Disgrace Under Pressure: BP Looks to Pull Plug on Paying “Future Loss” Claims to Victims of Gulf Disaster

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We’ve finally arrived at that place where nothing BP does shocks us anymore, no matter how offensive or inane. After so many forays beyond the pale, the ability to shock recedes. How do you continue to offend and outrage when you’ve already erased all ethical expectations and broken all boundaries of common decency?

More than a year into the nightmare that is the Gulf oil spill, we have become completely desensitized to BP’s failings, outrages and line-crossings. It’s a strange phenomenon to witness when it finally takes hold, kind of like your crazy Uncle Lou at any given holiday gathering. Everybody knows he’s eventually going to do something dreadful – again, like he does at every family get-together (where liquor is served) – so it becomes a matter of when not if.

And so it goes with BP. I find myself appalled by the action but not at all surprised by the source. It seems BP has established a level of moral bankruptcy that allows it to operate completely unaffected by time-tested societal deterrents, like being judged or shamed.

Late last week, BP sent a letter to Kenneth Feinberg, the administrator of BP’s $20 billion victim compensation fund, suggesting that the Gulf Coast economy has already made such a strong recovery that the plug should be pulled on paying “future loss” claims to victims of the 200-million-gallon oil spill. In a mind-boggling story that went viral over the weekend, BP believes that the coastal economies of Louisiana, Alabama, Mississippi and Florida have made a full recovery. Consequently, BP contests, there should be no need to compensate victims for any future losses.

(Stunned silence.)

From a July 9 Bloomberg News article:

“The current economic data do not suggest that individual and business claimants face a material risk of future loss caused by” the spill, BP said in a 28-page letter sent Thursday to Kenneth Feinberg.

This seems like the perfect place to run out a string of incredulous expletives – perhaps in all caps for emphasis – but I’m trying to remain above all that (for my mother’s sake).

Up to this point, the formula for determining future losses – which many, including myself, considered woefully inadequate from their inception – was twice 2010 losses, except for oyster harvesters who could seek four times 2010 losses (see link to my previous post on the claims process below). But now BP is taking it one more ridiculous step further, saying all payments on future losses should be stopped. More on the specifics of the claims process from the Bloomberg report, and just how much is at stake:

Claimants waive their right to sue BP and other companies involved in the spill when they accept the final, lump-sum payments that include future-damage estimates. Individuals and businesses can continue to seek interim payments covering past damage every three months and retain their legal options. BP said before the final methodology was released that Feinberg’s formula for future losses, which the company said wasn’t required by federal law, was too generous.

A July 8 Reuters report reminds us (though many of us need no reminding) of the baseline economic impacts:

BP’s deepwater Macondo well ruptured in April 2010, causing a fiery explosion that killed 11 rig workers and spewed more than 4 million barrels of oil into the Gulf. The accident closed waters to fishing, disrupted tourism and caused the government to shut down deepwater exploration for months.

As you might expect, those victims hit hardest by the spill’s impacts – like fishermen, crabbers and oystermen – are up in arms as BP plumbs new depths of denial. A WWL-TV report, out of St. Bernard, La., sheds some light on the plight of those who rely on the Gulf for their livelihoods:

Bruce Guerra has been a crab fisherman in Yscloskey for 25 years. And since the BP oil spill, he began seeing alarming differences in his catch.

“I guess where he was, he probably was in oil,” said Guerra, as he showed Eyewitness News a crab he’d recently caught. “See how this is all black?”

Guerra said crabs have been coming up dead, discolored, or riddled with holes since last year’s spill.

Now Guerra, and many of the crabbers that work for him, said they’re trapping 75 percent fewer crabs than they were pre-oil spill.

Apparently, the executives over at BP haven’t been crabbing out on the Gulf lately.

David Frazier, a commercial fisherman from Yscloskey who’s out on the water everyday, believes the spill’s impact on the crabbing industry is getting worse not better. WWL-TV quotes Mr. Frazier as saying: “After they closed and reopened the area we was fishing in, the crabs was there. And this year, the crabs ain’t there.” Frazier’s observations corroborate reports of depleted catches from dozens of commercial fishermen my law associates and I have spoken to over the last few weeks.

To make matters worse, many crabs didn’t produce any eggs this year due to the spill, signaling a long-term thinning of the population and therefore smaller catches for fishermen in the future. But none of that seems to matter even the slightest bit to BP, one of the wealthiest and most powerful companies on the planet.

The one industry BP is admitting may experience ongoing damages is oyster harvesting, but even that concession comes with a tangle of strings attached. From the WWL-TV report:

The British oil company argued there is no reason to believe that anyone would suffer future losses from the spill, with the limited exception of oyster harvesters. But there’s a catch.

To get a payout for future losses, BP argues oyster harvesters should have to prove their beds were destroyed by oil from the spill, not from the state’s freshwater diversion afterward.

According to BP, no claimant has documented evidence that their oyster bed was destroyed by oil from the Deepwater Horizon disaster.

“Since the beginning I didn’t get paid right,” said Ryan Guerra, a longtime Yscloskey oyster harvester. “I’m tired of it. I’m tired of fighting with them. I’m disgusted.”

Guerra said 70 percent of his latest harvest was dead.

Well, one of the big reasons claimants haven’t provided documentation that their oyster beds were destroyed by BP oil is that many of the beds were killed not by oil but by the enormous amount of fresh water government officials flushed into the Gulf as a last-ditch effort to push the oil away from the shoreline. As many of you know, oysters need the salt in ocean water to survive. According to an MSNBC report from last year:

Ed Cake, an oyster biologist who has consulted for the oyster and the oil industries, said he is worried that the fresh water flushed into the Gulf to keep the oil away could kill saline-dependent oysters.

Undoubtedly, Cake’s prediction of fresh water damage came true, much to the horror of many an oyster harvester. And now, under BP’s new requirement that harvesters prove oil killed their oyster beds, thousands of Gulf Coast victims could go uncompensated for their losses. Industry officials estimate that 60 to 70 percent of all oysters eaten in the United States come from the Gulf of the Mexico, translating to hundreds of millions in annual local revenue – or as it applies to the post-spill world, lost local revenue.

In addition to the very tangible damages – past, present and future – the spill poses to the Gulf’s fragile fisheries, many people continue to have valid concerns about seafood safety. Based on scads of lab-certified test results on dozens of seafood samples – from crabs to fish to shrimp to oysters – I am one of the many who questions the government’s all-clear on seafood safety (see link to my previous post on seafood safety below). As you’ll recall, we got to that premature all-clear declaration through the government’s highly criticized, universally mocked “sniff test” or “sensory test.” The problem with the government’s testing regimen is that many of these toxins are completely undetectable by the human nose, leading one expert to quip that even a bloodhound on his best day couldn’t sniff them out.

NOAA’s “seafood testing” program has been roundly discredited by independent researchers across the country (see link below to a post on the shortcomings of the government’s testing program). There is no doubt that toxins from BP’s 200 million gallons of oil has breached the food chain, and I along with many others living on the Gulf Coast, have curbed seafood consumption. That’s a simple economic fact that the industry will be dealing with for the foreseeable future.

A BP talking point – one that appears to have been cooked up in an evidentiary vacuum – uses the government’s all-clear on seafood safety as proof that the Gulf Coast economy is alive and well, and that consequently, “future loss” claims should be nullified. Realists argue that the ongoing and pervasive public perception, real or otherwise, that Gulf seafood is tainted is an economic force to be reckoned with. From a July 8 Associated Press report:

BP notes evidence of recovered fisheries and government assurances that seafood is safe to eat as part of its argument. New Orleans seafood processor Harlon Pearce says that doesn’t address the lingering effect of the spill on the seafood business.

“For someone to say we don’t have damage in the future is clearly wrong,” Pearce said. While BP comments cited evidence that Gulf Seafood is safe, Pearce said the public’s perception hasn’t caught up with that reality. He estimated his distributions are down about 25 percent and it will take years to regain the trust of consumers and a place in the national market.

Pearce, who is president of the Louisiana Seafood Promotion and Marketing Board, said the board’s research indicates it took three to five years for the Alaskan seafood market to rebound after the Exxon Valdez spill, and noted a study commissioned by the board that says 75 percent of consumers around the country are still concerned about seafood safety.

I know I am.

Not surprisingly, attorneys in Louisiana (including myself) who have access to a huge amount of information and evidence on the spill strongly disagree with BP’s assessment of a full Gulf recovery. More from the AP report:

Allan Kanner, an attorney for the state, wrote: “The state’s economy is still battling the prolonged downturn brought on by the Deepwater Horizon event and resulting spill, including the impacts of the offshore drilling moratorium imposed in direct response to the spill. The State’s revenues depend on a robust coastal economy, and that very economy continues to struggle in the wake of the spill.”

A recently released study from the Natural Resources Defense Council (NRDC) provides support for Mr. Kanner’s claim, reminding us that some beaches and towns along the Gulf Coast are still reeling from the spill’s impacts. From the NRDC’s Testing the Waters 2011 study:

All four segments of Fourchon Beach in Lafourche Parish have been closed since May 7, 2010, and will probably remain closed throughout 2011. The oil spill closures at one section of Grand Isle Beach and all four sections of Grand Isle State Park Beach in Jefferson Parish were not lifted until this year.

It’s unclear exactly how BP came to the conclusion that the Gulf Coast economy has made a full recovery when there are entire beaches that remain closed to this day due to the spill – and will most likely stay closed for the rest of the year. Hmmmmmmm.

For many spill victims, BP’s wildly irresponsible assertion could be the last straw in pushing them into formal litigation. We will keep an eye on how Ken Feinberg responds to BP’s suggestion that the Gulf Coast Claims Facility stop paying claims for future losses. So far, his response has been measured, writing in an emailed statement on Friday that the claims facility “welcomes any and all input from any interested sources, including BP. We take all of the submissions ‘under advisement.'”

Read the MSNBC report from June 2010 on the plight of the Gulf oyster industry here: http://www.msnbc.msn.com/id/37856183/ns/business-us_business/t/oil-spill-puts-gulf-oyster-industry-ice/

See the Bloomberg News story here: http://articles.philly.com/2011-07-09/news/29755490_1_bp-and-other-companies-bp-plc-kenneth-feinberg

Read the AP story here: http://news.yahoo.com/apnewsbreak-bp-wants-end-future-loss-claims-175219602.html

Read my previous post on the problems plaguing the claims process: http://www.stuarthsmith.com/will-bp-spill-victims-be-made-whole-new-report-exposes-a-raft-of-problems-inside-the-gulf-coast-claims-facility

Here’s the full WWL-TV report from St. Bernard: http://www.wwltv.com/news/BP-wants-to-end-payments-for-future-losses-Fisherman-react-125252384.html

© Smith Stag, LLC 2011 – All Rights Reserved

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Stuart H. Smith is an attorney based in New Orleans fighting major oil companies and other polluters.
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