BP /Gulf Coast Claims/ DISTRICT COURT FOR THE EASTERN DISTRICT OF LOUISIANA

8/3/2019 BP /Gulf Coast Claims/ DISTRICT COURT FOR THE EASTERN DISTRICT OF LOUISIANA

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UNITED STATES DISTRICT COURT

FOR THE EASTERN DISTRICT OF LOUISIANA

IN RE: OIL SPILL by the OIL RIG * MDL NO. 2179

DEEPWATER HORIZON IN THE *

GULF OF MEXICO on APRIL 20, 2010 **

*

THIS DOCUMENT RELATES TO: *

ALL CASES * JUDGE BARBIER

*

* MAG. JUDGE SHUSHAN

*************************************

PLAINTIFFS SUPPLEMENTAL BRIEF IN SUPPORT OF

SUPERVISION OVER THE BP INTERIM CLAIMS PROCESS

Plaintiffs, through undersigned counsel, respectfully supplement their briefing in

response to the Courts Order and Reasons of February 2, 2010,1 requesting the parties

respective positions regarding BPs compliance, or lack thereof, with the requirements of the Oil

Pollution Act of 1990 (OPA):

MAY IT PLEASE THE COURT:

As more fully outlined below, Plaintiffs respectfully submit that BP is in violation of

OPAs requirement to establish an interim claim process and to pay interim claims; that BP,

through its Gulf Coast Claims Facility (GCCF), has violated of the spirit of the Courts Order

seeking to protect plaintiffs and putative class members from confusion and misunderstanding;

and that the releases obtained from plaintiffs and other putative class members are invalid and

should not be enforced. Plaintiffs, therefore, respectfully ask the Court to appoint a Special

1See generally, MOTION TO SUPERVISEEXPARTECOMMUNICATIONS BETWEEN BP DEFENDANTS AND PUTATIVE

CLASSMEMBERS [Doc 912] (Dec. 21, 2010); ORDER AND REASONS [Doc 1098] (Feb. 2, 2011); and, PLAINTIFFSSUPPLEMENTAL MEMORANDUM CONCERNING BPS FAILURE TO COMPLY WITH THE MANDATES OF OPA [Doc 1318](Feb. 18, 2011).

Case 2:10-md-02179-CJB-SS Document 3423 Filed 07/25/11 Page 1 of 22


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Master, pursuant to Rule 53(a)(1)(A) and/or (C) of the Federal Rules of Civil Procedure, to (i)

assure compliance with OPA; (ii) ensure accurate and appropriate communication with

claimants; (iii) make findings and/or recommendations regarding the satisfaction of OPAs

presentment requirements; and (iv) make findings and/or recommendations regarding the scope

and/or efficacy of releases.

I. THE GCCFS ABJECT FAILURE TO PAY INTERIM CLAIMS VIOLATES

OPA.

On February 2, 2011, over five months ago, this Court entered an Order identifying the

GCCF as the entity with the responsibility to ensure that the mandates of OPA are implemented.

(Rec. Doc. 1098). The GCCFs own June 2011 statistics reveal that the GCCF has paid fewer

than 16% of interim claims filed, compared to the 97% payment rate of quick final claims

accompanied by releases.2 This telling statistic demonstrates that the GCCF continues to follow

the BP litigation mandate of settling as many claims as possible to reduce the size of the putative

class.

By amending OPA in 1996 to establish the mandatory interim claim requirement,

Congress sought to ensure that victims were paid immediately after an oil spill without losing

rights to pursue long-term claims. Like any law, the goals of OPA can only be accomplished if

polluters adhere to itor they are forced to comply. The complaints of Gulf Coast residents

today are identical to those of Rhode Islands spill victims in 1996, which led to the creation of

the interim claims process. BPs coercive tactics to obtain final releases from putative class

members filing claims with the GCCF are also similar to those tactics revealed to Congress in

2Gulf Coast Claims Facility, Status Report at 1 (May 14, 2011), attached as Exhibit A.



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1996 when it considered amending OPA. BPs strategy to obtain releases has permeated its

interactions with putative class members from the outset. The abject failure of the interim claims

process administered by the GCCF is the latest, and most troubling, in a long line of actions by

BP designed to close the books on the oil spill. In dire need of relief, Plaintiffs turn to this

Court, with its broad authority to protect putative class members and to ensure that the

mandates of OPA are implemented. [Doc 1098, at 7]

A. BPs Early Tactics to Withhold Interim Payments to Obtain Releases.

Barely one week after the April 20, 2010, oil spill, BP convinced hundreds of

unsuspecting and confused Gulf Coast fishermen to sign releases of all claims against BP. The

releases were extracted either as a condition of working in the Vessel of Opportunity (VoO)

program or in exchange for a $5,000 one-time payment.3 Judge Engelhardt of this Court ruled at

an emergency hearing that BPs release was overbroad.4 After public backlash and official

rebuke,5

BP subsequently entered into a Consent Judgment formally invalidating the release.6

B. BPs Coercive Tactics Continue with the GCCF.

Following the failure of these early efforts, BP changed only its tactics for obtaining

releases, not its overall strategy. After struggling with its own oil spill claims process for over 3

months, BP established the GCCF in August 2010 to administer the OPA-mandated interim

claim process. The first phase, the Emergency Advance Payment program, was marred by

several significant problems, which are well documented in the previously filed Plaintiffs

3 See George Talbot, BP Told to Stop Circulating Settlement Agreements With Coastal Alabamians, Mobile Press-Register, May 2, 2010, at http://blog.al.com/live/2010/05/bp_told_to_stop_circulating_se.html; Stephanie Condon, BPTold to Stop Distributing Oil Spill Settlement Agreements, CBSNews.com, May. 3, 2010, athttp://www.cbsnews.com/8301-503544_162-20003978-503544.html, attached as Exhibit B.4

Id.5

Id.6

See Consent Judgment, Rec. Doc. 6 in Barisich v. BP, EDLA Case No. 2:10-cv-01316, attached as Exhibit C.



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Motion to Supervise. [Doc 912-1] Notably, when the GCCF ended the Emergency Advance

Payment program in November 2010, it left two-thirds of the claims unresolved.7 Indeed, BPs

failure to pay interim claims under its Emergency Advance Payment program had the effect of

stranding the majority of putative class members without the type of immediate relief Congress

required polluters to provide under OPA. As of Thanksgiving of 2010, putative class members

continued to go without interim relief.

In mid-December 2010, the GCCF unveiled the next phase of BPs claims programa

quick pay program offering $5,000 per individual and $25,000 per business. Again, rather

than provide the required interim relief mandated by OPA, the GCCFs protocol made it clear

that BP intended to require putative class members to make a final claim in exchange for a full

release of their rights and an assignment of those rights to BP.8 For months, this quick pay

program was for all intents and purposes the only mechanism to obtain compensation for oil spill

losses. For example, as of late January 2011, the GCCF paid one interim claim out of the 42,155

interim claims submitted. In contrast, by that same date, the GCCF had paid 81,933 quick pay

claims out of the 85,741 quick pay claims submitted.9 A seafood business owner in Mobile,

Alabama, who took a quick pay during this time articulated the crux of the problem: It was kind

of like a pressure signing. If youre hungry and someone offers you something to eat, its hard to

say no.10

7 See Jonathan L. Ramseur, Cong. Research Serv., Liability and Compensation Issues Raised by the 2010 Gulf Oil Spill at16, (Mar. 11, 2011), attached as Exhibit D.8

See Feinberg Releases 'Emergency Protocol' For BP Oil Spill Claims (With Complete Protocol), Mobile Press-Register,Aug. 20, 2010, at http://blog.al.com/live/2010/08/feinberg_releases_emergency_pr.html, attached as Exhibit E.9

See Rec. Doc. 1085 at 5-6.10

See Gulf Oil Spill: Tracking the Claims Struggles Persist for Those Seeking Compensation, Mobile Press-Register,Feb. 6, 2011, http://blog.al.com/live/2011/02/gulf_oil_spill_tracking_the_cl_6.html, attached as Exhibit F.



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C. The GCCF Continues to Withhold Interim Payments in Attempts to Secure

Quick Pay Releases.

The GCCF allegedly instituted an interim claims process in February 2011, yet it has

failed to provide interim relief to putative class members. In practice, there is still no interim

claim process in place. The GCCF continues to manipulate putative class members making

interim claims and drives them to sign full releases in exchange for relief that should not come at

such a cost. BP, through the GCCF, is using the interim claim procedure to leverage releases in

direct contravention of OPAs mandate.

Statistics appearing on the GCCF website reveal the disparity between the payment of

interim claims and the payment of quick pay claims. As of late May 2011, GCCF has failed to

pay 86.4% of interim claimants. Conversely, as of that same date, GCCF has failed to pay only

3% of the quick pay claims.11

While the statistics clearly indicate that the GCCF is paying quick pay claims and not

paying interim claims, they do not offer a clear understanding of the type and quality of relief

actually flowing to claimants.12

For example, the statistics do not distinguish whether interim

claimants actually received interim relief, or some other type of paymentfor example, a quick

payment. It is also unclear if the number of claims paid includes any or all of the 3,658

claimants who accepted final offers. Even the 13.6% of interim claimants who have been paid

may have, in fact, been paid through the quick pay option. The GCCF Status Report

ambiguously reports claimants paid not interim claims paid.13

The dollar amount of interim

claims paid to individuals averages $6,441.84, barely more than the $5,000 individual quick

11See Gulf Coast Claims Facility, Status Report at 1 (May 14, 2011), Exh. A.

12Id.



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settlements being offered by the GCCF.14 Similarly, businesses receiving interim relief have

been paid on average $25,249.39, not even $250 more than the quick business settlement of

$25,000.15

The GCCFs figures suggest that many payments made on interim claims were, in fact,

quick pay equivalents made in exchange for the claimant signing a release and assignment of

rights. Regardless of the GCCFs confusing representations on how many interim claims have

been paid, one thing is clear: the vast majority of interim claimants have received no payment

whatsoever. More significantly, only 184,091 of 511,171 claimants, that is to say 36% of all

claimants, have received any payment at all from the GCCF at any time.

16

While the failure to pay interim claims, as noted above, helps explain why so many

victims are in dire straits and easily manipulated, the payment statistics illustrate only part of

the problem. The GCCF reported as of May 31, 2011 that 88% of claims have been

processed,17 thus leading Mr. Feinberg to declare victory and wind down the GCCF sooner

than expected.18

This statistic, however, says nothing about what it means to process a claim

or how these claims have actually been handled (or mishandled).

First, the statistic relating to total number of claims processed includes quick pay

claims, which require no review by the GCCF19

and are often not the type of claim the claimant

initially submitted (but rather offered in response to an interim claim). This suggests a

13Id.

14

Id.15Id.

16Id.

17Gulf Coast Claims Facility, Status Report at 1 (June 1, 2011), attached as Exhibit G.

18 BP Spill Fund Winding Down After $4 Billion Paid Out: Report, Reuters, May 29, 2011,http://uk.reuters.com/article/2011/05/29/business-us-bp-fund-idUKTRE74S18I20110529, attached as Exhibit H.19 Ramseur, supra note 6 at 16, Exh. D.



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fundamental failure by the GCCF to process interim claims. Second, the manner in which claims

are processed contributes to delay, which exacerbates not only economic hardship but also

confusion and frustration, driving more and more residents and businesses already on the brink

of economic collapse to throw in the towel and give up the rights that Congress sought to protect.

The GCCF seemingly presents the option to victims of obtaining interim relief, yet in actuality,

the documentation requirements are confusing and dauntingespecially when compared to the

ease of obtaining a quick payment, which BP offers without any documentation requirements in

exchange for a release.

Moreover, the GCCF fuels the growing uncertainty and frustration surrounding the

requirements for presentment under OPA by alleging documentation deficiencies in interim

claims. This continued uncertainty leads many putative class members to wonder whether they

have preserved their ability to sue BP in court. This most fundamental aspect of OPA

presentment, inextricably linked with both the GCCF and this Courts MDL, cannot remain a

mystery or a moving target.

Putative class members experience with the GCCFs ongoing claims methodology and

procedure has borne out the concerns of Plaintiffs earlier expressed in their initial moving papers

regarding confusion in the process that leads to abuse of victims who seek the interim relief that

OPA guarantees. Processed putative class members who actually receive a substantive

response, as opposed to a Deficiency Notice, get a Determination Letter along with

attachments that outline the GCCFs calculation of loss. Whether or not a claimant has filed a

full final claim, an inordinate amount of the GCCFs response concerns the full final

payment calculation. The full final calculation represents the most that the claimant can



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expect from the GCCF if it satisfies significant documentation requirements,20 and generally, the

calculation predicts a minimal chance of being compensated in the future. The resulting message

is clear: the only way to get compensation from the GCCF is to take the quick pay and sign the

complete release and assignment of all rights to BP.

The accounts of individual, putative class members illustrate the widespread problems

suggested by the statistics and support the need for judicial intervention to prevent potential

coercion and potentially unknowing waivers of rights."21 The Affidavit submitted in support of

this supplemental Memorandum, for example, from Bui Tinh, a representative of Queen Mary of

Vietnam Community Development Corporation (CDC), a social service organization helping

members of affected communities to file claims, describes how the burdensome and unrealistic

requirements for interim claim documentation set up certain failure that is then used by the

GCCF to manipulate putative class members into accepting quick payments and signing

releases.22 The CDC Affidavit further recounts how the GCCF processes claims by

misapplying its own methodology to arrive at the quick pay or nothing alternative.23

The

Affidavit of the CDC exposes the subtle scare tactics employed by the GCCF that lead putative

class members to accept quick payments out of fear and based on the belief that they will never

20 See Gulf Coast Claims Facility, GCCF Document Requirements,http:www.gulfcoastclaimsfacility.com/requirements.pdf, attached as Exhibit I.21

The accounts of individual, putative class members illustrate the widespread problems suggested by the statistics andsupport the need for judicial intervention to prevent potential coercion and potentially unknowing waivers of rights."

Sorrentino v. ASN Roosevelt Center LLC, 584 F.Supp. 2d 529,532 (E.D.N.Y. 2008) quoting Ralph Oldsmobile, Inc. v.General Motors Corp., 2001 WL 1035132 at *2 (S.D.N.Y. 2001) ("Findings of potential coercion and potentiallyunknowing waivers of rights" suffice to require court supervision, correction, and enforcement.).22

See, for example, the Affidavit of Tinh Bui at 10, describing the confusing and burdensome documentationrequirements imposed on claimants as representative of the experience of hundreds of claimants assisted by the MQVNCommunity Development Corporation, attached as Exhibit J.23

Id. 7 (stating that the GCCFs erroneous methodology led to gross underestimations of damages).



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get a better offer.24 These examples indicate the systemic nature of the problem and reinforce

Plaintiffs need for judicial relief. These accounts shed light on exactly what the GCCF means

when it reports that 88% of the claims have been processed.

D. Defects in the GCCF Review Process Cause Additional Hardships for

Putative Class Members.

The experiences of claimants not only evidence the tactics employed by the GCCF to

obtain releases for BP, but they also expose defects in the GCCFs review process. In one case,

the CDC avers that the GCCFs assumptions about income operated to reduce an oyster

shuckers calculated 2010 losses by almost 50%.25 That amount is then halved again, based on

the Tunnel Reports speculation about the longevity of environmental impacts,26 yielding a full

final loss amount, which is the equivalent of nine months of 2009 income. Under the GCCFs

methodology, the claimants full final offerthe total amount he can ever expect from the

GCCFis $0.

Grace Scire, the Gulf Coast Regional Director of Boat People S.O.S. (BPSOS), a non-

profit organization helping Asian-Americans in Louisiana, Mississippi, and Alabama to navigate

the GCCF and OPA claims submission process, corroborates the desperation and confusion

created by the GCCFs handling of the claims submitted by the Vietnamese and Southeast Asian

Community. She confirms that several individuals have accepted final payments in the

amount of $5,000 because they could not wait any longer and were desperate for some income to

offset their losses. Ms. Scire, who has personally been helping hundreds of putative class

24Id. 5 (stating that claimants believe they have no other option than to accept the quick pay).

25 Id. 7.26

For a discussion of the myriad flaws in the Tunnel Report underlying the GCCFs methodology, see PlaintiffsSupplemental Memorandum Concerning BPs Failure to Comply with the Mandates of OPA (Rec. Doc. # 1061 at III.B.)



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members, confirms that there has not been a single offer of interim payment made by the GCCF

to any claimant who has come to BPSOS.27

E. These and Other Systemic Problems Violate the Spirit of the Courts

February 2, 2011 Order.

In addition to the GCCFs own statistics, noted above, sworn affidavits of organizations

and institutions collectively representing hundreds of putative class members, together with

several media reports, demonstrate the increasing severity and breadth of the GCCFs failed

interim claims process:

The President of the Louisiana Oystermans Association confirmed that BP/GCCF

has a pattern of requiring endless documentation, many times asking for the samematerials over and over again as well as not paying interim claims for ourmembers [thus] forcing many of the members of the Association to have to acceptthe quick pay option or starve because the GCCF refuses to pay their interimclaims.28

Wayne Ciko, the owner of the Billet Bay Historical Society, whose property BPsignificantly contaminated with oil from the April 20, 2010 spill, has waited morethan 90 days for a response to his interim claims. The damages to remediate theproperty are estimated to be in excess of $750,000. GCCF asked him to send thesame documents he previously sent in on several occasions. In the meantime,GCCF offered him the quick pay option.

29

Oystermen in lower Plaquemines are reportedly accepting $5,000 quick paymentsand signing releases because they have not received interim payments and cannotwait any longer for relief.

30

Alabama Attorney General Luther Strange stated during an interview in March2011 that the GCCFs payment of claims has been too slow [and] the Gulf CoastClaims Facility has dragged its feet until victims are desperate to settle foranything.31

27 Affidavit of Grace Scire, Gulf Coast Regional Director of Boat People S.O.S. (BPSOS), attached as Exhibit K.28

Affidavit of Byron Encalade, President, Louisiana Oystermans Association, attached as Exhibit L.29

Affidavit of Wayne Ciko, Billet Bay Historical Society, LLC, attached as Exhibit M.30

Susan Buchanan, Oyster Growers Say Post-Spill Assistance Is Inadequate, Huffington Post, Apr. 25, 2011, athttp://www.huffingtonpost.com/susan- buchanan/oyster-growers-say-postsp_b_853469.html, attached as Exhibit N.31

Katherine Sayre, Alabama Attorney General Luther Strange Urges BP Claims Czar to "Quit Dragging Your Feet",Mobile Press-Register, Mar. 21, 2011, attached as Exhibit O.



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For Florida putative class members, a news outlet reported that the final andinterim payments have been slow since the end of the EAP program. Take awaythe quick payments, and less than 5 percent of Florida business claims and 15 percent of its overall claims filed since the end of the emergency process have

been paid.

32

Ryan Lambert, a Louisiana fishing guide, told CNN that [i]f you dont agree tothis [quick pay] amount you start a terrible process constant delays, requests formore documentation, with no communications from BP. Most people cant waitany longer to pay off their bills. He has received only 10% of his million-dollarlosses and believed that the claims process is pressing business owners to theropes in the hope that well become desperate enough to accept the companysquick claim $25,000 settlement offers.

33

The affidavits and materials accompanying this Memorandum all indicate the same

systemic problems. Cumulatively the statistics, the individual illustrations, and the

representative affidavits demonstrate that since February 2011, the GCCF is strategically and

systematically forcing putative class members to accept quick payments with accompanying

releases because they are offered no other viable option. It is not limited to a few mistakes or

egregious examples. BP has established a claims process with the primary function of

convincing putative class members that the only compensation available is a minimal set amount

that comes with a full release attached. The delay in responding to interim claims, the near-

complete failure to pay interim claims, and the skewed final payment calculation delivers the

message to over 112,000 putative class members: the only way to ever get any more

compensation is to take the quick payment amount and sign a release.

32Travis Pillow, Oil Spill Claims Numbers: Payments Still Slow, The American Independent, Apr. 19, 2011, attached as

Exhibit P.33

Ryan Lambert, BP Defaulting on Debt to People of the Gulf, Special to CNN Opinion, Apr. 19, 2011, available athttp://articles.cnn.com/2011-04-19/opinion/lambert.bp.oil.spill.compensation_1_bp-blowout-oil-spill-catastrophic-spill?_s=PM:OPINION, attached as Exhibit Q.



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II. OPA REQUIRES BP TO PAY INTERIM CLAIMS.

BP and its claims agent, the GCCF, have challenged this Courts authority to monitor and

if necessary ensure compliance with OPAs mandates related to the claims process. BP contends:

OPA imposes very limited, purely procedural requirements. It requires only the existence of

some process whereby claims are presented to the responsible party...In short, OPA does not

prescribe how a responsible party must implement the required claims procedure.34 Not

surprisingly, Kenneth Feinberg and the GCCF echo BPs argument: With respect to the issues on

which the Court has directed further briefing the processing of claims, methods for evaluating

them, and releases - OPA has no mandates.35

BPs and GCCFs position that BP can lawfully establish any interim claim procedure it

wants, regardless of how ineffective at compensating short term losses, regardless of how coercive in

securing full releases, is incorrect and should not be countenanced by this Court. The responsible

party establishes the procedure, no doubt, but the procedure has to work as intended by OPA in order

to comply with OPA. When enacting OPA, in response to the environmental tragedy wrought by

the grounding of theExxon Valdezin Prince William Sound, Congress intended to enact, and in

fact did pass, a law that would quickly and fully compensate victims and place the costs of an oil

spill on the polluter. See Rice v. Harken Exploration Co., 250 F.3d 264, 266 (5th Cir. 2001)

(stating that the goals of OPA are to streamline federal law and provide quick and efficient

cleanup of oil spills, compensate victims of such spills, and internalize the costs of spills within

the petroleum industry) (citing Senate Report No. 101-94, reprinted in 1990 U.S.C.C.A.N. 772,

723)(excerpts attached as Exhibit R).

34BPs Supp. Mem. Re: OPA and GCCF [Doc. 1330] at p.5.

35 Kenneth R. Feinberg Amicus Curiae Brief [Doc. 1332-2] at p.8 (emphasis in original).



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Congress did not intend, however, and OPA does not provide, a process by which BP can

limit a putative class members right to obtain complete compensation by withholding payment

subject to a full and final release. The process BP has established is antithetical to OPAs

mandate. The GCCFs own statistics convey the reality that it is not paying interim claims and

the numbers reveal just how little BP is paying to secure full and final releases of claims, with

full subrogation rights, and with no concern for the full compensation of those affected.

OPA unambiguously establishes the rule that a responsible party must pay all amounts to which

a claimant is entitled. OPA 1005(b), 33 U.S.C. 2705(b). As previously briefed to the Court

[Doc. 1318, at pp.3-7], the requirement that a responsible party make continuing payment of

interim claims for damages without obtaining a release for more than it paid appears throughout

OPA; it is an integral part of its goal of ensuring full compensation for putative class members.

In 1996, six years after Congress enacted OPA, the North Cape oil spill off the coast of

Rhode Island exposed the need to protect victims from the financial hardship created by long

term spill impacts. In the aftermath of the North Cape oil spill, which resulted in lengthy and

extensive fisheries closures and the decimation of the lobster fishery, desperate victims with no

other options released all legal rights in exchange for needed short-term compensation. Congress

amended OPA in direct response to this polluter-created duress by adding the interim claims

provisions.

Testimony offered in support of the 1996 OPA amendments reveals the fragility of

victims and the methods of abuse. For example, the President of the Rhode Island Lobstermens

Association testified that the polluter was using OPA to pay off claims at minimal rates and to

effectively discourage putative class members from seeking legitimate, long-term claims for



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damages. He further testified that the polluter was also using OPA as a tool to coerce releases

from putative class members by waving a few dollars in front of people to force them to agree

to limitations on their rights.36 He also expressed concern that the polluter was using OPA to

set up road blocks that prevent putative class members from obtaining full recovery for their

losses, in contravention of the purposes of the Act. The same coercive tactics to obtain final

releases being employed by BP today were squarely before Congress when it was considering

amending OPA. Congress designed the interim claim amendments to redress the problem. The

interim claim procedure mandated by OPA must function to avoid these problems, not

exacerbate them as is currently occurring.

Congress specifically considered arguments against the proposed amendment to OPA to

create a mandatory interim claims process. Insurers complained that the interim process would

create too much uncertainty for insurers by making virtually every claims payment interim and

instead expressed a preference for a final payment and release process that would allow them to

close the books on a spill.37

Congress flatly rejected the argument and enacted the interim

provisions as proposed. Congress also considered the suggestion that interim payments and the

procedures governing them should be discretionary and that the Responsible Party was

voluntarily being more efficient and generous than anyone had a right to expect.38

Congress

rejected that approach as inadequate. Indeed, Congress refused to retreat from the mandatory

36

Prepared Testimony of Bob Smith, President, RILA, Before the Senate Environment and Public WorksCommittee Re: The Rhode Island Oil Spill and Implementation of the OPA 90 (excerpts), attached as Exhibit S en

globo.37 Prepared Testimony of Richard H. Hobbie, III, President Water Quality Insurance Syndicate on Behalf of theAmerican Institute of Marine Underwriters Before the Senate Environment and Public Works Committee Re:S.1730, The Oil Spill Prevention and Response Improvement Act (excerpts), Exhibit S.38 Id.



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nature of interim claims, even as it relates to claims paid from federal monies in the Oil Spill

Liability Trust Fund (Trust Fund).

The United States Coast Guard-administered Trust Fund and the implementing

regulations are instructive on the issue of releases and lend further support to the argument that

interim claims must be paid and any release should be narrow in scope. The Coast Guard does

not require a claimant to release the responsible party, or others, from any and all damages,

known or unknown, 33 C.F.R. 136.115. Under OPA, it cannot. The Coast Guard only obtains

an automatic release for a compensated claim, just as OPA provides.

III. THE MANNER IN WHICH THE GCCF IS REFUSING TO PAY INTERIMCLAIMS THREATENS BOTH THE RIGHTS OF PUTATIVE CLASS MEMBERS

AND THE AUTHORITY OF THIS COURT AND DISTORTS OPAS

PRESENTMENT REQUIREMENT.

The current manner in which BPs interim claim process is being handled by the GCCF

has created unnecessary uncertainty and confusion that adversely affects the rights of putative

class members and litigants, but also the authority of this Court to manage this litigation.

Because OPAs presentation requirement is both a condition precedent to later legal challenges,

as well as a mechanism intended to promote resolution of claims for damages and to facilitate

immediate payment of interim claims suffered by victims of oil spills, Plaintiffs respectfully

maintain that the conditions for meeting this requirement should be simple, straightforward, and

obvious. Allowing the presentment requirement to become increasingly more complicated and

mysterious cuts against the clear definition of the term claima request, made in writing for

a sum certain, for compensation for damages or removal costs resulting from an incident. OPA

1001; 33 U.S.C. 2701. It also does violence to the remedial nature of the statute. To prevent

continued abuses of the process, Plaintiffs request that the Court appoint a monitor or Special



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Master to oversee and/or supervise the interim claims process to halt the ongoing coercion and

impairment of rights by BP and the GCCF.

Under the plain terms of the Act, the presentment requirement is satisfied when a

written request for a sum certain for covered damages is made to the responsible party.

Presentment must inform the responsible party of the nature and extent of the damages alleged

and of the amount of monetary damages claimed. Johnson v. Colonial Pipeline Co., 830 F.

Supp. 309, 311 (E.D. Va. 1993). The responsible party must publish the procedures by which a

victim may present a claim within 15 days after designation as such. OPA 1014(b); 33 U.S.C.

2714(b). However, the responsible party is not given the authority to define what

presentment means for purposes of OPA.

BPs unpredictable, abstruse procedures have effectively created a moving target that no

claimant stands a fair chance of hitting. Judicial intervention at this stage to clarify presentment

is appropriate and well within the Courts authority under 28 U.S.C. 1407 and Federal Rule of

Civil Procedure 23.39

Any writing by a claimant submitted to BP and/or the GCCF under any

phase of the various claims process, that sets out a sum certain (whether interim or final) and a

simple, reasonable description of the damages claimed, should be deemed to satisfy the

definition of claim and thus presentment under OPA.

39See also, 33 U.S.C. 2717(b) (federal district courts shall have original exclusive jurisdiction over all

controversies arising under this Act). The plaintiffs requests for a declaration of legal rights and obligations underOPA are controversies between Plaintiffs and BP under the Act which are separate and distinct from a substantiveclaim for a sum certain of damages or removal costs from BP.



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Additionally, the GCCFs handling of interim claims threatens putative class members

rights, and has intruded into the province of this Court to determine liability and allocation of

fault and ensure that BP complies with the mandates of OPA. The GCCFs practice of

requesting documents that do not exist and submitting calculations that misrepresent documents

that have been produced are being used as tools to force putative class members to accept final

payments and sign releases.

Courts have created the rule that these relationships deserve the Courts heightened

attention and that communications and the exchange of documents can and should be supervised

by the district court. See, e.g., Kleiner v. First Natl Bank of Atlanta, 751 F.2d 1193, 1197 (11th

Cir. 1995); Jones v. Jeld-Wen, Inc., 250 F.R.D. 554, 561 (S.D. Fla. 2008); Hampton Harwarde,

Inc. v. Cotter & Co., 156 F.R.D. 630, 631-32 (N.D. Tex. 1994). Rule 23(d)(1) protects the

members of a proposed class against coercion and mis-information. See, e.g., In re Currency

Conversion Fee Antitrust Litigation, 361 F. Supp. 2d 237, 252 (S.D.N.Y. 2005) (stating that the

district courts authority to regulate communications under Rule 23(d) is not limited to

communications that actually mislead or otherwise threaten to create confusion, but extends to

communications that interfere with the proper administration of a class action or those that abuse

the rights of members of the class); Keystone Tobacco Co., Inc v. U.S. Tobacco Co., 238

F.Supp.2d 151, 154 (D.D.C. 2002) ([T]he Court rejects defendants position that it has no

authority to limit communications between litigants and putative class members prior to class

certification.). Rule 23(d)(1) augments and informs this Court's case management powers,

and "may be combined with an order under Rule 16." Fed.R.Civ.P. 23(d)(3).



18/143

18

This court may exercise its Rule 16/Rule 23(d) authority at any time, including during the

pre-certification stage. MANUAL FOR COMPLEX LITIGATION, FOURTH (Federal Judicial Center

2004), 21.12. This Court is vested with the authority to protect putative class members against

"settlement offers that are potentially overreaching or coercive." Sorrentino v. ASN Roosevelt

Center LLC, 584 F.Supp. 2d 529,530 (E.D.N.Y. 2008). This power applies "even before a class

is certified." Sorrentino, 584 F. Supp. 2d at 532, quoting Ralph Oldsmobile, Inc. v. General

Motors Corp., 2001 WL 1035132 at *2 (S.D.N.Y. 2001). "Findings of potential coercion and

potentially unknowing waivers of rights" suffice to require court supervision, correction, and

enforcement. Id.

A Rule 23(d)(1) order is an exercise of the Courts case management authority. It is not a

Rule 65 injunction. Kleiner, supra. Thus, courts have held that a specific showing of abuse is

not needed for a court to exercise authority; indeed, the goal of Rule 23(d)(1) orders is to prevent

confusion, concern or abuse before it happens, by recognizing and regulating the situations in

which the risk of such incursions into class members rights can arise, before such rights are lost.

See, e.g., Abdallah v. Coca-Cola Co., 186 F.R.D. 672, 678 (N.D. Ga. 1999) (Coca-Cola has not

given the Court any reason to suspect that it will attempt to mislead its employees and coerce

them into non-participation in this case. But simple reality suggests the danger of coercion is real

and justifies the imposition of limitations on Coca-Colas communications with potential class

members).

OPA does not mention, contemplate, or provide any authority for the use of a release of

litigation rights during the OPA-presentment stage. OPA does not provide any mechanism to

resolve (with a release or otherwise) punitive damage claims, maritime claims, medical



19/143

19

monitoring or personal injury claims. The GCCFs motivation to use the OPA-presentment

requirement as a tool to avoid litigation by extracting releases is unquestioningly a BP directive.

As a BP directive, the release should be clear to a layperson, contain necessary safeguards, be

expressly limited to OPA claims against BP, and not infringe upon the Courts authority to

supervise and manage this litigation and the putative class. As such, all releases entered into by

unrepresented putative class members should be retroactively voided, or at a minimum, the Court

should suspend the effectiveness of any releases obtained from putative class members by the

GCCF for the benefit of BP and other defendants until such time as the validity of the releases

can be judicially determined.

IV. CONCLUSION AND RELIEF REQUESTED.

This Court has already recognized that it has the responsibility to ensure that the

mandates of OPA are implemented. BP has failed to comply with the letter and spirit of OPA, a

law designed to provide an interim claims process focused on paying short-term damages to

putative class members without requiring them to waive their rights pending full compensation.

Instead, BP through the GCCF continues to make things as difficult as possible for the victims to

receive interim payments. Desperate people do desperate things, and BP and the GCCF have

been able to extract releases via the quick pay option from those who could no longer afford to

wait. GCCF's release-encumbered, low dollar, so-called quick pay payments outnumber OPA-

prescribed interim payments by nearly 10-to-1. GCCFs own numbers bear this out: as of May

31, 2011, only 13,085 putative class members throughout the entire Gulf Coast have received

interim payments compared to 114,482 who took quick pays and signed overbroad releases.



20/143

20

Plaintiffs therefore respectfully request the Court to appoint a Special Master to supervise

the BP / GCCF claims process in order to: (i) assure compliance with OPA; (ii) ensure accurate

and appropriate communication with claimants; (iii) make findings and/or recommendations

regarding the satisfaction of OPAs presentment requirements; and (iv) make findings and/or

recommendations regarding the scope and/or efficacy of releases.

This 25th day of July, 2011.

Respectfully submitted,

/s/ Stephen J. Herman /s/ James Parkerson Roy__________Stephen J. Herman, La. Bar No. 23129 James Parkerson Roy, La. Bar No. 11511Herman Herman Katz & Cotlar LLP Domengeaux Wright Roy & Edwards LLC

820 OKeefe Avenue 556 Jefferson Street, Suite 500 New Orleans, Louisiana 70113 Lafayette, Louisiana 70501Telephone: (504) 581-4892 Telephone: (337) 233-3033Fax No. (504) 569-6024 Fax No. (337) 233-2796E-Mail: [email protected] E-Mail:[email protected]

Plaintiffs Liaison Counsel Plaintiffs Liaison Counsel

PLAINTIFFS STEERING COMMITTEE

Brian H. BarrLEVIN, PAPANTONIO, THOMAS,MITCHELL, ECHSNER & PROCTOR, PA316 South Baylen St., Suite 600Pensacola, FL 32502-5996Office: (850) 435-7045Telefax: (850) 436-6187E-Mail:[email protected]

Jeffrey A. Breit

BREIT DRESCHER & IMPREVENTO999 Waterside Drive, Suite 1000Norfolk, VA 23510Office: (757) 670-3888Telefax: (757) 670-3895E-Mail:[email protected]

Robin L. GreenwaldWEITZ & LUXENBERG, PC700 BroadwayNew York, NY 10003Office: (212) 558-5802Telefax: (212) 344-5461E-Mail: [email protected]

Rhon E. JonesBEASLEY, ALLEN, CROW, METHVIN,

PORTIS & MILES, P. C.218 Commerce St., P.O. Box 4160Montgomery, AL 36104Office: (334) 269-2343Telefax: (334) 954-7555E-Mail: [email protected]



21/143

21

Elizabeth J. CabraserLIEFF, CABRASER, HEIMANN &BERNSTEIN, LLP275 Battery Street, 29th FloorSan Francisco, CA 94111-3339Office: (415) 956-1000

Telefax: (415) 956-1008E-Mail: [email protected]

Philip F. Cossich, Jr.COSSICH, SUMICH, PARSIOLA & TAYLOR8397 Highway 23, Suite 100Belle Chasse, LA 70037Office: (504) 394-9000Telefax: (504) 394-9110E-Mail:[email protected]

Robert T. Cunningham

CUNNINGHAM BOUNDS, LLC1601 Dauphin Street, P. O. Box 66705Mobile, AL 36660Office: (251) 471-6191Telefax: (251) 479-1031E-Mail: [email protected]

Alphonso Michael Mike EspyMORGAN & MORGAN, P.A.188 East Capitol Street, Suite 777Jackson, MS 39201Office: (601) 949-3388

Telefax: (601) 949-3399E-Mail: [email protected]

Calvin C. Fayard, Jr.FAYARD & HONEYCUTT519 Florida Avenue, SWDenham Springs, LA 70726Office: (225) 664-4193Telefax: (225) 664-6925E-Mail: [email protected]

Ervin A. Gonzalez

COLSON HICKS EIDSON255 Alhambra Circle, PenthouseCoral Gables, FL 33134Office: (305) 476-7400Telefax: (305) 476-7444E-Mail: [email protected]

Matthew E. LundyLUNDY, LUNDY, SOILEAU & SOUTH, LLP501 Broad StreetLake Charles, LA 70601Office: (337) 439-0707Telefax: (337) 439-1029

E-Mail: [email protected]

Michael C. PalmintierdeGRAVELLES, PALMINTIER,HOLTHAUS & FRUGE618 Main StreetBaton Rouge, LA 70801-1910Office: (225) 344-3735Telefax: (225) 344-0522E-Mail: [email protected]

Paul M. Sterbcow

LEWIS, KULLMAN, STERBCOW &ABRAMSON601 Poydras Street, Suite 2615New Orleans, LA 70130Office: (504) 588-1500Telefax: (504) 588-1514E-Mail: [email protected]

Scott SummyBARON & BUDD, P.C.3102 Oak Lawn Avenue, Suite 1100Dallas, TX 75219

Office: (214) 521-3605Telefax: (214) 599-1172E-Mail: [email protected]

Mikal C. WattsWATTS GUERRA CRAFT, LLPFour Dominion Drive, Building 3, Suite 100San Antonio, TX 78257Office: (210) 447-0500Telefax: (210) 447-0501E-Mail: [email protected]



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22

SOREN E. GISLESON

JULIA A. LeMENSE

CLAY GARSIDE

K. LUAN TRAN

DARRIEL McCORVEY

KIM EVERS

AARON AHLQUIST

On Brief.

CERTIFICATE OF SERVICE

WE HEREBY CERTIFY that the above and foregoing Brief will be served on All Counsel byelectronically uploading the same to Lexis Nexis File & Serve in accordance with Pretrial Order No. 12, and will be filed with the Clerk of Court of the United States District Court for theEastern District of Louisiana by using the CM/ECF System, which will send a notice ofelectronic filing in accordance with the procedures established in MDL 2179, this 25th day ofJuly, 2011.

/s/ James Parkerson Roy and Stephen J. Herman



23/143

6,826 Final Offers)6,826 Final Offers)

n Required

Paid Cla

184, Payment 143,

112

31

(EAP) 169,122

46

ayment

hase II - Interim and Final Stage)

aims Subject to Liens, Audit Holds, etc.)


24/143

, , ,

52,355 46,583 8,

227,985 211,754 112,

Claimants with

Filed Claims

Reviewed

Claimants

Paid Cla

26,966 26,425 25,

21,183 15,829 2,

25,178 14,837 2,

73,327 57,091 31,

1. Final: Quick P

38.40%

ull Review (net of

mants withyment or Interim

bmissions)

35.87%

ayment (net of

ants with

nt Submissions)

5.73%

All Claimants with Filed Claims

Amount Paid to All Claimants


25/143

1. $0.01 - $5,000.0

65.16%

00.01 - $10,000.00

18.53%

5. $100

1. $0.01 - $5,000

38.26%

2. $5,000.01 - $1019.29%

0.01 - $25,000.00

29.41%

000.00

Individual Amount Paid by Value Range


26/143

1. $0.01 - $5,0

15.95%

2. $5,000.01 -12.0

0,000.01 - $25,000.00

50.92%

000.01 - $100,000.00

17.24%

2. $5,000.01 -2.94%

0,000.01 - $25,000.0037.10%

00.01 - $100,000.00

28.04%

5. $100,000.0

21

6. Over $5

8.8

Business Amount Paid by Value Range


27/143

165,

52,

72,

19,

2,

312,


28/143

312,


29/143

Food, Beverage and52.66%

try / Businesspes

9%

ail, Sales and Service

32.14%

# of Individual Claims Paid by Industry

Fishing

7.93%

Food, Beverage and

47.32%

Business

ail, Sales and Service

32.23% Tourism a1

Amount of Individual Claims Paid by Industry


30/143

Fishing

19.35%

Food, Beverage

9.23

No I

Rental Property(ies)

26.84%

ales and Service

37.42%

and

# of Business Claims Paid by Industry

Fishing

21.25%Food, Bever

1

No Ind

Rental Property(

16.41%

Sales and Service35.81%

g and

Amount of Business Claims Paid by Industry


31/143

Submitted Claims Paid Cl

LA 224,857 106,FL 240,566 126,AL 94,132 47,MS 60,335 25,TX 9,078 2,

Other 3,312,

Claims by State of Loss(Claimants may have more than one Claim Type)

LA

38.01%

1.86% Other

3.69%

FL

35.93%

AL

16.38%

MS

9.59%TX

1.44%

msAL

17.35%


32/143

d to stop circulating settlement agreements with coastal Alabamians | al.com

/blog.al.com/live/2010/05/bp_told_to_stop_circulating_se.html[6/8/2011 3:29:05 PM]

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Huntsville Times

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Attorney General Troy King

has asked BP to cease

circulating settlement

agreements among south

Alabamians.

By George Talbot

Follow

me > Breaking News from the Press-Register > Mississippi Press

P told to stop circulating settlement agreementswith coastal Alabamians

blished: Sunday, May 02, 2010, 8:49 PM Updated: Monday, May 03, 2010, 6:32 AM

abama Attorney General Troy King said tonight that he has toldpresentatives ofBP Plc. that they should stop circulating settlementreements among coastal Alabamians.

e agreements, King said, essentially require that people give up theht to sue in exchange for payment of up to $5,000.

ng said BP's efforts were particularly strong in Bayou La Batre.

e attorney general said he is prohibited from giving legal advice tovate citizens, but added that "people need to proceed with cautiond understand the ramifications before signing something like that.

hey should seek appropriate counsel to make sure their rights areotected," King said.

the end of Sunday, BP aimed to sign up 500 fishing boats inabama, Mississippi and Florida to deploy boom.

had distributed a contract to fishermen it was hiring that waivedeir right to sue BP and required confidentiality and other items,arking protests in Louisiana and elsewhere.

rren Beaudo, a spokesman for BP, said the waiver requirement had been stripped out, and thates already signed would not be enforced.

P will not enforce any waivers that have been signed in connection with this activity," he wrotean e-mail.

t King said late Sunday that he was still concerned that people would lose their right to sue bycepting settlements from BP of up to $5,000, as envisioned by the claim process BP has set up.

e attorney general said he is prohibited from giving legal advice to private citizens, but addedat "people need to proceed with caution and understand the ramifications before signingmething like that."

o the best of my knowledge BP did not ask residents of Alabama to waive their legal rights in

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e way that has been described," Beaudo said.

Updated at 8:48 p.m. with BP response.)

lated topics: BP, Deepwater Horizon, Gulf of Mexico oil spill, Gulf of Mexico oil spill 2010,wsuit, oil spill, Troy King

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AreYouListening May 02, 2010 at 6:24PM

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Money won't change this.

bamarollon May 02, 2010 at 6:55PM

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This guy has come 180 degrees. What leadership and good advice. I am VERY impressedwith him over the last couple of months. I am beginning to think he was being smearedby his foes.

jjinbhm May 02, 2010 at 9:20PM

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Oh Please...this guy is a putz. He is just hoping to place a dollar amount the state canrecoup before the election cycles.

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Case 2:10-cv-01316-CJB-SS Document 6 Filed 05/04/10 Page 1 of 7Case 2:10-md-02179-CJB-SS Document 3423-1 Filed 07/25/11 Page 12 of 119

EXHIBIT C


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CRS Report for CongressPrepared for Members and Committees of Congress

Liability and Compensation Issues Raised by

the 2010 Gulf Oil Spill

Jonathan L. Ramseur

Specialist in Environmental Policy

March 11, 2011

Congressional Research Service

7-5700

www.crs.gov

R41679


EXHIBIT D


42/143

Liability and Compensation Issues Raised by the 2010 Gulf Oil Spill


Summary

The 2010Deepwater Horizon incident produced the largest oil spill that has occurred in U.S.waters, releasing more than 200 million gallons into the Gulf of Mexico. BP has estimated the

combined oil spill costscleanup activities, natural resource and economic damages, potentialClean Water Act (CWA) penalties, and other obligationswill be approximately $41 billion.

TheDeepwater Horizon oil spill raised many issues for policymakers, including the ability of theexisting oil spill liability and compensation framework to respond to a catastrophic spill. Thisframework determines (1) who is responsible for paying for oil spill cleanup costs and theeconomic and natural resource damages from an oil spill; (2) how these costs and damages aredefined (i.e., what is covered?); and (3) the degree to which, and conditions in which, the costsand damages are limited and/or shared by other parties, including general taxpayers.

The existing framework includes a combination of elements that distribute the costs of an oil spillbetween the responsible party (or parties) and the Oil Spill Liability Trust Fund (OSLTF), whichis largely financed through a per-barrel tax on domestic and imported oil. Responsible parties areliable up to their liability caps (if applicable); the trust fund covers costs above liability limits upto a per-incident cap of $1 billion.

Policymakers may want to consider the magnitude of theDeepwater Horizon incident and theliability and compensation issues raised under a scenario in which BP had refused to financeresponse activities or establish a claims process to comply with the relevant OPA provisions. BPhas either directly funded oil spill response operations or reimbursed the federal government foractions taken by various agencies. BP has paid damage claims well above its liability limit andoutside the scope of its liable damages.

Although evidence indicates that the levels of current framework (liability limits and OSLTF)may be sufficient to address the more common mix of spills that have historically occurred, the

current combination of liability limits and $1 billion per-incident OSLTF cap is not sufficient towithstand a spill with damages/costs that exceed a responsible partys liability limit by $1 billion.Even if the per-incident cap were increased, the current (and projected) level of funds in theOSLTF may not be sufficient to address costs from a catastrophic spill.

The options available to address these issues depend upon the overall objective of Congress. Oneobjectivewhich has been expressed by many in and outside Congressis to provide fullrestoration and timely compensation (i.e., through channels other than litigation) for the impactsfrom the spill, without directly burdening the general taxpayers. If this is the objective, Congressmay consider some combination of (1) increasing the offshore facility liability limit andcorresponding financial responsibility demonstration; (2) increasing the OSLTF per-incident cap;or (3) increasing the level of funds available in the OSLTF. In addition, policymakers may want to

consider an industry-financed fund, akin to the nuclear power industrys fund, that couldsupplement or potentially replace the current system.

Another objective might be to maintain the existing system, which may be sufficient to addressall but the most extreme scenarios. Catastrophic spills in U.S. waters have historically been rare.Some may argue that establishing a system that can withstand a catastrophic event would imposecosts and yield consequences that would not justify the (expected) ability to address acatastrophic event.



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Contents

Introduction ......................... .......................... ........................... .......................... ........................ 1

Existing Liability and Compensation Framework ........................... .......................... ................... 2

Responsible Party .......................... ........................... .......................... ........................... .......2Liability................................................................................................................................3

Liability Limits .......................... .......................... ........................... .......................... ......5Financial Responsibility..................................................................................................6

The Oil Spill Liability Trust Fund ............................ ........................... ............................ ......7Compensation or Claims Process........................ ............................ ........................... ............ 8

Issues for Policymakers...............................................................................................................9

Liability Limits ....................... .......................... ........................... .......................... ............. 10OSLTF Limitations ......................... ........................... .......................... ........................... .... 11

Per-Incident Cap ....................... ............................ ............................ ........................... . 11Level of Funding...........................................................................................................12

Claims Process....................................................................................................................14

Potential Options for Policymakers ...................... .......................... .......................... ................. 18

Figures

Figure 1. Oil Spill Liability Trust Fund......................... .......................... ........................... ........ 13

Tables

Table 1. Deepwater Horizon Oil Spill Claims Data by State.......................................................16

Table A-1. Evolution of the Scope of Oil Spill Liability.............................................................21

Table A-2. Evolution of Oil Spill Liability Limits ......................... ........................... .................. 22

Appendixes

Appendix. Liability TablesHistorical Perspectives ...................... ......................... .................. 21

Contacts

Author Contact Information ....................... ......................... .......................... .......................... ..24



44/143


Congressional Research Service 1

Introduction

On April 20, 2010, theDeepwater Horizon oil drilling rig was nearing completion of BPsdeepwater oil well when an uncontained release of hydrocarbons (oil and natural gas) caused

explosions and fire, resulting in 11 crew member fatalities. The incident produced the largest oilspill that has occurred in U.S. waters, releasing more than 200 million gallons over approximately84 days.1 Although several companies were and are involved (to varying degrees) with theDeepwater Horizon incident, BP was (and continues to be) the most prominent private party in oilspill response and compensation activities. Thus, for the purpose of this report, BP is discussed asif it is the sole responsible partya key term in the existing liability and compensationframework.2

The United States has not encountered a spill comparable to the 2010 Gulf spill since the 1989Exxon Valdez in Prince William Sound, Alaska. TheExxon Valdez spill tallied approximately $2billion in cleanup costs and $1 billion in natural resource damages in 1990 dollars. Thesecombined figures equate to approximately $5 billion in todays dollars and do not include the

wider array of claims for which responsible parties are now liable.

3

The total costs of the 2010 Gulf spill are projected to dwarf those of theExxon Valdez. In its 2010financial statement, BP estimated the combined oil spill costscleanup, natural resource andeconomic damages, potential Clean Water Act (CWA) penalties, and other obligationswill beapproximately $41 billion. This estimate includes payments made to date as well as projectedfuture payments, such as claims. However, BP acknowledges the difficulty in estimating somecosts and does not include these costs in its projection.4 Therefore, this estimate is subject toconsiderable uncertainty.

The incident received considerable attention in 2010,5 highlighting multiple policy mattersregarding oil spills and their aftermath. An issue that has generated (and to some degree continues

1 A portion (17%) of this oil did not enter the Gulf environment, but was directly recovered by BP. See, FederalInteragency Solutions Group, Oil Budget Calculator Science and Engineering Team, Oil Budget Calculator:

Deepwater Horizon-Technical Documentation, November 2010.2 Transocean owned theDeepwater Horizon drilling rig. Three companies own the Macondo well: BP has a 65% share,Anadarko Petroleum Corporation has a 25% share, and MOEX Offshore has a 10 % share (National Commission onthe BP Deepwater Horizon Oil Spill and Offshore Drilling, Deep Water: The Gulf Oil Disaster and the Future ofOffshore Drilling, Report to the President (hereinafter Commission Report) January 2011).3 In addition, this figure does not include punitive damages. Punitive damage claims were litigated for more than 12years, eventually reaching the U.S. Supreme Court in 2008 (Exxon Shipping v. Baker, 554 U.S. 471 (2008)). Plaintiffswere awarded approximately $500 million in punitive damagessubstantially less than was originally awarded ($5billion) by a U.S. district court in 1994. An additional $500 million in post-judgment interest on those damages wassubsequently awarded.

4 As stated by BP: The total amounts that will ultimately be paid by BP in relation to all obligations relating to theincident are subject to significant uncertainty and the ultimate exposure and cost to BP will be dependent on manyfactors. Furthermore, the amount of claims that become payable by BP, the amount of fines ultimately levied on BP(including any determination of BPs negligence), the outcome of litigation, and any costs arising from any longer-termenvironmental consequences of the oil spill, will also impact upon the ultimate cost for BP. BP, Fourth quarter and fullyear 2010 financial statement, February 1, 2011, at http://www.bp.com/.5 In the 111th Congress, the House of Representatives conducted at least 33 hearings in 10 committees; the Senateconducted at least 30 hearings in 8 committees. Members introduced more than 150 legislative proposals that wouldaddress various topics related to the oil spill.



45/143



to generate) particular interest is the oil spill liability and compensation framework.6 Thisframework, which is grounded in federal statute and regulations, determines the following:

1. who is responsible for paying for oil spill cleanup costs;

2. who is responsible for paying for economic and natural resource damages

associated with an oil spill;

3. how these costs and damages are defined (i.e., what is covered); and

4. the degree to which (or conditions in which) the costs and damages are limitedand/or shared by other parties, including general taxpayers.

The first section of this report provides an overview of the existing liability and compensationframework. The second section highlights many of the liability and compensation issues raised bytheDeepwater Horizon event. The third section discusses options for policymakers to adjust,amend, or supplement the current framework.

Existing Liability and Compensation FrameworkPresident George H. W. Bush signed into law the Oil Pollution Act of 1990 (OPA) 7 on August 18,1990, consolidating existing federal oil spill laws, expanding authorities within the CWA, andcreating new provisions regarding oil spill liability and compensation.8

The OPA liability and compensation framework includes a combination of elements thatdistribute the costs of an oil spill between the responsible party (or parties) and a trust fund,which is largely financed through a per-barrel tax on domestic and imported oil. Responsibleparties are liable up to their liability caps (if applicable); the Oil Spill Liability Trust Fund coverscosts above liability limits up to a per-incident cap of $1 billion. These elements are discussed insome detail below.

Responsible Party

A critical term and concept in the OPA liability and compensation framework is the responsibleparty. The liability provisions of OPA apply to each responsible party for a vessel or a facilityfrom which oil is discharged (33 U.S.C. 2702). The responsible party is specifically taskedwith further OPA obligations, including claim duties. Some have identified OPAs specificassignment of liability (often referred to as channeling)9 and other duties as a key component ofthe framework. The channeling mechanism may simplify the compensation process, because the

6 See CRS Report R41684, Oil Spill Legislation in the 112th Congress, by Jonathan L. Ramseur.7 P.L. 101-380, primarily codified at 33 U.S.C. 2701 et seq. OPA amended other sections of the U.S. Code, includingthe Clean Water Act (e.g., 33 U.S.C. 1321) and portions of the tax code (26 U.S.C. 4611 and 9509).8 See also CRS Report R41266, Oil Pollution Act of 1990 (OPA): Liability of Responsible Parties , by Robert Meltz;and CRS Report RL33705, Oil Spills in U.S. Coastal Waters: Background and Governance, by Jonathan L. Ramseur.9 See e.g., Nathan Richardson,Deepwater Horizon and the Patchwork of Oil Spill Liability Law, Resources for theFuture discussion paper, June 2010.



46/143



responsible party assignment makes it unnecessary for agencies and courts to determine whichparty caused the spill.10

The term responsible party has a specific meaning for different sources of oil spills.11 Asdefined by OPA (Section 1001), responsible party means the following:

(A) Vessels. - In the case of a vessel, any person owning, operating, or demise chartering thevessel.

(B) Onshore facilities. - In the case of an onshore facility (other than a pipeline), any personowning or operating the facility, except a Federal agency, State, municipality, commission,or political subdivision of a State, or any interstate body, that as the owner transferspossession and right to use the property to another person by lease, assignment, or permit.

(C) Offshore facilities. - In the case of an offshore facility (other than a pipeline or adeepwater port licensed under the Deepwater Port Act of 1974 (33 U.S.C. 1501 et seq.)),the lessee or permittee of the area in which the facility is located or the holder of a right ofuse and easement granted under applicable State law or the Outer Continental Shelf LandsAct (43 U.S.C. 1301-1356) for the area in which the facility is located (if the holder is adifferent person than the lessee or permittee), except a Federal agency, State, municipality,commission, or political subdivision of a State, or any interstate body, that as owner transferspossession and right to use the property to another person by lease, assignment, or permit.

(D) Deepwater ports. - In the case of a deepwater port licensed under the Deepwater Port Actof 1974 (33 U.S.C. 1501- 1524), the licensee.

(E) Pipelines. - In the case of a pipeline, any person owning or operating the pipeline.

(F) Abandonment. - In the case of an abandoned vessel, onshore facility, deepwater port,pipeline, or offshore facility, the persons who would have been responsible partiesimmediately prior to the abandonment of the vessel or facility.

Liability

OPA unified the liability provisions of existing oil spill statutes,12 creating a freestanding liabilityregime. Section 1002 states that responsible parties are liable for any discharge of oil (or threat ofdischarge) from a vessel or facility13 to navigable waters, adjoining shorelines, or the exclusiveeconomic zone of the United States (i.e., 200 nautical miles beyond the shore). Liability underOPA is strict,14 meaning that impacted parties need not show or prove that the spiller actednegligently for liability to attach.15

10 See e.g., Mark A. Cohen et al.,Deepwater Drilling: Law, Policy, and Economics of Firm Organization and Safety ,

Resources for the Future discussion paper, January 2011.11 See 33 U.S.C. 2701(32).12 The Federal Water Pollution Control Act of 1972, as amended, generally referred to as the Clean Water Act (CWA,33 U.S.C. 1251 et seq); the Trans-Alaska Pipeline Authorization Act of 1973 (TAPAA, 43 U.S.C. 1651), theDeepwater Port Act of 1974 (DPA, 33 U.S.C. 1501 et seq), and the Outer Continental Shelf Lands Act Amendmentsof 1978 (OCSLAA, 43 U.S.C. 1801 et seq).13 The definition of facility is broadly worded and includes pipelines and motor vehicles. OPA 1001(9).14 Under OPA, the terms liable and liability are construed to be the standard of liability which obtains undersection 311 of the [Clean Water Act]. Courts have interpreted section 311 of the Clean Water Act as imposing strict(continued...)



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Under OPA, a responsible party is liable for cleanup costs incurred, not only by a governmententity, but also by a private party. But the cleanup activities must be consistent with the NationalOil and Hazardous Substances Pollution Contingency Plan, generally referred to as the NationalContingency Plan (NCP), the regulations governing oil and hazardous substance responseoperations.16

In addition, OPA broadened the scope of damages (i.e., costs) for which an oil spiller would beliable. (For a historical comparison of oil spill liability provisions, see Table A-1 in the Appendixto this report.) Damages include the following:

Natural resources: damages for injury to, destruction of, loss of, or loss of useof, natural resources, including the reasonable costs of assessing the damage,which shall be recoverable by a United States trustee, a State trustee, an Indiantribe trustee, or a foreign trustee. 17

Real or personal property: damages for injury to, or economic losses resultingfrom destruction of, real or personal property, which shall be recoverable by aclaimant who owns or leases that property.18

Subsistence use: damages for loss of subsistence use of natural resources,which shall be recoverable by any claimant who so uses natural resources whichhave been injured, destroyed, or lost, without regard to the ownership ormanagement of the resources.19

Revenues: damages equal to the net loss of taxes, royalties, rents, fees, or netprofit shares due to the injury, destruction, or loss of real property, personalproperty, or natural resources, which shall be recoverable by the Government ofthe United States, a State, or a political subdivision thereof.20

Profits and earning capacity: damages equal to the loss of profits orimpairment of earning capacity due to the injury, destruction, or loss of realproperty, personal property, or natural resources, which shall be recoverable byany claimant.21

Public services: damages for net costs of providing increased or additionalpublic services during or after removal activities, including protection from fire,

(...continued)

liability on parties responsible for the discharge of oil or hazardous substances into the waters of the United States. SeeUnited States v. New York, 481 F. Supp. 4 (S. D.N.Y. 1979). See CRS Report R41266, Oil Pollution Act of 1990(OPA): Liability of Responsible Parties, by Robert Meltz.15 See, e.g., Nathan Richardson,Deepwater Horizon and the Patchwork of Oil Spill Liability Law, Resources for the

Future discussion paper, June 2010.16 OPA 1002(b)(1)(B). The NCP is codified in 40 CFR Part 300. For further information on the NCP see CRS ReportRL33705, Oil Spills in U.S. Coastal Waters: Background and Governance, by Jonathan L. Ramseur.17 OPA 1002(b)(2)(A).18 OPA 1002(b)(2)(B).19 OPA 1002(b)(2)(C).20 OPA 1002(b)(2)(D).21 OPA 1002(b)(2)(E).



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safety, or health hazards, caused by a discharge of oil, which shall be recoverableby a State, or a political subdivision of a State.22

OPA provided limited defenses from liability: Act of God, act of war, and act or omission ofcertain third parties.23 These defenses are similar to those of the Comprehensive Environmental,Response, Compensation, and Liability Act (CERCLA), enacted in 1980 for releases ofhazardous substances and pollutants or contaminants (but not oil).

Liability Limits

OPA provides liability limits (or caps) for those responsible for a spill. Liability limits are notunique to OPA and limits existed in several federal statutes preceding OPA. (For a historicalcomparison of liability limits see Table A-2 in the Appendix to this report.) However, the limitsare not automatic, but conditional. First, the liability limits do not apply to situations involvingacts of gross negligence or willful misconduct. Second, liability limits do not apply if theviolation of a federal safety, construction, or operating requirement proximately caused the spill.Third, parties must report the incident and cooperate with response officials to maintain their

liability caps.24

According to the National Pollution Funds Centeran office of the U.S. CoastGuard that manages the Oil Spill Liability Trust Fund (discussed below)liability limits are notusually well defined until long after response, and litigation may be required to resolve theissue.25

The liability limits differ based on the source of the oil spill ( Table A-2). The limits for mostsources are simple dollar amounts.

Vessel liability limits are generally based on the size of the vessel (measured ingross tonnage). For example, a tank vessel matching the size of theExxon Valdez(95,000 gross tons) would have a cap of either $304 million (single-hull) or $190million (double hull).

Onshore facility (which includes pipelines) liability is limited to $350 million.Although OPA allows the President to decrease this limit through regulations,this authority has not been exercised.

Deepwater port (e.g., Louisiana Offshore Oil Port, LOOP)26 liability is limited to$350 million. OPA authorizes the Secretary of the department in which the CoastGuard is operating (i.e., Homeland Security)27 to adjust this limit to not less than

22 OPA 1002(b)(2)(F).23 OPA 1003.24 OPA 1004(c).25 National Pollution Funds Center, FOSC Funding Information for Oil Spills and Hazardous Materials Releases, April2003, p. 4.26 The Louisiana Offshore Oil Port (LOOP) is the only offshore deepwater port for oil in U.S. coastal waters.According to the U.S. Department of Transportations Maritime Administration, three other deepwater ports are inoperation that accept liquefied natural gas. See http://www.marad.dot.gov.27 The Homeland Security Act of 2002 (P.L. 107-296) transferred the Coast Guard to the Department of HomelandSecurity. The Coast Guard was formerly within the Department of Transportation.



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$50 million. This authority was exercised in 1995, setting the liability limit at$62 million,28 and subsequently increased to $87 million in 2009.29

Offshore facilities (like the BP oil well involved in the 2010 Gulf of Mexicospill) have unlimited liability for oil removal (cleanup) costs30 and a $75 millionlimit on other damagesnatural resources and the five categories of economicdamages (listed above).

Mobile offshore drilling units (MODUs), like theDeepwater Horizon, are firsttreated as tank vessels for their liability cap. If removal and damage costs exceedthis liability cap, a MODU is deemed to be an offshore facility for the excessamount.31

OPA requires the President to issue regulations to adjust the liability limits at least every threeyears to take into account changes in the consumer price index (CPI).32 Despite this requirement,adjustments to liability limits were not made until Congress amended OPA in July 2006 (Table A-2). As of the date of this report, onshore and offshore facility liability limits remain at the samelevel established in 1990. If the adjustments had been made, offshore facility liability limits foreconomic and natural resource damages would be approximately $125 million (plus unlimitedremoval costs).33

Financial Responsibility

To ensure that parties responsible for an oil spill can provide funding for oil spill response andcompensation to affected parties, OPA requires that vessels and offshore facilities maintainevidence of financial responsibility (e.g., insurance or financial statements documentingsignificant revenue). OPA does not have an analogous requirement for onshore facilities.

The current levels of financial responsibility are related to the current liability limits for varioussources (e.g., vessels, offshore facilities) of potential oil spills. The liability limits differ by

potential source. In the case of vessels, whose liability limits are a single dollar amountencompassing both removal costs and other damages, the financial responsibility levels are

28 60 Federal Register39849, August 4, 1995.29 74 Federal Register31368, July 1, 2009. Codified in 33 CFR 138.230(b).30 OPA 1002 defines removal costs as the costs of removal that are incurred after a discharge of oil has occurred or,in any case in which there is a substantial threat of a discharge of oil, the costs to prevent, minimize, or mitigate oilpollution from such an incident. Relatedly, OPA 1002 defines remove or removal as containment and removal ofoil or a hazardous substance from water and shorelines or the taking of other actions as may be necessary to minimizeor mitigate damage to the public health or welfare, including, but not limited to, fish, shellfish, wildlife, and public andprivate property, shorelines, and beaches.31 33 USC 2704(b). For further interpretation see National Pollution Funds Center, Oil Pollution Act Liabilities forOil Removal Costs and Damages as They May Apply to the Deepwater Horizon Incident (undated).

32 With Executive Order 12777 (October 18, 1991), President George H.W. Bush delegated this responsibility toseveral federal agencies. Executive Order 13286 (signed by President George W. Bush on March 5, 2003) reorganizedduties in response to the creation of the Department of Homeland Security. The Coast Guard

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