[House Hearing, 111 Congress]
[From the U.S. Government Publishing Office]


 
                       FULL COMMITTEE HEARING ON 
                       RECOVERY IN THE GULF: WHAT 
                     THE $20 BILLION BP CLAIMS FUND 
                       MEANS FOR SMALL BUSINESSES 

=======================================================================

                                HEARING

                               before the


                      COMMITTEE ON SMALL BUSINESS
                             UNITED STATES
                        HOUSE OF REPRESENTATIVES

                     ONE HUNDRED ELEVENTH CONGRESS

                             SECOND SESSION

                               __________

                              HEARING HELD
                             JUNE 30, 2010

                               __________

               [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
                               
            Small Business Committee Document Number 111-071
Available via the GPO Website: http://www.access.gpo.gov/congress/house

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                   HOUSE COMMITTEE ON SMALL BUSINESS

                NYDIA M. VELAZQUEZ, New York, Chairwoman

                          DENNIS MOORE, Kansas

                      HEATH SHULER, North Carolina

                     KATHY DAHLKEMPER, Pennsylvania

                         KURT SCHRADER, Oregon

                        ANN KIRKPATRICK, Arizona

                          GLENN NYE, Virginia

                        MARK CRITZ, Pennsylvania

                         MICHAEL MICHAUD, Maine

                         MELISSA BEAN, Illinois

                         DAN LIPINSKI, Illinois

                      JASON ALTMIRE, Pennsylvania

                        YVETTE CLARKE, New York

                        BRAD ELLSWORTH, Indiana

                        JOE SESTAK, Pennsylvania

                         BOBBY BRIGHT, Alabama

                      DEBORAH HALVORSON, Illinois

                  SAM GRAVES, Missouri, Ranking Member

                      ROSCOE G. BARTLETT, Maryland

                         W. TODD AKIN, Missouri

                            STEVE KING, Iowa

                     LYNN A. WESTMORELAND, Georgia

                          LOUIE GOHMERT, Texas

                         MARY FALLIN, Oklahoma

                         VERN BUCHANAN, Florida

                      BLAINE LUETKEMEYER, Missouri

                         AARON SCHOCK, Illinois

                      GLENN THOMPSON, Pennsylvania

                         MIKE COFFMAN, Colorado

                  Michael Day, Majority Staff Director

                 Adam Minehardt, Deputy Staff Director

                      Tim Slattery, Chief Counsel

                  Karen Haas, Minority Staff Director

        .........................................................

                                  (ii)

  


                         STANDING SUBCOMMITTEES

                                 ______

               Subcommittee on Contracting and Technology

                     GLENN NYE, Virginia, Chairman


YVETTE CLARKE, New York              AARON SCHOCK, Illinois, Ranking
BRAD ELLSWORTH, Indiana              ROSCOE BARTLETT, Maryland
KURT SCHRADER, Oregon                W. TODD AKIN, Missouri
DEBORAH HALVORSON, Illinois          MARY FALLIN, Oklahoma
MELISSA BEAN, Illinois               GLENN THOMPSON, Pennsylvania
JOE SESTAK, Pennsylvania
MARK CRITZ, Pennsylvania

                                 ______

                    Subcommittee on Finance and Tax

                    KURT SCHRADER, Oregon, Chairman


DENNIS MOORE, Kansas                 VERN BUCHANAN, Florida, Ranking
ANN KIRKPATRICK, Arizona             STEVE KING, Iowa
MELISSA BEAN, Illinois               W. TODD AKIN, Missouri
JOE SESTAK, Pennsylvania             BLAINE LUETKEMEYER, Missouri
DEBORAH HALVORSON, Illinois          MIKE COFFMAN, Colorado
GLENN NYE, Virginia
MICHAEL MICHAUD, Maine

                                 ______

              Subcommittee on Investigations and Oversight

                 JASON ALTMIRE, Pennsylvania, Chairman


HEATH SHULER, North Carolina         MARY FALLIN, Oklahoma, Ranking
BRAD ELLSWORTH, Indiana              LOUIE GOHMERT, Texas

                                 (iii)


               Subcommittee on Regulations and Healthcare

               KATHY DAHLKEMPER, Pennsylvania, Chairwoman


DAN LIPINSKI, Illinois               LYNN WESTMORELAND, Georgia, 
MELISSA BEAN, Illinois               Ranking
JASON ALTMIRE, Pennsylvania          STEVE KING, Iowa
JOE SESTAK, Pennsylvania             VERN BUCHANAN, Florida
BOBBY BRIGHT, Alabama                GLENN THOMPSON, Pennsylvania
MARK CRITZ, Pennsylvania             MIKE COFFMAN, Colorado

                                 ______

     Subcommittee on Rural Development, Entrepreneurship and Trade

                 HEATH SHULER, North Carolina, Chairman


MICHAEL MICHAUD, Maine               BLAINE LUETKEMEYER, Missouri, 
BOBBY BRIGHT, Alabama                Ranking
KATHY DAHLKEMPER, Pennsylvania       STEVE KING, Iowa
ANN KIRKPATRICK, Arizona             AARON SCHOCK, Illinois
YVETTE CLARKE, New York              GLENN THOMPSON, Pennsylvania

                                  (iv)


















                            C O N T E N T S

                              ----------                              

                           OPENING STATEMENTS

                                                                   Page

Velazquez, Hon. Nydia M..........................................     1
Graves, Hon. Sam.................................................     2

                               WITNESSES

Feinberg, Mr. Kenneth, Administrator, Golf Coast Claims Facility.     4

                                APPENDIX


Prepared Statements:
Velazquez, Hon. Nydia M..........................................    26
Graves, Hon. Sam.................................................    28
Feinberg, Mr. Kenneth, Administrator, Golf Coast Claims Facility.    30

                                  (v)

  


                       FULL COMMITTEE HEARING ON
                       RECOVERY IN THE GULF: WHAT
                     THE $20 BILLION BP CLAIMS FUND
                       MEANS FOR SMALL BUSINESSES

                              ----------                              


                        Wednesday, June 30, 2010

                     U.S. House of Representatives,
                               Committee on Small Business,
                                                    Washington, DC.
    The Committee met, pursuant to call, at 10:03 a.m., in Room 
2360, Rayburn House Office Building, Hon. Nydia M. Velazquez 
[Chair of the Committee] presiding.
    Present: Representatives Velazquez, Moore, Shuler, 
Dahlkemper, Schrader, Kirkpatrick, Critz, Bean, Altmire, 
Clarke, Halvorson, Graves, Bartlett, Westmoreland, Buchanan, 
Luetkemeyer, and Thompson.
    Chairwoman Velazquez. Good morning. This hearing is now 
called to order.
    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, this spill has paralyzed the economy 
of this region during its normally most prosperous time of the 
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 the small business owners and provide the 
local economies with the support they need, BP established a 
$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 at 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 of small businesses. Today, 81,701 claims 
have been opened, from which more than $128.4 million has been 
disbursed since the fund began operating on June 16. We need to 
make sure that small businesses know how quickly they will 
receive payment 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 fishermen, 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 of New Orleans's 
restaurants reporting that they rely on nonlocals 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 tarballs 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 ongoing 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 businesses 
fail to recover following a disaster. In many cases, these 
businesses go under simply because they lack 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 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 you for 
taking time out of your busy schedule to appear before our 
Committee today.
    With that, I will now yield to Ranking Member Graves for 
his opening statement.
    Mr. Graves. Thank you, Madam Chairman.
    Thank you for holding this hearing, a very timely hearing, 
I think.
    My thanks go out to Mr. Feinberg for joining us today, and 
I am looking forward to hearing your plans for managing BP's 
$20 billion compensation fund.
    The Deepwater Horizon oil rig explosion, which cost 11 
workers their lives on April 20, was a tragedy of enormous 
proportions; and the seemingly unstoppable leak of millions of 
gallons of oil created an environmental and economic disaster 
of unimaginable proportions.
    Let us all remember that this catastrophe is not first to 
befall this region in recent years. Hurricanes Katrina and Ike, 
the 2008 energy crisis and recession each brought new layers of 
devastation to the Gulf, devastation that families and 
businesses are still working to overcome. Just as the people in 
the Gulf region begin to recover, they have now been hit with a 
new disaster, one that has leveraged even more trauma on an 
already delicate economy.
    The oil spill has put a halt on nearly every component of 
the economy in the Gulf region. Right now, Louisiana has been 
hit hardest by the oil spill. The State's economy relies 
heavily on oil and natural gas production, chemical and 
petrochemical production, commercial fishing, and tourism. 
Louisiana contains about 10 percent of all the known U.S. oil 
reserves. It is the country's third-largest producer of 
petroleum and has impressive reserves in natural gas, producing 
approximately one-quarter of all the U.S. supply of natural 
gas.
    The State's commercial fishing industries are responsible 
for about 25 percent of all the seafood landed in America, and 
its tourism industry employs over 80,000 workers. Travelers 
spend an estimated $5.2 billion in the State each year; and, 
sadly, the oil spill has effectively shut down each of these 
segments of the State's economy.
    As the spill spreads east, the economies in Alabama, 
Mississippi, and Florida are soon going to be under siege. 
Florida's tourism industry, which is responsible for 80 million 
visitors each year, could be particularly devastated by the oil 
spill; as this industry brings more than $60 billion in taxable 
sales revenue and employs in excess of one million Floridians.
    The widespread implications of the spill become clearer 
every day. We must work together to minimize the environmental 
and economic impact of this spill and determine how we can help 
rebuild the Gulf region.
    On June 16, BP agreed to create a $20 billion escrow 
account to compensate affected businesses, business owners, and 
other victims of this spill. As the independent authority on 
processing and administering payment of the hundreds, if not 
thousands, of claims that are soon going to come from the 
businesses, Mr. Feinberg will be responsible for keeping the 
economy and small businesses in the Gulf region intact as we 
all work to recover from the spill's destruction.
    Mr. Feinberg, I look forward to your testimony today with a 
special interest in how you are going to ensure the claims 
processes are orchestrated efficiently and fairly for small 
business. I am sure you are already well aware of the critical 
role such entrepreneurs play in America's economy, and I expect 
that they will receive adequate compensation so they can 
survive yet another disaster in the Gulf and come out stronger 
on the other side.
    Madam Chair, I appreciate, again, you calling this hearing.
    Chairwoman Velazquez. Thank you.
    It now is my great honor to welcome Mr. Kenneth Feinberg. 
He is the founder and managing partner of the law firm Feinberg 
Rozen. He is a renowned expert in arbitration and was recently 
named the independent administrator of a $20 billion fund to 
compensate victims of the oil spill in the Gulf of Mexico. He 
is currently setting up an independent claims facility to 
process business and individual claims against BP.
    Mr. Feinberg's experience includes managing the September 
11 victims' fund, the Virginia Tech victims' fund, and serving 
as chief of staff to the late Senator Ted Kennedy.
    Thank you, Mr. Feinberg, and welcome.

  STATEMENT OF KENNETH R. FEINBERG, ADMINISTRATOR, GULF COAST 
                        CLAIMS FACILITY

    Mr. Feinberg. Thank you, Madam Chairwoman.
    You are absolutely right. This is the first opportunity I 
have had to meet here in Congress by the House or the Senate to 
discuss the plans for the design, implementation, and 
administration of this Gulf Coast claims facility.
    It is very, very difficult to say "no" to the chairwoman, 
who was so helpful to me during the administration of the 9/11 
victims' compensation fund, which impacted her district 
tremendously. This is one opportunity for me to thank the 
chairwoman publicly for all she did in helping me with the 
administration of that program.
    I am accompanied today by the Deputy Administrator of the 
fund, Camille Biros, who is also here if there are particular 
questions where I need to consult with her.
    But let me say that if I do nothing else in the next few 
minutes, I want to clarify and emphasize certain points about 
this Gulf Coast claims facility.
    First, by agreement, between the administration and BP, 
this is an entirely independent facility. It is not beholden to 
the administration. It is not beholden to BP. By agreement, 
they decided, let's establish and fund a truly credible 
independent facility that will process eligible claims and pay 
them promptly.
    Second, understand, please, that I am not the administrator 
of the $20 billion escrow fund. I am the administrator of the 
Gulf Coast claims facility which will draw on part of that $20 
billion fund. That $20 billion fund may also be used for 
government claims against BP, for cleanup costs brought by 
States, local government, Federal Government. Those costs come 
out of the $20 billion escrow, but it is not part of my 
obligation or mandate.
    So please make the distinction between my responsibility in 
processing private claims of all types arising out of that $20 
billion and other claims that might be brought by government 
against BP, part of that $20 billion, that are not on my watch.
    This is a purely private facility. It is not a facility of 
the Federal Government or a subfacility of an agency. It is a 
private compact creating this independent facility which I will 
design and administer.
    Next, in addition to the $20 billion, the administration 
and BP agree to set aside $100 million for so-called moratorium 
claims involving laid-off rig workers who may be out of work 
because of the imposed moratorium on other drilling in the 
Gulf. That $100 million is not part of the $20 billion; it is 
in addition. Whether or not I will administer that $100 million 
moratorium fund is up to the administration and BP. I don't 
think that has been finally resolved yet.
    It may be that the $100 million limited to moratorium rig 
worker claims--moratorium rig worker claims, not small business 
moratorium claims--wage loss, whether that fund will be a 
separate segregated account in the facility or whether it will 
be parked and administered somewhere else, it remains to be 
seen. Whether those rig workers subject to the moratorium will 
file claims with me or file claims with some other 
administrator implementing the $100 million distribution, it 
remains to be seen.
    That is not on my watch. It has to be resolved between the 
administration and particularly BP; and I think BP is going to 
have to decide in the next few days whether that $100 million 
should be part of the facility, separate from the $20 billion, 
but administered by me or whether it should be administered by 
somebody else.
    So I want to make that clear, because there has been some 
confusion generated by some of my earlier comments and others. 
Because I am trying to figure out myself exactly how that $100 
million for moratorium workers will be designed and 
administered.
    Next, I welcome and urge all eligible claimants to file a 
claim with this facility that has been established under my 
direction. I want to emphasize that those claimants include, as 
the chairwoman and Congressman Graves pointed out, not just 
individuals, small businesses, large businesses. Anybody, any 
private individual or company who feels that they have a valid 
claim to draw out of this facility should file a claim.
    There is no obligation to filing a claim with this 
facility. You do not give up any rights. You do not have to 
make any decisions at this time. You are seeking emergency 
financial assistance, which this facility is recognizing, and 
only later, if you decide to remain in the facility and seek a 
lump-sum settlement down the road, would you then have to 
decide whether to surrender your rights to sue in return for a 
lump-sum payment. But that is down the road. Right now, if you 
file a claim, we will give you a number, we will process your 
emergency application, and, if you are eligible, we will pay 
you promptly within a matter of days.
    So I would urge everybody in the Gulf who believes they may 
have a claim to file a claim, because there is no obligation in 
so doing.
    Now, to date, even before this facility was established, BP 
set up on its own a claims process that has so far, as the 
chairwoman pointed out, paid about $130 million to claimants. 
It is not as if--unlike the 9/11 fund or Virginia Tech or Agent 
Orange, when I got involved, it is not as if I am building from 
scratch. There is a program in place that is, as we speak, 
accepting, processing, and paying claims.
    Now, unfortunately, that program could work better. It is 
not sufficiently efficient. It is not paying all that many 
small business claims. It needs to pay more small business 
claims and large business claims.
    It is not sufficiently transparent. I am getting a lot of 
objection from State and local governments that they are having 
trouble processing how--monitoring how BP is doing in accepting 
claims, considering them, and then approving or disapproving 
claims.
    So I think one task I have got to do quickly is develop a 
much more transparent sunlight so that Congress, as part of its 
oversight function, as well as local governments--Governor 
Jindal has been very strong on this point. We have got to do a 
much better job--as has Homeland Security been very strong on 
this point. We have got to do a much better job as this 
facility begins to make sure that the data that can demonstrate 
the efficiency and success of the facility--or its 
shortcomings--is made available to this Committee and other 
similar Committees, and that is one objective that I will 
undertake.
    Finally, as a summary point, it is very important that I 
provide appropriate compensation to all eligible claimants. 
Every claimant is not eligible. There are going to be two 
important prerequisites to securing compensation under this 
facility:
    One, is the claim eligible? Is it appropriate to even file 
a claim? How will I decide that?
    Well, Congress gave me some guidance that I think may prove 
very, very valuable when it enacted the 9/11 Victims 
Compensation Fund back in 2001. Congress said, in that 
legislation, in deciding whether a claim, a 9/11 claim, is 
appropriate, valid, legitimate, look to the law of the State of 
the victim.
    Look to, in this case, the facility, say, let's look at the 
law of Louisiana, Florida, Mississippi, Alabama, Texas. 
Maritime law under OPA, the Pollution Control Act, may be the 
way to decide eligibility is to say to a claimant, look, you 
can file a claim with me, and I will process that claim. If 
your claim is legally sufficient under your own State law, I 
will recognize it. If not, I won't, or maybe I have to exercise 
some discretion in that regard.
    But there has to be some way to categorize and define what 
is an eligible claim and what is not an eligible claim. There 
is not enough money in the world to pay everybody who would 
like some money. You have got to decide in a principled way, as 
we have in all of these other claims facilities like 9/11. 
These claims under your own law are not eligible and work out 
some definition in that regard.
    Secondly, even if you have an eligible claim corroborated, 
you have to corroborate your claim. You can't come in and say. 
I am out of work. I am losing $5,000 a month. Pay me. Well, 
show me that you are out of work. Show me something that 
corroborates the amount that you seek in order to justify a 
prompt emergency payment.
    So I want to emphasize that this fund established just less 
than 2 weeks ago, I am determined, as I have in the past, 
bipartisan, apolitical, I am determined to pay every eligible 
claim, pay it as promptly as I can, get the money out.
    Governor Barbour of Mississippi, last week when I met with 
him, gave me some very valuable advice. He said, Ken, I just 
want you to know, time is the enemy. Time is the enemy. You 
have got to get this money out the door.
    I learned that 25 years ago in the Agent Orange Vietnam 
veterans case when Judge Jack Weinstein, Federal judge who had 
that case, said, Ken, when it comes to the Vietnam veterans, 
get these settlement monies out to them ASAP, and that is what 
I will try and do.
    My final point, this program cannot be administered by me 
from Washington. The only way this program works, you have to 
go down to the Gulf and meet the people down there, hear what 
they say, hear their concerns, why they are worried about their 
financial future, why they are angry, why they are dispirited, 
why they are frustrated.
    I have--from the moment I was given this assignment, I have 
constantly been down in the Gulf, in Alabama, Mississippi, 
Louisiana, tomorrow, back to Alabama and to see Governor Crist 
in Florida; and I will continue to go back there every week. 
Because unless you are down there, listening in town hall 
meetings to what all of your constituents are saying about the 
problems, you can't really get a feel for the need for this 
facility to work and to work effectively.
    So that is sort of a very brief summary, but I anticipate a 
fair number of questions, and that is why I am here.
    Madam Chairwoman and Congressman Graves, I thank you both 
for the opportunity to be here. I am honored to be here today.
    [The statement of Mr. Feinberg is included in the 
appendix.]
    Chairwoman Velazquez. Thank you, Mr. Feinberg.
    Let me just say that the lessons that we learned from 9/11 
and other funds that you have been able to manage is a test of 
your integrity, your expertise, your human understanding of the 
suffering that is required to make a facility like this an 
effective vehicle to help the people of the Gulf to recover. So 
thank you for your service.
    Mr. Feinberg, studies have shown that businesses who get 
cash assistance shortly after they are impacted by a natural 
disaster or any kind of disaster are much more likely to 
succeed than those who have to go to through a prolonged wait 
for financial assistance. Early payments by BP to small 
businesses have been limited to one month's worth of lost 
profits. Small businesses say these payments are too little to 
cover operating expenses and payroll. Are you considering 
modifying these methods to allow businesses to secure up-front 
payments beyond a month's profits?
    Mr. Feinberg. Yes.
    Governor Riley of Alabama and Senator Landrieu of Louisiana 
both suggested to me that when it comes to small businesses, 
instead of month-to-month-to-month emergency payments, Mr. 
Feinberg, how about a 6-month lump-sum payment or something 
like that to give small businesses more certainty? Absolutely. 
We plan to do something like that.
    Chairwoman Velazquez. Very good.
    For many small businesses, compensation received from the 
claims fund is going to be tied to economic losses. Similarly, 
the Small Business Administration is now making loans for 
economic damages as well. Depending on how the claims fund 
classifies its assistance, the Small Business Administration 
could recognize assistance from the claims fund as duplicative 
and reduce its loans amounts to affected business owners. Are 
you going to take steps to ensure that the BP fund assistance 
is not classified as duplicative or other assistance like SBA 
disaster loans, which will then result in a reduction of loans 
to businesses?
    Mr. Feinberg. This is the first I have heard of this 
problem. I will look into this problem.
    Under the program that I am establishing--I want to note 
the flip side of that. I will look into that issue, Madam 
Chairwoman, but under the program I am deciding, like the 9/11 
fund, if a small business receives insurance or other 
collateral sources of payment tied to the spill, that money 
would be--we would offset that amount--it has already been 
received--against whatever ultimate, long-term award we would 
give. But I will look into that issue for you.
    Chairwoman Velazquez. The Small Business Administration has 
approved less than 20 percent of the disaster loans it has 
received from the Gulf's small businesses, very low. Given this 
low percentage, Louisiana's economic development secretary, 
Stephen Moret, requested that the Small Business Administration 
consider the promise of future BP payments in assessing loans 
requests. So it is very important that you have a process in 
place to get this information to the Small Business 
Administration so that they can fully understand the financial 
standing of loan applicants.
    Mr. Feinberg. I completely agree with that.
    One of the hurdles I confront--and I must say Governor 
Jindal, when I met with him in Baton Rouge, made this point 
repeatedly--that the data that is available to date is so 
inadequate in advising other governmental agencies and State 
officials that that is one of my top priorities, to make sure 
that credible data is made available to regulators at the 
Federal and State level for precisely those reasons.
    Chairwoman Velazquez. Very good.
    Many of the claims coming from Florida may relate to lost 
tourism dollars. In some cases, the decline in value could be 
based on the public misperception of tarballs on beaches. Will 
these claims be considered valid even if there is no physical 
damage to real estate or surrounding beaches?
    Mr. Feinberg. Now that is a tough question.
    Chairwoman Velazquez. I know.
    Mr. Feinberg. Clearly, under Florida law, I think it is 
fair to say it is not compensable. If there is no physical 
damage to the beaches and it is public perception, I venture to 
say that it is not compensable.
    How we deal with that problem is something I have got to 
address. That is in this area where some discretion is going to 
have to be exercised, but, at the same time, I have to 
appreciate what the governing law of Florida and the other 
States is in that regard. But it is a fair question, and you 
posed it, so we will look into it.
    Chairwoman Velazquez. Thank you.
    Mr. Graves.
    Mr. Graves. Thank you, Madam Chair.
    One of our members has another obligation, so I am going to 
let Mr. Buchanan go.
    Chairwoman Velazquez. Thank you.
    Mr. Buchanan.
    Mr. Buchanan. Thank you, Madam Chair.
    Mr. Feinberg, I appreciate you being here today. It is nice 
that this is first Committee that you are coming to.
    I have also read and talked to colleagues that you are 
outstanding, that you get on this quick, and there is a lot of 
people hurting.
    But I also just want to mention, when we talk about jobs, 
let's make sure we can focus big time on small businesses, 
because they create the jobs, and the more we can help with 
them--but let me go right back to the one point.
    We had a briefing--I represent Sarasota-Bradenton, which is 
about a--and this is where I think things are going to get 
complicated and there is a lot of confusion--we have 60, 70 
miles of pristine beaches, additional water lines. We probably 
have, you know, another 70, 80 miles. So we have got a lot of 
frontage, a big part of who we are. And our business is 
tourism. Maybe it is a third.
    So what are we going to do about--they are saying that 
where the tarballs roll up on the beaches, let's say in 
Pensacola, the business is off 70, 80 percent. This is a 
briefing we had last week, our staff. In our area, they are 
claiming where you don't have tarballs but you are on the Gulf, 
because of the press, it is going to be as much as 50 percent. 
And then you are talking about Florida law and all of these 
other things.
    What are we going to do for these motel, restaurant owners? 
We have all of these barrier islands that come down there. They 
count on tourism in the summer. What are we going to do with 
them because of the perception? We might get the tarballs for a 
year, but, in the meantime, a lot of these people are going to 
go out of business.
    I get phone calls every day talking about, oh, god, we have 
got a $20 billion fund. But we have to clearly define that.
    Before you answer that question, I do want to invite you 
down to our community. I would love to host you there--we have 
a little town hall--because it is nice to go to Pensacola, and 
you need to do that, but also Tampa Bay, which we are part of 
that community. We need to talk about what's going on there and 
figure out what we are going to do.
    Because I don't want to just keep telling people that, you 
know, I don't know. I am not sure. Check with Florida law. We 
need answers to these questions because people aren't going to 
survive long enough to ever get a check.
    So let me maybe let you comment on that initially, just in 
terms of we are going to have to somehow define what we are 
going to do with these--where there is not tarballs, there 
might be someday, but it is affecting their business 50 
percent. What are we going to do?
    Mr. Feinberg. First, I can answer the easy part of your 
question. If you invite me down to your district to have a few 
town hall meetings, I accept. It is the only way to do this 
job. I invite you--I would welcome that invitation. I will be 
there.
    Mr. Buchanan. You are invited, and I will have you down as 
soon as I can get you. I want you to come down. But it will be 
a very positive thing, and I am sure people want to hear from 
you. So count on that. And if the Governor wants to come, he 
can join us. So as soon as you have got some time, we want you 
down.
    Go ahead.
    Mr. Feinberg. Now you are posing, as the chairwoman posed--
this is a very tough issue. I mean, there is not enough money 
in the world to pay every single small business that claims 
injury, no matter where or when. I use that famous example of a 
restaurant in Boston that says I can't get shrimp from 
Louisiana and my menu suffers and my business is off. Well, no 
law is going to recognize that claim.
    On the other hand, you pose the problematic, not hypo, the 
real-world problem of beach-front small businesses that, even 
though the water is pristine, nevertheless, the public fear or 
concern or misinformation leads to a drop in customers, in 
guests. We have got to deal with this.
    Now, 9/11, 9/11 dealt with it in an interesting way. 9/11 
carved out a small geographic area where the 9/11 fund said, if 
you claim that you have physical injury, respiratory problems 
because of the World Trade Center dust and debris, well, we 
will recognize that claim but only in the immediate vicinity of 
the World Trade Center. If you are uptown or over across the 
Hudson in Jersey City, we can't recognize that claim.
    Maybe, maybe--I am just throwing out some ideas. Maybe, 
even though Florida law would never recognize that claim, maybe 
beach-front property or some sort of delineation of special 
situation or what have you, maybe. Because you are absolutely 
right. People are suffering.
    Mr. Buchanan. Well, let me go back. Madam Chair is going to 
cut me off in 5 minutes. I want to get a couple of questions.
    Mr. Feinberg. Go ahead.
    Mr. Buchanan. It is one thing to say a restaurant can't get 
shrimp in the Northeast. It's another thing where people are 
losing 50 percent of their business.
    But, regardless of what Florida law is, I hear what you are 
saying. But we have never had anything like this. We have got 
2.5 million gallons of oil pouring out into the Gulf every day, 
60,000 barrels.
    With all of this coverage worldwide--people come from 
around the world, different parts of the country, come to our 
beaches. They are not coming. So it is different. This is a 
completely different thing.
    So, regardless of what the Florida law is, we have to 
clearly take a look at communities. I think Tampa Bay and 
south, what we are going to do about it? Because we are on the 
Gulf. Again, it is one thing for the tarballs to roll on the 
beach. It is another thing if the business is down half.
    And we have to get to that answer fairly quickly, because 
people are making mortgage payments, I can tell you, and they 
are getting cancellations, and they are going to have to give 
the properties back to the bank. They need to know that we are 
either going to step up and do something or give some kind of 
SBA preferred loan or something. But I have got to be able to 
tell them something. Just to say we will check on it, we will 
let you know--we have got to define these issues early on.
    Mr. Feinberg. And I have every intention of defining these 
issues in the next few weeks, not months.
    One thing BP has done, as I understand it, not on my watch, 
they have funded some major public relations effort to convince 
people that the water is pristine and you should come back in 
areas where it is perfectly okay, promoting commerce and 
promoting, you know, positive signs that the tourism shouldn't 
suffer.
    But, again, you are raising an absolutely legitimate, real 
question which we have got to address promptly.
    Chairwoman Velazquez. Time is expired.
    Mr. Buchanan. Thank you, Madam Chair.
    Mr. Feinberg. Thank you.
    Chairwoman Velazquez. Mr. Schrader.
    Mr. Schrader. Thank you, Mr. Feinberg, for being here. I 
really appreciate it. You have got your work cut out for you 
here, I am afraid, so good luck. And this Committee hopefully 
will be a resource. If you have issues and problems, 
legislation you need to make your job a little easier, I think 
the chair--
    Mr. Feinberg. Anything that will make my job easier, I 
welcome any and all resources.
    Mr. Schrader. Thank you.
    The Deepwater business impact analysis indicated that 
possibly 7 million businesses, 6 million small businesses with 
10 or fewer employees might be affected here by what is going 
on in the Gulf. Do you have the resources to take care of those 
businesses?
    Mr. Feinberg. We certainly will have the resources 
necessary to process any and all business claims, individual 
claims, small business, large business. We will have those 
resources, yes.
    Mr. Schrader. And how do you anticipate calculating the 
lost profits or earning power and over what timeframe, to your 
comment a moment ago, that there is not enough money in the 
world to take care of all the likely claims coming in? What 
geography do you anticipate taking claims from and consider 
them legitimate and, you know, up to what level of 
reimbursement can people expect?
    Mr. Feinberg. Again, you are raising the critical--the 
critical true questions. What constitutes an eligible claim? 
Who is eligible to even file? Congressman Buchanan points out 
the Boston restaurant can't file, but beach-front properties 
will file.
    So the first issue is going to be under your question. The 
first issue is going to be, how will you determine what is an 
eligible claim for compensation? And there I am inclined to 
begin with the same analysis I did in 9/11. Well, what does 
local law say about the eligibility of that claim? How 
attenuated can a claim be and still be subject to compensation, 
proximate cause, as they say in the law? That is one question.
    Your other question you pose, Congressman, is, well, even 
if a business is eligible, it has had a loss. How do you 
calculate the economic loss? Now there, there are time-honored 
methodologies from, let's say, the date the spill began, up 
until a projected--a projected--oh, it will take you, we 
estimate, 2 years to recover, 3 years to recover, 4 years to 
recover. So we will--
    Mr. Schrader. Which of those years are you going to use?
    Mr. Feinberg. I don't know, and it may vary. It may vary 
whether you are a motel, a fisherman, a shrimper, an oyster 
harvester. It may vary from profession to profession how long 
it would take fishing charters or sight boats.
    Mr. Schrader. The real world will be that some of these 
will actually--some of these claims, frankly, won't be for the 
total amount. The reimbursement won't be for the total amount 
of the loss. Some of these fishermen may be out of work for a 
decade.
    I am worried about the floor of the ocean, and it is going 
to be--you know, the shrimp are going to be in big trouble. I 
have fishermen in my coast. I am from Oregon, and my coastal 
fishermen are very concerned about our friends in the Gulf.
    We actually have researchers from Oregon State University 
checking the migratory patterns of a lot of the species down 
there to see what sort of effects they are going to have on 
Congressman Buchanan's area. So we are very concerned. We want 
to make sure that there is adequate compensation, that this 
industry continues to persist in the Gulf of Mexico.
    Mr. Feinberg. Let me respond. Here is what I think we will 
do, as with the 9/11 fund. Here is what I think we will do this 
time.
    Oyster harvester, in your business, we think, once the oil 
starts, so we know how pervasive it is, we think that your 
oyster harvesting will only be impacted for--and I am just 
giving this as an example--2 years.
    First, you are getting emergency payments without any 
obligation just to get you by. And as the chairwoman has 
suggested, it won't be month to month. It will be more of a 
lump sum.
    Now, let's sit down, oyster harvester. We anticipate that 
for 2 years, another profession 3 years, another profession 8 
years, whatever it might be, we think, based on our internal 
review, that you will suffer total loss over that period of X 
dollars. Here, here is a check. Now, that check--not emergency 
payment, that is long-term, lump-sum payment. That check is in 
full satisfaction of your claim.
    You have two choices, accept the check and release BP and 
everybody else from any future litigation. This is a check 
designed to make you whole and to end your uncertainty about 
going forward. You don't have to take it.
    If you think that our analysis is faulty, if you think it 
is incorrect, we have shortchanged you, you think it is a 
trick, don't take it. You can leave the facility and go 
litigate or do whatever else you would otherwise do in an 
effort to be made whole.
    My goal is to minimize the number of people who won't take 
the check. Because that is the whole point of this fund.
    Chairwoman Velazquez. Time has expired.
    Mr. Graves.
    Mr. Graves. Thank you, Madam Chair.
    And you answered the biggest part of my question, which is 
kind of the timeline and, you know, how long are businesses--
how are they going to know how much they are impacted?
    But as kind of a follow-up to that, when does a business, I 
guess, waive the right to claim? How long does it go? I mean, 
in some cases, they may not realize they may be trying to make 
it work and don't realize the impact until some time later. I 
mean, when do they have to waive their right to be able to come 
back?
    Mr. Feinberg. They don't have to waive their rights, 
Congressman, when they take any emergency assistance. We are 
going to get that money out right away to these companies and 
these small businesses.
    There will come a time, probably in the next year or 18 
months or 2 years, when I will present them an opportunity. We 
have examined your individual business. We think that you will 
be impacted by the spill for X period of time. Here is a check 
in full satisfaction of your loss.
    Now, if you don't think that the check accurately 
corroborates the loss, if you think that your loss is going to 
be much greater, well, we will listen to you. But, ultimately, 
here is a check. And you have to make a voluntary choice. Take 
the check and release your right to sue; or, Mr. Feinberg, 
thank you very much. I think you are being unfair. You are 
short-changing my business. I don't know how long it is going 
to take, and I don't think your check is adequate. I am going 
to go to court to try and get more.
    And I will say to that claimant, that is entirely your 
right. But I warn you, if you go to court, you will litigate 
for years. You may not win. I think my analysis is accurate. I 
am trying to help you. I think it is right. You may not win in 
court. You will litigate for years. You will have to pay a 
lawyer and wait and wait. Are you sure that this check isn't 
adequate?
    That is going to be the challenge. That is going to be the 
challenge, ultimately.
    Mr. Graves. And kind of to follow up on top of that, too, 
when--I am sure there is going to be folks out there that are 
going to make, how long into the future is it before they can 
come back and make a claim? Because some may not realize just 
how much the impact is until some time later. I mean, I guess 
there has to be a point that they need to have made a claim 
sometime before then.
    Mr. Feinberg. Right now, with the 9/11 fund, Congress kept 
the facility open for 33 months. Maybe with this facility we 
better keep it open the same time, longer, or whatever. That 
will be up to BP and the administration as to how long they 
think the facility should remain in place.
    I do think that it is important at some point to announce 
to the world that the facility is going to end. It is an 
amazing thing, Congressman. You see it all the time. Until 
people know that there is an end date, they procrastinate. They 
wait. They are not sure. I am uncertain. Meanwhile, the clock 
is ticking; and they need help.
    So I would hope that there would be some end date. We 
haven't yet decided what that date will be. But I agree with 
you that there has got to be sufficient time for people to get 
a handle on what they think is the ultimate loss that they 
suffer.
    Mr. Graves. Thanks.
    Thanks, Madam Chair.
    Chairwoman Velazquez. Mr. Critz.
    Mr. Critz. Thank you, Madam Chair, and thank you, Mr. 
Feinberg.
    This is a huge undertaking. Do you feel comfortable with 
the staffing and the infrastructure that you have in place to 
be able to handle what you said was an emergency turnaround of 
2 weeks for someone to get a check? That is pretty incredible. 
Are you in a position where you feel comfortable right now?
    Mr. Feinberg. Yes. Let me just say the Deputy Administrator 
of the program, Camille Biros, is here today who is working on 
those very issues concerning staffing. I can say that we will 
supplement the existing staff that is already on the ground in 
the Gulf. It is about a thousand people. We will increase that 
staff. We will increase that staff with local people.
    This cannot be administered from here. I have learned from 
9/11 and other similar tragedies. I mean, you have got to have 
local people who are trusted in the Gulf. And if this Committee 
has ideas as to who some of those local people might be, I 
would appreciate names. But we think we will be able to do it.
    Now, the 2-week turnaround, the emergency payments, already 
BP has distributed over $130 million. I think the emergency 
payments will continue. We will accelerate them. We will make 
it even more efficient and transparent.
    The longer-term, lump-sum payments that Congressman 
Graves--that have been raised by the Member from Oregon, that 
is going to take a little bit longer, but we want to get in 
place as soon as we can a facility to pay lump sum as well.
    It sure would help if the oil would stop. It is very hard 
to come up with lump-sum payments in total satisfaction of your 
loss when you don't know if the oil is going to continue to 
spread and reach your business. So once the lump sum--the lump-
sum payment program can't work until the oil stops.
    Mr. Critz. I appreciate that, and you had mentioned keeping 
the facility open 33 months after 9/11. Obviously, we don't 
have an end date when the oil is going to stop, so it is 
impossible to predict.
    I saw you on TV the other day, and you mentioned that a lot 
of the small businesses and folks don't even know how to file a 
claim, or even know if they are eligible. What's being done 
proactively to reach out to these people to let them know what 
the claims process is and how easy is the claims process? Will 
you tell us what the claims process actually is?
    Mr. Feinberg. That is a fundamental question, making sure 
people file. I can't help them if they don't file. I have got 
tremendous help from Governor Barbour, Governor Riley, Governor 
Jindal, and Governor Crist. All of them are working to spread 
the word, get it out on the Internet. Electronic filing is 
going to be permitted, including corroborating documents, all 
online, if you want to do it that way.
    The Postal Service called me. They are willing to put 
claims forms in every post office in the Gulf. I heard from the 
Postmaster General on that.
    We are going to reach out every way we can in community 
town hall meetings, various other ways to disseminate the news.
    The claim form itself is relatively simple. It is not 
complicated. If you will go to one of 35 claims offices that 
are already set up in the Gulf, 14 alone in Louisiana, there 
are people there who will help you fill out a claim. If you 
want to make an appointment to come in when you are not 
working, there will be somebody there to help you fill out a 
claim. It is not that difficult, especially the emergency 
payments, when we will require much less corroboration than we 
would otherwise require for a long-term, lump-sum payment. So 
we are working on that.
    Mr. Critz. Good. Thank you.
    With the 9/11 experience that you have, I am sure you are 
putting into place, or have put in place protections against 
fraud.
    Going beyond that, you have industries that may be 
completely impacted and the people who are working in that 
industry aren't able to come back at all. Are there going to be 
opportunities for retraining and using funds to help people go 
into new industries?
    Mr. Feinberg. Not on my watch. I mean, it is a wonderful 
idea. Whether or not there will be opportunities for retraining 
or shift in job opportunity, I have got enough challenges with 
this claimant fund, as you have heard, without getting into 
that. But I think it is a fabulous idea if there are other 
State and Federal Government agencies interested in that.
    Chairwoman Velazquez. Time has expired.
    Mr. Westmoreland.
    Mr. Westmoreland. Thank you, Madam Chair.
    Mr. Feinberg, I really appreciate you. I have listened to 
you on TV, also, and hearing you here today gives me a little 
confidence in the ability to answer some of these questions.
    Mr. Feinberg. Thank you.
    Mr. Westmoreland. But, Mr. Feinberg, I know in 9/11 you 
probably had to deal with the real estate issue or property 
values and especially of some of the surrounding real estate 
that may have been damaged in the attack and possibly rental 
income or whatever from apartments or whatever.
    If you are familiar with the Gulf Coast, you know that the 
real estate market down there has been depressed because of the 
economy that we have. I have a real estate background. In the 
case of the real estate, with this oil coming up, the real 
estate values are going to be diminished.
    Now, how do you compensate for something like that? That 
has got to be a very difficult thing to do. Because, you know, 
there are different values depending on--you know, real estate 
is location, location and location. How are you going to go 
about--and is that an eligible claim for someone?
    Mr. Feinberg. You are the real estate expert.
    Here, I am not sure. But let me give some guiding 
principles.
    If your real estate is devalued because of physical injury 
to the real estate, that the oils on your property are 
contiguous, that is easy. That is an easy claim. You are 
obviously, I think--I am getting ahead of myself, but you will 
tell me. But I think you are obviously eligible.
    The problem is going to be, just as you imply, what about 
the real estate--the condo or the co-op or the house--that is 5 
blocks from the beach? That is why it is of less value than a 
house right on the beach. It is 5 blocks, so it is a 5-minute 
walk to the beach.
    Now, two problems. One, what if the beach does have 
degradation, tarballs or what have you, oil balls? That is 
problem number one. It is not on your property, but it is 5 
blocks away, and the beach is diminished, and your home value 
is diminished because it is right there, 5 blocks away. That is 
one problem.
    I am less worried about that problem than the second 
problem, which Congressman Buchanan raises. I am on the beach, 
but there is no oil at all there. It is just the public 
perception that drives the values down.
    I mean, on the one hand, those people are suffering. They 
deserve some help. On the other hand, there is not enough money 
in the world to pay every homeowner, wherever they live in the 
Gulf Coast, who says my property is down because of the oil 
spill.
    How we--maybe you have an answer--how we define eligible, 
ineligible, I venture to say, if there is no physical damage, 
probably, I venture to say, the law of Florida doesn't give any 
of them compensation. But I am not sure. That is not the end of 
the discussion.
    Mr. Westmoreland. Yes, and I can't help but agree with you. 
Because if you just go down and spend time with us in 
Mississippi, Alabama, Orange Beach, Florida, whatever, there 
are a number of listings there for sale. I promise you that 
people are not down there looking for vacation property right 
now with the oil spill.
    There were probably a lot of people that were buying due to 
a depressed market, looking for a good deal. But finding a good 
deal and buying a piece of property that has got tarballs and 
oil in the Gulf is a different story.
    So I hope that you will take that under consideration when 
you start looking at what's eligible and--with the real estate 
market.
    Mr. Feinberg. I mean, one way to look at it is to say, make 
an assumption, there is no question--I am making an assumption 
now--there is no question that the property value has 
diminished as a result of the spill. RPTS WALKERDCMN 
BURRELL[11:00 a.m.]
    Mr. Feinberg. [Continuing.] Let's assume that is right. 
That doesn't mean that every property is entitled to 
compensation. So various Members have raised this issue and we 
are going to have to sort it out in a way that will challenge 
my expertise and certainly challenge yours.
    Mr. Westmoreland. I know you will do a good job. Thank you. 
I yield back.
    Chairwoman Velazquez. Thank you. Mr. Shuler.
    Mr. Shuler. Thank you, Madam Chair. As Mr. Westmoreland has 
said, you have given all of us, I think, as we sat and listened 
to you give your testimony, a sense of confidence. Sometimes 
given the difficult tasks that you are in I might ask why on 
earth would anyone accept this responsibility, but I am so glad 
it is you--for what you have given us, the confidence here that 
things can be done. It is a very difficult task though.
    Mr. Feinberg. Thank you.
    Mr. Shuler. One concern regarding the $20 Billion fund is 
whether there will be enough money in the fund to cover small 
business claims, since federal, state and local claims are 
coming out of this same pool of money. What percentage do you 
feel is small business money of that $20 billion versus the 
Federal, State, and the local government claims.
    Mr. Feinberg. Don't know yet. Don't know yet. I can give 
you two answers. So far loss of income, about 45--49 percent so 
far of the $130 million that has been paid out roughly has gone 
to other than wage loss, loss of income--now that is individual 
small business--loss of income, individual property, loss of 
profits, miscellaneous. So I don't know for sure how much will 
be small business, Congressman, but I can say this, which is 
important, very important. Under the arrangement entered into 
between the administration and BP in setting up this facility, 
if the $20 billion proves to be insufficient, BP has agreed as 
part of this arrangement to replenish the fund.
    So it is not as if BP's responsibility ends with $20 
billion. I hope, I hope $20 billion is enough. But if it isn't, 
my understanding is that $20 billion, that there be additional 
funds as needed.
    Mr. Shuler. Regarding the $20 billion currently set aside 
for emergency claims funds for the hold harmless agreement and 
the settlement come out of this pool of money, or are separate 
funds set aside?
    Mr. Feinberg. It is all within the $20 billion so far, and 
then if that is insufficient then there will be additional 
funding provided. So all part of the $20 billion. I think the 
$130 million that has been paid out so far is not part of the 
$20 billion. That has been paid by BP separately, independent 
of the escrow account. I think that is right. I think that is 
right.
    Mr. Shuler. Madam Chair, I have one more question. Let's 
look at after claims are filed. When everything is finished, 5, 
10, 15 years down the road, what are the lessons learned 
regarding filing claims. What are you hoping to get out of it 
so that if this ever happens again we can expedite it even more 
quickly than is presently being done?
    Mr. Feinberg. The lessons you learn from each of these 
disasters start with the answer to the following question: How 
many claimants decided to enter this program, this independent 
facility rather than litigate. There is no better test of the 
success of this program or other programs like it, like 9/11. 
In looking at the consumers who you are trying to help, have 
they trusted the system, the facility, have they entered it 
voluntarily, have they accepted the judgment of the 
Administrator. In the 9/11 fund, as the chairwoman knows, 97 
percent of all eligible claimants entered the fund voluntarily. 
If we can do something like that here to avoid the lawsuits 
being filed and protracted litigation in the Gulf, I suspect 
that is the best litmus test of the success of the program.
    Mr. Shuler. Thank you so much, and I yield back my time. 
Best of luck to you.
    Chairwoman Velazquez. Mr. Luetkemeyer.
    Mr. Luetkemeyer. Thank you, Madam Chair.
    Mr. Feinberg, thank you for your testimony. I have heard 
you speak before. You are a very impressive individual, and I 
thank you for the hard work you are doing and the job you are 
doing. You are doing very well.
    Congressman Shuler asked a number of questions I was going 
to ask, so I won't follow up on those. I was just kind of 
curious about the problems with BP because while they have 
obligated $20 billion, my understanding is the company is worth 
about 9. If that is the case they have committed themselves to 
more than the value of the company, and I am concerned that 
while this is a nice settlement they won't be able to pay this 
in time. Have you looked at that at all? Is that a concern of 
yours? Are my figures wrong?
    Mr. Feinberg. I don't know if your figures are right or 
wrong. I trust your figures. All I know is I have got a claims 
process to design to administer and there is going to be $20 
billion available, in whole or in part, from EDUs in 
administering this program. I am confident from what I have 
read that BP is prepared. It has told the administration that 
if needed it will supplement the $20 billion. So I would like 
to think that BP is prepared to pay what it takes to pay valid 
claims.
    Mr. Luetkemeyer. Okay. That is fine I yield back the 
balance of my time. Thank you, Mr. Feinberg.
    Chairwoman Velazquez. The committee will stand in recess 
subject to the call of the chair. We have four votes, so we 
will be back in 15 minutes. Thank you.
    [Recess.]
    Chairwoman Velazquez. The committee is called back to 
order. And I will recognize the gentlelady from New York, Ms. 
Clarke.
    Ms. Clarke. Thank you very much, Madam Chair, and thank 
you, Mr. Feinberg, for your testimony here today. I concur with 
my colleagues in saying that you have brought a real uplifting 
moment to what has been such a downer for so many Americans, 
just watching this whole event unfold, and having you at the 
head of this brings a lot of comfort to those of us who have 
been on pins and needles about the livelihoods of those in the 
Gulf region.
    As you know, there are a growing number of health 
complaints related to this spill and the cleanup. My New York 
colleagues and I think that this evokes memories of the health 
concerns faced by Ground Zero workers. In the weeks after 9/11 
officials underestimated the negative health impact of the 
cleanup effort resulting in inadequate responses to citizens' 
health concerns. This is pertinent because small businesses 
could be on the hook for costs associated with health problems 
of their employees who may have been involved with this.
    How is the independent claims fund taking into account the 
likely high levels of health incidents related to those working 
on this spill, and is the fund taking into account the impact 
on the long-term health and economy of those associated with 
the cleanup?
    Mr. Feinberg. Physical injury claims are subject to my 
jurisdiction in the facility. Anybody with a physical injury 
claim, mostly respiratory claims, but also germinological 
claims from handling the oil and the detergents, et cetera, 
should file a claim with the fund. They will have to 
corroborate their claim with sufficient medical documentation. 
They will have to corroborate their degree of disability and 
those claims are eligible.
    You are absolutely right. The 9/11 fund processed about 
5,000 physical injury claims. We paid about 2,300 that were 
eligible, and I suspect that we will see in this fund a fair 
number of physical injury claim, medical claims, which you 
know, assuming they are valid, all compensable, yes.
    Ms. Clarke. Very well. You said in your testimony that you 
anticipate a diverse number of claims, that each will be judged 
on their individual merits. I am pleased that you are committed 
to transparency and efficiency in the claims process, but I 
wonder will small businesses and families be able to make 
claims without a lot of red tape? Will they need to lawyer up 
simply to provide an acceptable claim that can receive prompt 
attention? I am concerned that more well to do businesses, 
business owners will have the means to furnish a claim that 
results from consulting with outside professionals, such as 
lawyers or accountants, will mom and pop be able to file timely 
and sufficient claims and will your staff be able to assist 
individuals who are having trouble filing or preparing a claim?
    Mr. Feinberg. Yes. We will make the claims process for 
small businesses relatively simple and straightforward. They 
will not need a lawyer. They are entitled to a lawyer if they 
would like one or an accountant or a statistician or whoever 
they would like to bring with them. That is perfectly okay. My 
goal is to make the process so transparent and simple that it 
will be efficient and that mom and pop will not be adversely 
impacted.
    Let me say one other thing on that, which you will recall 
from the 9/11 fund. A rising tide raises all ships. If a very 
sophisticated business comes in to the fund and uses a lot of 
accountants and highly skilled experts to develop an award that 
is justifiable but is based on a lot of expertise, we will take 
that principal, that award and make sure we pass that principal 
through to everybody, including small businesses, like you say 
mom and pop. So if a large business benefits from expertise, we 
will see to it that small businesses also benefit from that 
result flowing from that expertise.
    Ms. Clarke. Well, thank you very much, Madam Chair. I yield 
back the balance of my time, but I just wanted to share with 
Mr. Feinberg, my colleagues and I have been remarking about the 
unique blend of Brooklyn and Boston you have in your accent. 
Thank you.
    Mr. Feinberg. Neither of which is particularly helpful 
south of the Mason-Dixon line.
    Chairwoman Velazquez. Mrs. Halvorson.
    Mrs. Halvorson. Thank you, Madam Chairman, and Mr. 
Feinberg, thank you for being here. This has been a major 
concern, as you know, for everybody and especially those of us 
on Small Business. You know, with unemployment the way it is 
and with things that are going on, we are very concerned about 
the cleanup and I have got a couple of questions. First of all, 
there are people that are unemployed all over the country. Are 
there opportunities for people to show up and help, because I 
am telling you we could hand everybody a skimmer, a shovel, 
just about anything to help cleanup? What are we doing for 
small businesses and people to help because obviously there is 
work to be done?
    Mr. Feinberg. I can say this, although that is a very good 
question which isn't part of my mandate in processing claims. 
It is my understanding that BP is hiring those workers laid off 
as a result of the spill and putting them back to work as part 
of cleanup, as part of special programs.
    So I think your question is better directed at BP. My 
understanding is an effort is being made to hire those very 
local Gulf workers impacted by the spill.
    Mrs. Halvorson. Right, and obviously that isn't your issue, 
but my constituents, just that is all I hear from and they said 
next time you got anybody in front of you that you can bring 
that up too. But my concern for you is what kind of safeguards 
or what are we doing with regard to safeguards or putting 
something in place for fraudulent claims or something that--
what can we do to make sure that people aren't applying for 
help or doing something that may be fraudulent?
    Mr. Feinberg. Great question. Nothing will undercut the 
credibility of this program more than fraud. You have to expect 
it. Human nature, you just have to expect it.
    Now, in the 9/11 fund we had 7,300 applications, only 35 
fraudulent. The Department of Justice, Civil Fraud Division, 
second to none, second to none, enormously helpful to us in 
that Federal public program involving taxpayer money. I have 
asked the Department of Justice, Civil Fraud Division, to once 
again weigh in here and help monitor this program to avoid 
fraud. I am also considering hiring a private vendor with 
expertise in fraud investigation and audit to make sure that 
claims that are filed are legitimate claims because fraud could 
really undercut the credibility of this program, and we will be 
ever vigilant in that regard.
    Mrs. Halvorson. Absolutely, because if one person gets away 
with it everybody else will be at the trough, and so I am glad 
to hear that you might be hiring somebody because every dollar 
you spend in looking at how for fraud will be a dollar seventy-
five or so saved.
    So thank you and thank you for being here and doing this 
because this is something that is very important, but we also 
don't want to undercut the program for what we are doing. Thank 
you and, Madam Chair, I yield back.
    Chairwoman Velazquez. Mr. Altmire.
    Mr. Altmire. Thank you, Mr. Feinberg, for being here. I was 
wondering about the final decisions rest with the IFC but BP 
has the right to appeal claims above $500,000 and if BP appeals 
an award for a small business in particular, will the funds be 
distributed while the award is being appealed or does the 
business have to wait for that to be done?
    Mr. Feinberg. The business would have to wait. But let me 
say that that $500,000 rule is under advisement now. It may be 
modified, it may be eliminated. I also think that if there is 
one appeal from either a claimant or BP, I am not doing 
something right, because the whole purpose of this program is 
to get money out fast, get it out final, get it out 
efficiently, with people satisfied that they have been treated 
fairly, and every appeal that is taken from my decision is I 
failed.
    So I think it is very, very important to state that I hope 
that whatever the appeals process ultimately is in the 
protocol, I hope that appeals will be de minimis, that we would 
have very few, if any, and that I will work to minimize those 
appeals because I think a small business that is not satisfied 
with my treatment of that business, I have failed and I would 
hope that that small business would get an efficient appeal, 
even under the protocol as I am thinking it is currently, we 
are working on it, the appeal process would only take 10 days. 
But 10 days is 10 days too long, I understand, and we will work 
on that. It is a very good point.
    Mr. Altmire. Are there any circumstances where you pay out 
some of the claims?
    Mr. Feinberg. We pay out all of the claims in an emergency 
way.
    Mr. Altmire. But if it is under the appeal challenge.
    Mr. Feinberg. Oh, yes. If a small business has filed a 
various types of claims, here is a loss profit claim, here is a 
business interruption claim, here is a third claim, and they 
are only appealing one of the three, let's say, the other two 
ought to be paid immediately. Absolutely. Absolutely.
    Mr. Altmire. When you oversaw the 9/11 victim compensation 
fund you offered the option of in-person claim submission for 
victims. Are you going to be offering a similar option for 
small businesses this time?
    Mr. Feinberg. I think we should. I think we should, yes. We 
have already said anybody can, any small business or individual 
can go into one of those claims offices and meet face-to-face 
with one of our local people. Yes.
    Mr. Altmire. You had a discussion with Mr. Buchanan earlier 
about visiting his district, and I know you just gotten back 
from the Gulf. I was wondering about the ongoing forums that 
you might have, what your plan is to get the word out with 
updates on the funds being available.
    Mr. Feinberg. My current plan is every week to go to the 
Gulf at least once or twice. You have to, you got to be there 
to get the word out, town hall meetings. We have got to--I 
think we have already got up the Internet. Do we have our Web 
site up yet? It will be up fairly soon. Within a couple of 
weeks we will have our own Web site up. We are maximizing every 
way we can to get the word out. There is no better way than to 
go down and meet with people word of mouth.
    Mr. Altmire. You mentioned earlier that the location of the 
claimant will be one of the bases for determining the rights 
and the damages. According to press reports, the tort laws of 
their State will be used in weighing the rights of action but 
what about when some small businesses operate in more than one 
State? How does that factor in?
    Mr. Feinberg. A couple of answers. First, the press is 
accurate that the tort laws of a State are a factor. I want to 
emphasize that I have made no decision yet on whether or not 
local law should govern in every case. There are examples of 
inequity and injustice where the local law may not be the best 
barometer of what to do. But I suppose if a company or a small 
business has residents or operates in several States, we ought 
to be looking at the State that is most convenient and helpful 
for that company.
    Frankly, I am not sure there is going to be wide variations 
in local law when it comes to proximate cause. There are 
variations in local law, but I think when it comes to the 
question of the scope of recovery, based on an attenuated claim 
where there is no oil, I think the law is fairly consistent and 
the question is how do we improve on that. That is going to be 
the issue more than differences in local law.
    Mr. Altmire. Thank you, Mr. Feinberg.
    Chairwoman Velazquez. Mr. Thompson.
    Mr. Thompson. Thank you, Madam Chairwoman, and thank you, 
Mr. Feinberg, for being here in front of the committee. I 
appreciate your testimony and your responses to our questions.
    My first question is, can you explain, in a little more 
detail, how the oil spill liability trust fund fits into the 
independent claims facility?
    Mr. Feinberg. You mean the $20 billion? The $20 billion 
that has been set aside.
    Mr. Thompson. Yes.
    Mr. Feinberg. There, as I understand it, because I am not--
I was not one of the negotiators of that $20 billion, but my 
understanding is that $20 billion has been agreed upon between 
the administration and BP, that BP will put in an escrow 
account, requiring signatures from both BP and the 
administration, $20 billion. That $20 billion will encompass 
any and all claims arising out of the spill, not just my 
claims, not just my claims. Government claims, State claims, 
claims that are not part of my facility jurisdiction. In 
addition, BP has set aside, by agreement with the 
administration, $100 million to recover rig worker moratorium 
claims, claims of rig workers put out of work as a result of 
the Gulf moratorium. That is separate from the $20 billion and 
that is $100 million reserved for rig workers. Whether I will 
process those claims or some charity or foundation will process 
those claims I don't think that has been finalized but 
hopefully that be finalized in the next day or two.
    Mr. Thompson. All right. How about the role of private 
insurers in the process? Can you explain a little bit about how 
that dovetails and how this actually work?
    Mr. Feinberg. It dovetails two ways. Again, I don't know 
about any private insurers in this spill. My understanding is 
BP is self-insured. My understanding is there may be of course 
insurance among some of the claimants, small businesses have 
insurance. The way that insurance will most likely dovetail is 
that if a claimant files a claim with me for business 
interruption, lost profits, physical damage, and that claimant 
has some insurance, that insurance will be offset against any 
award that I would issue.
    Now we haven't finalized this. That was the 9/11 fund of 
course. All 9/11 claims were paid, but we deducted before 
making those claims other sources of collateral sources of 
income. We would likely do that here as well.
    Mr. Thompson. How many folks do you have working with you 
to process this massive amount of claims?
    Mr. Feinberg. Right now as we get ready to transition from 
what BP is doing to this Gulf Coast claims facility there are 
about a thousand people, roughly a thousand people already in 
the Gulf at roughly 35 different claims offices working to 
process claims. We will undoubtedly increase that number. We 
will streamline the process. We will go online and allow 
electronic processing of claims. We will increase our capacity 
with a 1-800 number. We will make sure that we have enough 
people to make sure that nobody is disadvantaged by delay or 
inefficiency.
    Mr. Thompson. The judges who hear these appeals are 
obviously an important part of the workforce. Is there a 
specific set of qualifications that are sought in the 
individuals who have been designated to hear those appeals?
    Mr. Feinberg. No judges have yet been designated by me. I 
have authority to designate those judges. We have not yet begun 
the process of examining qualifications. I do think that one 
critical qualification is that those judges, whoever they may 
be, be local, that they be from the Gulf, that they have 
credibility with Gulf residents, that it be a diverse number. I 
think we will probably want five or six, that it be diverse in 
terms of gender and race, et cetera, and that they be 
recommended as of outstanding capability and integrity. I don't 
think they have to be judges frankly. Ex-judges are welcome, 
but there may be some very wise people living in the Gulf who 
everybody would agree that person should be one of those 
appellate judges.
    Mr. Thompson. Thank you. Thank you, Madam Chairwoman.
    Chairwoman Velazquez. The gentleman's time has expired Ms. 
Bean.
    Ms. Bean. Thank you, Madam Chairwoman, and thank you, Mr. 
Feinberg, for being here today. It is very important to hear 
from you because this affects so many of our business 
communities around the country. My question has to do with how 
you are going to make sure that you can maintain independence? 
Given that you may be using BP claims personnel or field 
office, how do you then make sure that it is independent from 
the fund and will BP have an incentive to continue 
administering the claims process outside of the independent 
claims fund in an effort to minimize how much they ultimately 
pay out?
    Mr. Feinberg. No. BP is transitioning as we speak to get 
out of the claims business and turn all of that over to the 
Gulf Coast claims facility which I have been assured by both 
the administration and BP will be absolutely 100 percent 
independent from BP, or the administration for that point. The 
administration has made it very clear they want it independent. 
They do not want to be micromanaging this.
    So I am not concerned about that. To the extent that the 
existing subcontractors who have been working in the claims 
offices are qualified and know the issues and can help process 
claims expeditiously, great. To the extent that we make an 
independent judgment that changes should be made or 
supplementing the existing workforce, we will do that. But 
clearly, this program will be independent and will not be 
beholden to either the administration or BP.
    Ms. Bean. Let me also ask since property values are the 
easiest to measure relative to, say, business claims, how are 
you going to balance the distribution of limited resources 
across different types of claims?
    Mr. Feinberg. I don't think there are limited resources, 
first of all. BP has made it clear in its agreement with the 
administration that if $20 billion is insufficient it will 
replenish what is needed to pay all eligible claims.
    The problem with the property claims is going to be 
eligibility, not compensation. How will we go about deciding 
when diminished property values are compensable and when they 
are not. That to me is more of a challenge than assuring 
adequate compensation.
    Ms. Bean. Okay. My final question has to do with sort of 
the recent reports that have indicated that the SBA has denied 
roughly 70 percent of claims, insurers have already paid out 
some $400 million in claims.
    How do you envision that this independent claims fund will 
interact with those both the insurance industry and the SBA and 
if an entity receives or is denied funding from either the 
insurance company or the SBA, how will that factor into your 
assessment of a claim?
    Mr. Feinberg. That is a very good question. I don't know 
the answer other than to say that we will make an independent 
judgment as to the legitimacy and eligibility of any claim 
quite apart from what SBA or an insurance company certainly has 
done. An insurance company's denial of a claim will be 
contractual. I mean it may not be that--it may be that the 
insured is very eligible. The reason that the insured was 
denied insurance is probably related to what the contract says 
between the insured and the insurer rather than any particular 
reason that I would deny the claim.
    Ms. Bean. I said it was my last question. I have one more 
since I have a little bit of time left. Given that you have 
already been paying 100 percent of claims up to now and that it 
is unlikely that all claims are legitimate, what will you do to 
weed out fraud?
    Mr. Feinberg. As I said earlier, we plan to get the--we 
hope--of the best fraud weeder outer there is, the Department 
of Justice, Civil Fraud Division, and to the extent that they 
will help us wonderful, to the extent that we also have to 
retain some private investigative company to assist us in that 
task, we will do that as well.
    Ms. Bean. Thank you so much. I yield back.
    Chairwoman Velazquez. Mr. Feinberg, I still have some 
questions that I would like to ask. I know that I posed a 
number of questions on the relationship between the Small 
Business Administration--between claims and Small Business 
Administration assistance, many of which may be new to you. 
However, because of the problems that we saw with Katrina, I 
want to ensure that SBA is taking steps to coordinate their 
relief efforts and to this point have you been contacted by the 
Small Business Administration?
    Mr. Feinberg. I have not. I don't think my people have. I 
think to the extent that, Madam Chairwoman, that you can help 
facilitate that open line of communication with a letter to the 
SBA or to us or whatever and follow up, we will do that.
    Chairwoman Velazquez. Definitely. Mr. Feinberg, we are all 
watching the path of Hurricane Alex, wondering what its impact 
will be on the spill and containment efforts. I understand that 
the claims fund is not responsible for damages caused by 
natural disaster but the hurricane may affect certain claims 
against BP. Are you currently looking at ways to address the 
potential impact of a hurricane on claims?
    Mr. Feinberg. Yes. We are looking at what the law would say 
if as a result of a hurricane the oil is more pervasive and 
spreads to beaches or other areas where it might not otherwise 
have landed or come ashore but for the hurricane, and we will 
be able to handle those claims as well.
    Chairwoman Velazquez. My final question to you, Mr. 
Feinberg, is many Americans in the Gulf who fulfilled their 
dream of owning a business are watching oil coming out of that 
area and simply do not know what the future holds. What would 
be your message to them?
    Mr. Feinberg. I would give the same message I think that I 
have given when I was asked to do a similar task in Agent 
Orange in Brooklyn and the 9/11 fund and the horrible massacre 
at Virginia Tech, the program I administered after Katrina in 
the Gulf in New Orleans. I would urge all of those people, take 
heart, take heart. I can't help in other areas, personal areas, 
other problems that you may have, but when it comes to 
financial uncertainty, take heart, there is a program in place. 
We are gearing up, and I would urge anybody in that region who 
is worried about the future, financial uncertainty, file a 
claim, at least get the ball rolling, so that we can evaluate 
your claim, provide what emergency assistance we can give, and 
try and help you through this difficult time. I wish I had the 
power to help you with nonfinancial issues. That I can't do. 
But on the financial side, if we can at least get your claim in 
and evaluate it, hopefully, at least as to that problem, we can 
come to your aid and provide you some certainty and relief.
    Chairwoman Velazquez. Mr. Graves, Mr. Thompson, do you have 
any other questions?
    Well, I just want to take this opportunity on behalf of the 
members of the committee to really thank you for providing so 
much insight into this equation of the Gulf Coast. One of the 
biggest challenges that we face is how to restore the public 
trust, and I believe, truly believe based on past experiences 
with you that you are going to play a major role in that 
effort.
    Mr. Feinberg. Thank you, Madam Chairwoman. I will always be 
in your debt for what you did 7 or 8 years ago and I am at your 
beck and call at any time with this committee. If you would 
like me to come back, I will be back as often as you think it 
is necessary.
    Chairwoman Velazquez. Thank you.
    Mr. Feinberg. Thank you.
    Chairwoman Velazquez. I ask unanimous consent that members 
will have 5 days to submit a statement and supporting materials 
for the record. Without objection, so ordered.
    This hearing is now adjourned.
    [Whereupon, at 12:05 p.m., the committee was adjourned.]

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