methods used to calculate them to be “seriously flawed, not supported by the legislation and to substantially overstate the claims.”

BP Finance Director Brian Gilvary explained that proving a loss of tax revenue by these governments would be especially difficult given that BP’s response to the 2010 spill led to 40,000 people being hired and increased taxes paid as a result.

“It would be a pretty hard case to prove that there was actually a loss of tax revenue,” Gilvary said.

Earlier on Tuesday, BP said that fourth-quarter profit fell one-fifth from a year ago.

An inability to settle state claims would be a complication for BP as it tries to avoid a related civil trial due to start on Feb. 25, with separate talks also under way with the federal government on a Clean Water Act liability ranging from $5 billion to $21 billion.

BP’s top in-house lawyer, Rupert Bondy, said the company had already provided a $42.2 billion assessment for all claims, and a total of $37 billion has already been committed through separate settlements. Bondy emphasized that BP would litigate the $34 billion in state and local claims.

Louisiana and Alabama have been prominent in their public demands for BP to pay its debt to the Gulf Coast.

Garret Graves, senior coastal adviser to Louisiana Governor Bobby Jindal, called the $34 billion number “extraordinary,” especially because it does not include state claims under the Clean Water Act or the Natural Resource Damage Assessment process of the OPA.

“Perhaps this helps BP to realize the size and scope of the problems they have caused the citizens of the Gulf,” Graves said, though he cited “bright spots” such as tourism and seafood safety agreements BP struck with the states, and BP’s “early restoration” agreement for the coast.

“They have continued to try to downplay the significance the oil spill has had on us,” he added. “BP hasn’t done itself any favors in gaining goodwill with anyone in the Gulf. With a few exceptions early on, they have been incredibly difficult to deal with and their credibility is subsurface.”

A spokeswoman for Alabama Attorney General Luther Strange did not have an immediate comment.

Transocean Ltd, owner of the rig destroyed in the Macondo disaster, said on Tuesday it was still open to negotiating any remaining claims against it beyond its $1.4 billion federal government settlement agreed a month ago. But the company is also prepared to go to court.

“While litigation is always unpredictable and unpleasant and uncertain, I can guarantee you we are ready to go to trial if we have to,” Chief Executive Steven Newman said at the Credit Suisse Energy Summit in Colorado.

A hearing on Tranoscean’s federal criminal settlement is set for Feb. 14 in New Orleans. BP’s criminal settlement, originally agreed in November, was approved last week.

The civil case, with a trial set for Feb. 25, is In re: Oil Spill by the Oil Rig “Deepwater Horizon” in the Gulf of Mexico, on April 20, 2010, No. 10-md-02179, in the U.S. District Court, Eastern District of Louisiana.