BP warns of rising costs from spill settlement
NEW ORLEANS – BP is warning investors that the price tag will be “significantly higher” than it initially estimated for its multibillion-dollar settlement with businesses and residents who claim the 2010 oil spill in the Gulf of Mexico cost them money.
The London-based oil giant estimated last year that it would spend roughly $7.8 billion to resolve tens of thousands of claims covered by the settlement agreement.
But in a regulatory filing this week, BP PLC said businesses’ claims have been paid at much higher average amounts than it had anticipated.
The company also said it can’t reliably estimate how much it will pay for unresolved business claims following a ruling Tuesday by the federal judge supervising the uncapped settlement. U.S District Judge Carl Barbier rejected BP’s interpretation of certain settlement provisions.
Barbier upheld claims administrator Patrick Juneau’s interpretation of settlement terms that govern how businesses’ pre- and post-spill revenue and expenses – and the time periods for those dollar amounts – are used to calculate their awards.
BP had argued that Juneau’s interpretation would lead to “absurd results” and “false positives,” but the judge said the settlement agreement anticipated that “such results would sometimes occur.”
“Objective formulas, the possibility of ‘false positives,’ and giving claimants flexibility to choose the most favorable time periods are all consequences BP accepted when it decided to buy peace through a global, class-wide resolution,” Barbier wrote.
BP spokesman Geoff Morrell said the company believes the way Juneau is processing business economic loss claims is “contrary to the agreement.”
“His approach has produced unjustified windfall payments to numerous business claimants,” Morrell said in a statement, adding that BP will pursue “all available legal options” to challenge Barbier’s decision.
BP already had revised its estimate for the total cost of the settlement before Barbier’s ruling, saying earlier this year that it expected to pay $8.5 billion instead of the $7.8 billion it estimated when it first cut the deal.