Isaac ‘Tar Balls’ Could Complicate BP’s Oil Spill Settlement [UPDATE]

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September 11, 2012

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(Bloomberg) — BP Plc’s proposed $7.8 billion partial settlement of 2010 Gulf of Mexico oil-spill claims shouldn’t be approved because last month’s hurricane shows how the extent of the spill’s damage still isn’t known, a victim’s lawyer said.

Large amounts of weathered oil and tar were washed up after Hurricane Isaac struck land in the Gulf of Mexico, showing that the spill hasn’t been contained and is still affecting the region, Stuart Smith, a lawyer for hundreds of Gulf Coast property owners and fishing and tourism businesses, said in a letter to the U.S. magistrate judge overseeing litigation over the 2010 spill.

BP’s contention that significant future contamination from the oil spill is unlikely is a “ridiculous proposition,” Smith said in the Sept. 10 letter filed in federal court in New Orleans today. “The landfall of Hurricane Isaac has changed the settlement landscape.”

BP, based in London, agreed in March to pay an estimated $7.8 billion to resolve most private plaintiffs’ claims for economic loss, property damage and injuries. The settlement, reached days before a scheduled trial on liability for the 2010 spill, doesn’t cover federal government claims and those of the Gulf Coast states.

Excluded Claims

Also excluded are claims of financial institutions, casinos, private plaintiffs in parts of Florida and Texas, and residents and businesses claiming harm from the Obama administration’s moratorium on deep-water drilling prompted by the spill. The settlement includes two separate agreements –one over medical claims, the other on economic and property damage.

U.S. District Judge Carl Barbier in New Orleans granted preliminary approval to the settlement in May and set a fairness hearing for Nov. 8. Smith and other lawyers have been filing objections to the settlement.

BP and the plaintiffs steering committee believe the settlement agreements “are fair, reasonable and adequate under the law and therefore should be granted final approval by the court,” Scott Dean, a company spokesman, said in an e-mailed statement.
The objections were expected, “as is common in any class- action settlement approval process,” Dean said.

Hurricane Isaac uncovered limited amounts of residual oil from the Macondo well, BP said in a statement today. This material was “buried in isolated stretches of shoreline we were cleaning before the storm hit,” Mike Utsler, president of BP’s Gulf Coast Restoration Organizations, said in the statement.

Cleanup Operations

BP has spent $14 billion on cleanup operations since the incident, the company said.

Smith asked U.S. Magistrate Sally Shushan to open limited discovery, or evidence-finding, on the effects of Isaac, as well as the extent of the environmental recovery in the Gulf.

Smith hadn’t provided the settling parties with enough opportunity to review and respond to his request for more discovery, Shushan said in an order today. Shushan gave BP and the plaintiffs steering committee, which reached the settlement with the company, until
Sept. 14 to respond to Smith’s request. She didn’t order more discovery.

Even before Hurricane Isaac, “oil continues to wash up on our beaches,” Allen Kanner, lawyer for Louisiana Attorney General Buddy Caldwell, said in a court filing last week objecting to the settlement. “At least four of our fisheries remain closed due to the continued concentration of oil in the Gulf.”

The proposed settlement “unfairly transfers the risks of future losses from BP to the victims even though BP legally remains forever responsible,” Kanner said.

The case is In re Oil Spill by the Oil Rig Deepwater Horizon in the Gulf of Mexico on April 20, 2010, MDL-2179, U.S. District Court, Eastern District of Louisiana (New Orleans).

-By Margaret Cronin Fisk and Laurel Brubaker Calkins. Copyright 2012 Bloomberg.
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