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Credit where credit is due. The Obama Administration managed to get BP to commit at least $20 billion to an independently administered escrow fund to pay economic damages arising from the BP oil disaster.
The few details released so far suggest some worthwhile features.
– BP’s commitment of $20 billion will be funded in installments of at least $5 billion this year and each of the next three years. That provides a continuing fund of money for damages that are likely to last over several years.
– With the expectation that total damages could exceed that amount, he President emphasized that the $20 billion is not a cap. He assured Gulf residents that all their claims will be covered.
– Given pressure from the Administration and Congress, BP will suspend dividends for the rest of 2010; with annual dividends at about $10 billion, that’s a major signal to markets that BP is serious about meeting this commitment.
– The escrow fund will be have credible independent oversight from Kenneth Feinberg, who oversaw the 9/11 victims compensation fund. If the fund is truly independently administered, it negates a major frustration claimants would have in facing BP stalling tactics.
– BP will also commit $100 million to compensate oil workers affected by the moratorium on new deepwater permits. The Administration has demanded this against doubts about its legal basis. But in the context of a $20 billion commitment, allocating another $100 million for something the Administration wanted was not a big deal. That $100 million essentially buys the Administration a partial defense against the Gulf Coast Congressmen who wanted the moratorium lifted, because, they argued, it was hurting Gulf jobs.
– And BP’s Chairman emerged from his meeting with Obama to apologize to the American people, promising to meet the terms of the agreement. From the New York Times:
After the president’s remarks, the chairman of BP, Carl-Henric Svanberg, announced the dividend suspension. Mr. Svanberg apologized “to the American people” for the disaster and said that BP would “look after the people affected, and we will repair the damage to this region and the economy.”
The White House was probably exchanging high fives while watching that.
It’s been frustrating to watch the Administration ducking governmental responsibility while leaving critical public health, safety and environmental decisions in BP’s hands. But there was also a tug of war to ensure BP remained financial liable for all damages. But nailing down a basic agreement on how damages get paid, the Administration is better positioned to assert more operational control over cleanup and restoration efforts. At least that’s my hope.
Oh, the "small people" comment? On PBS News Hour, BP executive Bob Dudley explained that for BP’s non-English Chair, Mr. Svanberg, "English is a second language." So "small people" wasn’t a reference to a scene from Wizard of Oz but instead probably meant "small businesses." Uh huh. So apparently we won’t need additional agreements for medium and large people.
John Chandley
More:
Naked Capitalism passes on more skeptical views: basically, the concern is the immediate damages will be much larger than $5 billion/year; so this accommodates BP’s cash concerns, but not the Gulf’s, assuming the $5 billion/year is limiting in the short run.
UK Guardian, BP to pay out $20bn over oil spill after Obama meeting
20 Comments
Credit indeed. But we still need a cleanup, and you know, stop the leak and all that.
Yep. CBS had a segment tonight about a guy who improvised his own skimmer, creating a box frame out of PVC pipe and adding cheap netting. A relative small boat can use it to scoop up nearly a ton of oil at a time, then attach the next net and do it again. Now they’re mass producing them. Just a little story, but the country needs a see and believe it’s not helpless.
here’s a picture of that one ton tarball
That’s the very one. Now that I think about it, maybe this is not for “small boats.”
That’s good news, but it really says a lot about how much is out there if that thing picked up so much of it.
The Administration needs to do several things quickly with regard to individuals and small businesses. It needs to list who qualifies for aid (and who does not), and it needs to be specific. It needs to say how much aid will be available, and for how long. And it needs to open at least one or two hundred claims offices to process claims. Finally, it needs to let people know how quickly claims will be processed and money distributed, and the time between the two should not be more than 1 month.
Claims to states and municipalities should be handled separately.
Yeah, I agree they (or the independent administrator) need to have this up and running quickly.
Fascinating technology. HP’s evening headlines at home page refers to Mother Jones article suggesting the well will NOT be closed off, contrary to Obama’s assurances to the contrary. Interesting that Judy Woodruff tonight “corrected” Tucker tonight by saying “if it is closed off” and that was the first time I’d heard her or anyone else at NewsHour raise that spectre. Whether it’s closed or not, it seems to me that the huge tar ball technology could certainly help at some level.
Blessings,
The devil is in the details. This could just as well be another one of the PhrRMA deals where the good stuff was announced publicly while the bad stuff still has never been officially acknowledged. I expect to see gremlins as it simply isn’t logical (and it would be a failure of fiduciary responsibility) that BP would give something up for nothing and then on top of that say how happy they are about doing it. Keep in mind that Obama has already promised the British PM that he wouldn’t undermine the value of BP, so that is yet another reason to be skeptical before giving positive credit to Obama on this before knowing what exactly this is. Obama could be covertly cutting a deal where BP agrees to pay all this off for less than the cost of the penalties alone (which at 60K barrels per day @ $4300 per barrel is about $1/4B per day is $15.5B so far).
I haven’t seen anything to suggest the escrow fund for economic damages is in lieu of, or was agreed to if the govt dropped, any penalties under the various statutes.
Any word on giving reporters and scientists access to the effected region?
A more skeptical view at Naked Capitalism:
http://www.nakedcapitalism.com/2010/06/bp-to-create-20-billion-fund-for-leak-damage.html
Not that I’ve seen.
More from the NY Times on other legal liabilities facing BP, beyond the $20 billion:
http://www.nytimes.com/2010/06/17/us/17liability.html?hp
Just because you haven’t seen something, it doesn’t mean you shouldn’t be skeptical. This just reminds me too much of HIR with claims that corporations are giving up something for nothing when in reality they got much more than was publicly acknowledged. I also don’t see how it would be logical to think that cheapskate BP decides to throw out $20B for nothing nor how as a matter of international diplomacy how Obama could go against his word to another head of state. Obama voluntarily boxed himself in with his talk to British PM and BP is just too happy to spend the money, so things don’t add up that we’ve been told all the facts.
If Thad Allen had seen that BP sucked the oil up from the start instead of spraying it with dispersants, they might not have needed twenty Billion dollars, and claims and damages would have been much less.
Even forgetting about plugging the well. Cleaning up the oil as it rises to the surface should have been the first priority from day one.
Even today BP is doing good a capturing the oil from the well it can, but a lousy job of cleaning up the oil they can’t capture.
Thad Allen is supposed to be Obama’s boot on the neck of BP, but has turned out to be a fuzzy slipper cooche cooing them, while bullshiting the rest of us.
CNN has helped to make the guy into a saint, because He gave them some access. It just goes to show You the Media will suck on anyone or anything they can. Even if it hides the truth.
Geebuz that’s ugly . . . . great pic, E.
Thanks for the read SC, I’ll believe the billions when it’s in a bank, till then I think the bankruptcy and sell off that GS is hired to do (IMO) is gonna make a lot of billions of greenbacks disappear.
BP will bankrupt and be sold off by end of this year IMO.
By by funds.
Mr klynn and myself discussed how wonderful it is for a company like BP, making record billions, cannot manage to get SOMEONE to write a speech for this guy the would not be offensive. Oil all over the Gulf is insult enough.
Little people…Good Lord.
Yuppers. “Small people” or “small businesses” ~ makes no f*&^ing difference WHAT language. In the context this is classism. They are the BIG guys. Everyone else is not-BIG. It’s offensive. And completely unconscious, of course.