BP has a agreed to place $20 billion in escrow to pay claims from Gulf Coast residents and businesses impacted by the Deepwater Horizon oil spill. The plan for the compensation fund was announced yesterday, after BP executives, including CEO Tony Hayward and Chairman Carl-Henric Svanberg, met with President Obama and administration officials at the White House.
Under the terms of the agreement, BP will pay into the escrow account over the next four years, including a payment of $5 billion this year. The fund will be administered by Kenneth Feinberg, the Washington lawyer who oversaw a similar fund for victims of the Sept. 11 terror attacks.
According to The Los Angeles Times, the fund will operate in a somewhat similar fashion to the 9/11 compensation fund, by setting up and publishing criteria for paying out claims. Anyone suffering an economic loss from the spill can file a claim. If claimants are not satisfied with the administrator’s decision, they can appeal to a three-judge panel.
The President also said that the $20 billion contribution made by BP does not constitute a “cap” on its liability. According to the Times, the fund does not shield BP from potential criminal or civil penalties sought by the government for the spill, such as fines for Clean Water Act violations.
President Obama also announced that BP will contribute $100 million to a fund that supports unemployed oil workers. According to a Washington Post report, BP wanted some assurance that it will not be forced to pay for the economic impact to the oil industry of the administrationâ€™s six-month moratorium on deep-water drilling. During yesterday’s announcement, there was no other suggestion that BP would be legally liable for lost wages in the oil industry, the Post said.
In conjunction with the announcement of the compensation fund, BP said it was suspending the payment of dividends to shareholders for the rest of the year. Over the past several weeks, BP had faced pressure from the U.S. government to cancel the dividend.
Meanwhile, oil continues to gush into the Gulf of Mexico, eight weeks after the April 20 explosion aboard the Deepwater Horizon oil rig that killed 11 crew. Yesterday, BP deployed a second containment system at the site that utilizes the same tubes and pipes put in place last month for the failed “top kill” attempt. The oil and gas coming from the well is being suctioned into a ship at the surface, and later burned off site.
BP and the Coast Guard has said the new system could collect 5,000 to 10,000 barrels per day, increasing oil collection to as much as 28,000 barrels per day.
The arrival of another tanker ship in mid-July could push that daily capture rate to between 60,000 and 80,000 barrels. The spill wonâ€™t be stopped until BP finishes drilling relief wells, something that wonâ€™t happen until August at the earliest.
Earlier this week, a group of government scientist again raised its estimate of the well’s flow rate. According to the Flow Rate Technical Group, anywhere between 35,000 and 60,000 barrels (1.47 million to 2.52 million gallons) of oil per day is gushing the well. Its previous estimate, released just last week, had put the flow rate at 20,000 to 40,000 barrels (840,000 to 1.68 million gallons) per day.
The new numbers mean that an astonishing 3 million barrels of oil have spilled into the Gulf each day since April 20, making it the regionâ€™s worst offshore oil disaster. It also means that a disaster comparable to the 1989 Exxon Valdez spill, which dumped almost 11 million gallons into Prince William Sound, Alaska, has been occurring roughly every week since the Deepwater Horizon oil rig exploded.