ORANGE BEACH, Ala. (MONEY Magazine) -- Randy Boggs met the enemy up close for the first time last June when he pulled his 65-foot fishing boat, Reel Surprise, out of the marina in Orange Beach, Ala., and into the Gulf of Mexico.
There it was, lapping against the hull, a vast oil slick as far as the eye could see -- "heavy and thick, like asphalt in a parking lot," says Randy, who runs a tourist fishing business with his wife, Susan.
"That slick was probably the most horrific thing I'd ever seen in my life," he says. "I thought for sure it would settle to the bottom like a toxic cloud and kill everything out here."
Randy and Susan had been expecting a banner year in 2010. After a long struggle, they'd had their best showing ever in 2009, earning $260,000 in pretax profit on $2.4 million in revenue from their company, B&D Maritime, which includes five fishing boats, a charter booking business, and a dock store.
They loved the outdoor life, and their daughter, Elizabeth, 6, was looking forward to long summer days catching pinfish. Now Randy was left wondering if everything they'd built would be washed away on a sea of black oil.
It was exactly one year ago this month that BP's Deepwater Horizon rig exploded about 100 miles southwest of Orange Beach. The blast killed 11 workers and released more than 200 million gallons of crude into the gulf -- nearly 20 times more than the Exxon Valdez spill -- before the well was finally capped on July 15.
The oil fouled beaches and shorelines, wreaked havoc on the area's ecosystem, and created one of the worst environmental disasters in U.S. history.
The economic impact was devastating, especially along the tourist-dependent Alabama coast: The number of visitors to Baldwin County, where the Boggses live and work, dropped by 1 million compared to 2009, real estate values sank by up to 65%, retail sales fell by half. And when the gulf was closed for fishing in early June, business for charter operations, like the Boggses', collapsed.
Says Pedro Mandoki, who runs a resort management company in Gulf Shores, Ala.: "Economic ground zero was right here."
The only way that Randy and Susan survived financially was by signing on with BP to help clean the oil from the gulf waters. That work, along with $348,600 in payments from the oil giant's compensation funds, helped offset the $1.6 million in losses the couple estimated they suffered as a result of the spill.
But this year there will be no cleanup work, and even those at the helm of BP's compensation fund suggest the local economy will bounce back only about 30% in 2011, with full recovery a year or two away.
Yet anything less than a complete turnaround this year could spell disaster for the Boggses. Reel Surprise Charters, their fishing-boat operation, has only enough money in the bank to prep the boats for the peak summer season, when the couple normally earn 80% of their income.
Randy, 46, and Susan, 42, have hardly any personal savings, and nearly all their assets apart from their home are tied up in the business.
Today the Boggs family's future depends largely on two great unknowns: Will tourists come back in sufficient numbers this year to keep them afloat? And just how bad will the long-term effects of the spill be?
Stephen Haidt, a financial planner in Mobile, who examined the couple's finances for MONEY, puts it bluntly: "If not enough people are fishing, Randy and Susan could lose everything."
Randy grew up poor on a tomato farm in northern Alabama. But he loved fishing so much as a teenager that he would finagle a ride 350 miles to the Gulf Coast to spend his summers working on charter boats.
He had to quit fishing and drop out of high school at age 17 to work in a factory when his father was sidelined by heart trouble. He got his GED, trained as a machinist, then took college courses toward a nursing degree, aiming to gain enough medical knowledge to launch a business manufacturing prosthetic joints.
By the time he graduated, he'd abandoned the idea and went to work in a hospital. But he was unhappy cooped up all day and hankered to do something that tapped into the contentment he'd felt as a kid on a boat. "With fishing, I can be my own boss, control my own destiny," he says.
So Randy quit nursing in 1998 and took a job on a friend's fishing boat in Orange Beach. That's where he met Susan, who was working at the marina's charter booking office. They married four years later.
Randy bought his first boat in 1999, a 38-footer called Sea Food, and started catching and selling fish to meet his $2,000 monthly loan payment, while pestering other fishermen about how to run a charter business. By 2000 he was ready to make his move, borrowing $50,000 from another captain for the down payment on the Reel Surprise.
His strategy was simple: Captain Randy offered a more affordable, family-friendly experience than the other boats -- his deck hands were not allowed to swear -- and he and Susan marketed aggressively.
By 2004 the business was doing well enough for Randy to buy a second 65-footer (eventually the fleet expanded to five). Two years later the couple moved from the small Orange Beach house they'd bought in 2000 for $107,000 to a larger, $225,000 home on three acres in nearby Elberta, 14 miles farther away from the water and the dangers of hurricanes like Katrina and Ivan.
As the economy tanked in 2008, business held steady for Randy and Susan because of their low prices -- $65 a person for a four-hour trip, half as much as their competitors charge. The following year Randy took over the marina's charter booking office, earning a 15% commission on every sale.
They sent corporate customers to the largest vessels in the marina, sport fishermen to the smaller boats, and families to Reel Surprise Charters. They also opened a dock store, selling beer, T-shirts, and fuel. At season peak, they employed 20 workers in all.
By 2009 business was booming. Their operating costs of $2.13 million were high, but revenues were even higher, at $2.39 million. They ended the year with $100,000 in the bank -- the first time they didn't have to borrow money to make ends meet during the off-season.
Success came with a punishing schedule. Running a business with a total capacity of 152 passengers on five boats making eight runs daily, Randy worked seven days a week from February to October, taking out boats from 8 a.m. to 7 p.m., then working at the marina after dark.
In addition to her full-time job as an administrative assistant for a property management firm, Susan kept the company's books, handled advertising, managed the website, and worked in the store and booking office -- often with Elizabeth, born in 2005, in tow.
As the economy started to recover heading into 2010, the couple looked forward to a breakout year.
On April 21, 2010, Randy had just pulled the Reel Surprise into the marina when a buddy told him there had been an explosion on an offshore oil rig the night before: "Rig's on fire. Looks like it'll sink."
Within days the booking office was getting calls asking whether it was still safe to fish in the gulf. Sure, they said, except for those two-day trips to the Deepwater Horizon area to fish for tuna, wahoo, and mahi-mahi.
Within weeks, as the spill crept within 50 miles of the coast, the 10- and 12-hour voyages for red snapper and trigger fish were canceled. But Randy's boats were still being booked at a normal pace for day trips that stayed within 30 miles.
On May 3, BP officials descended on Orange Beach to recruit fishermen for its cleanup operation. Randy did some quick calculations -- the contract obliged BP to pay $2,000 a day for his two big boats, which by summer's end would bring in $480,000, about what those boats earned in 2009. But the three other boats, which weren't operational the year before, would have brought in an estimated $400,000.
To sweeten the deal, BP paid for fuel and later picked up the tab for crews. For Randy -- with a $30,000 monthly nut and 20 employees relying on him -- the risk of saying no seemed too great. He signed up all five boats.
Over the next few weeks, as the oil crept closer to shore and bookings came to a standstill, that decision began to look even smarter. In early June the gulf was closed to fishing; a few days later oil began washing up on Orange Beach.
The emotional toll was nearly as devastating as the environmental and economic effects. Later, studies showed high levels of anxiety, depression, fatigue, and anger among people living in the area, particularly those who worked in the fishing industry or had otherwise suffered financial harm; the amount of oil that reached an area mattered less, the surveys showed, than the degree of financial loss.
Susan and Randy Boggs felt the suffering firsthand, when in late June a captain from a nearby marina climbed into the wheelhouse of his fishing boat and shot himself. After the suicide, the Baldwin department of mental health sent therapists to the docks.
Randy attended several group counseling sessions. "I felt like my life was over," he says, his normal wisecracking demeanor fading to seriousness. "I thought I'd lost everything I'd worked for all these years."
The well was finally capped July 15, ending Phase I of the crisis and beginning Phase II, when the locals tried to put their lives and businesses back together. The Boggses found themselves in an odd position: While the possible long-term effects of the spill remained potentially devastating to their livelihood and way of life, over the short term the crisis had turned into something of a windfall for them.
First, there was the money they earned from the cleanup. For their work for BP from May through August, the couple grossed nearly $900,000 -- considerably more than the charter boat division of their company had brought in the year before. That allowed them to keep all their employees on payroll at full salary and to pay off their mortgage, ($210,000), credit cards ($8,000), and two car loans.
Then, in November, the couple got a check for $336,600 from the Gulf Coast Claims Facility (GCCF), the $20 billion fund set up by BP to compensate local residents and business owners for losses related to the spill. That money has enabled them to cover their losses and set aside a modest amount ($85,000) to prep for the coming fishing season.
While that may seem like a lot of money, it's just a fraction of the $1.6 million that Susan estimated the business had lost from the oil spill in her claim to BP. The check arrived with no letter of explanation, so the Boggses didn't know why the amount was so much less than what they'd asked for or whether it was the only payment they'd get or just the first installment.
They were not alone in their confusion. GCCF head Kenneth Feinberg, who also presided over the Sept. 11 victims fund, has been criticized for being slow to settle claims (only 34% of claimants had been paid as of early March) and for presiding over a befuddling process.
The rules have been changed several times but now come down to two choices. Anyone who can prove financial harm from the spill can file periodic "interim claims" for documented losses through 2012 and retain the right to sue BP. Or victims can ask for a "final settlement" of past and projected future losses through 2012, but give up the right to sue.
The pressing question for Randy and Susan: Are they entitled to more money, and if so, how much? With their permission, MONEY contacted Feinberg to find out. It turns out that the couple made a mistake in calculating their losses, because they didn't deduct any money they had saved as a result of lower operating costs last year when they compared revenue from 2009 and 2010. "That substantially reduces their overall claim," Feinberg says.
The good news is that the Boggses can refile their 2010 claim, taking those saved expenses into consideration. And under a new rule, they can factor in anticipated growth in their business from 2009 to 2010, which may boost their claim since they had three new boats and were rapidly expanding their operations before the oil spill.
If the Boggses were to ask for a final settlement now, they would get an additional payment equal to what they've received so far: nearly $350,000 (the November payment, plus three smaller ones they got earlier in the year), Feinberg says.
But, he adds, he reserves the right to change the final-claims formula once the tourist season gets underway and the pace of the economic recovery becomes clearer.
As for BP, no matter what happens in the gulf, the company says it will wrap up these compensation proceedings by 2013. "Our deal with the White House was to have a three-year process," says Geir Robinson, director of claims for BP's Gulf Coast Restoration Organization.
Coincidentally, that's exactly how long the GCCF formula for calculating future losses assumes recovery will take, based on findings from Texas A&M's Harte Research Institute for Gulf of Mexico Studies.
It expects a 30% return to normalcy this year, 70% next year, and a full bounceback by 2013 -- with a key caveat: "Realistically, true loss to the ecosystem and fisheries may not be accurately known for years, or even decades," the report notes.
Randy Boggs, ever the optimist, scoffs at the predictions. He points to strong demand when federal authorities opened the gulf for a special red snapper season this past fall and notes recent bookings have been running at about the same clip as in 2010, before the spill.
"Hurricane Ivan decimated this Gulf Coast, and we bounced right back," he says. "The resiliency here is unbelievable."
Yet for now, even on sunny days with no danger in sight, Orange Beach has the atmosphere of a seaside community after a shark attack -- an ominous feeling that danger is still lurking beneath the waves.
The dozens of dead dolphins that washed up on shore in February and March only added to the unease. Even Randy admits to some trepidation over the long-term effects of the spill.
"I do not let my daughter eat fish more than once or twice a month," he says. And he advises his customers to do the same, suggesting that they catch fish, eat some occasionally, and throw some back -- even if such honesty isn't always best for business.
At MONEY's request, financial planner Stephen Haidt and legal expert Martin J. Davies assessed the challenges facing the Boggses as they gear up for a possible make-or-break season. Here are the recommendations:
If business doesn't come back quickly or another hurricane or man-made disaster rocks the Gulf Coast, the Boggses have no liquid assets to tide them over.
Haidt suggests selling their two smallest boats, which hold only 10 passengers combined and contribute little to the bottom line. The boats should fetch about $20,000, enough to cover four months of personal living expenses for the Boggs. The eventual goal: six months, or $30,000.
Randy and Susan should refile an interim claim for compensation from BP, says Davies, director of the Maritime Law Center at Tulane University in New Orleans.
Step 1: Recalculate their estimated losses, using the new GCCF formula that takes into account how much a business was likely to have grown, based on early 2010 revenues. That should work in the Boggses' favor.
If business hasn't bounced back to 2009 levels by Memorial Day, Davies suggests that the couple file another interim claim to recoup losses up to that point, retaining their right to sue BP. But if business is back up or close to it, he advises going for a final settlement before the rules can be changed to their disadvantage.
The Boggses should put $180,000 of any additional money from BP in a business emergency fund, says Haidt -- enough to cover six months of fixed operating expenses. That's on top of the $100,000 Susan sets aside every year from peak season revenue to cover costs during the winter.
Haidt estimates that even if business is down just 12% between May and December compared to the same period in 2009, the couple won't earn enough to save the $100,000 cushion they need to last through the winter (if they take a $350,000 final settlement, they'd run into trouble if business dropped 25%).
If that happens, Haidt says, the Boggses should shed another boat to bring their capacity in line with demand. Selling the 41-foot Wishbone should net $60,000 and cut their monthly overhead by $2,500. That would still leave them with the two 65-footers that generate most of their profits.
The couple have also applied for a $2 million loan at 4% from the Small Business Administration. But Haidt says it is folly to go into debt to prop up a business that's declining.
The Boggses plow every penny back into their business, leaving them with just $19,000 in a 401(k) and $12,000 saved for college. They regard the equity in their boats -- now $365,000 -- as their retirement fund. But if the business tanks, the boats could drop in value; plus, those assets are not protected from creditors.
Instead Haidt tells Randy to set up a company 401(k) plan that would allow the firm to contribute 25% of his salary and give himself regular raises. Says Haidt: "In a few years he could have half a million dollars not available to creditors."
Randy and Susan agree they should sell their two smaller boats and even a third, if necessary. And they're on-board with getting serious about retirement planning. But they go back and forth about whether it makes sense to take a final settlement.
"Look at Alaska -- after 22 years, the fishing industry still hasn't recovered from the Exxon Valdez," says Susan, so it may make sense to retain their right to sue. "It's a gamble either way."
And if the business really doesn't bounce back? "I'd go back to nursing to make sure my wife and child didn't go hungry, then start over again," Randy says. "I've recovered from a lot worse things than this oil spill. If I have to, I'll do it again."
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