Ruling Against BP Clears Way for Appeal of Spill Payouts

A U.S. judge’s ruling Friday against BP Plc means the company can proceed with its appeal of the way a court-appointed administrator apportions payments for claims related to the 2010 Gulf of Mexico oil spill, some of which BP called “absurd.”

Federal District Judge Carl Barbier said he found no reason to reverse his decision last month to uphold the payout process. This was despite BP’s protest at payouts including $21 million for a Louisiana rice mill 40 miles (64 km) from the coast which earned more revenue in 2010 than in any of the previous three years.

The hearing in New Orleans federal court revisited a part of BP’s liability laundry list that seemed settled last year when it agreed to terms on economic, property and medical compensation for individuals and businesses who filed a class action suit.

As of Friday, more than 160,000 claims have been submitted under the Deepwater Horizon Economic and Property Damages Settlement, according to the settlement website, and a total of $1.87 billion of payments had been made on 27,488 claims.

The source of dispute is about the calculation of business economic losses, for which $743 million has been paid out on 4,461 claims, according to the website.

BP initially estimated the overall settlement bill at $7.8 billion, but the total is uncapped, and dependent on decisions made by Patrick Juneau, a Louisiana lawyer who administers the payments under complex rules set out by the agreement.

“BP believes today’s proceedings and the related filings were necessary steps on the way to appellate review,” the company said in a statement on Friday, confirming it had filed a notice of appeal with the Fifth Circuit Court of Appeals – the next step in the federal judicial hierarchy.

BP said it would consider how to proceed based on Barbier’s latest ruling, but reiterated that Juneau’s interpretation of the settlement produced “unjustified windfall payments” for “non-existant, artifically calculated” losses.

Barbier told BP that it should take the issue up with the appeals court and then ask him to stay his original decision to uphold the payouts process on March 5.

Barbier is also presiding over a trial to determine blame and overall damages for the disaster at the Macondo well, and that trial enters its seventh week on Monday.

The accident killed 11 people and triggered the worst offshore oil spill in U.S. history. BP has estimated it will spend at least $42 billion to cover clean-up, fines and other liabilities, and has sold off assets to cover its costs.

In an affidavit this week, Juneau explained the workings of the claims administration, which started operating last June following the April 2012 settlement. Over the summer, his team of experts and accounting firms ran blind tests of real claims and tweaked the process after suggestions from BP, Juneau said.

Juneau added that he himself had raised the possibility of people being compensated even if their losses were not spill related, and BP’s lawyers responded to him that those people were entitled to full recovery.

After a fairness hearing in November, Barbier granted final approval of the process the following month. Juneau noted there was already an internal appeals process set out in the agreement for any party which disagreed with the program’s calculations, involving an independent panel of court-appointed neutrals.

On top of the plaintiffs’ claims, there are also civil claims under the Clean Water Act covered by the New Orleans trial that could add as much as $17.5 billion to the total bill. Billions more could be piled on in economic damage claims from Gulf Coast states, while a third set of claims, for natural resource damage, have not yet been filed.

The overall civil trial heard by Barbier is In re: Oil Spill by the Oil Rig “Deepwater Horizon” in the Gulf of Mexico, on April 20, 2010, U.S. District Court, Eastern District of Louisiana, No. 10-md-02179.