washingtonpost.com
Administration: BP agrees to expedite oil spill claim payments

By William Branigin and Dana Hedgpeth
Washington Post Staff Writer
Thursday, June 10, 2010; 2:53 PM

Oil giant BP, under mounting pressure to meet its obligations in the Gulf of Mexico oil spill, has agreed to implement a more transparent and expedited claims process to pay individuals and businesses harmed by the disaster, U.S. officials said Thursday.

Coast Guard Adm. Thad W. Allen, who heads the federal response to the disaster, told reporters that he and other administration officials met with BP representatives Wednesday at his request to talk about claims issues following public criticism of the company by President Obama.

At the White House, where Obama met Thursday afternoon with relatives of workers who were killed in the drilling rig explosion that marked the start of the oil spill disaster, the president called on Congress to update federal laws to improve the government's ability to respond to such crises and to make sure that affected people are "all made whole." Eleven workers died after the Deepwater Horizon drilling rig burst into flames April 20 following an oil well blowout 5,000 feet below the surface of the gulf.

Obama also said the United States needs to "move much more aggressively" on energy policy.

After meeting with congressional leaders, he said existing U.S. laws "have not been adequate for a crisis of this magnitude." The 1990 Oil Pollution Act, which caps the liability of offshore leaseholders at $75 million per spill, plus removal costs, "was passed at a time when people didn't envision drilling four miles under the sea for oil," Obama said. "And so it's going to be important . . . that we update the laws to make sure that the people in the gulf -- the fishermen, the hotel owners, families who are dependent for their livelihoods in the gulf -- that they are all made whole and that we are in a much better position to respond to any such crisis in the future."

Obama added: "Although our immediate task is to deal with a crisis that is affecting millions of people down in the gulf, we can't keep our eye off the importance of having an energy policy that meets the needs of the next generation and ensures that the United States is the leader when it comes to energy policy. We are not yet that leader. And that's what I want us to be."

House Speaker Nancy Pelosi (D-Calif.) said after the meeting that U.S. taxpayers "must know that BP will be held accountable for what is owed." Asked whether BP should cut its dividends to shareholders, Pelosi suggested that it was more appropriate to reimburse beleaguered businesses in the gulf. "They have a responsibility under the law to pay these damages," she said. "They made $17 billion last year. Maybe people who receive dividends have deeper pockets."

Senate Minority Leader Mitch McConnell (R-Ky.) agreed that BP must "clean up the spill," but he said Republicans oppose using the spill as a "rationale" for passing energy legislation that includes what he called a "national energy tax" in the form of a cap-and-trade provision. That, he said, would be "completely and totally unrelated to a logical response to the environmental catastrophe we're experiencing in the gulf."

In a news conference at the Department of Homeland Security, Tracy Wareing, a top DHS official, said the U.S. side voiced "pressing concern" at the meeting with BP about the time the company was taking to pay claims. She said U.S. officials pointed out, and BP recognized, that its previous approach of waiting until after the books have closed for each month before paying claims "will not work."

Wareing said BP promised to "implement a more expedited claims process" that takes into account the ability of businesses to pay expenses for the upcoming month and the issue of seasonal earnings. For example, she noted, shrimpers, whose season officially began last week, earn most of their annual income in a few months, so calculating damage payments to them based on a monthly average of their yearly earnings shortchanges them.

Allen said the pumping of oil and natural gas from a damaged wellhead deep in the gulf continues apace. In the latest 24-hour period, he said, 15,800 barrels (663,600 gallons) of oil was produced, the highest level yet. However, an undetermined amount of oil continues to escape from a containment cap placed on the wellhead last week, and the total amount of oil coming up from the well remains unknown.

Also Thursday, Attorney General Eric H. Holder Jr. pledged that the Obama administration would ensure that U.S. taxpayers are not stuck with the costs of the BP oil spill.

In a news conference, Holder promised "that the American people will not pay a dime for the cleanup of the Gulf region and that BP will be held responsible for all the damages that have occurred." He said the administration would "take the necessary steps to make sure that that occurs."

However, he declined to comment when asked whether the administration would seek an injunction to prevent BP from paying dividends to shareholders. Obama has publicly criticized the company for reportedly planning to pay $10.5 billion in dividends for this quarter, for buying about $50 million worth of advertising to improve its image and for allegedly "nickel-and-diming" people with claims. Oil industry officials have said the $10.5 billion is an annual figure for dividends.

Allen said Wednesday that BP was moving a "mobile drilling unit" to the site that would allow the company to produce as much as 28,000 barrels a day (almost 1.2 million gallons).

The quantity of oil spilling into the Gulf of Mexico has been the subject of speculation and controversy for weeks. Early in the crisis, the National Oceanic and Atmospheric Administration issued an estimate of 210,000 gallons a day, but more recently a government-appointed team of scientists known as the Flow Rate Technical Group produced estimates of 504,000 to 1.05 million gallons.

Because the damages and penalties that could be levied against BP would be based on the amount of oil released into the gulf, investors interpreted Wednesday's news as substantially increasing the company's potential liability.

BP's stock price plunged more than 15 percent Wednesday, to a 14-year low. It fell again Thursday in early trading in London before recovering some ground mid-morning, as British analysts told investors that the extent of the U.S. sell-off was unwarranted, the Associated Press reported.

Since the Deepwater Horizon explosion, BP's stock price has dropped by more than 50 percent. The most recent declines were attributed to both the amount of oil flowing from the well and comments from Interior Secretary Ken Salazar that the Obama administration will ask BP to repay the salaries of workers laid off because of the six-month moratorium on deep-water exploratory drilling.

At Port Fourchon, La., where many of the boats and drilling rigs that operate in the gulf are based, residents and local officials expressed frustration with Obama's moratorium on drilling on the Outer Continental Shelf.

Chett Chiasson, executive director of the Greater Lafourche Port Commission, said the area's economy depends on the oil and fishing industries. Already, he said, three of the 33 deep-water drilling rigs affected by the moratorium have left for foreign waters.

"They're going to go where they can make money," said Chiasson. If the six-month moratorium continues, he said, it could cost the area $750 million in lost business, hurting the grocery stores, hotels, helicopter companies, gas stations and other suppliers of goods and services to the rigs. It could also cause the port area to lay off some of the roughly 4,000 employees who work in the industry, he said.

"You've got a marriage of fishing and working in the oil fields here," Chiasson said, noting that many locals often work on oil rigs in the off-season for fishing. "Now they can't fish, and the drilling side is gone, too. It leaves us in a really bad situation. We're fighting for our lives right now. We've got people who can't pay their mortgages or the light bills or the note on their boat."

Hedgpeth reported from Port Fourchon, La. Staff writers Marc Kaufman and David A. Fahrenthold contributed to this report.

View all comments that have been posted about this article.

© 2010 The Washington Post Company