President Barack Obama said BP Plc will put $20 billion over four years into an oil spill compensation fund that will be independently administered by lawyer Kenneth Feinberg.
The fund won’t cap BP’s liability for cleanup costs and economic damage, Obama said after he and some of his top advisers met with BP executives at the White House, and it won’t supersede the rights of individuals or states to sue the company. The company also will contribute $100 million to a fund to help support unemployed oil rig workers.
“This $20 billion will provide substantial assurance that the claims people and businesses have will be honored,” Obama said. “The people of the gulf have my commitment that BP will meet its obligations to them.”
BP Chairman Carl-Henric Svanberg said after emerging from the meeting that the London-based company is canceling quarterly payments of its $10-billion-a-year dividend for the rest of the year. He also issued an apology to the American public for the spill from a BP well in the Gulf of Mexico, the biggest in U.S. history.
“We made it clear to the president that words are not enough,” Svanberg said outside the White House. “We understand that we will and we should be judged by our actions.”
BP’s American depositary receipts were up 45 cents to $31.85 in New York trading. Earlier they touched $33. The shares are down 46 percent since the April 20 explosion aboard the Deepwater Horizon drilling rig that killed 11 workers and triggered the oil spill.
Obama said he is confident the company will be able to pay claims.
“BP is a strong and viable company, and it is in all of our interests that it remain so,” he said.
The agreement was announced after almost four hours of meetings between administration officials and company representatives, who also included Chief Executive Officer Tony Hayward, Lamar McKay, president of BP America Inc., Robert Dudley, BP managing director, and company lawyers.
Among the administration officials in the meetings were Attorney General Eric Holder, chief of staff Rahm Emanuel, Lawrence Summers, head of the National Economic Council, Bob Bauer, chief lawyer to the president, and Carol Browner, the president’s adviser on energy and climate change.
Apology at Meeting
Svanberg began his remarks at the meeting with an apology and separately spent 25 minutes alone with the president in the Oval Office, Browner said at a briefing afterward.
Obama said during their private conversation he emphasized to Svanberg that for the families and small business owners in the gulf region “this is not just a matter of dollars and cents.”
“A lot of these folks don’t have a cushion” and still were recovering from the effects of Hurricanes Katrina and Rita and the recession, Obama said he told Svanberg.
“This season was going to be the season where they were going to be bouncing back,” he said. “Some of them, if they don’t get relief quickly, may lose businesses that have been in their families for two or three generations.”
Svanberg said he understood the frustration expressed by the president and gulf residents.
“I hear comments sometimes that large oil companies are, are greedy companies or don’t care, but that is not the case in BP,” Svanberg said. “We care about the small people.”
Obama is tapping Feinberg to act as an independent third party to judge claims and authorize payments to gulf coast residents affected by the oil spill. Obama previously named Feinberg in June 2009 to oversee executive pay at companies that received aid from the Treasury Department’s $700 billion Troubled Asset Relief Program.
He is managing partner of law firm Feinberg Rozen LLP in Washington. Feinberg, 64, has spent his career resolving legal claims, including settlements for those affected by the defoliant Agent Orange in Vietnam, the Dalkon Shield birth-control device, and the 2007 Virginia Tech shootings that killed 32 people.
The amount for the fund is in line with what Senate Majority Leader Harry Reid, a Nevada Democrat, had suggested that BP set aside to compensate residents and businesses affected by the spill, which is threatening the shorelines and economies of four states.
The government yesterday increased its estimate of the amount of oil gushing from a damaged BP well to 35,000 to 60,000 barrels a day.
Based on the low end of the estimate, BP well may have leaked 1.99 million barrels so far. That exceeds the 262,000 barrels spilled by the Exxon Valdez in 1989 and the U.S. record 300,000-barrel spill by a tanker off the Oregon coast in 1968, according to statistics from the American Petroleum Institute.
Obama has called the BP leak “the worst environmental disaster America has ever faced.”
The accident prompted Obama to declare a six-month moratorium on deepwater offshore oil drilling and under the agreement reached today BP contribute to a fund for oil workers who lost jobs because of that.
BP has spent about $1.6 billion on containing and cleaning up the spill so far. The company’s spending for cleanup and liabilities may reach $40 billion, Standard Chartered Plc estimated last week.
BP’s payments accounted for about 14 percent of all dividends in the U.K.’s benchmark FTSE 100 stock index last year. Fitch Ratings yesterday lowered BP’s credit score by six grades to BBB, two levels above junk, on concern costs will escalate.