Fri Mar 15, 2013 7:32pm EDT

n">(Reuters) - BP launched its promised appeal against "fictitious" and "absurd" oil spill compensation payouts on Friday and asked a judge to temporarily halt to those made on a so-called business economic loss basis.

In a New Orleans court filing, BP gave examples of businesses in industries far from the spill and unconnected with the coastline that enjoyed strengthened earnings in the spill year of 2010 and yet had received millions in spill compensation.

The British oil and gas group, which has already sold a substantial part of its business to pay reparations and fines for the disaster, said it could be "irreparably harmed" by the payouts without relief from the court, because they could cost it "billions" more than it budgeted for when it agreed to a settlement in April 2012.

BP was appealing a March 5 ruling, which upheld the way the compensation was being paid to business claimants wanting recompense.

The ruling, by the same U.S. District Judge Carl Barbier who presides over BP's ongoing trial on separate civil charges, reopened a part of the saga that appeared to have been settled almost a year ago when BP agreed terms on economic, property and medical compensation for more than 100,000 individuals and businesses who had filed a class action suit.

At the time of the settlement, BP estimated the bill would be $7.8 billion - already making it one of the biggest settlements of its kind in U.S. history.

For a graphic of BP's oil spill costs: link.reuters.com/nen26t

The actual amount is uncapped, and dependent on decisions made by Patrick Juneau, a lawyer from Louisiana who administers the payments under a complex set of rules set out by the agreement.

As the payments started to flow out, BP realized that the funds it had set aside would be insufficient. At first, it added more, reaching $8.5 billion by the end of 2012, while complaining that the payments to businesses were too generous and the terms of the settlement were being misinterpreted.

On March 5, Judge Barbier upheld Juneau's methods.

Two days later, BP said it would appeal, and it reduced the sum earmarked for payments back to $7.7 billion to underline its disapproval.

"The BEL (Business Economic Losses) policy decisions rewrite the agreement's express terms, and contradict its purpose, plain text, and underlying principles by authorizing compensation awards for claimants seeking to recover for non-existent 'losses.'" BP's Friday filing said.

"BP did not agree to pay what is already hundreds of millions of dollars, and potentially billions, to claimants with 'losses' that do not exist in reality, but result solely from the claims administrator's rewriting of the agreement."

The April 2010 spill happened when the Macondo well ruptured and the Deepwater Horizon rig that was working on it exploded and sank. The accident killed 11 men and spouted 4 million barrels of oil into the Gulf of Mexico in the United States' worst offshore oil spill.

"ABSURD" CLAIMS

In its filing, among the examples BP offered of "absurd" claims, the British company referred to a $21 million payment made to a rice mill in Louisiana situated some 40 miles from the coast that earned more revenue than in spill year of 2010 than in 2007, 2008, or 2009.

It also cited a $9.7 million recompense for a highway, street and bridge construction company in northern Alabama, almost 200 miles from the Gulf, and which does no business in the region, and for which 2010 was its best year on record.

BP also referred to a digital printing business and a law firm that had been compensated despite strong profits.

All were unnamed.

Lawyers for the Plaintiff Steering Committee (PSC), with which BP agreed the settlement, and which is a plaintiff in the ongoing trial along with the Department of Justice, said BP had no case for appeal.

"This court has already affirmed Mr. Juneau's independent interpretation of the settlement agreement..., terms which were negotiated, co-authored and expressly agreed to by BP," said co-lead counsels Steve Herman and Jim Roy.

"Simply put, BP undervalued the settlement and underestimated the number of people and businesses that qualify under the objective formulas that BP agreed to."

Yet Internet advertisements from lawyers boast of the ease with which payments far in excess of actual losses can be obtained.

One describes the experience of a Florida bicycle retailer it represented. The shop enjoyed an increase in spill year revenue to $2.5 million from $1.9 million in 2009, and yet managed to win a payout of "almost one million dollars," the advertisement says.

Another explains how under one of the tests involved, claimants can demonstrate a loss by choosing to compare "any consecutive three months from 2010" with "a large combination of months going back to January 2007."

BP's appeal covers just one area of a raft of costs and potential costs it faces as the third anniversary of the spill approaches on April 20.

Its accounting provisions for the spill total around $42 billion - equivalent to about 30 percent of its stock market value. Almost matching that it has sold assets worth $38 billion to finance compensation, clean-ups and fines, and it has paid, or committed to pay, $37 billion. The actions have sliced $5 billion a year, or 14 percent, off its cash flow - a basic measure of its ability to make money.

Some $4 billion in criminal claims - which are capped - have been settled, and are included in the above amounts, but civil claims under the Clean Water Act covered by the trial that began in February could add another $17.5 billion.

Billions more could be piled on in economic damage claims from Gulf Coast states. A third set of claims, for natural resource damage, have yet to be quantified.

(Reporting By Andrew Callus in London; Additional reporting by Jonathan Stempel in New York and Kristen Hays in Houston; Editing by Leslie Adler)

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Emergency response crew hired by Exxon Mobil clean up oil spill along the Yellowstone River in Laurel, Montana, July 6, 2011.

WASHINGTON | Wed Jan 2, 2013 7:15pm EST

WASHINGTON (Reuters) - An Exxon Mobil pipeline spill into the Yellowstone River in 2011 would have been far less severe if the company had not delayed closing valves, a report issued on Wednesday by federal pipeline regulators said.

Exxon's Silvertip pipeline, which carries 40,000 barrels per day of crude in Montana, leaked about 1,500 barrels of oil into the Yellowstone River in July 2011 after the region suffered heavy flooding.

Had Exxon Mobil Pipeline Company's shutdown procedures required remote controlled valves to be closed immediately after a leak, "the crude oil release volume would have been much less," said a U.S. Pipeline and Hazardous Materials Administration report obtained by Reuters on Wednesday.

Controllers closed some valves and pumps 10 minutes after the spill. But workers then waited about 46 minutes before shutting other valves, the report said. If the company had responded faster the spill would have been about two-thirds smaller.

The report said erosion from the flooding exposed the pipeline to debris that severed it and caused the leak. It did not specify fault or express that Exxon violated any safety regulations. A spokesman said the agency was reviewing the report to determine if enforcement actions will be taken.

The Silvertip routinely transports oil sands crude from Canada which environmentalists have said can corrode pipelines. The oil industry has said the petroleum is no more corrosive than other crude transported in pipelines. Exxon has said no Canadian oil was in the line near the area that was affected by the spill.

After the spill, Exxon had installed a new quarter-mile section of the line at least 40 feet under the river.

An Exxon spokeswoman said the company would not comment on the report until it had more time to review and analyze its findings.

(Reporting by Timothy Gardner; Editing by Bob Burgdorfer)

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The Olympic Stadium is reflected on a temporary structure sponsored by BP at the Olympic Park in Stratford, the location of the London 2012 Olympic Games, in east London July 18, 2012.

WASHINGTON | Sat Oct 6, 2012 10:16pm EDT

WASHINGTON (Reuters) - Senators from the U.S. Gulf Coast urged President Barack Obama on Friday to ensure that any legal settlement for the 2010 Gulf of Mexico oil spill does not undermine a recently passed law that would funnel billions of dollars worth of fines to their states.

The U.S. Justice Department and BP Plc have discussed a potential settlement for damages caused both to Gulf waters and the coastline, which could be worth billions of dollars to states still trying to recover from the worst offshore oil spill in U.S. history.

While the details of those discussions have been kept under wraps, Democratic and Republican senators from the region said they have "grave concerns about developments of the settlement terms" that have been cited by local media outlets.

Senators pointed to recent press reports that the Justice Department and BP are discussing settlement terms that would maximize penalties to be paid under Natural Resource Damage assessments, and minimize those paid under the Clean Water Act.

The RESTORE Act, signed by President Barack Obama on July 6, directs that 80 percent of Clean Water Act penalties paid by BP be placed in a new trust fund for restoration efforts in the five coastal states damaged by the worst U.S. offshore oil spill: Louisiana, Alabama, Mississippi, Florida and Texas.

In a bipartisan letter - a rare sight ahead of the November 6 presidential elections - eight senators told Obama they are worried the Justice Department is considering allowing the bulk of fines to be assessed under the Oil Pollution Act for damages assessed to the coastline, with a minority of fines assessed for damages under the Clean Water Act.

Fines arising from Clean Water Act violations could reach $21 billion, if BP is found to be grossly negligent of causing the April 20, 2010, explosion aboard the Deepwater Horizon drilling rig that killed 11 rig workers and unleashed 4.9 million barrels of oil that soiled the shorelines of four Gulf Coast states. BP has adamantly denied any accusations of gross negligence, and declined to comment on the senators' letter.

Without the bill, federal Clean Water Act fines would have gone straight to the U.S. Treasury. Anywhere from $4 billion to $16.8 billion could flow into states' coffers under the bill's terms.

The Mobile (Alabama) Press-Register first reported the proposed deal earlier this week, citing unnamed officials who had been briefed by the Justice Department.

The potential settlement could be attractive to BP, because fines under the Oil Pollution Act are treated more favorably by the U.S. tax code than are Clean Water Act fines, congressional sources said.

"Not only would the federal government have final say as to what qualified as environmental damage but BP, who is responsible for this, would also get a tax deduction that could write off millions," Representative Jo Bonner, an Alabama Republican, told Reuters. "The audacity of giving BP a tax write-off."

A Justice Department spokesman had no comment on either negotiations nor the criticisms from elected officials.

Senators told Obama the trade-off would mean less money allocated through a formula lawmakers negotiated in the RESTORE Act, legislation which puts decisions on how the money is spent in the hands of states and local governments.

"Circumventing the will of Congress by short changing the RESTORE Act is wholly unacceptable to us. We urge you to reject such an approach," said the letter, signed late on Friday by Mary Landrieu, a Louisiana Democrat, and Richard Shelby, a Republican from Alabama, who co-authored the legislation.

Shelby is concerned that Alabama's two coastal counties could lose out on planned recovery projects if the settlement was skewed toward Oil Pollution Act damage assessments, aides told Reuters.

"We urge you to negotiate a robust settlement that does not achieve a higher amount under one of these statutes at the expense of the other," said the letter, also signed by Florida senators Marco Rubio, a Republican, and Bill Nelson, a Democrat.

Republicans Jeff Sessions of Alabama, Thad Cochran and Roger Wicker of Mississippi, and John Cornyn of Texas also signed the letter.

Louisiana, which bore the brunt of environmental damage from the spill, expects to be compensated for damages regardless of the legal means, said Garret Graves, senior environmental advisor to Louisiana Gov. Bobby Jindal.

"Every statistic that's out there in regard to the impact of the spill clearly points to a disproportionate impact on the state of Louisiana, and Louisiana's focus will be ensuring that we fulfill our legal obligation to address all of these impacts to the Gulf," Graves said.

(The story corrects paragraph 17 to read "Thad Cochran and Roger Wicker of Mississippi" instead of Missouri)

(Additional reporting by David Ingram in Washington, Verna Gates in Birmingham, Alabama, Kathy Finn in New Orleans and Emily Le Coz in Tupelo, Mississippi; Editing by Chris Baltimore and Gary Hill)

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