A $20 billion fund for victims of BP Plc’s Gulf of Mexico oil spill will make initial payments equal to six months of reimbursement after criticism the process is too slow, claims administrator Kenneth Feinberg said.
Elected officials in the region have said month-to-month payments to small business are insufficient to help companies stay in business, Feinberg told the House Small Business Committee today in Washington. Calculating the payments may be complicated as long as the leak continues, he said.
“It sure would help if the oil would stop,” Feinberg said in his first congressional testimony since being named to run the independent claims facility. “It’s very hard to come up with lump-sum payments in total satisfaction of your loss when you don’t know if the oil is going to continue to spread and reach your business.”
Lawmakers such as Senator Mary Landrieu, a Louisiana Democrat, have criticized the pace of BP’s payments to businesses and individuals damaged financially by the biggest U.S. oil spill. After touring Gulf states last week, Feinberg said one of his goals was to speed payments to victims.
BP has said it has paid more than $128 million in claims as of the end of last week. Feinberg has praised BP’s efforts while pledging to improve the process. BP has hired 750 adjusters and set up 32 local facilities to help process claims.
Feinberg, 64, said determining whether to pay businesses and individuals that didn’t suffer direct damage is among the most difficult issues as the claims facility is created.
Companies that lost revenue because tourists stayed away, thinking a beach would be damaged, may be ineligible for reimbursement, Feinberg said. Such indirect claims may not “be compensatory,” he said.
Representative Vern Buchanan, a Florida Republican, said tourists are staying away from beaches near Sarasota even though oil hasn’t yet washed ashore. Buchanan said the state laws Feinberg is relying on may be an insufficient guide in determining eligibility.
Businesses or property owners along the Gulf coast may be harmed by public misperceptions of the spill, and a decision on resolving such claims remains to be made, Feinberg said.
“Property value has diminished as a result of the spill,” Feinberg said. “Let’s assume that’s right. That doesn’t mean that every property is entitled to compensation.”
“It’s a thorny issue,” he told reporters after the hearing.
After the Sept. 11 attacks, Feinberg said the victims’ fund that he also administered established “small, geographic areas” near the World Trade Center within which individuals could be compensated for health ailments.
Feinberg said his Gulf Coast claims facility may set zones of eligibility for certain claims when the damage suffered isn’t physical.
Local communities and the states of Louisiana, Alabama, Mississippi and Florida can seek reimbursement from the $20 billion account for their cleanup costs, Feinberg said, noting he will not make decisions on the states’ claims.
BP and the Obama administration haven’t designated an administrator for a separate, $100 million account to pay rig workers idled by a six-month drilling moratorium, Feinberg said, backing away from comments suggesting he will run the wage fund.
Feinberg said he would visit the Gulf region once or twice a week to encourage people to file claims. Eligibility will be clarified in the next few weeks, not months, he said.