BP comes under fire for its handling of oil spill compensation

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An exhausted oil-covered brown pelican sits in a pool of oil along Queen Bess Island Pelican Rookery, 3 miles (4.8 km) northeast of Grand Isle, Louisiana in this June 5, 2010 file photo. BP Plc has filed a lawsuit against Halliburton, the company that cemented the blown-out well which caused the Gulf of Mexico oil spill, on April 21, 2011 after claiming $40 billion from rig owner Transocean. BP said Halliburton concealed critical information which could have prevented the disaster. Birds from the rookery were affected by BP's Gulf of Mexico oil spill. Picture taken June 5, 2010. Photo - Sean Gardner/Reuters

Since the environmental catastrophe in the Gulf of Mexico last year, British Petroleum (BP) Plc paid more than $5 billion in compensation to the 204,434 claimants to the victims of the Deepwater Horizon oil spill.

The well that was owned by BP exploded in April last year and was plugged only after 3 months with hundreds of thousands of barrels of crude oil gushing into the sea.

The Gulf Coast Claims Facility has received more than 947,000 claims from 50 states and 36 nations, according to a summary released today by Kenneth Feinberg, the claims administrator. The facility draws on a $20 billion fund that has been set aside by BP after the oil spill. The fund also pays for clean-up costs and restoration projects through payments provided to local governments. So far, it has withdrawn $6.7 billion.

Overall, weve largely succeeded in getting money out to eligible claimants, said the administrator. Feinbergs report was released to mark the first anniversary of accepting applications for compensation.

Around 125,000 individuals and businesses seeking payment have been denied because they didnt have sufficient evidence indicating that they incurred losses due to the spill, Feinberg added.

COUNTER CLAIMS

Feinberg Rozen LLP receives $1.25 million a month from BP to run the facility. The firm handles complaints from Gulf Coast residents and policymakers who said payments have come too slowly and in smaller amounts than sought.

The only success Mr. Feinberg has had is in coercing desperate victims of the spill to have to accept whatever was offered,said, MississippiAttorney General Jim Hood. It looks like he did a good job for BP, not for Mississippians, the unhappy state servant added. Out of the money obtained from BP, $5,421 was paid to state businesses and $5,297 to individuals.

Many residents in the coastal communities had to wait for months before they received their compensation. Tony Kennon, mayor of Orange Beach, Alabama said the way claims were being processed was a mix bag for the victims. He added: For the most part, folks arent necessarily happy with the amount, but are happy to be out of the process and ready to move on.

Kennon credited Feinberg for shifting his philosophy more in a direction we thought was fair when it came to judging the types of claims that were eligible to compensation.

Emergency checks to help claimants cover their short term losses for up to 6 months, have already been paid. Victims may also attain interim payments periodically to aid them.

LAWSUITS

BP is facing more than 350 lawsuits filed by thousands of property owners, fishing interests and tourism businesses that claim the oil giant has caused harm through the spill linked to the explosion and sinking of the Deepwater Horizon rig. Although victims are partially covered for their losses, it is only when they accept the final payments that they will forgo a court remedy.

Feinberg said that about $3 billion of the $5 billion paid so far didnt require businesses or individuals to waive their legal rights and that 2,200 claims have been sent to the U.S. Justice Department as possible fraud.

According to the report, 40% of the total amount has gone to residents and businesses inFlorida, while the second highest, about 30%, was collected in Louisiana. Alabama and Mississippi are the other two states that suffered substantial economic and environmental losses.

So far 97% of the claims have said to be reviewed by BP appointed auditors.

BP announced that individuals, businesses and other groups that have been adversely affected by the spill can apply for emergency payments between August 23 and November 23. After this time, only final settlement claims will be accepted, and the cut off date for sending those applications is August 23rd, 2013.

Feinberg is facing criticism about the handling of the process with critics questioning its transparency. The BP appointed firm agreed to an independent audit after a meeting with U.S. Attorney General Eric Holder in July.

COMPENSATION ELIGIBILITY

The documents released about the oil spill outline exactly who will compensated for the damage done by the oil spill. People or businesses in a community or municipality adjacent to a beach shoreline, marsh, bay or tributary of the gulf where oil or oil residues came ashore or appeared in the waters will be given top priority.

It continues to point out that eligibility will take into account, among other things, geographic proximity, nature of industry, and dependence upon injured natural resources.

Legal experts say that the possible provision in the final oil spill settlement protocol that requires people to waive their right to sue companies other than BP that were working on the rig is also expected to face protest.

We have our work cut out for us, Feinberg said adding: We arent going anywhere. BP and his firm seem to believe that payments for the damage can be stopped now since the economy of the Gulf Coast has improved. About 4,400 claimants each week still apply to the fund, Feinberg insisted.

While there is little doubt that some of the claimants are applying with hopes to make a profit out of BPs responsibility to fix this disaster, no amount of money can undo the damage caused to the marine life.

Whats more is that this is not the first mishap in the history of BP over the past decade. In 2005, there was an explosion in the Texas City Refinery, owned by BP. Seventeen workers were killed and hundred others injured. The Occupational Safety and Health Administration accused BP of several safety violations that had led to the explosion, as the refinery had not been well maintained. The following year, in Prudhoe Bay, Alaska, a pipeline owned by BP exploded spilling 798,000 gallons of oil. Several warnings on corrosion taking place in various areas of the pipeline were issued. But the oil giant did little, if anything at all, to prevent further damage.

In the oil spill that took place on April 19, 2010, 11 platform workers died and 17 others were injured. An estimated 53,000 barrels of oil per day, escaped during the spillage. The White House commission, during its investigating, found that BP and those involved in the maintenance of the oil rig had tried to resort to cheaper options to fix any damages, and therefore any work done on it, was not strong enough to hold and led to the explosion.

Critics and environmental groups insist serious action needs to be taken to force BP to improve its standard of work and ensure that such an incident will not be repeated in the future.

Sources: Bloomberg, New York Times, Guardian

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