Is the Spill Victims’ Fund Keeping BP and the Feds in Bed?

Kate Sheppard

Oil spill victims waiting for answers at public meeting

In mid-June, when oil was still gushing from the Gulf well with no end in sight and pressure was mounting on the administration to show some spine, Obama called BP’s top executives to the White House for a summit. The parties emerged with an agreement that BP would set aside $20 billion in a fund administered by an independent mediator to compensate business owners and residents who suffered economic damages because of the spill. The president said the fund would “provide substantial assurance that the claims people and businesses have will be honored” and would ensure that BP followed through on its promise to make Gulf residents whole. “The people of the Gulf have my commitment that BP will meet its obligations to them,” said Obama. 

But the specifics of that agreement for the $20 billion fund were finally released last week (full agreement is here), and critics are now saying say the plan jeopardizes the government’s ability to hold BP accountable. In a letter to President Obama last week, the watchdog group Public Citizen outlined “very serious concerns” with the structure of the deal. The company agreed to deposit $5 billion into the escrow fund this year and $1.25 billion every quarter from 2011 through 2013, for a total of $20 billion. But securing the money is contingent upon BP’s Gulf subsidiary remaining profitable—which, of course, might not happen if the federal government follows through with the kind of criminal and civil penalties and that many Americans believe the company should receive for it’s negligence in the disaster. Another problem: The plan actually creates a perverse incentive for the company to increase drilling offshore in the United States, since under the terms of the deal, the money in the fund will come from revenue from BP’s Gulf of Mexico drilling operations.


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