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BP Business Economic Loss Claim Appeal 2016-869: Equipment rental company not excluded, despite ties to oil and gas


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 Claims Administrator awarded $113,392.96 to this equipment rental company in Cottondale, Alabama (Zone D). Policy 495 criteria were triggered and the AVM methodology was employed. BP’s single issue appeal asserts that the Administrator erred in failing to exclude the Claimant as a business in the Oil and Gas Industry.

The Administrator determined that the NAICS Code appropriately describing the Claimant’s primary business activities was 532412 – Construction, Mining, and Forestry Machinery and Equipment Rental and Leasing. BP points to information provided to the Settlement Program by Claimant’s counsel that Claimant “specializes in assisting oil and gas companies with repairs associated with downhole problems in oil and gas wells.” Thus, BP is vocal in arguing that the proper NAICS Code should have been 213112 – Support Activities for Oil and Gas Operations. Because this NAICS Code is among those listed in Exhibit 17 as excluded, BP urges that Claimant should have been excluded.

BP supports its argument that Claimant is primarily a service business, as opposed to a rental company, based on its sales tax receipts. As BP sees it, Claimant paid only a small percentage of its total revenue in sales tax. BP bootstraps this information to suggest that Claimant is actually performing oil field services rather than renting equipment.

Claimant’s briefing describes BP’s arguments as speculative. Claimant argues that the Administrator followed Policy 480 v.2 in determining the appropriate NAICS Code based on its 2010 tax return and other evidence of its primary business activity, i.e., the rental of equipment and tools. Claimant argues that the fact that it rents equipment that is sometimes used in the oil and gas business does not transform it into an Oil and Gas business.

Policy 480 v.2 requires the Administrator to look to the Claimant’s 2010 tax return and 2010 business permits, if applicable, along with other evidence, to determine the NAICS code that most accurately describes its primary business activity. De novo review reflects that Claimant’s 2010 tax return listed its primary business activity as “Tool Rental; Oil Field Tools.” Further, the 2010 P&Ls indicate that approximately $53,000 of Claimant’s $65,000 annual revenue was from the rental of equipment.

The record supports the Administrator’s assignment of NAICS Code 532412. BP’s arguments are largely speculative and fail to persuade this panelist that the Claimant is a business in the Oil and Gas Industry. No error has been shown. Accordingly, the award is affirmed.

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