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BP expects surge in Deepwater payments

Ed Crooks
Monday, 2 Dec 2013 | 2:53 AM ET
Chris Ratcliffe | Bloomberg | Getty Images

BP is expecting a surge in compensation payments over the 2010 Deepwater Horizon disaster, after a slowdown that has lasted almost two months.

The company revealed in a court filing just before the Thanksgiving holiday last week that it had been told payments for businesses' economic losses, which had been held up since an appeal court ruling at the beginning of October, were about to restart.

It says the expected resumption of payments increases the need for the court to issue an injunction blocking unjustified claims for compensation under the settlement it agreed with plaintiffs' lawyers last year.

(Read more: BP CEO hits outat class action lawsuits)

BP argues that businesses that appear not to have suffered losses as a result of the spill have been paid more than $500m as a result of a misinterpretation of the agreement by the court-appointed claims administrator,and says it is trying to stop any more such payments, which could run to billions of dollars.

The cost of the settlement, which BP has estimated to be significantly more than $9.2bn, will begin to hit reported profits if future court decisions go against it.

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Dudley: BP to manage capital carefully
CEO Bob Dudley says investors should view BP as a "fundamentally sound oil and gas company" and explains why the group is "excited about exploration."

A ruling from the Fifth Circuit appeals court in New Orleans on October 2 approved an injunction to stop payments to businesses that had not "experienced actual injury traceable to loss" from the spill.

The injunction put in place by the lower district court did not go as far as BP wanted, but seems to have had a marked impact on compensation payments.

Data from Patrick Juneau, the claims administrator, show that between October 11 and November 11 there was no increase in the number of claimants paid for business losses. Between November 11 and November 27, there was only a modest pick-up, with the number of claimants paid rising by four, and total payments rising by $5.2m.

However, BP's lawyers argued in a filing with the appeals court last week that unless the court moved to enforce its October 2 judgment, the compensation programme would resume paying claims for business losses that were unjustified "because their alleged injuries have no causal nexus to the oil spill".

(Read more: BP wins reprieve over Gulf spill payouts)

BP says that if businesses that were not affected by the spill are paid compensation, then the settlement is not legally valid, and will have to be scrapped.

Plaintiffs' lawyers who support the settlement as interpreted by Mr Juneau have accused BP of trying to ignore the agreement it made last year, and said the company's executives should not be allowed to change their position "simply because the settlement is costing them more than they hoped".

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