June 22 (Bloomberg) -- The Obama administration is still weighing how to pay for aid to oil rig workers who’ve lost jobs because of a moratorium on deepwater drilling, in addition to $100 million pledged by BP Plc, administration officials said.
While President Barack Obama has asked Congress for legislation for a program to provide unemployment assistance for such workers, the administration is seeking to avoid having taxpayers foot the bill, the officials, who spoke on condition of anonymity, said.
The officials refused to say whether the administration would seek more money from BP or its partners in the damaged and leaking well in the Gulf of Mexico.
Compensation for laid-off rig workers emerged as one of the points of contention heading into last week’s White House meeting that included Obama, BP Chairman Carl-Henric Svanberg and Chief Executive Officer Tony Hayward. That money is separate from a $20 billion fund put up by BP to pay economic damage claims from individuals and businesses on the Gulf Coast affected by the worst oil spill in U.S. history.
The administration approached London-based BP about contributing money to help out-of-work rig employees three days before the June 16 meeting in Washington, in as many as five telephone calls between White House counsel Robert Bauer and the company’s outside lawyer, Jamie Gorelick, a partner at WilmerHale in Washington and a former deputy attorney general under President Bill Clinton, according to the officials who were involved in the negotiations.
It was one of several issues still unresolved when Svanberg and Hayward arrived at the White House and walked into the Roosevelt Room shortly after 10 a.m. for what turned out to be four hours of negotiations, twice as long as scheduled.
BP took the position coming into the meeting that it had no liability for lost wages resulting from the government-imposed deepwater drilling moratorium, according to a company adviser familiar with the talks, who spoke on condition of anonymity.
The talks culminated in a private Oval Office session between Obama and Svanberg. Ultimately, Svanberg and Hayward agreed to contribute $100 million to the fund for rig workers, which the White House described at the time as a “foundation.”
David Nichols, a spokesman for BP, said the company wouldn’t comment on negotiations with the White House.
“The agreement we reached was a way forward,” he said.
The administration hasn’t put a price tag on the cost to workers from the six-month moratorium. It was imposed after the Deepwater Horizon rig exploded on April 20, killing 11 workers and triggering the spill.
Sources of Money
“We’re looking at a variety of different sources where some of those workers can be compensated for their lost work,” Bill Burton, deputy White House press secretary, said at a briefing yesterday, without elaborating.
The compensation fund for laid-off rig workers was one of several concessions made by BP under White House pressure, according to administration officials.
BP also conceded on a request to earn credit on the interest accrued on the $20 billion escrow, the details of collateral for the claims fund, and ultimately decided to forgo a second-quarter dividend payment. Obama aides said that if a payment was made to shareholders, BP also needed to pay into the escrow, according to the administration officials and the BP adviser.
In order to protect the collateral, both sides agreed that if the pace of the claims being paid out exceeded the amount of money in the fund and in the collateral account, BP and administration officials would enter into new negotiations about increasing the security interest, according to administration officials and the company adviser.
The administration officials said the government’s demands were adjusted based on the operational limitations of BP. They recognized that in order to ensure BP’s viability, the company needed to spread out the payments into the $20 billion economic compensation fund over four years, the officials said.
The amount for economic claims isn’t capped and the fund will be independently administered by lawyer Kenneth Feinberg.
In addition to its liability for economic claims, BP is responsible under the law for the full cost of cleanup operations. The administration today sent a third bill to BP and its partners for $51.4 million to cover the cost of the response. The companies have paid $71 million to the government so far.
BP has said the cost of its response to the spill has reached $2 billion. Standard Chartered Plc has estimated the company’s spending for cleanup and liabilities may reach $40 billion.
The company’s stock has slumped 47 percent since the rig explosion. The average yield on BP’s bonds has surged to 539 basis points, or 5.39 percentage points, more than benchmark rates, from 41 basis points before the accident, according to Bank of America Merrill Lynch index data.
The cost of insuring the company’s debt for five years using credit-default swaps rose 6.5 basis points to 478.5, after reaching a record-high closing price of 583 on June 16, according to CMA DataVision.
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