By Sam Youngman and Ben Geman - 06/17/10 12:24 AM EDT
Under immense pressure from the White House and congressional lawmakers, BP agreed Wednesday to create a $20 billion escrow fund for damage claims related to the Gulf oil spill and announced it would suspend dividend payments for the year.
Executives with the oil giant met at the White House with President
Barack Obama and administration officials to hammer out details of an
independently run fund to compensate Gulf residents and businesses
affected by the worst environmental disaster in U.S. history.
In remarks after the meeting, BP Chairman Carl-Henric
Svanberg apologized “to the American people” for what he called “this
tragic accident that never should have happened.”
“I hear comments sometimes that large oil companies are greedy
companies or don’t care,” he said. “But that is not the case in BP. We
care about the small people.
“We will look after the people affected, and we will repair the environmental damage to this region and to the economy.”
An adviser to BP said Wednesday afternoon that the company does not
think it’s liable for the lost income but that it agreed as “a goodwill
gesture made at the request of the president.”
Obama, speaking in the White House State Dining Room, stressed that
the $20 billion escrow, over four years, is “not a cap,” and that BP
will be on the hook for costs and claims over that amount.
“BP will also continue to be liable for the environmental disaster
it has caused, and we’re going to continue to work to make sure they
address it,” said the president.
Obama, who returned Tuesday from his fourth visit to the Gulf Coast
since the April 20 explosion of the Deepwater Horizon rig, said he has
seen the frustration and concerns of Gulf Coast residents. The escrow
account “will provide substantial assurance the claims people and
businesses have will be honored,” he said.
BP’s liabilities for the spill are “significant” and BP officials “acknowledge that fact,” he added.
“And we will continue to hold BP and all other responsible parties
accountable,” he 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. So this is about accountability. At the end of the day,
that’s what every American wants and expects.”
The fund will be administered by attorney Kenneth Feinberg, who
oversaw the 9/11 victims compensation fund and has served as the
administration’s “pay czar” on executive compensation at firms
receiving federal rescue money. Any Gulf claims rejected by BP will be
adjudicated by a three-person panel.
The announcement that BP would halt dividend payments for the year
follows criticism from a slew of Democrats over the prospect of BP
paying out billions of dollars to investors when it faces obligations
to Gulf Coast residents.
Earlier this month, Obama also highlighted the dividends, citing the
planned payments — along with an expensive public-relations TV ad
campaign — in warning the company that it must meet its obligations to
the Gulf Coast.
In explaining its decision to temporarily cancel the payments, BP
said that “current circumstances require the board to be prudent” but
that the company “remains strongly committed” to future payments. BP
will consider resuming them in 2011 when it has a clearer picture of
the spill’s financial impact.
After dropping in early trading, BP’s stock ended the day at 31.85, up 1.43 percent.
The four-hour White House meeting ran well past its scheduled time.
A source with knowledge of the meeting said that at one point, BP’s top
executives met with their attorneys to hammer out the details of the
At the White House briefing Wednesday afternoon, Carol Browner, the
president’s climate change czar, acknowledged there were “sticking
points.” But neither she nor White House press secretary Robert Gibbs
said what they were.
Browner said BP’s executives began the meeting by apologizing, which was “not something we asked for.”
She described the $20 billion escrow as a “White House-driven
agreement” and said the $100 million in compensation for oil rig
workers was also “suggested by the White House.”
“It was a business meeting,” Browner said. “It was a focused business meeting.”
Svanberg said the company appreciated Obama’s “deep concern” for Gulf residents.
“I trust also that the president sensed the sadness and the sorrow
that we feel for this tragic accident that should never have happened,”
Svanberg deflected questions about whether the company took
shortcuts in drilling the well, as some senior Democrats have alleged.
“We will scrutinize everything that we do to make sure that we
understand the root cause of this tragic accident, because it shouldn’t
happen,” he said.
Adm. Thad Allen, the national incident commander in charge of the federal response to the spill, said that BP has paid out about $81 million on 66,000 claims so far.
This story was originally posted at 2:56 p.m. and updated at 4:39 p.m. and 8:24 p.m.