BP does not want to pay the full price for oil spill damages. You might remember back when the oil was still gushing into the Gulf of Mexico in June, then BP-CEO Tony "Make This Right" Hayward apologized for the oil spill and promised that the company would actually make it right. Need I remind you? They even made a TV spot about it: wait, sorry, wrong one. Try this one instead.
But as it turns out, when BP said they would "make this right," apparently they actually meant "make this right as long as it doesn't cost too much." According to the New York Times, BP is arguing that the settlement terms for oil spill victims negotiated by Kenneth Feinberg from the $20 billion compensation fund are too generous, given the actual damages from the disaster. Feinberg based his compensation claims on the assumption that the recovery from the spill would be relatively quick, so most applicants would receive double their 2010 losses. He has been strongly criticized by many Gulf residents and politicians for understating the possible extent of the oil spill damages, but BP thinks he's being too generous.
In an extensive filing with the Gulf Coast Claims Facility, BP argues that the planned payments exceed probable future damages because they overestimate the potential for future losses. Thus, there is no credible support for the assumption of an artificially high future loss factor based solely on the inherent uncertainties in predicting the future and the mere possibility that future damages may occur. This is especially true when, as here, the proposed methodology gives GCCF claimants the ability to protect themselves against such a risk. Each claimant has the unilateral option to choose between a final offer and an interim payment offer. Accordingly, all claimants who believe their future losses will likely be greater than the GCCF's predicted future loss factor can choose to reject a final payment offer at this time and instead opt for interim payments as provided under OPA. Moreover, the proposed future loss factor is subject to revision if new data justifies it. The GCCF plans to review the future loss factor every four months in light of new data and revise it if necessary.
BP instead proposes that losses should be closer to 25 to 50% of the claimants' 2010 losses, significantly less than Feinberg's terms.
Ultimately, as the administrator of the independent fund, Feinberg has control over the claims and dealing with the man; I don’t believe he will take kindly to being publicly rebuffed by BP. (We can put to rest these rumors that Feinberg is secretly working for the oil company.) But that’s not all. In a wonderful little bit of timing, BP comments came to light on the same day that Japan's nuclear safety panel released improvements, and the Oil Spill Commission released its final evaluation report — which contained the news that BP had known a year before the accident that there were problems with Halliburton, the company that conducted the faulty cementing job on the Deepwater Horizon.
"The sad fact is that this was a completely avoidable catastrophe," said the commission's chief counsel, Fred Bartlit, in a statement. "Bad management decisions were the real cause." At the same time, BP is trying to wriggle out of liability for damages from this very spill. It's certainly a different tune than BP sang back in June when the company agreed to the $20 billion fund, and BP chairman Carl-Henric Svanberg once said: We care about the little people. I sometimes hear comments about big oil companies or greedy corporations having no interest, but that's not the case with BP. We care about the little people."
There is a legal term in Yiddish for all this: "chutzpah."