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BP Business Economic Loss Claim Appeal 2016-93: Rice storage facility AVM, not agriculture


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 operates a and storage facilities in Lacassine, La. Claimant asserts that it operates its Lacassine facility 365 days a year, earning income from rice stored by farmers in its bins and drying facilities. Claimant further states that farmers may bring rice to be dried and stored at any point of the year, not just at the peaks of growing and harvest season. In addition farmers may elect to leave their rice in storage at its facility for as long as a year or longer, paying storage fees to Claimant for the entire time the rice is in its facilities. Therefore Claimant asserts that there is an on-going revenue stream that included a “spike” in 2009 revenue. Claimant concluded that the Settlement Program adequately and appropriately determined compensation for the Lacassine Claim.

BP generally asserts the award does not comply with the terms of the Settlement Agreement, including without limitation the BEL framework and Policy 495. BP argues the Settlement Program used an incorrect matching methodology, applying the Annual Variable Margin Methodology (“AVMM”) despite the fact that the Claimant’s NAICS Code identifies it as an agricultural business whose matching issues are best addressed through the Agriculture Methodology (“AM”). BP states that the Settlement Program erred by failing to apply the Agricultural Method to this claim.

Claimant identified its NAICS Code as 115110 “Support Activities for Crop Production”. Consistent with the Claimant’s selection, after reviewing Claimant’s tax returns and website, the Settlement Program applied NAICS Code 115114 – “Postharvest Crop Activities” (except Cotton Ginning)” which is a more specific subcategory of NAICS Code 115110.

BP acknowledges that the Settlement Program assigned the correct NAICS Code, but asserts that the Settlement Program did not apply AM as Policy 495 requires, and erroneously applied AVMM instead. BP argues the Claimant supports the production of a specific crop, namely rice, as opposed to “general agriculture industry; and accordingly there is a clear and identifiable crop season associated with Claimant’s revenue. While BP does acknowledge that Claimant’s revenue is generated not only from drying rice after the harvest, but also from year-round rice storage, it believes the AM methodology should be applied.

The accountants for the Settlement Program, however, appear to agree with Claimant’s position that its business is not seasonal but rather year-round in its storage services for farmers both at harvest and beyond. They cite “the description of the business indicates the claimant supports the general agriculture industry and accordingly, there is no crop season over which revenues can be allocated.” The Claims Administrator identified that this BEL claim was “not sufficiently matched” using the criteria set out in Policy 495 (Section I). Based on the business’s industry type, the Claim’s Administrator evaluated the claim under the AVMM as set forth in Policy 495 (Attachment B).

Further BP asserts that the Settlement Program failed to investigate an unusual, one-time spike in Claimant’s “Storage Income” for September 2009 which , based on the record, was earned over the course of many months, not simply the month in which Claimant recorded the income. While the Claimant does not specifically address this issue, it did provide supporting documents in the form of “Storage Journal”. The Settlement Program noted that this document generally conformed to Claimant’s P&Ls. While BP questions reliability of the September 2009 entry, the Settlement Program did have that opportunity to test the credibility of that which it examined. Certainly the records clearly show that for 2009, 2010, and 2011 if there was a spike within the calendar year it occurred in and around August to September of each of those years. Thus the “spike” of 2009 was not remarkable compared to the spikes of 2010 and 2011. Thus, this Panelist is satisfied with that review. Therefore, the decision of the Claims Administrator is due to be affirmed and the appeal denied.

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