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BP agrees to put up $20 billion for damage claims

WASHINGTON - President Barack Obama wrested a $20-billion compensation guarantee and an apology to the nation from British oil giant BP Wednesday, announcing the company would set up a major claims fund for shrimpers, restaurateurs and others whose lives and livelihoods are being wrecked by the oil flooding into the Gulf of Mexico.

Applause broke out during a community meeting in Orange Beach, Ala., on the news.

"We asked for that two weeks ago and they laughed at us," Mayor Tony Kennon said. "Thank you, President Obama, for taking a bunch of rednecks' suggestion and making it happen." 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 is the first big success Obama has been able to give to Gulf residents and the nation in the eight weeks since the explosion.

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 nonnegotiable 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.

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.

Also, BP chairman Carl-Henric Svanberg said he was sorry for speaking clumsily after saying earlier Wednesday at the White House that the energy giant cares about "small people" hurt by the Gulf oil spill.

Svanberg said in a written statement that he was trying to say BP understands how deeply the spill has affected people who live along the Gulf and make a living from it.

He made the remark after Obama had spoken of the small business owners and fishermen harmed by the nation's worst oil spill.

DEVELOPMENTS

In other developments Wednesday in the BP oil-spill story:

  • A spokesman 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.
  • Resolving one particularly thorny dispute between BP and the government, the company 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.
  • As BP Tony Hayward prepared to testify Thursday on Capitol Hill, the Associated Press obtained prepared testimony in which 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."
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