WASHINGTON – Reaching one of his top goals in the Gulf oil spill crisis, President Barack Obama announced Wednesday that BP had agreed to create a $20 billion fund that will pay damages to fishermen, small businesses and others who suffered financial losses in the worst environmental disaster in U.S. history.
The agreement, which came after a sober, four-hour meeting at the White House between Obama and BP executives will result in the company feeding $5 billion a year into the new escrow fund through 2013. BP will also suspend dividend payments for the rest of the year – steps toward ensuring that an ample pot of money is on hand to pay out claims.
At Obama’s insistence, BP will not control the fund or decide who gets reimbursed for losses. A neutral party, Kenneth Feinberg – who played a similar role after the Sept. 11 attacks, overseeing the fund set up to compensate victims – will run the payment system. If Feinberg rejects a claim, people will have the right to appeal to a three-person panel.
In addition, BP earmarked $100 million to compensate oil workers who’ve lost their jobs due to the moratorium on deepwater drilling that was put into place after the accident. To date, the company said it has spent $1.75 billion on containing the spill and cleanup.
By laying out the escrow money, BP is not escaping liability for cleanup of the Gulf, White House officials said. Nor will the payment immunize BP from potential criminal charges. The Justice Department is examining whether BP or others broke any laws when the Deepwater Horizon oil rig exploded on April 20, killing 11 workers.
“We got everything we wanted,” White House spokesman Robert Gibbs said.
The closed door meeting opened with an apology from the company’s Swedish chairman, Carl-Henric Svanberg. Obama accepted, a White House spokesman said.
Obama was in and out of the meeting and spoke privately to Svanberg for about 25 minutes in the Oval Office. After leaving the White House, Svanberg addressed reporters and described Obama as “frustrated.” BP’s chief executive officer, Tony Hayward, stood behind him. Hayward has been ridiculed in the U.S. as the public face of BP, earning no sympathy with a plea earlier this month, “I’d like my life back.”
Hayward is expected to strike a contrite tone in his testimony today at a congressional hearing, his first committee appearance.
The energy giant will finance the $20 billion escrow fund in part by suspending its dividend for the rest of the year, freeing up an estimated $7.5 billion that otherwise would have gone to shareholders, selling $10 billion in assets and other measures.
Cancellation of the dividend is certain to produce a backlash in Britain, where BP payments provide a substantial share of pension fund income.
Creating the escrow fund is one of Obama’s few concrete achievements since the oil began gushing 58 days ago. Unable to plug the hole, the White House has sought to take command of a worsening environmental catastrophe that has hijacked its agenda. On Tuesday night, Obama gave the first Oval Office speech of his presidency, using military metaphors to convey a sense that he is fully in charge and sensitive to the plight of oil spill victims.
After reaching the agreement, Obama gave a brief address from the State Dining Room. He said the $20 billion payment is not a cap, meaning BP could potentially add to that sum.
Getting BP to pay damages is a politically popular step. A Gallup poll shows that 59 percent of the country believes BP should pay all losses stemming from the spill, even if that destroys the company. What’s more, the public doesn’t want Obama to coddle the oil giant; 71 percent said the president has not taken a tough enough stance with BP, according to Gallup’s polling.