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BP Business Economic Loss Claim Appeal 2016-2040: Sales Reallocated Over Cottonseed Ginning Season Instead of When Sales Revenue Received

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, a cotton gin operator in St.Joseph, Louisiana, appeals the denial of its BEL claim on the basis it failed to satisfy the causation requirements of Exhibit 4B of the Settlement Agreement. Claimant asserts the Settlement Program(SP) incorrectly applied the provisions of policy 495 when it reallocated ginning revenues derived from
cottonseed sales over the ginning season instead of when the cottonseed sales occurred. Claimant contends that this wrongful adjustment, if corrected, would result in claimant satisfying the causation requirements of Exhibit 4B. Claimant also argues that policy 495 prohibits such adjustments in the absence of obvious accounting errors or mismatches of revenues and expenses.BP in response argues that the action of the SP was authorized by Policy 495 as interpreted and approved by recent court decisions.
A review of the record discloses that cottonseed is a by-product of the cotton harvest. Once the cotton lint is obtained after the ginning process the gin operator receives the cottonseed product from the farmer as in-kind payment. This practice was reflected in the Calculation Notes.  Instead, the Claimant received the majority of its income from the sale of cotton seed, which was from the cotton ginned by Claimant during the Cotton ginning season(August to November).
DWH Accountant noted the majority of cotton seed sales were not reported within the ginning season.As all cotton seed sales pertained to the ginning activities in August to November for each year, DWH Accountant made the following adjustments to spread the cotton seed sales to the corresponding ginning months. These stated reasons exhibit the exercise of reasonable professional judgment vested in the program reviewers by policy 495 and as approved in recent discretionary review court decisions. See decision numbers,2016-100 and 2016-548.
The SP determined the in-kind payment was earned and received during the ginning season even though the value to be assigned to it was not known until the product was sold later on the open market; thus,it was reasonable to relate this deferred compensation back to the earlier period assigned to it. Furthermore,as noted in these decisions, actual accounting errors need not be shown before such adjustments can be made, only mismatches of revenues or expenses. There is no error. The decision of the Claims Administrator is affirmed and the appeal of claimant is denied.

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