The Washington Post just reported that the government and BP have reached a preliminary deal for BP to set up a 20 billion dollar escrow account for claims. BP will be making payments into the account over the course of several years.
At first glance this seems like a lot of money, but considering the hundreds of billions of dollars in revenue that BP pulls in each year, the more I think about it, the more it looks like BP is getting off easy at $20 billion to me. Of course, this account is only for claims and there will be a healthy dosage of lawsuits to follow, but what concessions did BP extract from the government from this fund? It seems kind of murky at the moment…
“Behind the scenes, the company had signaled what it expected from Wednesday’s meeting — and the company appears to have gotten exactly what it wanted.
Most of all, it wanted some assurance that it will not be forced to pay for the economic impact to the oil industry of the administration’s six-month moratorium on deep-water drilling. Although neither Obama nor Svanberg explicitly addressed that contentious issue in their public remarks, Obama noted that BP had “voluntarily” created the $100 million fund for unemployed oil workers. There was no other suggestion that BP would be legally liable for lost wages in the oil indusry.
BP also needed some affirmation that the government is not going to drive the company into bankruptcy as a result of the spill. The company has heard lawmakers declare that there should be no limit to its liability. Simultaneously the amount of oil surging from the reservoir beneath the gulf has turned out to be far greater than originally estimated. BP executives have seen the company’s market value plummet along with the company’s credit rating.
Obama said exactly what the BP executives and their shareholders wanted to hear: “BP is a strong, viable company and it is in all of our interests that it remain so.”
The company issued a press release after the meeting in which it quoted Svanberg saying that he was “confident that the agreement announced today will provide greater comfort to the citizens of the Gulf Coast and greater clarity to BP and its shareholders . . . We welcome the administration’s statements acknowledging that BP is a strong company and that the administration has no interest in undermining the financial stability of BP.”
I’ll link to reactions from the environmental community as I see them.