Who Decides if a BP Spill Claim Is Legitimate?

By Bryan Walsh, TIME, June 11, 2010

Legitimate. It's the word that could come to define the extremely expensive, extremely litigious aftermath of the Gulf of Mexico oil spill. Almost from the beginning, BP has promised to pay what it calls all "legitimate" claims by people and businesses affected by the spill. But legitimate, when it's contained in a print ad as part of BP's new multimillion-dollar campaign or poshly pronounced by CEO Tony Hayward in one of the accompanying TV commercials, sounds very different from the way it sounds coming out of the mouth of a bayou shrimper in Venice, La. What constitutes legitimate is still an open question.

At the very least though, it looks like BP won't be the only one who gets to decide. A day after demanding that the company turn over data about its financial-claim payment process, the Coast Guard reported that BP had pledged to expedite payment to affected businesses in the Gulf. "BP recognized that its previous approach of waiting until after the books have closed for each month to calculate losses will not work," Tracy Wareing of the Federal Emergency Management Agency said at a news conference Thursday. "It won't get dollars quickly enough to the businesses that are struggling on the ground." (See pictures of people protesting against BP.)

And reports are filtering back from Louisiana that BP's lost oil seems to be flowing a lot faster than its cash. David Camardelle, the mayor of Grand Isle in southeastern Louisiana, told a hearing of a subcommittee of the Senate Homeland Security and Government Affairs Committee that he knew of 37 applications from his community still waiting for their $5,000 claims check from BP. "Every day, I have a mom that comes in front of me and asks me, 'Mr. David, how am I going to get food for my kids,'" Camardelle said. "Please, please send us some help." (See photos of victims of the BP oil spill.)

BP has said that it has already paid over $80 million in claims to more than 10,000 individuals in Louisiana, Florida, Alabama and Mississippi, with more coming soon. The company also says that it has opened scores of claims centers around the affected coastline, and that it is trying to process claims in a few days at most. "We'll do this until it's finished," said Darryl Willis, vice president of resources for BP America, in a teleconference with reporters over the weekend.

To aid the company in speeding the payment process, Alabama is considering assigning National Guard troops to work at claims centers — a uniquely effective lever only the government can use. But the very nature of how many people work on the Gulf Coast is going to trump the number that will be answering phones and processing documents. And the very nature of the fishing industry won't help either. Fishing can bring in a lot of money in a very short period of time during the right season, but fishermen might be hard-pressed to provide evidence — bank statements, pay stubs — that can back that up. The same goes for many other businesses: if receipts are dwindling at a restaurant, or guests are cancelling at a resort, how is it possible to prove that the spill alone is responsible? "We're stuck in the middle," says Chris Camardelle, whose seafood restaurant in Grand Isle has been badly hurt by the oil spill. "So it's a tricky situation." (See a brief history of BP.)

The government has insisted repeatedly that BP will pay all the costs of the cleanup and all damages as well — and Washington seems willing to push the oil company as far as it can. But there will surely be limits. President Obama has said that he will push BP to compensate rig workers who have been laid off because of the six-month moratorium on deepwater drilling he instituted to fix the industry's safety standards, but there's skepticism that claim could hold. As BP comes under greater pressure politically in Washington, a backlash is beginning to build in Britain, especially over the question of whether BP will be able to make billions in expected dividend payments to shareholders even as the spill is continuing. "I do think it starts to become a matter of national concern if a great British company is being continually beaten up on international airwaves," London Mayor Boris Johnson told the BBC Thursday.

As the spill worsens, though, the pressure will only increase — and a new scientific estimate of the leak rate shows that Gulf catastrophe could be even worse than we ever imagined. After reviewing better video from the underwater leak, the government's Flow Rate Technical Group estimated on Thursday that the oil was escaping at a rate between 20,000 bbl. and 40,000 bbl. a day, and that was before robots severed the broken riser at the wellhead a week ago, which may have increased the flow by as much as another 20%. That's up from an earlier estimate of between 12,000 bbl. and 19,000 bbl., and an initial number of about 5,000 bbl. a day, though some independent scientists were arguing weeks ago that the flow was far higher than that. And it's still not certain. "Our scientific analysis is still a work in progress," said U.S. geological-survey director Marcia McNutt, the head of the flow-rate team. "In coming days we'll be refining our estimates further. (Read a Q&A on who's liable for the Gulf oil spill.)

The total amount of oil spilled into the Gulf will have an impact on the kind of damages claims the government — and private individuals — can bring against BP. But while it's important to get a fix on the leak, it won't be the final determination of the damage. "Even if we can't be precise about the amount of oil spilled, we can make conservative estimates of the losses suffered here, and they'll be huge," says David Uhlmann, the director of the environmental law and policy program at the University of Michigan Law School and a former prosecutor for the EPA. "But the easy part is going to involve the financial penalties and the civil penalties — the hard part will be restoring the region and making the victims whole."

Indeed, although BP's ubiquitous ads have said repeatedly that the company will "make things right," given the scale of the damages, that might prove impossible. And like with legitimate, the definition of the word right will be up for grabs. It will be defined, ultimately, by the courts; there have already been countless suits filed against BP by private individuals and businesses, and the government is pursuing an investigation of the spill too. "It's gearing up to be the most heavily fought legal battle in history," says Jody Freeman, founding director of the environmental law and policy program at Harvard Law School. So we know that one group will end up better off than when the spill started: the lawyers.

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