The BP $20 Billion Gulf Claims Facility Has Paid Nearly Nothing

BP plc (NYSE: BP) was forced by the US government to set up a $20 billion claims facility to cover costs from the Deepwater Horizon disaster. The money was meant to make businesses and individuals whole who were affected by the catastrophe. A year after the accident, only $3.8 billion, or 19%, has been paid out. Not much more money may be handed out if  evaluations of the spill’s impact are accurate.

The Gulf Coast Claims Facility run by Kenneth Feinberg, who also solved all of Wall St.’s pay problems after the credit disaster, is in charge of disbursing the money.  His latest report shows that 201,261 claims have received final payment. Just over 857,000 claims have been made. Feinberg has been attacked for the meagreness of the payments and the slow pace at which they have been made.

A group of scientists who have examined the impact of the spill say that the “health” of the Gulf is almost back to pre-spill levels. “More than three dozen scientists grade the Gulf’s big picture health a 68 on average. It was 71 before the spill and 65 back in October, the AP reports. The same scientists say that there are some dead portions of the sea floor in the spill zone and that some fish have died. But, the report is damning to those who say that the effects of the spill are extremely serious and long-lived.

The criticism of Feinberg will grow. It is unimaginable that so little of a $20 billion reserve could be used. Surely the US government must have applied some test to ask for the sum and surely BP must have looked at the problems created by the spill to accept the number. But, it does not look that way.

Assessments of the disaster have been flawed since just weeks after the explosion. It took months to determine the size of the leak. Some experts said there were huge dead patches of the Gulf in which nothing could grow or live. Other scientists presented maps that showed oil moving out of the Gulf and up the Atlantic coast as far as Virginia where it was expected to be swept toward the UK by strong currents.

Feinberg has read the scientific reports and may have concluded that the Deepwater Horizon explosion was a disaster of unprecedented magnitude. That does no mean its cost were anywhere close to what has been forecast and the BP facility will never be close to exhausted.

Douglas A. McIntyre