BP oil spill: with escrow plan, Obama races to claim BP's money
President Obama wants BP oil spill claims to be paid through an escrow account funded by BP. The plan comes as BP is weighing whether to pay dividends to shareholders.
Reports Sunday indicate that President Obama will direct BP to set up an escrow account from which damage claims by individuals and businesses along the Gulf Coast will be paid. If BP refuses, Mr. Obama is prepared to argue that he has the legal authority to force BP’s hand, the reports suggest.
The move comes as BP considers whether to pay dividends to its shareholders. Members of Congress including House Speaker Nancy Pelosi have demanded that BP refrain from paying dividends to shareholders at a time when BP has enormous and open-ended financial obligations in the Gulf.
In Britain, however, the dividend payments are a large reason why BP’s stock is seen as being so desirable. To delay dividend payments at a time when BP stock has already lost some 40 percent of its value would cast the company into even greater uncertainty.
Obama, however, has few options available to him if he wants to take greater control of the BP oil spill fallout. The federal government has been largely a spectator of the sea floor, where BP bots and oil-industry engineers are better equipped to deal with the leak.
Meanwhile, along the Gulf Coast, the slick has become so large and fragmented that it has often confounded the federal government’s efforts to deploy BP and its armada of oil-fighting contractors more quickly and efficiently.
That leaves the administration seeking at least to hold BP to its word that it will pay all legitimate claims. The escrow account appears to be an insurance policy.
The account would be managed by a third party in order to avoid claims that the government was taking advantage BP or BP was being negligent in its payments.
Pitching the plan to BP
Obama will reportedly discuss the idea with the chairman of the BP board, Carl-Henric Svanberg, when they meet Wednesday. Obama will be in the Gulf Monday and Tuesday and will give his first prime time address to the nation about the oil spill Tuesday night.
The proposed escrow account comes two days after the administration issued another ultimatum to BP. In a letter to BP, Coast Guard Rear Adm. James Watson gave BP until Sunday night to come up with an improved plan for collecting leaking oil at the well.
BP’s current plan involves bringing in two pairs of ships that together can collect 2.1 million gallons of oil a day, but they will not arrive at the scene until mid-July. BP is now collecting about 650,000 gallons a day, though an indeterminate and seemingly large volume of oil is still escaping.
Whether or not BP responds, the letter, the escrow account, and the prime time address suggest that the federal government is tightening the screws on BP.