Posted by Patrick M. Regan
President Obama met with the leaders of oil giant BP on Wednesday at the White House. Following President Obama’s strong urging, BP announced that it agreed to establish a $20 billion compensation fund for victims of the April 20, 2010, Deepwater Horizon oil spill. By federal law, economic liabilities for oil spills are capped at a mere $75 million; BP’s waiver of that limit represents a significant concession in the face of intense pressure from the Obama Administration, Democratic leaders in Congress, and the American public. Importantly, the $20 billion fund does NOT cap BP’s liability–the Wall Street Journal reports that the figure serves as “neither a floor nor a ceiling” for the ultimate price tag.
President Obama was determined not to let this environmental disaster turn into another Exxon Valdez case. In the Valdez case, Exxon deliberately dragged the legal proceedings on for nearly 20 years, and then paid only $5 Billion in damages—-Exxon’s profits during this time were as high as $40 Billion per year. Many of the fishermen and others whose livelihoods were destroyed by the Valdez spill never received any money during their lifetimes.
The BP compensation fund will be independently administered and controlled by Kenneth Feinberg. Feinberg has experience not only as the administrator of the compensation fund for victims of the 9/11 terror attacks, but more recently as the “Wall Street Pay Czar,” controlling the pay of financial executives as part of the government’s bailout of the banking industry.
BP has stated that it intends to “make a ‘significant reduction’ in capital spending and speed asset sales to generate about $10 billion in the next 12 months” (WSJ). To that end, BP has canceled shareholder dividends for at least the first three quarters of this year.
In addition to the $20 billion fund, BP has agreed to set up a $100 million fund specifically designated to compensate workers affected by the 6-month offshore drilling moratorium enacted by the Obama Administration in response to the disaster. Further details about the compensation fund are expected in the coming days.