Policy

Doing Business on the Gulf Coast, Post-Spill


As the owner of Randol's, a seafood processing plant and restaurant in Lafayette, La., Frank Randol has weathered virtually every natural and man-made disaster to hit his Gulf Coast business in the past four decades, from Hurricane Katrina to the Great Recession. Last April's BP Deepwater Horizon oil spill that killed 11 workers and ultimately unleashed 170 million gallons of crude into the Gulf of Mexico has been among the worst, Randol says.

"Our processing was interrupted, our costs went through the roof, and our margins were not there anymore," says Randol, 65. His 70-person business lost more than $500,000 in 2010 and is awaiting payment for a claim he filed in August with the Gulf Coast Claims Facility, the $20 billion fund to compensate individuals and businesses for losses related to BP's spill. "We were hand-to-mouth. We are still in that mode."

Randol is one of thousands of Gulf Coast small business owners affected by the spill—the world's largest accidental release of oil into marine waters. In some Gulf Coast areas, tourism and fishery industries have declined dramatically, spurring nearly 100,000 businesses to file claims. In Louisiana, deliveries of commercial catches were down 40 percent in 2010, according to Ewell Smith, executive director of the Louisiana Seafood Board. Mississippi's Harrison County Tourism Commission found that while the number of tourists in the state's Gulf Coast area increased a bit in 2010 over 2009, they spent slightly less.

Claims Confusion

Meant to offset such losses, the claims system is proving too opaque, some business owners and lawyers say. Understanding the formula for a successful claim "is the $64,000 question," says Daniel Becnel Jr., a Louisiana lawyer who has settled more than 1,000 spill loss claims for individuals and businesses. "This is a gigantically complicated process. If you send in your form today, it could go to one of 27,000 people. I could send the same identical claim into someone in Louisiana, someone in Mississippi, and someone in Florida, and get three different adjustments on these numbers."

Kenneth Feinberg, whom BP hired to administer its compensation fund in June, says the primary challenge for many is providing proper documentation of losses attributable to the spill. "When your next-door neighbor got $10,000 and you received half that, there is a natural negative reaction to perceive inconsistent treatments," he says. "There may be very good reasons, like better proof and different circumstances."

With $3.8 billion paid out for more than 500,000 claims and counting, inconsistencies are inevitable, Feinberg says. Any claimant who feels a "final payment" for the full losses is premature should take an interim payment and come back to the Gulf Coast Claims Facility with documentation of damages for each quarter, he says. He expects the facility will be caught up with all claims by the end of the year.

For some business owners, the claims process is further complicated by uncertainty over long-term damages. "We're not going to take a final payment [yet] because in two years something may pop up and business could slow down again," says Biloxi (Miss.) T&D Charters owner Thomas Becker, 69. He worries about under-the-surface problems that may take years to emerge. "We just don't know what will happen, and no one can give us an answer."

Perception Problem

Perhaps the biggest obstacle to a sustained recovery along the Gulf Coast is would-be tourists' perception, say business owners from Florida to Texas. While they note their beaches are clean, they say tourists have an image of a coastline blackened with oil. Seafood buyers outside the region also remain hesitant. "The perception problem is still very, very real," says the Louisiana Seafood Board's Smith, though he expects it to turn around in the "next two to three years."

Denial about the extent of damages could also hamper the turnaround in the long run, says Charlotte Wells, the baykeeper for Galveston Baykeeper in Seabrook, Tex., a member of the environmental group Waterkeeper Alliance. She says 26 miles of Texas coastline were affected by the oil, but most of it has been dispersed with detergent-like chemicals. That dispersed oil is difficult to see and difficult to find, says Wells. "To what extent is it in our water and in our seafood?" says Wells. "I still don't think we know that."

For snapshots of coastal business owners in Texas, Louisiana, Mississippi, Alabama, and Florida, flip through this slide show.

Prentice is a contributing reporter for Bloomberg Businessweek.

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