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If the Deepwater Horizon tragedy in the Gulf of Mexico were a movie – has Stephen Spielberg called back yet? – it would have reached the point where a familiar but hard-to-identify supporting actor appears on our screens. He will be playing the part of Louis Freeh, the former head of the Federal Bureau of Investigation. Cue an extended scene (interior, night) in sweltering New Orleans offices.

Mr. Freeh has been appointed to look into allegations of misconduct in the office administering compensation claims against BP relating to the Deepwater Horizon accident and oil leak in April 2010. The oil company agreed a $7.8-billion (U.S.) civil settlement last year for people whose livelihoods were affected by the leak. But BP has accused the administrators of the settlement of paying out claims for "fictitious and inflated losses" unrelated to the leak. That would appear to breach the spirit of the settlement, at least. BP fears the eventual bill could be twice the figure agreed.

On Monday, BP's appeal against a ruling that the settlement is being administered fairly will be heard. The company might be confident it has a case, given that Mr. Freeh was appointed by a court. But it may be a bit late for BP to suffer a dose of buyer's remorse. In the weeks after the Deepwater Horizon accident, it opened its wallet a bit too much, creating the impression that it was a soft touch. And the settlement appears loosely drafted. How else to explain the different interpretations of it?

BP is frustrated – as it should be. The company has made a total provision of $42.2-billion for the cost of Deepwater Horizon, including the settlement, clean-up costs and fines. The row over the settlement raises the unnerving prospect that this mind-boggling number may not be enough. Investors are entitled to worry that BP may be running not just out of patience but out of money. Meanwhile, BP rightly does not want to be put on the hook for claims it regards as bogus.

BP's provisioning so far includes a $20-billion trust fund for clean-up costs, of which $18.3-billion has been paid out so far. So it may have $1.7-billion to spare for the settlement. But that is beside the point. BP owes it to its shareholders to bring financial clarity to the Deepwater Horizon tragedy. A hefty additional charge may still be required if it is found guilty of gross negligence in a separate trial to assess damages. But that has to be it. BP is right to start playing a bit of hardball on the streets of the Big Easy.

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Study and track financial data on any traded entity: click to open the full quote page. Data updated as of 27/03/24 6:40pm EDT.

SymbolName% changeLast
BP-N
BP Plc ADR
-0.29%37.46

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