BP Oil Spill Victims Worry Over Compensation ClaimsJul 16, 2010 | Parker Waichman LLP
Even as word spread that the BP oil spill has finally been capped, at least for now, many people along the Gulf Coast are worried that a fund set up to compensate them for damage to their incomes won’t cover all their losses. According to a report in The Wall Street Journal, many seafood-based businesses in the region are concerned that it will be difficult to estimate those losses because of uncertainty about how long it will take crab and shrimp populations to recover, or how quickly U.S. consumers will start buying Gulf seafood again.
The $20 billion compensation fund was announced with much fanfare earlier this summer by the Obama administration. The fund is being administered by Kenneth Feinberg, of the Feinberg Rozen law firm, who oversaw a similar fund for victims of the Sept. 11 terror attacks. The White House has maintained that the $20 billion doesn’t represent a ceiling of what BP will pay, and has said the oil company will replenish the fund when and if the money runs out.
According to the Journal, Feinberg has said he plans to hand out final, lump-sum compensation to businesses based on estimates of their total losses over coming years. Once the BP oil spill is finally over, he will be asking businesses to submit estimates of those losses.
But many business owners say that will be difficult. “How am I supposed to project my losses not knowing how all of the different species we carry will be affected in the next year to five years?” Wayne Hess, manager of American Seafood Inc., a processor and wholesaler in New Orleans, told the Journal. “The female crabs that are mating right now don’t drop their eggs until October or December. Those larvae may not make it.” Hess said his sales were down roughly 30% from their annual average of $5 million to $7 million.
“Are we going to have a crab season next year, and are there going to be fishermen who will fish next year?” Gary Bauer, president of Pontchartrain Blue Crab Inc., another Louisiana seafood wholesaler and processor asked. “How does BP reimburse for that? I spent 10 years of my life building a brand, and they destroyed it.” His sales of blue crab and shrimp have dropped to 20% of their normal $8 million-a-year pace, the Journal said.
Many in the Gulf are worried about the type of documentation they’ll be required to provide to prove their long-term losses. Feinberg has offered only a vague sketch of the level of proof he would find acceptable, the Journal said. But yesterday, during a trip to the region, Feinberg said that in the absence of records priests, mayors or even sheriffs could vouch for claims of local businesses. Final payments will be the result of negotiations between adjusters and applicants.
It may not be long before we see exactly how all of this will pan out. It did appear yesterday that an end to the spill could finally be in sight, when for the first time since the April 20 explosion aboard the Deepwater Horizon oil rig, BP shut off the flow of oil into the Gulf. Valves on a new containment cap installed earlier this week were shut off yesterday, temporarily stopping the gusher. BP is now conducting pressure tests of the device that are expected to last about 48 hours.
Perfect results from those tests could allow BP to completely stop the flow while it works to complete relief wells that will be used to permanently stop the spill. Good results – a more likely scenario – will enable BP to siphon all the oil from the well to ships on the surface in a controlled manner until the relief wells are completed. Those wells are expected to be finished between the end of July and mid-August.
While the start of the testing did raise some hope and excitement, BP and government officials were trying to temper those emotions with caution. If the tests show that pressure under the cap is low, that means oil coming up from the underground reservoir is escaping out of the pipe and seeping into underground rock formations, The Wall Street Journal said. If this happens, the oil could find its way up to the seabed and begin leaking into the Gulf. There are some doubts about the condition of the undersea well, so such a scenario is possible.
Since the Deepwater Horizon rig exploded April 20, the U.S. government estimates that between 90.4 and 178.6 million gallons of oil have spewed into the Gulf of Mexico.