BP Loses Bid to Avoid Paying Spill Center $130 Million

BP Plc lost a bid to avoid paying the third-quarter operating budget of the 2010 Gulf of Mexico disaster claims administrator, totaling $130 million, as part of its settlement with most private claimants.

U.S. District Judge Carl Barbier rejected BP’s appeal of a magistrate’s decision earlier today that ordered the company to fund the budget “in its entirety” no later than Aug. 12. Barbier agreed with the magistrate, ruling today after a hearing in New Orleans.

The U.K.-based energy company rejected the Deepwater Horizon Claims Center’s fund request two days ago, saying the administrator hadn’t provided sufficient detail to determine whether the budget was “reasonable,” according to a filing in New Orleans federal court.

BP can’t withhold funds to run the settlement program, U.S. Magistrate Judge Sally Shushan ruled today. “The refusal to fund the third quarter 2013 budget is unreasonable,” Shushan said.

Barbier ordered BP to submit a report to the court when it funded the administrator.

BP faces thousands of lawsuits over damages caused by the explosion and sinking of the Deepwater Horizon rig. The blast killed 11 workers and released more than 4 million barrels of crude from BP’s well off the Louisiana coast in the worst offshore oil spill in U.S. history

Administrator’s Budget

BP reached the agreement with most private party plaintiffs last year, initially estimating the cost of the settlement at $7.8 billion. The company last month raised the estimate to $9.6 billion.

“The claims administrator’s budget is subject to BP’s reasonable approval,” the company argued in an Aug. 5 letter to the program. The budget provided failed to include “supporting analysis, metrics or explanatory notes providing any transparency into the budgeting process or justification for the $130,300,000 request.”

BP says it has paid more than $500 million in administrative fees to the claims center through the first half of this year, according the letter. As of July 28, BP has paid $4.2 billion in total compensation under the settlement, according to court filings.

‘Legitimate’ Concerns

“Today’s hearings related to BP’s request for information to which we are entitled under the settlement agreement,” Geoff Morrell, a spokesman for the London-based company, said in an e-mailed statement. “The court said that the concerns we raised are legitimate.”

The claims program “itself admitted that the facility is inefficient and that costs are higher than they should be,” Morrell said. BP had offered to provide interim funding to cover currently payable invoices while it reviewed information sought from the claims administrator, Morrell said.

Nick Gagliano, a spokesman for the Deepwater Horizon Claims Center, didn’t immediately return phone and e-mail messages seeking comment on the ruling. Richard Stanley, a lawyer for claims administrator Patrick Juneau, didn’t immediately return a call seeking comment.

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

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