March 3, 2012 / 7:53 PM / in 6 years

BP's $7.8 bln deal may speed payments for U.S. spill

* Oil giant still faces other claims for compensation

* U.S. Justice Department says is ready to go to trial

* Lawyers could get higher fees as result of settlement

By Andrew Longstreth and Tom Bergin

NEW YORK/LONDON, March 3 (Reuters) - The estimated $7.8 billion deal struck by BP Plc with businesses and individuals suing over the massive 2010 Gulf of Mexico oil spill could speed up payments to thousands of claimants and offers lawyers a potential windfall in legal fees.

London-based BP announced the deal on Friday with the Plaintiffs’ Steering Committee (PSC), which represents condominium owners, fishermen, hoteliers, restaurateurs and others who say their livelihoods were damaged by the April 20, 2010 explosion of the Deepwater Horizon drilling rig and subsequent oil spill.

The settlement, which delayed a giant trial that had been set to get underway in a New Orleans federal court on Monday, is a step by BP toward resolving its liability in the case, which stretches into the billions of dollars. However, the deal does nothing to settle charges brought by the biggest player in the trial: the U.S. government.

Eleven people died and 4.9 million barrels of oil spewed from the mile-deep (1.6 km-deep) Macondo oil well is by far the worst offshore U.S. oil spill.

U.S. District Judge Carl Barbier in an order late on Friday delayed the trial, saying the settlement “would likely result in a realignment of the parties in this litigation and require substantial changes” to the trial plan.

Barbier, who will preside over the three-part trial which could stretch through 2012, set no definite date for the trial to resume. Barbier would also have to approve the settlement.

BP has paid out about $6.1 billion to date to compensate about 220,000 plaintiffs from the Gulf Coast Claims Facility, a trust fund administered by Kenneth Feinberg.

Lawyers for the PSC, Stephen Herman and James Roy, said the settlement would speed up compensation for thousands of victims. “It does the greatest amount of good for the greatest number of people,” they said in a statement.

The proposed settlement could also be good news for attorneys, who could stand to charge big fees for negotiating claims.

“They’re attempting to negotiate their fees,” said Daniel Becnel, a Louisiana tort attorney who represents clients who have filed claims with Feinberg. Though courts have limited legal fees to 6 percent so far, “They want an open-ended claim fund, meaning BP would handle any claim forever,” Becnel said.

Following pressure from the White House, BP created a $20 billion fund in 2010 to compensate victims of the spill that froze out trial lawyers.


BP said in a statement that the new court-supervised claims process would assess claims according to new protocols agreed with the lawyers leading the plaintiffs steering committee, who had claimed Feinberg’s criteria were too harsh.

Many of those affected by the spill, including people in the hospitality and tourism industries that are important in the Gulf region’s economy, receive a share of their income in cash.

BP said the proposed settlement was not an admission of liability and that BP would assign to the plaintiffs some of its claims against Transocean and Halliburton.

Apart from BP, which owned 65 percent of Macondo, the main corporate defendants are Switzerland-based Transocean Ltd , which owned the Deepwater Horizon, and Houston-based Halliburton Co, which provided cementing services for the well. The settlement does not address legal damages that plaintiffs might seek from BP’s well partners, which are also suing each other.

BP still faces claims by the U.S. government, which is pursuing violations of the Clean Water Act and other laws. BP has said it expects government fines to total $3.5 billion, but the maximum under law is in excess of $20 billion if gross negligence can be proven.

BP also faces claims from Gulf states as well as its drilling partners.

“Delays or deals made by other players do not change the facts of this case and we are fully prepared to argue the merits of our case based on those facts,” said a spokesman for Transocean.

The U.S. Justice Department said it was prepared to go to trial to hold those responsible accountable for outstanding federal claims.

“The United States will continue to work closely with all five Gulf states to ensure that any resolution of the federal law enforcement and damage claims, including natural resources damages, arising out of this unprecedented environmental disaster is just, fair and restores the Gulf for the benefit of the people of the Gulf states,” department spokesman Wyn Hornbuckle said.

David Uhlmann, a University of Michigan law professor and former chief of the Justice Department’s environmental crimes section, said the settlement was good news for the victims of the Gulf oil spill “who will see their losses compensated much more quickly than the victims of the Exxon Valdez oil spill.”

“It also paves the way for BP to negotiate agreements with the federal and state governments and begin the process of moving beyond the Gulf oil spill,” he said.

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