Unsettling settlement: Companies excluded from BP payout

Six years after oil from BP’s Macondo well gushed into the Gulf of Mexico for an unprecedented three months, the toll is still being tallied, as politicians cheer advancing landmarks in the ongoing legal settlement process, and environmental activists cite studies that appear to vindicate their initial alarm concerning the effects of disaster on marine life and the ecosystem as a whole.

Eleven crewmen died after the Deepwater Horizon platform exploded on April 20, 2010, about 60 miles off the Louisiana coast. A blowout preventer failed, a pipe located a mile beneath the surface broke, and the constant flow into the Gulf was televised live for months despite various efforts to halt the stream.

Commercial and recreational fishing were shut down and sensitive environmental areas including shorebird rookeries were oiled in varying degrees. The federal government shut down drilling operations while the cause of the spill was investigated, infuriating local politicians and regionally cementing resentment toward the Obama administration, which had already drawn heavy regional criticism from the time of the president’s inauguration.

The nation as a whole tried to make sense of Louisiana’s paradoxical stance, with officials demanding an end to the drilling moratorium as Macondo oil continued to gush, eroding what national sympathy existed for the state and region, which transformed instead to fear of Gulf seafood.

Ironically, the environmental disaster resulted in Gulf seafood being the most scrutinized and tested in the world.

On the eve of the event’s sixth anniversary, an announced settlement on one aspect of case litigation generated a flurry of press releases from elected representatives, giving a false impression that the effects of the spill had finally abated.

And while that was true for many people and businesses, it remains far from the case for others.

U.S. District Judge Carl Barbier granted approval for a $20.8 billion settlement agreement for civil claims, raising a prior figure of $18.7 billion that had been announced in July. Of the $20.8 billion, Louisiana is expected to receive $6.8 billion, to be paid out over the next 16 years.

“Louisiana has been working nonstop to overcome the devastating losses along our coastline, in our coastal communities, and in our economy,” said U.S. Sen. David Vitter, in a response released during the month of April. “Eleven men tragically lost their lives in the devastating explosion and oil spill, and in the five years since, Louisiana has done what we do best – recover, rebuild, and progress. While it has been an uphill battle to ensure that Louisiana was fairly compensated, we did achieve substantive wins, including passing the RESTORE Act, and the final approval of the $20 billion BP settlement provides Louisiana the long-awaited avenue to advance the rebuilding and revitalizing process.”

The figure announced in April included a $5.5 billion Clean Water Act penalty, plus interest, $8.1 billion in natural resource damages, including mandated restoration of coastal habitats. Another $600 million included in the settlement will reimburse costs shared by the federal government and various states for assessing damage.

Environmental advocates hailed the final settlement as well, in a joint statement issued on behalf of the Environmental Defense Fund, the National Wildlife Federation, National Audubon Society, Ocean Conservancy and The Nature Conservancy,

“The opportunity to begin the biggest environmental restoration effort in American history is now a groundbreaking reality for the Gulf, following the finalization of the settlement with BP,” the statement reads. “In the aftermath of the spill, elected officials, state and federal agencies and residents across the Gulf worked together as never before to ensure passage of the RESTORE Act to benefit the ecosystems and communities of the region. We are eager to continue this work with both state and federal leaders to quickly update the RESTORE Act Comprehensive Plan, and advance restoration work. Restoring the Gulf wholly and correctly — and sooner rather than later — means that we’re fast tracking the region’s resilience, and protecting the people, wildlife and jobs across the Gulf for the benefit of the entire nation.”

But even as those voices marked the anniversary and the settlement, business owners affected by the spill who are still not made whole questioned when the oil giant would make good on that promise.

“I still haven’t been paid the money I was promised,” said Stu Scheer, a long-established charter fishing guide who had trips canceled throughout 2010 and beyond. The groups that Scheer hosts as clients make their travel and fishing plans well in advance. And while his Cocodrie business – like others in the region – is recovering, the losses have still been substantial.

Charter captains and commercial fishermen who signed up to aid the clean-up effort and were contracted directly by BP say the cash that helped out short-term was not a replacement, in many cases, for the loss of regular clients.

Likewise, oilfield vessel companies whose activities would have been sharply curtailed by the Gulf drilling moratorium were in some cases kept afloat during the spill by BP cleanup contracts.

“BP helped us in several ways,” said Angela Belanger, president of Lin-Bar Marine in Bourg. Although her vessels are currently tied up, their pause in operation is due to the current oilfield downturn, and not the oil spill or the moratorium.

But that’s not the case with everybody. Teams of attorneys are still involved with helping companies assert their rights within a maze of sometimes conflicted claim and settlement processes. They still run into instances where initial decisions made by business owners have had lasting effect on their ability to recover.

Houma attorneys Berwick and Stan Duval have handled a large share of BP-related claims as part of their admiralty and marine law practice.

Some of their clients are still awaiting the final outcome of appeals and court action which, although technically under the litigation settlement umbrella, still have far to go.

“Certain industries were excluded such as oil and gas, financial institutions,” Berwick Duval explained, referencing the settlement plan. Basic determinations of who was in and who was out were based on the North American Industry Classification System. The NAICS (pronounced “nakes”) assigns codes to various businesses based on what they do and how they do it.

Developed under the direction and guidance of the Office of Management and Budget, NAICS is “the standard for use by federal statistical agencies in classifying business establishments for the collection, tabulation, presentation, and analysis of statistical data describing the U.S. economy,” according to the U.S. Census Bureau. Those five or six digit codes are applied in a wide range of circumstances, including trade agreements, tariff assignments, and even certain tax-related determinations.

“If you are one of the codes excluded from the settlement you were out,” Stan Duval said. Or so it would appear. In some cases, the hearing administrator could reclassify a company.

BP, the Duvals said, was strict in its determination of which NAICS codes were excluded from settlement. But a hearing administrator’s over-ride could change that. In some instances, Stan Duval said, BP’s attorneys agreed to place some businesses in different NAICS classifications. Complicating matters was a status for some businesses that amounted to a “yet to be determined.” Those businesses, Berwick Duval said, still don’t know if their claims will be paid. Likewise, the determination that some businesses were to be excluded because their pain was caused not by the spill, but the federal drilling moratorium that followed, also tended to be fluid.

A company that objected to its placement as a moratorium company could seek a supervisory ruling. But there is no timetable for when those rulings will be made, so they remain in what amounts to an oil spill “purgatory.”

In some cases, businesses filed claims but did not sue under provisions of the federal oil pollution act. The period for filing such suits has ended. According to local attorneys, those businesses that relied solely on accountants to prepare their settlement documents but did not also contact lawyers to be in a position to sue for their OPA claims are now left out in the cold, except for whatever their initial claims process got for them.

One of the more controversial aspects of the litigation was the decision by Judge Barbier – in line with BP’s arguments – that moratorium companies were exempted from the settlements.

Six companies involved with offshore drilling had brought the initial action that resulted in the moratorium ruling, although billions of dollars of claims by moratorium companies were affected. Barbier effectively ruled that Congress, in crafting the Oil Pollution Act, never intended for it to hold a polluter responsible for actions by a government entity whose purpose was to prevent similar disasters. While there is no doubt the moratorium was imposed because of the Deepwater Horizon blowout, Barbier reasoned that the moratorium was spurred by a determination that safety measures and checks in place were not adequate “and was motivated by perceived weaknesses of industry-wide safety measures.”

Meanwhile, non-financial tolls of the spill are still being counted and examined.

Last month, NOAA issued a report which said that an “increased number of stranded stillborn and juvenile dolphins found in the Gulf of Mexico from 2010-13 were likely caused by chronic illnesses in mothers who were exposed to oil from the Deepwater Horizon spill.”

A paper published in the journal Diseases of Aquatic Organisms is part of an effort to explain the unusual number of dolphin deaths in the Gulf between 2010 and 2014. The investigation continues, and the study says the long-term effects of the spill on dolphin reproduction is still unknown.

NOAA confirmed that bottlenose dolphins have been “dying in record numbers in their mothers’ womb or shortly after birth in areas affected by the 2010 Deepwater Horizon oil spill.”

“Our new findings add to the mounting evidence from peer-reviewed studies that exposure to petroleum compounds following the Deepwater Horizon oil spill severely harmed the reproductive health of dolphins living in the oil spill footprint in the northern Gulf of Mexico,” said Dr. Teri Rowles, veterinarian, co-author of the study, and head of NOAA’s Marine Mammal Health and Stranding Response Program, which is charged with determining the causes of these events.

“In contrast to control populations, we found that Gulf of Mexico bottlenose dolphins were particularly susceptible to late term pregnancy failures, signs of fetal distress and development of in utero infections including brucellosis,” said Dr. Kathleen Colegrove, Ph.D., the study’s lead author and veterinary pathology professor at the University of Illinois Chicago-based Zoological Pathology Program.

Scientists saw higher numbers of stranded stillborn and juvenile dolphins in the spill zone in 2011 than in other years, particularly in Mississippi and Alabama. “The young dolphins, which died in the womb or shortly after birth, were significantly smaller than those that stranded during previous years and in other geographic locations,” said Dr. Stephanie Venn-Watson, study co-author and veterinary epidemiologist from the National Marine Mammal Foundation.

“Bottlenose dolphins carry their unborn young for about 380 days, so stillborn and juvenile dolphins found in the early months of 2011 could have been exposed in the womb to petroleum products released the previous year,“ Colegrove said. “Pregnant dolphins losing fetuses in 2011 would have been in the earlier stages of pregnancy in 2010 during the oil spill.”

The researchers report that 88 percent of the stillborn and juvenile dolphins found in the spill zone had abnormal lungs, including partially or completely collapsed lungs. That and their small size suggest that they died in the womb or very soon after birth – before their lungs had a chance to fully inflate. Only 15 percent of stillborn and juvenile dolphins found in areas unaffected by the spill had this lung abnormality, the researchers said.

BP has maintained that the data the company has seen thus far “do not show that oil from the Deepwater Horizon accident caused an increase in dolphin mortality. This new paper fails to show that the illnesses observed in some dolphins were caused by exposure to Macondo oil. In fact, numerous studies conducted over the last several decades have shown that respiratory illness – one of the conditions cited – is among the most common causes of death for bottlenose dolphins, including a study where half of the dolphins examined had pneumonia.” •

BP settlement