Scoring $20 billion for compensation fund for victims of the Gulf oil spill, President Barack Obama made good on a promise to make British Petroleum “pay” for the worst environmental disaster in U.S. history. While BP promised to cover the damages, no one knew for sure how and when the cash would be rolled out. “We asked for that two weeks ago and they laughed at us,” said Orange Beach, Alabama Mayor Tony Kennon. “Thank you President Obama for taking a bunch of redneck’ suggestions and making it happen,” confirming that the mechanism for delivering the much-needed cash to Gulf Coast residents and business. Obama’s White House meeting with BP officials ends wild speculation about how emergency funds would eventually roll out. Obama promised to “make BP pay,” despite the many obstacles preventing the cash from getting to needy victims.
With at times tense negotiations, Obama got BP to agree to an initial $20 billion fund to be administered by an independent third-party, led by “pay czar” Kenneth Feinberg, the man responsible for the $7 billion Sept. 11 compensation fund. Transatlantic tensions reached the boiling point after BP’s repeated failures to cap the mile-deep well that’s spewed some $120 million gallons of sticky crude oil into the Gulf’s sensitive ecosystem. When tar-covered birds and other wildlife swept up on Louisiana, Alabama, Mississippi and Florida marshlands and barrier islands, the nation’s collective ire boiled over. Since the April 20 explosion of Deepwater Horizon’s rig, killing 11 platform workers, BP has blown more smoke than the oil fires they’ve set off the Gulf Coast. Despite repeated attempts to cap the well, BP consistently minimized the extent of the spill
Now estimated at over 118 million gallons, BP still insists they intend to cap at least 90% of the well within the week. Prior BP estimated grossly underestimated the extent of the spill or the efforts to cap the leak. So far, BP promises to cap the well haven’t panned out. “What this is about is accountability,” Obama said after an intense negotiation session June 16 with BP executives. “For the small-business owners, for the fisherman, for the shrimpers, this is not a matter of dollars and cents . . . A lot of those folks don’t have a cushion,” driving home the need for an independent escrow account to handle claims. Obama used every ounce of his persuasiveness to convince BP that they had to set up the escrow account to begin paying damages to Gulf Coast residents and businesses. Saying he was “personally devastated,” BP CEO Tony Hayward apologized for the mess.
Hayward’s remarks hope to defuse expected hostilities faced when he’s grilled today before Congress. “We will no 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,” said BP Chief Financial Officer Byron Grote, knowing full well that the relief well won’t be done until August. If BP’s new cap efforts don’t work, another 100-200 million gallons could set the Gulf’s environment back for a generation. BP’s announced today they would suspend dividends to share holders, saving about $2.8 billion this year. Stock prices rocked back-and-forth after Obama announced the $20 billion compensation fund, specifying the timetable for BP depositing total $20 billion. Should courts find BP of gross negligence, additional civil penalties and fines could add more than $15 billion more to the settlement.
In setting up the $20 billion compensation fund, Obama gave BP no cap on potential damages. No promise was made about possible claims that affect BP’s earnings and share prices for years to come. Hayward sought a cap on damages but knows that BP faces a dicey future paying for the unprecedented decimation of the U.S. Gulf Coast, whose ecology could take more than a generation to repair. Obama got BP to agree to a separate $100 million fund to help oil rig workers impacted by the government’s moratorium on offshore drilling. No one can speculate about the extent of BP’s future damages related to lasting environmental damages. While BP must accept ultimate responsibility for the spill, Swiss-based Transocean, Ltd., who built the rig and Texas-based Anadarko Petroleum also must share the costs. Ultimately, Gulf residents and businesses must be made whole.
Obama didn’t back down when it came to holding BP’s CEO Tony Hayward’s feet to the fire when it came to setting up an urgent compensation fund for Gulf residents and businesses. BP’s feeble attempts to cap the well since April 20 highlight the ongoing risks of deepwater oil drilling. While accidents are rare, it only takes one to causing the worst environmental disaster in U.S. history. BP’s inability to stop the oil leaks exposes the hazard of offshore drilling and limitations of current technology to provide failsafe mechanisms to prevent future disasters. Getting BP to agree to an urgent compensation fund lowers the uncertainty to victims but raises the specter of poor earning for years to come. With his approval ratings heading south, news of a compensation fund was welcomed news to the Gulfs residents and businesses. Obama’s toughness and concessions from BP is bound to pay off.
About the Author
John M. Curtis writes politically neutral commentary analyzing spin in national and global news. He’s editor of OnlineColumnist.com and author of Dodging The Bullet and Operation Charisma.