Perspective on the 20 billion: " Lawsuit Seeks $19 Billion from BP"

[BelgianMadCow]

NewsCore) - The Center for Biological Diversity on Friday filed the largest citizen enforcement action ever taken under the Clean Water Act against BP and Transocean Ltd over the Gulf of Mexico oil spill.

The suit was filed in a New Orleans federal court and is seeking the maximum penalty under the act, which could amount to more than $19 billion.

The Center said if BP was found to have shown gross negligence or wilful misconduct, it would face penalties of up to $4,300 per barrel of oil spilled.

The current rate of oil spilling into the Gulf means BP is potentially liable for about $11 billion in penalties. If the spill continues to August 1, 2010, BP's liability could be about $19 billion.

more: http://www.myfoxtampabay.com/dpps/news/lawsuit-seeks-$19-billion-from-bp-dpgonc-20100618-mh_8194490

on edit: potentially 11 billion dollar up till now, divided by 4300 dollar per barrel, divided by 250000 barrels (Valdez spill size) = 10.

This man-made catastrophy is at 10 times Valdez now. http://www.seattlepi.com/local/262707_exxonsettle13.html and some basic math: Exxon's bill was about 6 billion. Times ten = 60 billion... (still only three yearly profits)

[metapunditedgy]

1. If the claim is granted, would the $19B comout out of the $20B special fund

that was just set up? Or would BP have to find assets elsewhere?

If court cases have to get in line *behind* the 3d-party arbitration of the $20B fund, that could be interesting...

[elleng]

3. No; urelated.

20b is to compensate those individualas immediately affected; 'arbitration' separate and apart from whatever lawsuits.

[metapunditedgy]

4. But suppose BP only has $21B of assets. The court cases will take years to work out.

Does that mean that the "third party arbiter" basically has control of BP's assets? (In that scenario.) Suppose a judge sees that a good case is being made for $19B payout, but BP doesn't have much assets left after the $20B fund overseen by third-party. Can the judge do anything to ensure that the $19B (or a large fraction of that money) may be available to pay out? If not, we've just replaced the courts with a third-party arbiter.

Just trying to understand.

I see the same stuff happening with stocks. "Little people" own regular shares of the company in their 401ks. Meanwhile, the big fish are buying "preferred shares." When a company goes bankrupt and it's time to give assets to the shareholders, guess who goes to the front of the line, and who gets nothing.

[elleng]

5. Don't think so.

20b required now, for those immediately adversely affected, as in 'little people.' Arbiter simply determines whether those requesting are entitled, NOW, and to what extent.

LATER cases and judges happen when they do, and courts won't take action to 'assure' anything. We've done nothing like replace courts with 3d party arbiter, but rather assure that those immediately affected can be immediately aided. Lawsuit seeking 'penalty.' Recognize difference between compensatory and punitive damages.

[metapunditedgy]

8. I agree, I'm just trying to understand a scenario where BP has a fixed amount of assets, say $22B.

In a year, the arbiter has given away $18B of the fund for compensation and cleanup costs (hypothetically), while the court cases are just revving up. The arbiter can presumably give away the money a lot faster than the courts can, so people are dis-incentivized from going through the courts. And based on my experience, I'm not sure arbitration is a good thing for everybody... you can lose a lot of rights in the process.

Does that make sense? Bottom line is, if the *total* amount of claims (court+arbiter, *all* types of damages, punitive) gets close to the total amount of BP assets, then whoever gets to the money first wins. And the courts move slower.

I think the escrow fund is good, but there are some devilish details. I'd like to hear some talk about how the arbiter will coordinate with large, long-term court cases.

[elleng]

10. The arbiter will NOT coordinate with large, long-term court cases,

and BP does NOT have a fixed amount of assets; their business moves along. Arbiter does NOT give from 20B fund for cleanup costs, but for compensation for those immediately damaged.

Prez O adopted this approach, I believe, so 'little people' will be compensated quickly, and not suffer daily/weekly/monthly BECAUSE the courts move slower.

INDEPENDENT CLAIMS FACILITY
A new, independent claims process will be created with the mandate to be fairer, faster, and more transparent in paying damage claims by individuals and businesses.
· To assure independence, Kenneth Feinberg, who previously administered the September 11th Victim Compensation Fund, will serve as the independent claims administrator.

http://blogs.suntimes.com/sweet/2010/06/bp_oil_spill_20_billion_dollar.html

[metapunditedgy]

12. Thanks for link; this part is encouraging:

"Dissatisfied claimants maintain all current rights under law, including the right to go to court or to the Oil Spill Liability Trust Fund."

In my experience, arbitration has been a bad deal for "little people" because you end up signing away your right to further legal action. Hopefully, this is only limiting for BP, not for people making claims.

This is also good: "It will not assert any liability cap under OPA to avoid liability."

I still think there could be issues if/when BP's assets start to run out. There's always a rush to get to the front of the line for money. Again, I'm no expert, but I assume this will get argued over time in the large court cases. (Caveat as before, I'm no expert.)

(Putting it differently, obviously the US gov't thought the money well *could* dry up through hook or crook, hence the need for an escrow fund.)

[BelgianMadCow]

13. I agree - barring any kind of favour in return for it, the escrow fund is GREAT work from Obama

both it not bing a cap an not restricting other legal action.
Actually, the financial markets reacted very positively to the fund - because it made the liability more visible & "defined" as it were - but it isn't, it's only a lower boundary. So much for financial market logic.

[elleng]

15. Financial markets don't do 'logic;' pure emotion, imo.

[Catherina]

2. Rec'd but still 0. Go figure. Good luck Center for Biological Diversity n/t

[Mimosa]

6. I've read BP has at least 314 Billion of assets. n/t

[dipsydoodle]

7. Then you've misread something

At y/e dec.'09 their net assets were c. 100 , not 314 , and the 100 included 20 of goodwill and intangibles. It doesn't follow that the balance of 80 is that easily realisable either. It is an ongoing situation which is need to clear this mess.

5,4,3,2,1 before someone shows themselves up by misinterpreting what goodwill refers to. Even some of the cigarette packet accountants on DU should know what that is.

[metapunditedgy]

9. Here's the balance sheet from Yahoo Financial. Sounds like a difference between

"assets" and "net assets."

I know nothing about accounting (hence trying to understand), but it seems like there are a lot of issues on the table here.

Even assuming the Yahoo info is accurate, which it probably is not, there is the question of whether claims (damages, punitive, etc.) against BP get paid out before creditors get paid. CDSs on BP are jumping, and their debt rating is dropping, so some people are watching this very intently.

http://finance.yahoo.com/q/bs?s=BP+Balance+Sheet&annual

[Mimosa]

11. Thank you.

I'm sick over this.

[dipsydoodle]

14. So you see how I got my figures

The Yahoo statement is accurate and simply reiterates BP's annual report which I used. It would be up to a receiver, one of the big four international auditing firms , who got paid what in the unlikely event of their demise. The issue of the CDS's and their debt rating, which I think improved again anyway, have no bearing on their balance sheet. They do however affect BP's ability to raise funds they need both investment and the escrow account. Its what BP do on a running basis which would generate the profits necesary to help correct this adverse situation and as such its their continued well being which is actually , like it or not , in the overall interest of the USA.