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BP Questioning Some Macondo Claims

The oil major wants to recover some of the millions set aside for Gulf Coast businesses following the 2010 oil spill because it says some claims may have been inflated or the losses were nonexistent.

Long on the defense regarding the historic Macondo well blowout in the deepwater Gulf of Mexico three years ago, BP plc has gone on the offensive to recover some of the settlements it's paid out for Gulf Coast businesses that may have been inflated or fictitious.

BP in late June began advertising in Gulf Coast media outlets asserting that "trial lawyers and some politicians" encouraged some businesses and individuals to submit claims for inflated or nonexistent losses following the Macondo well blowout, which devastated the coastal states. BP counsel also sent letters to hundreds of attorney firms that have been representing businesses, with warnings that the settlement payments may have to be returned.

The offensive blitz has arrived ahead of a federal appeals court hearing set for on July 8. In April, U.S. District Judge Carl Barbier in New Orleans upheld a ruling he had made in December for a record $7.8 billion settlement that BP had reached with the Plaintiffs Steering Committee (PSC), which represents thousands of businesses said to be affected by the Macondo spill's aftermath (see NGI, Jan. 7).

However, BP, once on board with the settlement agreement, appealed. The Fifth U.S. Circuit Court of Appeals in New Orleans is to hear the case in a week.

In a letter dated June 25 that was sent to hundreds of plaintiff attorneys, BP counsel Daniel Cantor of Arnold & Porter LLP said the oil major was reserving "whatever rights it may have to pursue any legal method to recover such overpayments...You may wish to advise your client to consider the effect of such potential obligations for budgeting and planning purposes and in relation to any financial statements or other financial reports and disclosures submitted to regulatory agencies or other third parties."

PSC attorneys responded, objecting to BP's actions, and noting that BP agreed to the rules for how claims would be determined and compensation calculated.

"No process exists to alter the amount of an award after it has been paid," wrote attorneys James Roy and Stephen Herman. The letters from BP, the wrote, are an attempt to discourage anyone from pursuing claims under the PSC program. The BP threats violate the settlement agreement, as well as "BP's overriding obligation to support the settlement...Therefore, we ask you to reconsider your position."

The settlement, jointly calculated by BP and the PSC, set business economic losses partly by comparing an establishment's revenue and variable costs during a specific period in 2010 with those same figures in previous years and in the year after the Macondo spill. All of the economic losses were presumed to be spill-related for purposes of the settlement, according to the PSC.

However, BP contends that the PSC administrator had misinterpreted the meaning of some of the key agreement's terms to the benefit of individuals who could not have been harmed by the spill because of the business they did or the businesses' distances from the Gulf Coast.

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