Judge orders BP to pay US$130m fees to Gulf claims program

PUBLISHED : Thursday, 08 August, 2013, 12:54pm
UPDATED : Thursday, 08 August, 2013, 12:57pm

BP must pay US$130 million to a court-appointed administrator overseeing payments to thousands of people who claimed they were hurt by the 2010 Gulf of Mexico oil spill, a federal judge ruled on Wednesday, in a fresh legal setback for the oil company.

BP had balked at funding the third-quarter operating budget for the administrator, Louisiana lawyer Patrick Juneau, complaining that his bill contained “excessive costs.”

But US Magistrate Judge Sally Shushan in New Orleans ruled that it was “unreasonable” for BP to halt funding.

Fees have topped US$560 million since Juneau’s team started work in June last year, shortly after BP reached an agreement with businesses and residents to compensate them for spill-related injuries.

The fees amount to about 18 cents for each of the US$3.1 billion paid out so far, data from the claims administrator and the settlement show. BP’s finance director projected last week that the fees could eventually top US$1.5 billion.

BP did not comment on Shushan’s ruling.

It is trying to halt payouts, at least temporarily, complaining that Juneau’s payout formula is too generous, and that it has uncovered evidence of fraud and conflicts of interest in how claims are assessed.

Shushan’s colleague, US District Judge Carl Barbier, previously rejected BP’s request to freeze payouts. BP is appealing that ruling, and its appeal is pending before a federal appeals court in New Orleans.

On Monday, BP submitted court papers suggesting new evidence of fraud and conflicts.

Juneau previously announced an internal probe of allegations that a former worker in the program referred claimants to lawyers in exchange for a share of payments.

The costs to BP of running the program include payments to court-appointed vendors and appeals panelists.

Also included are the administrative costs to process remaining claims from the Gulf Coast Claims Facility, a fund set up to pay claimants before the current settlement was reached.

BP has incurred about US$42.4 billion of charges related to the April 20, 2010 explosion of the Deepwater Horizon drilling rig and rupture of the company’s Macondo well. Eleven people died, and the resulting offshore oil spill remains the largest in US history.

The company originally expected the payout program to cost US$7.8 billion, but last week boosted its estimate to US$9.6 billion and said it could go much higher.