BP Balks at Extending Spill Settlement to Moratorium Losses

BP Plc’s oil-spill claims administrator shouldn’t extend a company settlement to cover claims of business losses caused by the Obama administration’s deep-water drilling ban, BP told a court.

Lawyers for victims claiming harm from the 2010 spill last month proposed using damage formulas set out in BP’s settlement of economic-loss claims to compensate additional businesses for losses caused by the government’s suspension of deep-water drilling in the Gulf of Mexico after the spill.

The company opposed the idea in court papers filed today in U.S. District Court in New Orleans.

“Principles of substantive contract law preclude the claims administrator or the court from contradicting or re- writing the settlement, which requires the parties concurrence on how to handle these moratoria-related issues,” BP said. Such losses “were expressly excluded from the settlement.”

BP has consistently denied it has liability for billions of dollars in losses the Gulf Coast economy suffered as a result of the drilling ban, even as the company accepted responsibility for losses directly caused by the spill.

The London-based oil company said the proposed moratorium- loss compensation formulas were created by individuals singled out in a recent ethics probe for improper conduct.

Former FBI director Louis Freeh completed a preliminary investigation into allegations of fraud and misconduct at the court-supervised claims settlement program last week.

That probe cleared Patrick Juneau, the claims administrator, of wrongdoing while detailing ethical violations and potentially criminal conduct by several senior lawyers in the program.

“The heavy involvement” of parties that came “under heavy criticism and a serious cloud as a result” of Freeh’s probe render their suggestions for compensation suspect, BP said in the filing.

U.S. District Judge Carl Barbier, who is overseeing thousands of spill-damages suits, asked BP to respond to the proposal to extend its settlement to moratorium claims. The extension was jointly proposed by lawyers leading the spill litigation and BP’s claims administrator, after negotiations between BP and the lawyers broke down in mid-August, according to the filing.

BP for months has fought the claims administrator, saying Juneau’s misinterpretation of settlement terms is costing it billions of dollars in payments to businesses that weren’t directly harmed by the spill.

As a result, the estimated cost of the spill-claims accord has swollen from $7.8 billion in mid-2012 to at least $9.6 billion, BP said in recent regulatory filings. The offshore oil spill was the worst in U.S. history.

Barbier has repeatedly refused to suspend claims payments while BP appeals Juneau’s interpretation and Freeh continues to investigate the program. An appeals court in New Orleans heard arguments in the Juneau dispute in July. It hasn’t ruled.

The case is In Re Oil Spill by the Oil Rig Deepwater Horizon in the Gulf of Mexico on April 20, 2010, MDL-2179, U.S. District Court, Eastern District of Louisiana (New Orleans).

(With assistance from William Barlow in New York. Editors: Charles Carter, Glenn Holdcraft)