BP announced it would not pay dividends this year and agreed to create a $20 billion compensation fund for victims of the massive Gulf of Mexico oil spill following four hours of intense negotiations at the White House.
President Barack Obama also wrested an apology to Americans from the British oil giant on Wednesday, eight weeks after the Deep Horizon drilling platform leased by BP explode, killing 11 workers and setting in motion an environmental and economic catastrophe.
The apologetic talk was expected to continue Thursday when company CEO Tony Hayward will face sharp questions from lawmakers at Congress.
In prepared testimony obtained by The Associated Press, Hayward expressed contrition for the spill and its effects and said he was "personally devastated" by "these tragic events." He pledged, "We will not rest until the well is under control, and we will meet all our obligations to clean up the spill and address its environmental and economic impacts."
The spill has been a major distraction for Obama, who is battling a determined Republican political opposition. Wednesday's announcement was a rare piece of good news.
A new AP-GFK poll showed that a majority of Americans think the president has not handled the crisis well, a significant outcome in the countdown to November congressional elections that could cost Obama his Democratic majority in one or both houses of Congress.
Obama had said he would "make BP pay," and the company's chairman said after four hours of intense White House negotiations that BP was ready.
Creation of the fund - to be run by an administrator with a proven track record - is the first big success Obama has been able to give to Gulf residents and Americans in the eight weeks since the explosion, a period during which the spill has taken ever more of the public's attention, threatening anything else the president hoped to focus on or accomplish.
Huge as the $20 billion seems, both Obama and London-based BP PLC said it was by no means a cap.
The deal also adhered to what Obama had said was his non-negotiable demand: that the fund and the claims process be administered independently from BP. It won't be a government fund, either, but will be led by the administration's "pay czar," Kenneth Feinberg, better known as the man who oversaw the $7 billion government fund for families of victims of the Sept. 11, 2001, terrorist attacks.
The April 20 explosion of an offshore oil rig killed 11 workers and sent millions of gallons of crude spewing into the water from the broken well a mile (1.6 kilometers) below the ocean's surface - as much as 118 million gallons (446 million liters) so far and still flowing. More wildlife, beaches and marshlands are fouled every day, jeopardizing not just the region's fragile ecology but a prized Gulf way of life that is built on fishing and tourism.
Though the company hopes to install equipment soon to capture as much as 90 percent of the escaping oil, the leak is expected to continue at least until relief wells are finished in August.
The use of the BP escrow fund is intended to avoid a repeat of the painful aftermath of 1989 Exxon Valdez oil disaster in Alaska, when the fight over money dragged out in courts over roughly two decades.
"What this is about is accountability," said Obama in brief remarks in the State Dining Room after a four-hour, on-again, off-again White House negotiation session with BP executives. "For the small-business owners, for the fishermen, for the shrimpers, this is not just a matter of dollars and cents. ... A lot of these folks don't have a cushion."
On the driveway outside, BP Chairman Carl-Henric Svanberg apologized for "this tragic accident that should never have happened."
"We care about the small people," he said.
That comment wasn't as well-received as the promise of compensation.
"We're not small people," said Justin Taffinder of New Orleans. "We're human beings. They're no greater than us. We don't bow down to them."
Added Terry Hanners, who has a small construction company in Gulf Shores, Ala.: "These BP people I've met are good folks. I've got a good rapport with them. But BP does not care about us. They are so far above us. We are the nickel-and-dime folks of this world."
Asked about the remark by Svanberg, who is Swedish, BP spokesman Toby Odone told The Associated Press in an e-mail that "it is clear that what he means is that he cares about local businesses and local people. This was a slip in translation."
In creating a victims' compensation fund, BP will set aside $20 billion worth of assets from its U.S. operations and retrieve them as it makes cash payments to the fund.
Svanberg announced the company would not pay dividends to shareholders for the rest of the year, including one scheduled for June 21 totaling about $2.6 billion. The company will make initial payments into the escrow fund of $3 billion this summer and $2 billion in the fall, followed by $1.25 billion per quarter until the $20 billion figure is reached.
Aware that a healthy BP is in everyone's interest, Obama gave a plug for what he called "a strong and viable company" - a day after he had accused it of recklessness.
BP shares gyrated as the events unfolded. They rose more than 5 percent to $33 after Obama's words of support. But they slipped back as investors digested the full extent of BP's commitments, ending the day with a gain of 45 cents to close at $31.85 per share.
The company's potential liabilities, including cleanup costs, victims' compensation and civil fines, are breathtaking to consider - stretching far beyond the $20 billion fund.
For example, civil penalties can be levied under a variety of environmental protection laws, including fines of up to $1,100 for each barrel of oil spilled. That alone could translate to as much as $3 billion. If BP were found to have committed gross negligence or willful misconduct, the civil fine could be up to $4,300 per barrel, approaching $12 billion.
So far, 66,000 claims have been filed, $81 million awarded and 26,000 checks cut, said Coast Guard Adm. Thad Allen.
The $20 billion escrow fund can be used to pay all claims, including environmental damages and state and local response costs, with the exception of fines and penalties.
Resolving one particularly thorny dispute between BP and the government, the company also agreed to establish a separate $100 million fund to support oil rig workers idled by Obama's post-spill six-month moratorium on new deep-sea oil drilling. The administration also was to ask Congress for special unemployment insurance for the workers.
There has been little love lost between Obama and BP recently, with the president's rhetoric becoming increasingly sharp. In yet another jab at BP, the deal was made public by Obama aides even while the much-anticipated White House confrontation was under way.
The showdown opened with an apology from Svanberg and a recitation from Obama of the ills he has seen on his visits to the Gulf. The two sides broke up several times to talk privately or for Obama's aides to go consult with him, as the president stayed for the first 20 minutes but only ducked in and out after that. At one point, Obama and Svanberg spent 25 minutes alone in the Oval Office.
Afterward, the two men had respectful words for each other, with the chairman seeming to praise what he called the president's evident frustration on behalf of Gulf residents.
Source:
http://gresnews.com/ch/News-En/cl/CAS/id/104491/BP+says+its+sorry+-+and+guarantees+20B+for+Gulf
