THE WHITE House and BP yesterday agreed that the company formerly known as British Petroleum would establish a $20 billion (€16 million) fund to compensate victims of the oil spill in the Gulf of Mexico.
President Barack Obama presented the agreement as “an important step toward making the people of the Gulf Coast whole again”. He said he had encountered “frustration over the pace at which claims have been paid” and noted that the legal cap of $75 million on oil company liabilities was clearly insufficient.
“This $20 billion amount will provide substantial assurance that the claims people and businesses have will be honoured,” Mr Obama said. The figure was “not a cap”, the president said. Furthermore, BP agreed to establish a separate $100 million fund for oil rig workers who lost jobs because of the moratorium on deep water drilling. This had been a contentious issue in negotiations.
The British bank Standard Chartered Plc estimates BP’s liabilities in the spill at around $40 billion.
The $20 billion fund will be administered by Ken Feinberg, who oversaw the 9/11 compensation fund. A three-person panel will review claims that are rejected.
Addressing allegations that White House demands could drive BP to bankruptcy, Mr Obama said, “I’m absolutely confident BP will be able to meet its obligations to the Gulf Coast and to the American people. BP is a strong and viable company and it is in all our interests that it remains so.”
As he left the White House, flanked by other BP executives, the chairman, Carl-Henric Svanberg, said: “The BP board has today decided that we will not pay any further dividends this year ... We understand that we will and we should be judged by our actions.”
Mr Svanberg said BP was carrying out its own independent investigation into the causes of the explosion of the Deepwater Horizon oil rig on April 20th.
The BP executives were in the White House for four and a half hours, though it was not clear how much of that time was spent with Mr Obama.
Mr Svanberg said the president “is frustrated because he cares about the small people, and we care about the small people. I hear comments that large oil companies are greedy and don’t care. This is not the case.”
BP’s chief executive, Tony Hayward, will face the House Energy Committee today.
On the eve of the agreement, US officials substantially increased estimates of the amount of oil flowing into the Gulf for the fifth time, saying the most likely rate is between 35,000 and 60,000 barrels – equivalent to 2.5 million gallons – of oil per day.
The spillage rate has increased dramatically since BP carried out a “cut and cap” operation that has enabled it to siphon off some 15,000 barrels per day since June 3rd. Yet in a televised address from the Oval Office on Tuesday evening, and again in his remarks yesterday, Mr Obama conveyed BP’s promise that “in the coming weeks and days, these efforts should capture up to 90 per cent of the oil leaking out of the well.”
The president’s address was widely criticised by media from across the political spectrum. “It was a great speech if you were on another planet for the last 57 days,” said Keith Olbermann, a liberal commentator on MSNBC.
The most common criticism was that the speech was short on specifics. “We will fight this spill with everything we’ve got for as long as it takes,” Mr Obama said.
He has deployed 30,000 personnel, thousands of ships and 17,000 members of the National Guard to the region. “Because of our efforts, millions of gallons of oil have already been removed from the water through burning, skimming and other collection methods,” the president said.