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BP Oil Spill Settlement: Why Company is Trying to Renege

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The formulas developed by BP, agreed to by BP, and attested to under oath by BP, indeed may result in an overall liability that exceeds $7.8 billion, as seemed likely to all parties since day one. Why? Because the Deepwater Horizon Disaster devastated the economy from Key West to Tampa, from Mobile to Birmingham, from Pascagoula to Jackson, and from New Orleans to Shreveport. Along the coast and well inland. From beachfront t-shirt shops to manufacturing and service companies located hundreds of miles from the shore but who supply, support and rely on the tourism trade just as the surf shop does.

This region is wed to tourism. In fact, a new report issued in July 2013, estimates that Gulf eco-tourism alone generates over $19 billion annually. Just because a business does not sell ice cream on Pensacola Beach does not mean it was not affected. Quite the contrary. The companies most impacted are often located dozens or even hundreds of miles inland, simply because it does not make economic sense to house your construction company or beer distributorship on the most expensive beachfront property in the United States. Yet these companies build hotels on the coast and sell Budweiser to beachgoers. Of course they were affected when the tourists were no-shows and the second-home buyers went to the North Carolina mountains instead.

Before the ink dried on the Settlement Agreement, BP publicly declared that the cost associated with program would not exceed $7.8 billion. Representations to the same effect were made to shareholders and Wall Street. This in spite of the fact that the company expressly agreed that settlement funding would not be capped. The uncapped nature of the agreement was the result of negotiations by the parties and was an important aspect the Court relied upon in order to approve the settlement.

It turns out that this number, $7.8 billion, was seemingly pulled from thin air by BP, and not based on any reliable statistical, actuarial or empirical data. Most observers recognized that this figure would be exceeded. In fact, attorneys representing the plaintiffs cautioned BP very early on about making such representations to its shareholders. Nevertheless, the company shouted it from the mountaintops.

Now BP needs an out, so it blames the victims, while it could find the true culprit in the mirror.

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