NYT:
WASHINGTON — The White House and BP tentatively agreed that the oil giant will create a $20 billion fund to pay claims for the worst oil spill in American history, to be independently run by the mediator who oversaw the 9/11 victims compensation fund, Kenneth Feinberg, according to two people familiar with the deliberations.
The agreement was not final and was still being negotiated when President Obama and his top advisers met this morning with BP’s top executives and lawyers. Its preliminary terms would give BP several years to deposit the full amount into the fund so it could better manage cash flow, maintain its financial viability and not scare off investors.
The talks have been complicated by the fact that BP’s ultimate liabilities for the cleanup and lost business are unknowable since the two-month-old leak of its well in the Gulf of Mexico could well be spewing some oil for months more. To date, BP has spent more than $1 billion on containment, cleanup and claims from the Coast Guard, fishermen, oil workers and other businesses from Louisiana to Florida.
According to the Times, the negotiation is still ongoing, and there are obviously many more details we need to know, but here's a couple of initial observations/questions:
- What happens if $20 billion is not enough? Despite hopes that we will contain 90 percent of the leak in the next couple of weeks, the well is still leaking, and there's no guarantee that things won't get worse before they get better, nor is there a guarantee on how long it will be leaking. (According to Chuck Todd, this issue remains the subject of negotiations between the adminstration and BP.) [Update: President Obama said in a statement this afternoon that the $20 billion is not a cap.]
- Why does BP need several years to deposit funds? BP's combined profits over the last four years exceed $80 billion.
- Will this fund also cover cleanup costs, or is it solely for economic damage claims? [Update: President Obama said this is for economic damages only.]
- Will people who apply for compensation through the fund be required to relinquish their right to pursue claims in court? [Update: President Obama said this will not trump individual or state rights of action.]
- Once out of the political crosshairs, could BP weasel out of its obligations, either by declaring bankruptcy or simply refusing to pay?
Probably the bottom-line question will be this: Who benefits the most from this fund? Will it be people who were damaged by BP's recklessness? Or will it be BP and its investors, by giving the company a degree of certainty about their future?
Some people may argue that it is a win-win, but if that's the case, what is the explanation for giving BP a "win" after inflicting so much damage in the Gulf of Mexico?
Update 1: Upon reflection on my "win-win" question posed above, the important thing is that BP face some sort of major punitive action for its recklessness, but it doesn't necessarily need to be part of this particular fund. The reason why I think it's important to punish BP is simple: if spills like this become "manageable operating expenses" for big oil companies, we're going to see more and more of them. So while it's important to seek compensation for damages, it's also important to punish BP -- otherwise we're never going to see the end of these types of disasters.
Join the discussion in Drdemocrat's recommended diary, BREAKING: BP agrees to put $20 billion in ESCROW!