BP Will Create $20 Billion Oil Spill Damage Claims Fund
WASHINGTON, DC, June 16, 2010 (ENS) – Oil giant BP, and not the American taxpayers, will bear the financial burden of the devastating oil spill in the Gulf of Mexico, President Barack Obama and BP officials said after meeting at the White House this morning.
“BP has agreed to set aside $20 billion to pay claims for damages resulting from this spill,” said President Obama.
The fund is a cap on BP liabilities, but will be available to satisfy legitimate claims, including natural resource damages and state and local response costs. Fines and penalties will be excluded from the fund and paid separately.
From left: BP CEO Tony Hayward, BP Chairman Carl-Henric Svanberg, BP General Counsel Rupert Bondy, BP Managing Director Robert Dudley, White House Senior Advisor Valerie Jarrett, Labor Secretary Hilda Solis, Attorney General Eric Holder, Vice President Joe Biden, President Barack Obama, Homeland Security Secretary Janet Napolitano. (Photo by Pete Souza courtesy The White House)
Additionally, BP has agreed to establish a $100 million fund to compensate unemployed oil rig workers affected by the closure of the deepwater rigs during a six-month moratorium imposed by the President in May.
“I’m absolutely confident BP will be able to meet its obligations to the Gulf Coast and to the American people,” said Obama. “BP is a strong and viable company and it is in all of our interests that it remain so. So what this is about is accountability. At the end of the day, that’s what every American wants and expects.”
BP Plc Chairman Carl-Henric Svanberg told reporters after the meeting that the company would take care of people harmed by the spill and repair damage to the environment.
Svanberg said the company would forgo paying dividends to its shareholders for the first three quarters of this year. “We regret the cancellation and suspension of the dividends, but we concluded it was in the best interests of the company and its shareholders,” Svanberg said.
“We appreciated the constructive meeting conducted by the President and his senior advisers and are 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,” said Svanberg. “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.”
Agreement was reached to create a $20 billion claims fund over the next three and a half years.
BP will initially make payments of $3 billion in Q3 of 2010 and $2 billion in Q4 of 2010. These will be followed by a payment of $1.25 billion per quarter until a total of $20 billion has been paid in.
Attorney Ken Feinberg (Photo by Samuel Wantman)
While the fund is building, BP’s commitments will be assured by the setting aside of U.S. assets with a value of $20 billion. This level of assets will decline as cash contributions are made to the fund.
The new Independent Claims Facility will be administered by attorney Ken Feinberg, a mediation and arbitration specialist.
Feinberg served as special master of the U.S. government’s September 11th Victim Compensation Fund and currently serves as the special master for TARP [Troubled Asset Relief Program] Executive Compensation, overseeing compensation of top executives at companies that received federal bailout assistance.
The Independent Claims Facility will adjudicate on all Oil Pollution Act and tort claims, but not on federal and state claims. Payments from the fund will be made as they are adjudicated, whether by the ICF, or by a court, or as agreed by BP. Any money left in the fund once all legitimate claims have been resolved and paid will revert to BP.
Obama said that during a private conversation with Chairman Svanberg he spoke for the Gulf coast families, the small business owners, the fishermen, and for the shrimpers.
For them, said Obama, “this is not just a matter of dollars and cents – a lot of these folks don’t have a cushion. They were coming off Rita and Katrina; coming off the worst economy that this country has seen since the Great Depression, and this season was going to be the season where they were going to be bouncing back.”
“Not only that, but this happened, from their perspective, at the worst possible time, because they’re making their entire income for the year in the three or four months during which folks can take their boats out, people are coming down for tourism,” Obama said.
“I emphasized to the chairman that when he’s talking to shareholders, when he is in meetings in his boardroom, to keep in mind those individuals; that they are desperate; that some of them, if they don’t get relief quickly, may lose businesses that have been in their families for two or three generations,” said Obama. “And the chairman assured me that he would keep them in mind.”