Oil spill: BP agrees to set aside $20 billion to settle claims

WASHINGTON, D.C.—Earlier today President Barack Obama met with BP Chairman Carl-Henric Svanberg and other BP in the Roosevelt Room at the White House. They discussed the ongoing efforts to stop the oil leaking into the Gulf of Mexico and BP’s responsibility not only to pay for the cost of the cleanup of the oil spill, but also to compensate residents and businesses that have suffered financially as a result of the oil spill.

In his remarks after the meeting, the Obama announced that BP has agreed to set aside $20 billion to pay economic damage claims to people and businesses that have been affected by the oil spill:

“This $20 billion will provide substantial assurance that the claims people and businesses have will be honored. It’s also important to emphasize this is not a cap.  The people of the Gulf have my commitment that BP will meet its obligations to them. BP has publicly pledged to make good on the claims that it owes to the people in the Gulf, and so the agreement we reached sets up a financial and legal framework to do it.

“Another important element is that this $20 billion fund will not be controlled by either BP or by the government. It will be put in a escrow account, administered by an impartial, independent third party. So if you or your business has suffered an economic loss as a result of this spill, you’ll be eligible to file a claim for part of this $20 billion. This fund does not supersede either individuals’ rights or states’ rights to present claims in court. BP will also continue to be liable for the environmental disaster it has caused, and we’re going to continue to work to make sure that they address it.”

BP and the Obama administration agreed to appoint Ken Feinberg, who administered the claims process for victims of 9/11, to run the independent claims process.

Calling this agreement “an important step towards making the people of the Gulf Coast whole again,” the President reiterated the importance of keeping the families and businesses of the Gulf Coast, many of whom are still recovering from Hurricanes Katrina and Rita, at the forefront of the oil spill recovery process.

A new, independent claims process will be created with the mandate to be fairer, faster, and more transparent in paying damage claims by individuals and businesses.

The claims facility will develop standards for recoverable claims that will be published. A panel of three judges will be available to hear appeals of the administrator’s decisions. The facility is designed for claims of individuals and businesses who have been harmed by the oil spill; local, state, tribal, and federal government claims will continue to be handled directly by BP. The facility will decide all claims and in any event within the existing statutory timeframe. Dissatisfied claimants maintain all current rights under law, including the right to go to court or to the Oil Spill Liability Trust Fund.

Decisions under current law by the independent claims facility shall be binding on BP. All claims adjudicated under this facility have access to the escrow account for payment.

BP has agreed to contribute $20 billion over a four-year period at a rate of $5 billion per year, including $5 billion within 2010.  BP will provide assurance for these commitments by setting aside $20 billion in U.S. assets.

BP has reaffirmed its commitment to pay all removal costs and damages that it owes as a responsible party. It will not assert any liability cap under OPA to avoid liability.

The creation of the escrow account will provide assurance to the public that funds will be available to compensate the injured. This account is neither a floor nor a ceiling on liability.

BP will contribute to a foundation of $100 million to support unemployed oil rig workers.