Oil Spill: Obama Calls for $20 Billion in Escrow from BP
Policy + Politics

Oil Spill: Obama Calls for $20 Billion in Escrow from BP

Secure fund implies administration is worried about BP solvency

There’s a fiery new letter in the mail to BP, and it contains a number the company’s brass won’t be able to duck: $20 billion.

On Monday, Senate Majority Leader Harry Reid and members of the Senate Democratic Caucus sent a letter to BP’s CEO, Tony Hayward, instructing him to set aside $20 billion in escrow to compensate victims of the oil spill in the Gulf of Mexico. Securing the money now may avoid a major problem later if BP files for bankruptcy.  New York Times columnist Andrew Ross Sorkin, author of Too Big to Fail, told The Fiscal Times, "Any attempt to force BP to put money aside now implies that the US government is worried that BP won't -- or won't be able to -- pay later."

The senators want a response by June 18.

The letter from the senators, which expresses “profound concern” about the crisis and “deep regret for the severe consequences” of the spill on the nation as a whole, follows tough new talk about BP over the weekend from President Obama, just before he returns to the Gulf Coast. It’s his fourth visit to the region and first overnight trip there since the oil spill crisis began on April 20, when the Deepwater Horizon rig exploded in the Gulf of Mexico, killing 11 men, injuring 17 others, and unleashing the worst environmental disaster in American history. Upon his return, the president will address the nation about the oil spill and related issues from the Oval Office, the first time during his young presidency that he’ll be using that location for a live address.

Face to Face with BP
Obama is planning to meet with top BP officials, including Tony Hayward, BP’s embattled CEO, on Wednesday at the White House. Over the weekend, the president said he would insist that BP create an escrow account so that those damaged by the crisis can be adequately compensated. “The president will use every legal device at his disposal to make sure that this money is escrowed, and that there’s an independent administrator, so that claims are not slow, and that people can get the relief they need in a timely fashion, and that we don’t create more victims from this terrible disaster,” David Axelrod told reporters over the weekend.

Meanwhile, BP reported that the costs it’s now incurred for responding to the oil spill crisis have climbed to $1.6 billion. The company says that includes $25 million in new grants distributed to Florida, Alabama and Mississippi. It also includes the first $60 million for a project to build barrier islands off the coast of Louisiana. (BP did not include future costs in this figure.)

The board of BP was meeting in an emergency session on Monday to discuss both the escrow account and the status of dividend payments to shareholders while cleanup costs are still being handled. BP said that it had several options, including deferring dividends or paying them in the form of shares. BP shares fell 9.3 percent today to close at 355.45 in London, for the biggest drop in the benchmark FTSE 100. Its U.S. shares lost 9.7 percent to $30.67 at the close in New York.

As Heather Mulac, 17, of Grand Isle, La., told The Fiscal Times, “This oil spill is going to affect everyone. It’s slowing all our businesses down here. I am worried. How am I going to get the money to go to college?”