During his Oval Office speech last night, President Barack Obama told the American people that he would be meeting with the chairman of BP on Wednesday and that Obama would “inform him that he is to set aside whatever resources are required to compensate the workers and business owners who have been harmed as a result of his company’s recklessness.” In a speech many critics panned as too weak in the face of the growing oil spill, it was one moment when Obama seemed tough and in command.
Apparently he had reason: White House officials and BP executives have tentatively agreed that the energy company will set up a fund worth about $20 billion over the next several years to compensate residents and businesses in the Gulf of Mexico affected by the oil spill. The escrow account will be independently administered by Kenneth Feinberg, the lawyer who ran the compensation fund for victims of the Sept. 11 attacks, which the BP fund may be modeled on. Feinberg was also the government’s special master for executive pay under the Troubled Asset Relief Program (TARP).
The establishment of the independent fund at least gives Obama a clear political win after weeks of struggles against the oil spill, and gives some substance to the promise the President made last night to build back the battered Gulf region over the long term. For BP, which had earlier seemed lukewarm on the idea of an escrow, the $20 billion fund might at least give them some certainty on the company’s costs from the spill going forward. But it’s still an unprecedented figure—the company made about $14 billion in 2009—and significantly higher than what some analysts have been expecting the spill would finally cost the company. And the details would still need to be worked out. Dozens of lawsuits have already been filed against BP in the Gulf region, and the government has opened a criminal investigation into the Deepwater Horizon accident, which could very well result in charges being filed against BP. And with the leak ongoing—and worse then we’d known—the war between BP and Washington isn’t over by any stretch. It’s worth remembering that legal battles in the Exxon Valdez spill—which now looks like a puddle next to the Gulf disaster—were fought for nearly 20 years. Don’t expect this to be over a whole lot sooner.
It’s also worth noting that if the federal guidelines for spill liability currently on the books were followed and no other intervention were pursued, BP would be on the hook for 100% percent of the clean-up costs, but only $75 million in claims for indirect damages. A government trust fund fed by an oil industry tax would kick in another $1 billion. So this looks like a 20-fold improvement as far as what Gulf residents have pledged to them in writing. That being said, BP has insisted all along it wouldn’t stick to the liability cap and Congress is working on upping or lifting it altogether anyway.
You can contact Adam at firstname.lastname@example.org.