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Lawyer Says Feinberg’s Payment Plan for Oil Spill Victims ‘Borders on Delusional’

NEW ORLEANS (CN) - A Texas attorney representing more than 15,000 people affected by the Deepwater Horizon oil spill has several complaints about Kenneth Feinberg's method of calculating payments through BP's Gulf Coast Claims Facility. Attorney Tony Buzbee says Feinberg failed to consider income losses for several months, and fails to consider that 2008 and 2009 were the worst economic years in recent memory for the Gulf States.

Buzbee also contests Feinberg's 50.7% Loss of Income (LOI) calculation, as "an arbitrarily decided figure, [that] has no basis," and asks why final payments will be issued using just two years to calculate the oil spill's long-term impact.

Finally, Buzbee says, regardless of whether the economy of the Gulf Coast States recovers in two years, claimants and their livelihoods are still up against public perceptions from the disaster.

"Although there will never be a universal, across-the-board methodology that will be appropriate for every claimant, surely the methodology used should attempt to capture all loses, should err on the side of caution, and compensate claimants in a fair and equitable fashion," Buzbee wrote in the 16-page document addressed to Feinberg, Louisiana Senator Mary Landrieu, Gulf Coast congressmen and others.

Buzbee sent his "Comments Regarding the Gulf Coast Claims Facility's ('GCCF') Proposed Methodology for Final Payment of Claims' on Saturday, just days after Feinberg posted the GCCF's proposed final payment plan.

Feinberg and the GCCF said they will take comments on the proposal until Feb. 16, and then "may modify the proposed methodology based upon such comments."

Feinberg was appointed administrator of BP's $20 billion compensation fund in August 2010. BP put the money aside to pay claims after the April 20 explosion of the Deepwater Horizon killed 11 and set off the worst oil spill in history.

The final payment formula, released last week, assumes that claimants' losses for 2011 will be 70 percent what they were in 2010; that in 2012 they will be 30 percent what they were in 2010; and that there will be no losses for anyone in 2013.

In accepting a final payment, claimants sign away their rights to bring a lawsuit against BP or any of the other oil spill defendants.

Buzbee objects to the timeline: "As we have seen in the past (i.e. Hurricanes Ike and Katrina, 9/11, Exxon Valdez), a simple factor of two years fails to satisfy the necessary time to heal the economy of a region hit by a major disaster, and ultimately the factor of two years ignores the residual effects on the Gulf Coast economies that suffered from the oil spill." (Parentheses in original.)

Buzbee said he evaluated Feinberg's methodology after hearing comments from more than 800 businesses in Texas, Louisiana, Mississippi, Alabama and Florida.

The sentiment of comments so far posted on GCCF's website, from business owners and citizens, echo concerns raised in Buzbee's document.

Claimants say they do not understand Feinberg's basis for considering income only from between April and December;

they say 2008 and 2009 were their worst economic years and that until the oil spill 2010 was looking up;

they say the GCCF does not explain or present the calculations that produced the 50.7% Loss of Income;

and they worry that the effects of the oil spill will last far longer than two years and that public perception of the Gulf Coast may take years to recover.

A Florida business owner wrote: "As a fisherman I harvest shrimp from April-November. I change my gears and harvest oysters from December-March. Many of us work with different seafood products (fish, crabs, shrimp, oysters, etc) year around (sic). This is a whole year of loss.

"Please do not average 2008 and 2009 incomes. All of us have very low income in 2008. In 2008, we had two hurricanes: Hurricane Ike and Hurricane Gustav ..."

An "individual" on the site wrote: "The two-year impact calculation is just wrong. We as residents fully understand the impacts of disasters like this with dealing with major hurricanes. A 2-year impact is frankly absurd. The minimum should be 4 years, as this is what all of us witnessed after previous hurricanes."

Another "individual" commented: "You must think the oil went to our brains!!!!!!!!!!"

Buzbee wrote in his comments that "there can be no doubt that assuming that both the oil and its ill effects will be gone two years from now is an optimistic approach." He suggests instead that Feinberg use a 10- to 15-year range for calculating the long-term impact of the spill.

"Perhaps the one factor that has caused the most angst and grief among claimants is the GCCF's overly optimistic belief that the economic impact to be expected from the oil spill will be only two years," Buzbee wrote. "Such belief, inherent in the methodology, is completely contrary to the opinions of the overwhelming majority of most reputable scientists in their respective fields. Ostensibly in this optimistic outlook is that the oil, wherever it is, will be completely gone within two years. This view is clearly in the minority. But regardless whether this belief is supported in science, the assumption that the absence of oil means the economy in the region will be cured from all the ill effects of the disaster borders on delusional."

Buzbee suggests the GCCF use the best-case scenario for income from 2008, 2009, or 2010, per industry, to provide an accurate portrayal of losses suffered.

Rather than calculate costs using the net profits of businesses, the GCCF proposes using gross revenue.

"It is difficult to understand the reasons for this choice," Buzbee wrote.

"Due to the ability of net profits to paint an accurate picture of past and current operational efficiency, I strongly believe that the use of gross revenues (as opposed to net profits) and the length of time used (2 years) as the basis of the Final Payment calculation are grossly erroneous."

He adds: "As the victims of the oil spill continue to struggle to rebuild their lives, careers, and businesses, they deserve expeditious, fair, and equitable resolution of their claims by BP and the GCCF. As such, I ... respectfully request that the GCCF implement a calculation for the Final Payment that does not attempt to capitalize on factors that minimize the claimants' real loss. Instead, if the GCCF is to live up to its charge of accurately and fairly compensating the oil spill victims for their losses, it should employ a methodology that accurately and meaningfully appreciates the magnitude of such losses."

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