BP hit with 64,000 claims over Gulf coast oil spill
Tuesday 22 June 2010
As new evidence emerged of a breakdown in safety procedures at the Deepwater Horizon rig, the administrator of BP's oil spill compensation fund vowed to speed up payouts to victims of the disaster in the Gulf of Mexico.
"Do not underestimate the emotionalism, the frustration and the anger of people in the Gulf, uncertain of their financial future," warned Kenneth Feinberg, the man appointed by the White House to run the $20bn fund.
He admitted that haste in processing claims could increase the risk of fraud and error, but said the sheer scale of the emergency meant "we have got to err on the side of the claimant".
Earlier, BP said the disaster, now into its tenth week, had already cost it $2bn. As of last night, the British company had paid out only $104m to claimants. In all, 64,000 demands have been submitted so far, totalling $600m. That pace will, however, only accelerate as oil continues to spew from the broken well-head, contaminating an ever-wider area of the Gulf.
BP said it collected 23,290 barrels-worth of leaking oil on Sunday – far below the US government's estimate that 60,000 barrels are being spilled into the ocean each day. No end is in sight until relief wells come into operation, probably in early August.
Mr Feinberg said it was not clear whether the $20bn BP had agreed to set aside for compensation would prove sufficient. The important thing, he added, was speed. "We have got to ease the burden on these folks in the Gulf, just as [President Barack Obama] instructed me to do," he said. Mounting evidence that BP may have disregarded normal drilling safety requirements only added to the anger. Yesterday, the New York Times blamed the calamity on the absence of a second "shear ram", which is intended to sever and seal a deep water pipeline.
Most oil rigs have two such devices in case the first fails, but no such back-up was available when the Deepwater Horizon's shear ram failed, most likely because leaking hydraulic fluid stopped it from working, following an explosion that killed 11 workers on 20 April.
That theory appeared to dovetail with the account of Tyrone Benton, a rig worker who claimed a leak was found weeks before the disaster in one of two control pods directing the flow of hydraulic fluid. Both BP, the operator of the rig, and Transocean, the owner, were informed, Mr Benton told the BBC Panorama programme last night.
Instead of shutting down the entire rig to carry out the necessary repairs, BP simply closed the faulty unit, it was alleged. That meant it was relying entirely on the other control pod to cope with problems at what some workers were already describing as "a nightmare well".
BP says it has found no evidence of corner-cutting to save money, but the latest revelations will be seized upon by critics such as Henry Waxman, a California Democrat who led the ferocious grilling of BP's chief executive, Tony Hayward, on Capitol Hill last week. Mr Waxman accused the company of making "multiple decisions for economic reasons that increased the danger of a catastrophic well failure".
As the physical extent of the spill grows, so do potential financial liabilities for the companies involved, and relations between them are already fraying. The Houston-based Anadarko Petroleum, which has a 25 per cent interest in the blown-out well as a non-operating partner, has accused BP of either "gross negligence" or "willful misconduct" and may take legal action.
In Washington, some of the capital's priciest lobbying and legal stars have been enlisted in the battle. BP, whose PR efforts have been by common consent a disaster thus far, has hired Jamie Gorelick, a deputy attorney-general in the Clinton administration and a member of the commission into the 9/11 attacks, to help navigate the treacherous waters ahead.
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