Velazquez on the BP Oil Spill Claims Fund

Jun 30, 2010, 12:43 ET from Chairwoman Nydia M. Velazquez (D-NY), House Committee on Small Business

WASHINGTON, June 30 /PRNewswire-USNewswire/ -- Rep. Nydia M. Velazquez (D-NY), the Chairwoman of the House Committee on Small Business, delivered the following statement today at a hearing entitled, "Recovery in the Gulf: What the $20 Billion BP Claims Fund Means for Small Businesses":

"For the last 72 days, the nation has watched anxiously as oil has spilled into the Gulf of Mexico.  With estimates of up to 60,000 barrels per day, the spill has paralyzed the economy of this region during its normally most prosperous time of year.  In fact, economists estimate that over 7 million businesses will be impacted by the oil spill.  Almost 6 million of them will be small businesses with less than 10 employees.  For entrepreneurs, this is a catastrophe of an unthinkable size and scale.

"To compensate these small business owners and provide the local economies with the support they need, BP established the $20 billion Gulf Spill Independent Claims fund.  There is hope that the creation of this escrow account will avoid the situation created by the 1989 Exxon Valdez oil spill in Alaska.

"That catastrophe took decades of litigation to assess damages.  The roughly 32,000 claimants, primarily fishermen, received only about a quarter of the losses filed by each claimant after the Exxon Valdez spill.  The hope is that this time, small businesses will be more fairly compensated for their losses.

"During today's hearing we will examine how the claims fund will meet the needs on small firms.  To date, 81,701 claims have been opened, from which more than $128.4 million have been disbursed since the fund began operating on June 16th.  We need to make sure that small businesses know how quickly they will receive payments and how these payment amounts are being calculated.  The Committee looks forward to hearing Mr. Feinberg's thoughts on these matters today.  

"This is important to all businesses, but particularly those industries that have been directly affected by the spill and the resulting closure of nearly 40 percent of the Gulf.  The commercial fishing industry – made up of independent shrimpers, crabbers, oyster farmers, and fisherman – accounts for over 200,000 jobs and $5.5 billion in revenue.  Not only has the closure of fishing areas limited their ability to operate, but many are finding that the public's confidence in Gulf products has been eroded, creating another obstacle for the local economy.

"The problems faced by businesses in the fishing industry are matched by those in the tourism sector.  Hotels and restaurants rely heavily on tourism, with some New Orleans restaurants reporting that they rely on non-locals for up to 70 percent of their business.   Alabama – in the midst of what is normally its high season – has already experienced a 50 percent decline in tourism due to public fear of tar balls on local beaches.  In Florida, economists predict a loss of 195,000 jobs and a cost of almost $11 billion if just half of their tourism and leisure income goes away.  Unfortunately, it is clear that small firms across the Gulf are in for a tough summer.

"The claims fund that Mr. Feinberg administers is essential to the on-going recovery and eventual restoration of the Gulf Coast economy.  As we have seen in the past, a little assistance to these businesses will enable them to innovate and begin anew.  With oil continuing to flow, however, no one can foresee what the future holds.  

"But, what we do know is that these Gulf Coast businesses have overcome similar challenges – like they did after Hurricane Katrina.  These entrepreneurs are resilient and they should not be underestimated.

"It has been projected that over 40 percent of business fail to recover following a disaster.  In many cases, these businesses go under simply because they lack the financial resources necessary to restart their enterprises.  In the case of the oil spill, however, it is different – and much more complicated.  It is not just about the money, but making sure that the leak is stopped and the physical damage is mitigated.  Then, we will need to restore the public's trust in the Gulf as a center for commerce and tourism.

"I think I can speak for all of the Committee members here today in saying that we will do whatever it takes to help these small businesses overcome these challenges.  Given this, I think it is appropriate that Mr. Feinberg's first appearance before Congress is before this Committee and I want to thank him for taking time of out of your busy schedule to appear before our Committee this morning."  

SOURCE Chairwoman Nydia M. Velazquez (D-NY), House Committee on Small Business