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Obama to demand vast fund from BP for victims' claims

By Joel Achenbach and Ed O'Keefe
Washington Post Staff Writer
Monday, June 14, 2010; A01

In his showdown Wednesday with BP's top executives, President Obama will demand that they turn over a "substantial" amount of money to an independent mediator who will handle claims from people and businesses harmed by the environmental disaster, administration officials said Sunday.

The White House wouldn't say how much money it wants BP to put in the new escrow account, but Senate Democrats named their number Sunday, sending a letter to BP asking it to create a $20 billion fund to handle economic damages and cleanup costs.

BP did not reject the demands out of hand, and it took pains to avoid anything resembling a confrontational posture as it prepares for Wednesday's session.

Behind the scenes, the situation is much tenser. The administration, under immense political pressure to show that it's fully in charge, is pressing BP to fully clean up the mess both environmentally and economically. BP, however, fears any plan going forward that would create a potentially unlimited liability.

Whether BP accedes to the administration's latest demands will probably depend on the precise details of the third-party mediator process -- and most critically on what specifically will be considered a legitimate claim against the company.

"We're looking forward to a very constructive discussion with the administration. We will want to explain what we're doing, but we'll also be very much in listening mode," BP spokesman Andrew Gowers said Sunday.

The company's position is that it will pay for claims directly associated with the oil in the gulf. The Obama administration, however, ratcheted up the potential scope of BP's liability last week when Interior Secretary Ken Salazar told Congress that the administration wants BP to pay for the lost wages of oil industry workers affected by the moratorium on deep-water drilling. White House press secretary Robert Gibbs, responding to questions from reporters, affirmed Salazar's position: "The moratorium is a result of the accident that BP caused. . . . Those are claims that BP should pay."

The comments triggered a one-day slide of 16 percent in BP's share price on Wednesday, alarming shareholders and company officials, who regard such a plan as a deal-breaker. The stickiest issues could be hashed out in private before the White House meeting, where Obama will go face to face with BP's controversial chief executive Tony Hayward and the little-seen chairman of the board, Carl-Henric Svanberg, among other BP executives.

"BP will not hand over a blank check to anyone, whether it's the administration or an independent mediator," said a person familiar with senior BP executives' thinking, speaking on the condition of anonymity because of the sensitivity of the negotiations. "BP will constructively engage in a process -- on the basis of transparent and pre-agreed rules -- a claims oversight process. That's a different matter."

This has become a transatlantic issue that has alarmed officials in the United Kingdom, where BP plays an outsize role in pension funds. Obama and British Prime Minister David Cameron spoke Saturday and agreed that the company must do all it can to respond to the spill, the White House said.

Obama will make his fourth trip to the gulf region Monday, then return to the capital for a Tuesday night address to the nation in which he is set to discuss the details of the escrow account, senior adviser David Axelrod said Sunday.

"We want to make sure that money is escrowed for the legitimate claims," Axelrod said on NBC's "Meet the Press." The president's discussion with BP executives will focus on the amount of money that should be set aside in the account, Axelrod said.

"We've been very concerned about the claims process," Coast Guard Adm. Thad W. Allen, commander of the U.S. response, said on CBS's "Face the Nation." "This is not a core function of an oil-producing company."

Settlement funds for the victims of the Exxon Valdez spill came after years of litigation, and other class-action cases involving the tobacco and securities industries have resulted in similar settlements.

Carl W. Tobias, an environmental law specialist at the University of Richmond, said that determining who is eligible for payments from the escrow account may prove daunting.

"There will be a lot of details, like what kind of proof do you have to have?" he said. "Who's the burden of proof on? What's the cause and effect? Will they take evidence? Will you have to have receipts?"

Gulf Coast state governors seemed supportive of the escrow account. Alabama Gov. Bob Riley (R) said the fund should compensate everyone affected.

"I don't think there is a dividing line. I don't think you can say that one group is going to get it and another one doesn't," Riley said on CNN's "State of the Union."

Although the $20 billion fund requested by the Senate would not cap the company's claims obligations in the future, its establishment would be a first step toward ensuring further payments, according to the letter prepared by Senate Majority Leader Harry M. Reid (D-Nev.).

The House Natural Resources Committee on Sunday also asked Allen to ensure that the federal government maintains control of the damaged blowout preventer when, presumably later this summer after the well is plugged with cement, the five-story-tall contraption is lifted to the surface. The government subpoenaed the blowout preventer's owner, Transocean, instructing the company to keep it intact for ongoing investigations.

Staff writers Anne E. Kornblut and Juliet Eilperin contributed to this report.

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