BP and the Obama administration have reached a preliminary agreement under which the company will place $20 billion in an escrow account to pay claims stemming from the oil spill in the Gulf of Mexico, President Obama announced Wednesday after meeting with senior BP officials.
The agreement calls for BP to make two payments into the escrow account this year, then a payment each quarter over the next several years until the $20 billion amount is reached. Obama also announced that BP had agreed to create a $100 million fund for oil industry workers left jobless.
The fund will be administered by Kenneth Feinberg, the Washington lawyer who oversaw a similar fund for victims of the Sept. 11 terror attacks and who more recently was the Obama administration’s special master for executive compensation.
“This is about accountability,” Obama said after the meeting at the White House. “At the end of the day, that’s what every American wants and expects.”
BP chairman Carl-Henric Svanberg told reporters BP would suspend its dividend for the rest of the year to show its commitment to meeting claims related to the oil spill.
“This administration and our company are fully aligned in our interest of closing this well, cleaning the beaches and caring for those affected,” Svanberg said. He added, “I would like to take this opportunity to apologize to the American people on behalf of all the employees of BP, many of whom are living on the Gulf coast.”
The White House and BP had been negotiating over the amount in recent days. Administration officials had not publicly said how much they were seeking, but Senate Democrats on Sunday asked the company to set aside $20 billion to handle economic damages and cleanup costs.
Behind the scenes, the company had signaled what it expected from Wednesday’s meeting — and the company appears to have gotten exactly what it wanted.
Most of all, it wanted some assurance that it will not be forced to pay for the economic impact to the oil industry of the administration’s six-month moratorium on deep-water drilling. Although neither Obama nor Svanberg explicitly addressed that contentious issue in their public remarks, Obama noted that BP had “voluntarily” created the $100 million fund for unemployed oil workers. There was no other suggestion that BP would be legally liable for lost wages in the oil indusry.
BP also needed some affirmation that the government is not going to drive the company into bankruptcy as a result of the spill. The company has heard lawmakers declare that there should be no limit to its liability. Simultaneously the amount of oil surging from the reservoir beneath the gulf has turned out to be far greater than originally estimated. BP executives have seen the company’s market value plummet along with the company’s credit rating.
Obama said exactly what the BP executives and their shareholders wanted to hear: “BP is a strong, viable company and it is in all of our interests that it remain so.”
The company issued a press release after the meeting in which it quoted Svanberg saying that he was “confident that the agreement announced today will provide greater comfort to the citizens of the Gulf Coast and greater clarity to BP and its shareholders . . . We welcome the administration’s statements acknowledging that BP is a strong company and that the administration has no interest in undermining the financial stability of BP.”
Also Wednesday, BP announced that it had begun using a second containment system to capture oil leaking from the well, which according to the latest scientific estimate is gushing between 35,000 and 60,000 barrels a day (1.47 million to 2.52 million gallons).
The new technique pulls oil and gas from the blowout preventer and up to a surface ship, the Q4000, using one of the same lines that had been employed to pump heavy drilling mud into the well during the ill-fated “top kill” attempt last month.
This supplements the existing containment effort, which uses a cap on the sheared-off riser pipe to capture oil and gas and bring it to the drillship Discoverer Enterprise. That operation has managed to capture roughly 15,000 barrels a day.
The company, in announcing that the new technique had begun to pull hydrocarbons from the well, did not reveal the quantities involved. At best, the process can handle 10,000 barrels a day, the company has said, but it has also cautioned that neither containment technique has ever been used at such great depth, and “their efficiency and ability to contain the oil and gas cannot be assured.”
At the White House, Obama was expected to discuss efforts to halt the oil spill, clean up coastal areas and establish escrow accounts to compensate those who have been harmed by what the president described Tuesday night as BP’s “recklessness.”
In an address from the Oval Office, Obama called for the creation of BP-funded escrow accounts overseen by an independent entity, to compensate those who the president said have been “harmed as a result of [BP’s] company’s recklessness.”
BP officials expected to participate in Wednesday’s Roosevelt Room session included Svanberg, chief executive Tony Hayward and managing director Bob Dudley, the White House said.
In a statement, Sen. Charles E. Schumer (D-N.Y.), who on Tuesday proposed having Feinberg oversee the fund, hailed the decision to put him in charge.
“The victims can be confident that real help is on the way with someone as fair, diligent and sympathetic as Ken Feinberg running this fund,” he said. “He did an amazingly good job in New York for the families of those lost on September 11 and received plaudits from all sides. I believe when Feinberg completes his mission here, the people in the gulf will feel the same way.”