BP agrees to set aside $20 billion fund for Gulf oil spill

McClatchy NewspapersJune 16, 2010 

WASHINGTON — BP agreed Wednesday to set aside $20 billion in a fund to pay damage claims stemming from the ongoing oil disaster in the Gulf of Mexico, and President Barack Obama staked his own reputation on the claims being paid.

"The people of the Gulf have my commitment that BP will meet its obligations to them," the president said following a four-hour meeting at the White House between company and administration officials.

"I'm absolutely confident BP will be able to meet its obligations to the Gulf Coast and to the American people," Obama added.

BP Chairman Carl-Henric Svanberg offered an apology to all Americans as he emerged from the White House with Chief Executive Tony Hayward.

Svanberg said that "through our actions and commitments, we hope that over the long term that we will regain the trust that you have in us" and "we will live up to all our legitimate responsibilities."

The announcements followed an extraordinary meeting that took on the air of a summit, with lawyers for both sides negotiating in advance before Obama and his top advisers sat down across a long table from BP executives in the White House Roosevelt Room.

One such scripted moment worked out beforehand: that Obama would ask for, and get, a pledge from BP to set aside $100 million in a separate fund to compensate oil rig workers left jobless by Obama's moratorium on some oil drilling in the Gulf, pending new safety reviews.

"He asked if there was something we could do as a voluntary gesture," said BP attorney Jamie Gorelick. "I had discussed this previously with the White House counsel. . . . Much of the work had been done before the meeting."

Another issue discussed at the White House session was the financial health of BP.

Both sides agreed that it was best that BP remain "a strong and viable company" so it can pay for all of the damages caused by the well blowout, Gorelick said. "We know what it looks like when a company is driven into bankruptcy," Gorelick said, adding that bankruptcy laws would put shrimpers fourth in line for claims, behind creditors, employees and the government.

"This is about accountability," Obama said after the meeting. "At the end of the day, that's what every American wants and expects."

BP announced that it will suspend paying dividends to its shareholders for the rest of this year. The company last year made a profit of $14 billion on sales of $239 billion.

Obama said the $20 billion commitment isn't a cap, and White House officials said that if the company's liability is determined to exceed that amount, claimants can seek additional funds from BP.

White House adviser Carol Browner also said that "nothing has been taken off the table" in terms of the Justice Department's ability to take action against the company, including possible criminal charges. Browner also said that no company officials requested immunity for their remarks in the closed-door meeting.

The $20 billion fund will be financed over four years, with $5 billion deposited this year, then $5 billion a year through the end of 2013, company officials said.

To guarantee that the full amount is available quickly should it be needed, BP said it initially will set aside $20 billion in U.S. assets.

Svanberg also apologized behind closed doors to Obama. The president spent about 20 minutes in the full BP meeting in the Roosevelt Room and 25 minutes alone with Svanberg, said White House Press Secretary Robert Gibbs.

Svanberg said his impression of the president is that "he's frustrated because he cares about the small people, and we care about the small people. I hear comments sometimes that large oil companies are greedy companies or don't care, but that is not the case in BP. We care about the small people."

Svanberg declined to engage when a reporter asked him whether BP took safety shortcuts on the Deepwater Horizon that led to the April 20 explosion and the ongoing gusher. He said the BP board is doing its own independent investigation of what occurred and that "I have no further comments on that."

As of Wednesday, 66,000 claims had been filed, roughly $81 million disbursed and 26,000 checks cut, said the disaster's National Incident Commander, Coast Guard Adm. Thad Allen.

The $20 billion fund will be overseen by attorney Kenneth Feinberg. He's best known for administering payments from a special fund to the families of those killed in the Sept. 11, 2001, terrorist attacks and for his current role overseeing executive salaries at financial firms that received cash from the $700 billion government bailout.

He's also worked on payments to people harmed by the Agent Orange chemical that was used in the Vietnam War.

People and businesses that file claims for damages will be able to appeal if their claims are rejected. They won't have to waive any legal rights, and will also have the right to appeal to the courts, Gorelick said.

BP will waive its rights to appeal as part of the agreement, Gorelick said.

The company said details are still being worked out about which oil workers will be eligible for the $100 million fund, and that it wasn't clear whether the cash would be available to workers on deepwater rigs only or on shallow water rigs as well.

Gorelick said that BP doesn't think it's liable for lost wages due to the moratorium. "This is a goodwill gesture," the adviser said.

Most of the details were negotiated by Associate Atty. Gen. Tom Perrelli and Gorelick, a former deputy attorney general in the Clinton administration hired by BP.

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