Oil spill concerns turn to compensation
Tuesday, May 4, 2010
Even as BP finished construction on one massive containment dome Monday and started drilling a relief well to cope with the oil leaking from crumpled pipes at the bottom of the Gulf of Mexico, lawmakers and Gulf Coast residents began questioning whether the company will take full responsibility for the economic losses stemming from the spill.
The incremental steps forward -- the company finished one four-story, 74-ton dome and hopes to complete two others on Tuesday -- came as company and Obama administration officials predicted it might take up to three months to seal off the spill threatening the Gulf Coast's sensitive ecosystem.
The prospect of an extended leak has intensified concerns over what compensation BP is willing to pay, since a law passed after the 1989 Exxon Valdez spill requires companies to pay for cleanup costs but no more than $75 million for other damage.
BP posted a fact sheet on its Web site saying it will take responsibility for the spill cleanup as well as provide compensation for "legitimate and objectively verifiable" claims for property damage, personal injury and commercial losses. On a day when the stock market rose sharply, the company's shares fell $1.96, or 3.8 percent, to close at $50.19. It was the third worst performing stock in the S&P 500.
In his daily briefing Monday, White House press secretary Robert Gibbs underscored the administration's "commitment" to affected residents that BP will pay them for their economic suffering. "That's part of the law. Absolutely," Gibbs said. "The economic damages that are incurred are part of the cost of this incident. Absolutely."
Also on Monday, four members of Obama's Cabinet -- Homeland Security Secretary Janet Napolitano, Interior Secretary Ken Salazar, Environmental Protection Agency Administrator Lisa P. Jackson and Energy Secretary Steven Chu -- met with BP chief executive Tony Hayward and Lamar McKay, BP America chairman and president, to discuss the ongoing response to the spill.
The economic implications of the disaster are potentially mammoth -- but highly uncertain. The annual commercial seafood harvest in the gulf is $661 million, recreational fishing contributes $757 million and nearly 8,000 jobs, and tourism related to wildlife adds $517 million, according to the Harte Research Institute for Gulf of Mexico Studies.
It remained unclear Monday how much damage those industries will incur from the oil spill, and how long that damage will last. The research group estimates that $1.6 billion in annual economic activity is tied to the wetlands directly exposed to the spill.
"The question is if the marshes are impacted and how long they will be impacted," said David Yoskowitz, an economist at the institute. "It's all kind of up in the air right now until we really start to see the oil coming to shore and see what happens. There is no doubt that there will be some economic impact."
If economic activity were reduced by only a few billion dollars, it would be damaging for the regional economies of Louisiana, Mississippi and Alabama, but would be a drop in the bucket of the $14 trillion U.S. economy.
But some analysts see the potential for even more dire outcomes. David R. Kotok, chief investment officer of Cumberland Advisors, laid out scenarios in a note to clients that range from damages in the tens of billions of dollars and years of cleanup to a cost in the hundreds of billions of dollars that leaves the gulf as a "damaged sea" for a generation.
The spill, he said, has made the likelihood of a dip back into recession higher than it had been. "A 'double-dip' recession probably has been made more likely by this tragedy," Kotok wrote.
Staff writers Neil Irwin, Joel Achenbach and Steven Mufson contributed to this report.