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BP, on Friday, asked a federal judge to temporarily stop oil spill compensation payments, which it says are based on a ‘fictitious’ and ‘absurd’ business economic loss basis.

The oil company, in a New Orleans court filing, cited businesses that enjoyed strong earnings in 2010 when the spill occurred and which had no connection to the spill or with the coastline, had received millions in spill compensation.

BP, which has divested a considerable part of its business to pay for compensation and fines for the disaster, said the company is likely to be ‘irreparably harmed’ due to the payouts, without relief from the court, reported Reuters.

The company said the payouts could cost it ‘billions’ more than its budget of $7.8bn when it agreed to a settlement in April 2012.

BP initially added more, reaching $8.5bn by the end of 2012, but soon realised that the amount it had set aside for compensation is not sufficient. The actual amount is dependent on decisions made by Louisiana lawyer, Patrick Juneau, who administers the payments, under a complex set of rules set out by the agreement.

BP was appealing a 5 March ruling by Judge Barbier, who upheld Juneau’s methods of compensation.

"The company said the payouts could cost it ‘billions’ more than its budget of $7.8bn when it agreed to a settlement in April 2012."

Two days after the ruling, the company said it would appeal on Barbier’s ruling and subsequently trimmed down the amount earmarked for payments to $7.7bn.

In the Friday filing, BP said: "The BEL (Business Economic Losses) policy decisions rewrite the agreement’s express terms, and contradict its purpose, plain text, and underlying principles by authorizing compensation awards for claimants seeking to recover for non-existent ‘losses’."

"BP did not agree to pay what is already hundreds of millions of dollars, and potentially billions, to claimants with ‘losses’ that do not exist in reality, but result solely from the claims administrator’s rewriting of the agreement," BP added.

In the filing, BP has referred to a $21m payment made to a rice mill in Louisiana, located about 40 miles from the coast that earned more revenue in the spill year of 2010 than in 2007, 2008 and 2009.

The company also referred to a $9.7m compensation for a highway, street and bridge construction company in northern Alabama, nearly 200 miles from the Gulf, which has no business in the region.

BP chief executive Bob Dudley said the company has so far spent about $24bn as part of the cleanup and restoration costs and payments in relation to claims made by individuals, businesses and governments relating to the disaster.


Image: A public protest in New Orleans following the Deepwater Horizon spill. Photo courtesy of Infrogmation of New Orleans.

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