Compensation
Undoubtedly shared liability
BP announced it would take full responsibility for managing the oil spill and clean-up. The company has committed itself to paying “legitimate” claims for damage caused by the spill. According to analysts Sanford Bernstein & Co the disaster could cost BP over 8 billion dollars.
However, in terms of the accident suffered by the Deepwater Horizon rig, the determination of liabilities is likely to be more complicated. BP only owns a 65% stake in the oil well, while 25% belongs to US group Anadarko and 10% to the Japanese firm Mitsui. What’s more, the rig was leased to Transocean, a Swiss drilling contractor based in Houston (USA). Other oil-related companies could also be involved, notably Cameron International and Hydroil who provided the blowout preventers.
A future rise in compensation?
Currently in the US, liability of oil companies for accidentally-generated economic damages is capped at 75 million dollars. A number of senators, who believe this limit to be too low, have proposed a bill to raise this cap to 10 billion dollars.
Once this limit has been reached, the victims (companies and individuals) can turn to a reserve fund supported by a tax on oil companies for the oil produced or imported to the US. However, the total cost cannot exceed one billion dollars. The senators therefore propose to also raise this cap.
Key compensation figures
On 24 May 2010, BP undertook to earmark up to 500 million dollars for a research program to estimate the consequences on the environment of the oil spill in the Gulf of Mexico.
By 25 May 2010, BP had received 22,000 complaints, lodged at the 36 compensation offices set up in the states bordering the Gulf of Mexico, and had paid 9 million dollars in compensation. The number of claims and the amount of compensation paid out by BP then took off: by 7 August, 145,000 claims had been lodged and BP had paid out over 319 millon dollars in compensation. By 24 August, the number of claims had reached 154,000 and BP had offered 400 million dollars in compensation. No claims have been denied to date. In addition, on 9 August, BP announced that it had spent 6 billion dollars on repairing the damages caused by the oil spill.
Between April and November, BP and the other responsible parties (Transocean, MOEX and Andarko) received seven bills, totalling 581 million dollars, from the US Government. These bills covered the costs of response operations and BP paid the sum total. The eighth bill, for a total of 25.4 million dollars, was issued on 18 November and is awaiting payment.
On 16 June 2010, upon request by the US administration, BP agreed to create a 20 billion dollar claims fund, the Gulf Coast Claims Facility, which will be established over a number of years. This independent fund, managed by the attorney Kenneth Feinberg, will be used to meet the cost of damages for individuals and companies, the restoration of damaged natural resources as well as emergency response by local and federal administrations. On 9 August, BP made a first 3 billion dollar payment. From 23 August, claims were no longer received by BP but by the compensation fund.
In addition, on 1st October 2010, BP announced that it had spent over 11.2 billion dollars on repairing the damages caused by the oil spill.
On 17 December 2010, the US Government announced that it was suing BP and the other companies involved in the accident, to establish their civil liability.
Between April and November 2010, BP and the other responsible parties (Transocean, MOEX and Andarko) were issued with seven bills, for a total of 581 million dollars, by the US Government. These bills were to cover the costs of response operations and BP paid the entire amount. The eighth bill, for 25.4 million dollars, was sent on 18 November and is currently awaiting payment.
By 26 February 2011, 492,765 compensation claims had been filed with the GCCF, which had already settled 169,553 claims for a total of 3.8 billion dollars (on top of the 127,000 claims settled by BP for a total of 400 million dollars before GCCF took over claims management). Additionally, around 1.1 billion dollars were paid to the different States affected by the spill.
Prelude to an outstanding lawsuit
On 29 July 2010, hearings were held in Idaho to determine the conditions of the upcoming lawsuit. On 10 August, before the claimants and responsible parties, including BP and Transocean, the panel of judges announced that the claims lodged against the liable parties would be consolidated in a single joint claim. They will be heard by Judge Carl J. Barbier in Louisiana.
So as to restrict the number of claims, once a GCCF compensation offer has been accepted, claimants must waive their right to sue BP and the other responsible parties.