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BP Business Economic Loss Claim Appeal 2016-1856: Electric Substations are Not “Facilities” Under Policy 467

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The following is an Appeal Panel Decision issued pursuant to Section 6 of the BP Deepwater Horizon Economic & Property Damages Settlement Agreement and the Rules Governing the BP Appeals Process. Links may have been added to assist the reader. The original decision may be found here, as well as a glossary of BP Settlement terms.

The Claimant is an electric power cooperative with headquarters in Andalusia, Alabama. The Claimant filed BEL claims for its headquarters and for 19 of its electric
substations. The Claims Administrator denied the claims of all the substations, finding that they did not satisfy the definition of a Facility under Exhibit 5 of the Settlement Agreement. Claimant appeals.
Exhibit 5 of the Settlement Agreement defines “Facility” as “separate and distinct physical location of a Multi-Facility Business at which it performs or manages its operations.” Under Policy 467, a location must satisfy each of the following three elements in order to constitute a Facility: (1) A separate and distinct physical structure or premises; (2) Owned, leased or operated by the Business Entity; (3) At which the Business Entity performs and/or manages its operations. Claimant’s position is that the substations qualify as Facilities because the substations are distinct physical premises that are owned by Claimant. Additionally, Claimant contends that it performs and/or manages its operations at these substations.
With regard to this third criteria, Claimant puts forth the following: (a) Claimant has employees or agents present from time to time in the normal course of business who carry out regular maintenance, and (b) Claimant remotely monitors and controls the substations from its headquarters. Claimant argues that the function of the substations is to step down the voltage from the high transmission lines to make it commercially usable by residential and commercial consumers. Hence, Claimant
argues that it does, in fact, perform and/or manage its operations at these locations.
BP counters that Claimant manages or performs its operations from its headquarters, not from the substations. BP further points out that any employees or agents performing maintenance are not present on a routine basis. None of these employees regularly perform their work at these substations according to BP. Otherwise, the operation of the substation is controlled remotely from Claimant’s headquarters.
Policy 467 also directly addresses providers of electricity:
Electric Power Companies: Electric power general and/or distribution Entities are comprised of one or more central
offices, power lines, and power meters. The offices will typically be considered Facilities because they are structures
where business operations are actively performed and managed. Power lines are not Facilities because transforming
voltage and transmitting electricity does not constitute performing or managing business operations.
In its reply memorandum, Claimant submitted an affidavit from its CEO. The affidavit describes the substations as the point of delivery of electricity to Claimant’s member cooperatives. He also emphasizes that Claimant monitors, controls and operates the substations remotely from the company’s headquarters. Thus, the CEO asserts that Claimant performs or manages a significant aspect of its operations at the substations.
After careful de novo review, this Panel is unable to agree with the Claimant that it performs and/or manages its operations at the electric substations. These locations exist solely for the purpose of transforming voltage and transmitting electricity. Thus, under Policy 467, these substations do not qualify as Facilities. Claimant concedes that employees are physically present only to perform maintenance. Thus, the only way operations might be performed or managed is by the remote operation described by the CEO. But Policy 467 requires more. The use of the words “at which” suggests that the performance and/or management of the operations must be done at the Facility. This element is absent from the record in this claim.
For the foregoing reasons, the Claims Administrator was correct in denying this claim.  Accordingly, the Claimant’s appeal is denied.

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