$20 billion oil spill claims account could cause problems between BP, feds


HOOVER, Ala. — BP PLC and the federal government could find themselves in disagreement about whether $20 billion from the company will be enough to cover claims and other costs resulting from the massive Gulf oil spill.

BP’s incoming CEO Bob Dudley told reporters here Sunday, “One can never know in the legal system of the U.S., but I think that that looks like a good number to us.”

He said, “We think we put aside a reasonable set of liabilities.”

During a visit to Theodore in July, Vice President Joe Biden characterized the escrow account as a mere “down payment,” saying that the government would ensure that BP pays all it should.

“That’s why the president of the United States, under some criticism, got them to put a $20 billion down payment,” Biden said. “Folks, that ain’t the ceiling. That ain’t the ceiling. Whatever it takes to make this Gulf right, we’re going to make it right.”

Asked Sunday about the apparent discrepancy, BP spokesman Justin Saia said that the company expects to set aside a total of $32 billion and doesn’t consider $20 billion to be a limit.

“We’ve maintained very early on in this process that BP is fully committed to making everyone whole and restoring the Gulf region to where it was before this incident occurred,” Saia said.

The Press-Register could not immediately reach the White House on Sunday for comment.

Dudley, who was raised in Mississippi, met with reporters in two 30-minute sessions Sunday during the Southern Governors’ Association’s 2010 Annual Meeting.

He said that the company does not plan to use the Macondo well, responsible for the worst oil spill in U.S. history, or the underground reservoir of crude it tapped, for future drilling.

“The well will be capped, and nobody will ever want to go near that well again, and there are no plans to develop that Macondo structure field,” he said.

Dudley added that the extent of the disaster has been a “shock” that will force BP and the oil industry as a whole to re-evaluate their practices.

“What we need to do now as a company is go back and fundamentally look at deepwater drilling … and assure that we can drill safely again. I believe we can, but we need to rethink many, many things.”

He described the $20 billion escrow as an unprecedented step by the company to demonstrate its commitment to recovery. “I don’t think anything like that has happened before, in terms of a corporate response to a disaster,” Dudley said. “I hope that people see that in the spirit of not wanting to just set up a litigious stance on this from day one.”

But the lawsuits have come.

Earlier this month, Alabama Attorney General Troy King sued the company — against the wishes of Gov. Bob Riley and on the same day that the state filed its damage claim with BP.

Dudley said the lawsuit may delay BP from paying the state’s claim.

“It does change things, when you’re trying to work out a claim … and then you have a lawsuit,” he said. “Suddenly, you know, your lawyers say, ‘Well wait. You have to be a little bit more careful here.’”

The company will meet with officials from the governor’s and attorney general’s offices today to discuss the claim and what the next steps will be, according to Dudley.

Also, Dudley said that the failed blowout preventer would likely be removed from the Macondo well and loaded aboard a ship by today or Tuesday.

The “bottom kill,” executed through a relief well dug thousands of feet below the ocean floor and long heralded as the permanent solution to the leak, will begin in less than a week, he added.

Dudley said that some engineers had expressed concerns that completing the relief well could restart the leak. A “static kill,” completed early this month, is believed to have choked off the flow of oil and sealed the gusher with cement.

Dudley said that with a new blowout preventer on the well, the risk of a renewed leak will be minimized.

There are several reasons for the relief well to be completed, he said, including demonstrating that the difficult procedure can be done, providing more scientific data about the leak and giving closure to an oil-weary public.

The relief well “is going to happen,” he said.

Dudley, who currently heads the company’s Gulf Coast Restoration operations, is scheduled to take over the company Oct. 1.

He said that, having been raised in Hattiesburg, Miss., the spill is personal for him.

“Most of my growing-up memories of summers were on the Gulf Coast, spending time often (on) Ship Island,” Dudley said.

“When it happened, I could just visualize it, and I did. I had these images of — which has not turned out to be right — but I did have these images of (Exxon) Valdez oil coming up around the barrier islands,” he said. “I just thought, ‘Oh, this is going to be a terrible, terrible tragedy.’”

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Stuart H. Smith is an attorney based in New Orleans fighting major oil companies and other polluters.
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