Sunday, April 22, 2012

BP Settles While Congress Dawdles

Two years ago, the vessel Deepwater Horizon exploded at British Petroleum’s Gulf of Mexico Macondo well, killing 11 oil workers and spilling over 200 million gallons of crude oil into the seafood rich waters of the Gulf. A National Commission on the BP Deepwater Horizon Oil Spill and Offshore Drilling was promptly appointed to investigate the disaster and recommend meaningful government corrective actions. One year ago that Commission issued its report and recommendations.

Last week the Commission issued a report card and progress report on federal government and industry response its report, and to the human, economic and environmental impacts of the spill, and the grades were not pretty. The Obama administration got a B for reorganizing and improving federal agency response to spills, strengthening environmental review of offshore drilling permit applications, and eliminating conflicts of interest in the regulation of offshore well drilling and operation. The petroleum industry got a C+ for creating two consortia to respond to and contain offshore oil spills.  

Congress got a D for lacking the ability or gumption to enact any legislation whatsoever in response to the disaster. Specifically, the Commission report card notes that Congress has done nothing at all in response to Commission recommendations that offshore oil and gas companies be required to bear the costs of federal oversight through fees imposed on leasing and permit applications, and that the $75 million liability cap on liability for oil spills be significantly increased.  This Congressional inaction is especially galling in light of three more significant offshore oil and gas rig leaks in the past ten months.

Remarks in the report on lack of Congressional response include the following: “Risks will only increase as drilling moves into deeper waters with harsher, less familiar environmental conditions.”
Meanwhile, the same day the disgusting two year report card came out, lawyers for BP and over 100,000 class action litigants petitioned U. S. District Judge Carl Barbier in New Orleans for approval of a $7.8 billion dollar settlement which would resolve claims arising out of the disaster. If approved, the settlement would be one of the largest class action settlements in the history of the federal courts.  The figure of $7.8 billion is the estimated cost to BP of the proposed agreement, but the settlement would not cap BP’s exposure at any specific overall amount. Under the proposal, oil cleanup workers would be eligible for up to $60,700.00 each, plus actual hospital and medical bills caused by exposure to the toxic crude. Shoreline residents exposed to the spilled crude or its fumes could get compensation up to $5,450.00 each, plus health care expenses incurred as a result of their exposure. In addition, BP would set up a fund of $105 million to establish medical expenses and health monitoring programs for the next five years.

Lawyers for the plaintiff class want an interim award of fees and expenses of $75 million, plus future fees and costs capped at an additional $535 million. BP agrees to pay $57 million to promote Gulf Coast tourism and an additional $5 million for publicity on how businesses and residents can participate in settlement funds.

The proposed settlement agreement does not include the $6.2 billion BP has already paid out on 221,000 claims submitted to the Gulf Coast Claims Facility which was established shortly after the spill. It also excluder claims by federal and state governments for environmental damages, claims by banks, casinos and racetracks for lost tourism revenues, and claims of competing oil industry businesses for losses caused by the federal moratorium on deep water drilling.

Some seafood businesses expect to opt out of the settlement and proceed individually against BP if the proposed class agreement is approved by Judge Barbier. They argue that the proposed settlement shortchanges businesses losing millions of dollars in seafood sales as a result of the oil pollution in the Gulf. Judge Barbier has not yet scheduled any date for a fairness hearing on the settlement proposal.

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