Obama announces BP's $20B compensation fund

President Obama announced Wednesday that energy giant BP will finance a $20 billion fund to compensate people whose livelihoods have been damaged by the devastating oil spill in the Gulf of Mexico, and the giant British company's chairman apologized to America for the worst spill in U.S. history.
Obama said BP has voluntarily agreed to set aside $100 million to help oil workers displaced since the Deepwater Horizon rig exploded April 20 and killed 11 people.

Kenneth Feinberg, a lawyer overseeing executive pay issues for the White House, will be in charge of the compensation fund. A three-person panel will mediate any disputes.

Feinberg oversaw payments to 9/11 victims for the federal government.

"This is about accountability, and at the end of the day, that's what every American wants and expects," Obama said in the State Dining Room of the White House.

Obama said BP is committed to ensuring economic claims will be processed and paid out in a timely manner. According to a White House fact sheet, BP will contribute $5 billion a year for four years into an escrow account.

BP is providing assurance its financial obligations will be met by setting aside $20 billion in U.S. assets.


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After Obama's announcement, BP chairman Carl-Henric Svanberg apologized to the American people as he met with reporters outside of the White House. He said the company's board has decided not pay out further dividends to shareholders this year.

"I do thank you for your patience that you have in this difficult time," Svanberg said. "Through our actions and our commitment, we hope over the long term that we will regain the trust you have in us."

Svanberg said, "Words are not enough. We will be judged by our actions."

The compensation fund and money for oil workers were announced after a White House meeting between administration officials and BP executives, including Svanberg and CEO Tony Hayward. The "constructive" meeting, as Obama described it, ran longer than the White House expected and pushed back Obama's remarks by more than two hours.

"Today was a good start," Obama said. "This should provide some assurance to small-business owners that BP is going to meet its responsibilities."

Obama said he spoke privately with Svanberg about keeping the people of the Gulf in mind as the company continues to deal with fallout from the spill.

"I emphasized to him that for the families I met with down in the Gulf … this is not just about dollars and cents," Obama said. "A lot of these folks don't have a cushion."

During his Oval Office address Tuesday night, Obama vowed to hold BP accountable for what he described as "recklessness" in the Gulf.

"We will fight this spill with everything we've got for as long as it takes," Obama vowed.

A panel of federal scientists estimates the oil spill leaks 1.47 million to 2.52 million gallons a day.

Hayward will go before a congressional committee Thursday to explain the company's handling of the spill.

"I expect him to be sliced and diced," said Rep. Bart Stupak, D-Mich., chairman of the House Energy and Commerce subcommittee on oversight and investigations.

At earlier hearings, company executives such as BP America President Lamar McKay testified alongside other witnesses.

Stupak said he expects to press Hayward about BP's repeated problems over the years.

"We've had three investigations going the last five years," he said, referring to this one as well as probes into a deadly plant explosion in 2005 in Texas City, Texas, and a major oil spill in 2006 in Alaska. "Our committee's been on their butts for a while. They keep making representations they're going to get better — well, what happened?"

Stupak stressed that the carving up of Hayward he envisions has a larger purpose: to come up with a legislative proposal to prevent such accidents in the future. The former police officer spoke with the impatience of a cop going after a repeat offender.


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"We're frustrated with BP — it's been five years for some of us on the committee, fighting with them every step of the way," he said.

Rep. John Dingell, D-Mich., former chairman of the Energy and Commerce Committee, had a similar lament.

"I spent years investigating BP," he said. "I've got a pocketful of promises that they've made me in different times of how they were going to improve things. So I can see no way that they can be trusted to observe proper care and concern over safety measures."

Dingell said Hayward is "going to have, if I'm any judge of the committee and the temperament of the members, a very unpleasant afternoon."

Hayward said he's got thick enough skin to handle verbal assaults.

"I'm so far unscathed," he told analysts in a recent conference call, referring to the general criticism he's received. "No one has actually physically harmed me. They've thrown some words at me. But I'm a Brit, so sticks and stones can hurt your bones, but words never break them, or whatever the expression is."

Also:

• Shares of BP stock rebounded from an early slide Wednesday. Shares had dipped near a 14-year low Wednesday morning. They rallied at midday and by midafternoon were up $1, or 3.2% at $32.40.

• BP started burning oil siphoned from the ruptured well as part of its plans to more than triple the amount of crude it can stop from reaching the sea. BP said oil and gas from the well reached a drilling rig around 1 a.m. Wednesday.

The system uses lines to suck oil from a stack of pipes near the seafloor to a drilling rig on the ocean surface. Once the oil is aboard, it's shot down a specialized boom, mixed with compressed air and ignited.

BP says the burner could incinerate 210,000 to 420,000 gallons of oil daily once it's fully operational.


Contributing: Catalina Camia and Carolyn Pesce in Washington; Associated Press.
-by USA Today