States Weigh Big Claims Against BP

Gulf Coast states are gearing up to follow shrimpers and hotel owners in seeking payouts from BP PLC for lost revenue and other damages stemming from the Gulf of Mexico oil spill.

The demands could far exceed the $305 million BP has already given the states of Louisiana, Mississippi, Alabama and Florida to help pay cleanup costs, promote tourism and begin building sand berms off the coast of Louisiana, state officials say. Lawyers advising the states said they would eventually seek multi-billion dollar payouts, but it was still too early to give a tally.

BP declined to comment on the states' legal strategies. The British oil company agreed nearly two weeks ago to honor claims for damages and lost business revenue from individuals and businesses through a $20 billion, independent compensation fund administered by Kenneth Feinberg, the Washington, D.C.,-based lawyer and arbitration expert.

The fund is also meant to cover payments for states and localities to defray cleanup costs, but not necessarily claims for the larger economic damages that Florida and the other states plan to present directly to BP, the state's representatives said.

"We don't want to in anyway diminish that fund," said Steve Yerrid, an attorney picked by Florida Gov. Charlie Crist, a Republican, as a special counsel for the oil spill. Mr. Yerrid met Friday with Florida Attorney General Bill McCollum to discuss the state's strategy. "We are looking at much more global and larger losses to the state, which would be covered separately," he said.

Mr Yerrid is assembling a team of private attorneys to prepare for what he predicts will be "a very large reparations request." The other Gulf states have similar efforts underway—and have held talks with each other—although the legal strategies among them differ.

Florida intends to seek payments from BP to cover lost tax revenue, unemployed workers and other damages to the state's coastal economy, Mr. Yerrid said.

He and Mr. McCollum said the state hopes to avoid costly and time-consuming litigation and plans to seek periodic payments, like those that some businesses are already receiving, starting sometime this summer. "We think the state's losses are going to be very large, and that we shouldn't have to wait for final payment," Mr. McCollum said.

Mississippi Attorney General Jim Hood has sought advice from state university researchers, economists and lawyers to assess the environmental and economic damage the spill has caused to the state.

Mr. Hood said the process could take three or more years before he could present BP with the final bill because the issues aren't straightforward. For instance, hotel capacity along the coast may be similar to last year's but rooms now are occupied by clean-up workers instead of money-spending tourists.

Mississippi has already received $25 million from BP to pay for costs from the spill and another $25 million for its local governments that are grappling with an array of economic issues brought on by the slick that has washed ashore.

"We're first going to ask BP to pay what we can come up with and hopefully we can negotiate with them," Mr. Hood said. "But I'm losing faith quickly."

His advance planning includes strategies for a lawsuit against BP in state court. "I certainly don't want to be thrown into the mix with thousands of other claims" in federal courts, Mr. Hood said.

Louisiana's attorney general's office has hired plaintiff attorney Brad Marten of Seattle, who represented Alaska in the Exxon Valdez oil-spill litigation. Mr. Marten did not return calls for comment.

Texas, which has not been hit by any oil from the spill, is nonetheless "considering any and all possible legal avenues regarding the oil spill," said Jerry Strickland, a spokesman for Texas Attorney General Greg Abbott.

Mr. Abbott sued BP after a deadly 2005 explosion at BP's Texas City refinery. "Much like our legal challenge there, Texas in this case won't hire private lawyers but will handle possible future litigation in house with lawyers from our office," Mr. Strickland said.

BP faces exposure far from the Gulf itself. Eleven Atlantic Coast states, hundreds of miles away from the spill, have sent letters to BP and the other companies involved with the Deepwater Horizon drilling rig, asking them to preserve documents tied to the spill and appoint a liaison with between the companies and the attorneys general.

The attorneys general are arguing that their states' migratory birds and marine animals that spend part of their lives in Gulf waters affected by the spill will have major consequences for all shoreline states. "Even without oil actually reaching the Connecticut shoreline, this massive oil spill could still impose damage and destruction to the entire Atlantic coastline," Connecticut Attorney General Richard Blumenthal said in a statement.

By Neil King Jr, neil.king@wsj.com; Dionne Searcey, dionne.searcey@wsj.com; Vanessa O'Connell, vanessa.o'connell@wsj.com

Source: WSJ.com