Oil Spill Fund Administrator Softens Stance on Claim Compensation

Deepwater Horizon Gulf of Mexico Oil Spill

WASHINGTON (Dow Jones Newswires), Nov. 26, 2010

The overseer of a $20 billion oil-spill fund said Wednesday he will allow claimants affected by the largest marine oil spill in U.S. history to keep getting temporary relief--as they ponder whether to seek a final lump-sum payment or to sue BP and other companies involved in the incident.

The decision marks a concession from the fund's independent administrator Kenneth Feinberg, who had previously said claimants would have to surrender their right to sue the U.K.-based oil company in order to receive payments beyond emergency disbursements. The move responds to Gulf Coast anger over the claims process.

Gulf Coast residents had been complaining that the emergency payments were so small that they felt pushed into a harried settlement with the oil company to get more money. The deadline to apply for emergency payments expired Tuesday. Now, under the new program rules, businesses and individuals may request compensation once a quarter over the next three years while they ponder whether to permanently settle their claim. The program officially began Wednesday and lasts through Aug. 23, 2013.

"There will be many, many claimants who opt for the final payments in order to get a higher amount and move on," Feinberg told reporters. "If you take a quarterly payment and say down the road 'OK, I'm ready for a final payment,' there's no guarantee that final payments will be as generous."

The move shows the endurance of the economic fallout from the Deepwater Horizon oil spill more than seven months after it was unleashed by a rig explosion on April 20. The $20 billion fund, bankrolled by BP, which leased the rig that exploded, is intended to compensate those suffering economic damage from the incident, such as fishermen, hotel owners and tourism professionals.

Feinberg told reporters that emergency claims would likely total 450,000--four times more than he expected.

He said he expects to pay about $2.3 billion to cover 175,000 of those claims that are deemed eligible. Many claims lacked documentation, he said, adding that "fraud is a serious problem."

The new program was welcomed by some, but it isn't clear whether it will end frustration along the Gulf Coast.

Orange Beach, Ala., Mayor Tony Kennon said the interim payment plan was welcome news in the hard-hit resort city, where business owners have increasingly felt pressured to enter settlement talks with Feinberg's adjustors, without any notion of how much money they would receive.

"What he was doing was he was paying such small amounts, he was forcing them into final settlement," Kennon said. "That's despicable to me."

But Rep. Jo Bonner (R, Ala.), who this week asked the Justice Department to investigate the claims facility and exert direct oversight of the process, said that he had no more trust in the new process than in the emergency-payment program.

"Ken [Feinberg] knows that he has lied to the people of the Gulf Coast," Bonner said in an interview. "He unfortunately can put his head on a comfortable pillow tonight in Washington or Boston or New York City and not have to hear the people begging for crumbs off of the king's table, and I am not going to sit by and allow my people to beg for something that they are due."

Whether Feinberg can win back his trust may depend a lot on people like Alice Summers. The 75-year-old earned $700 a week as a secretary for an Orange Beach title company until she was laid off on July 30 when the local economy came to a halt. She received a $2,240 emergency payment from BP in August, but when Feinberg took the reins of the fund, adjustors classified her as a realtor and she was disqualified from the $20 billion fund. Because Summers' position was clerical and she has no real-estate license, she is also ineligible for compensation from a separate $41.5 million fund for agents and brokers.

While fighting to have her case reconsidered, Summers said she and her 76-year-old husband have canceled their life insurance policies and had to live on $265 a week that she receives in unemployment compensation. So far adjustors have been unwilling to reexamine her case for emergency payments, which has given her pause in seeking final settlement talks.

"I have written them, I have called them, and no one will listen to me," Summers said.

Copyright (c) 2010 Dow Jones & Company, Inc.

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