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BP Business Economic Loss Claim Appeal 2016-192: Metal fabricator not subject to moratoria review


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.

Claimant received an award of $698,957.20 pre-RTP. BP appeals, raising several points of error. First, appellant contends claimant should have been excluded as a member of the Oil and Gas Industry. Additionally, BP argues , even if was not excluded due to that exclusion, a portion of the revenues should have been excluded due to the Federal Moratoria. Finally, BP suggests the Settlement Program misclassified the insurance expense, didn’t exclude costs that were reimbursed and failed to consider related party issues.

Claimant is a metal fabricator located in Port Arthur, Texas. BP contends that several of claimant’s customers “include oil and gas companies” and the company is located in a major center for oil and gas activities. Therefore, appellant argues, by extension, that should be excluded pursuant to Section of the Settlement Agreement as “a business in the Oil and Gas Industry”.

The determination of whether a company is excluded under this provision is based on the totality of circumstances which, in turn, dictates the appropriate NAICS code for a claimant. In the immediate case, BP’s position lacks all merit. Claimant acknowledges it has customers in the Oil and Gas industry. However, Claimant also has numerous customers outside the oil and gas industry. Just because a company has some customers in oil and gas does not make it a member of the industry. To rule otherwise would lead to absurd results. Otherwise, every widget manufacturer that sells some of its product to an oil company would be a member of the oil and gas industry. This result was surely not intended by the Settlement Agreement.

Further, the Administrator assigned NAICS code 332322 ” sheet metal work manufacturing” to this claimant. This designation seems appropriate and this code is not one of those listed as a member of the Oil and Gas Industry under the Settlement Agreement.

BP’s suggestion that some of claimant’s losses stemmed from the Federal Moratoria is also without basis. This issue was not raised in the Notice of Appeal so it need not be considered. Notwithstanding this deficiency, claimant effectively addressed this argument. BP points to the fact that “is located in a major center for Oil and Gas exploration activity” and some of its products are “used in the petrochemical and petroleum industries”. These conclusory allegations are not enough to trigger a Moratoria review. Moreover, claimant effectively rebutted BP’s argument with the affidavit of the company’s general manager. He makes clear that, for the relevant period, 100% of products and services were provided to on shore industrial entities. There is no basis for a Moratoria review in this case.

Appellant’s next contention is that the Settlement Program should have more carefully scrutinized related party transactions involving entities with interlocking owners and officers. However, in order for the revenue to be excluded, it must be from related companies in transactions that are not arms length. This means that the prices and terms are artificially set based on the relationship between the parties as opposed to fair market value. BP has no evidence to indicate the transactions at issue were not arms length. Moreover, another portion of the general manager’s affidavit attests that all invoicing or bids to any entity, related to or not, were charged at the same price per unit. Additionally, invoices supporting this contention are in the record.

Finally, BP raised issues regarding expenses related to freight and insurance. Claimant agreed with BP’s position on these costs and adjusted its final proposal accordingly. As a result, claimant made a final proposal of $624,483.20. Under the baseball process, it is appropriate to select either BP or claimant’s final proposal. Therefore, final proposal of $624,483.20 is the correct award even though the Settlement Program awarded $698,957.20 which was in accord with claimant’s initial proposal before the adjustments were made.

BP’s appeal is dismissed and there is a ruling herein in favor of claimant’s final proposal of $624,483.20.

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