BP has finally made an initial $3 billion deposit to the Gulf of Mexico oil spill compensation fund. The company said it would make an additional $2 billion deposit in the fourth quarter.
According to a report in The Wall Street Journal, BP and the Obama administration are also close to a deal to use future revenues from the company’s Gulf of Mexico operations to guarantee the $20 billion fund.
Under an agreement it reached with the Obama administration earlier this summer, BP is supposed to put $5 billion a year over the next four years into an account to pay for spill-related costs, such as claims, environmental restoration and cleanup costs. The fund is to be administered by Ken Feinberg, the Washington, D.C. lawyer who oversaw the 9/11 victims compensation fund.
BP was supposed to make an initial deposit to the fund by September 30. But according to the Journal, the company chose to make an early deposit to “show its commitment to restoring the livelihoods of people affected by the worst offshore oil spill in history.”
On Monday, the company and the Justice Department announced they had completed talks to establish the fund, according to the Journal. Discussions continue, however, on how BP will guarantee its remaining obligation of $17 billion. The administration is seeking security in the form of collateral in the event that BP couldn’t meet its obligation due to financial or legal problems.
Currently under discussion is a deal whereby BP would use production payments from its producing Gulf wells as collateral for the fund, and would provide quarterly production updates to the government. The collateral requirements would be reduced as BP pays money into the fund.
According to The Wall Street Journal, BP currently is the operator of 89 producing wells in the Gulf and a stakeholder in 60 other wells operated by other companies. It is not drilling any new wells there at this time.
Yesterday, BP said it has received 145,000 claims from Gulf Coast residents and business owners citing lost income because of the massive spill. The company also boasted that it had paid out $324 million without denying a claim.
However, a report in the Fort Worth Star-Telegram pointed out that 39,000 claims remain in limbo, and other claims have only been partially paid. In that article, Mississippi’s Attorney General Jim Hood speculated that BP would rather wait for Feinberg to take over the claims process this month. If a claim is denied, “he’s the bad guy” instead of BP, Hood said.
Darryl Willis, BP’s claims director, said the company isn’t deliberately delaying, and that pending claims are either still being evaluated or need more documentation. However, a BP spokesperson told the Star-Telegram that BP does defer “questionable” claims to Feinberg, including “restaurants and tourist claims from areas that haven’t been impacted by an oiled beach.”