BP ordered to explain its refusal to pay $130M


BP was ordered to appear in a U.S. court this week to explain why it shouldn’t pay $130 million (USD) in its multibillion-dollar Gulf Coast oil-spill settlement.

U.S. Magistrate Judge Sally Shushan issued the show cause order after being forwarded a BP PLC letter sent to the court-supervised Deepwater Horizon Settlement Program, responsible for evaluating compensation claims from Gulf Coast businesses and residents after the 2010 spill.

The letter said BP wouldn’t make the third-quarter advance payment of $130.3 million to fund claims administrator Patrick Juneau’s proposed third-quarter budget until the British multinational oil and gas company is convinced the claims program is being operated properly.

The letter, from BP claims administrator Maria Travis, was filed Monday, the same day BP warned the U.S. 5th Circuit Court of Appeals the multibillion-dollar settlement would likely be dissolved if the court upheld a U.S. District Court’s interpretation of rules governing the payment of business economic claims, The (New Orleans) Times-Picayune said.

BP is appealing the district court’s interpretation.

The company has criticized the business economic claims and said in a recent Securities and Exchange Commission filing it believed its claims liability was now $9.6 billion, up from an original $7.8 billion estimate.

It said its liability could grow even higher if U.S. District Judge Carl Barbier’s decision isn’t overturned and the rules aren’t changed.

The company says it has nearly used up all of a $20 billion trust fund it set aside to cover claims.

It would be unreasonable to approve a budget that validates and incentivizes the various claims administration vendors to perpetuate their track record of poor productivity and excessive costs, Travis wrote to Juneau’s office.

The letter listed a dozen items it said Juneau’s office would have to explain before BP would pay the bill.

Juneau, appointed by Barbier after being recommended by both BP and the Plaintiff Steering Committee, said in a statement he would appear at the Wednesday hearing.

“We will be fully prepared to address and will address the request of the claims administrator to fund the proposed third-quarter budget,” he said.