BP Agrees to 20 Billion Dollar Account for Victims of Gulf Disaster

In a meeting with President Obama today, BP executives agreed to create a 20 billion dollar account to pay off claims by people and businesses affected by the disaster, reports the NYT. Obama called on BP’s leadership to establish an escrow account in last night’s Oval Office speech (read Zach Carter’s analysis of Obama’s speech here). A few days ago the Democratic caucus sent a letter to BP demanding the fund contain 20 billion dollars.

The 20 billion dollar account will be administered by Kenneth Feinberg, who oversaw the 9/11 victims compensation fund. NYT reports:

Its preliminary terms would give BP several years to deposit the full amount into the fund so it could better manage cash flow, maintain its financial viability and not scare off investors.

The talks have been complicated by the fact that BP’s ultimate liabilities for the cleanup and lost business are unknowable since the two-month-old leak of its well in the Gulf of Mexico could well be spewing some oil for months more. To date, BP has spent more than $1 billion on containment, cleanup and claims from the Coast Guard, fishermen, oil workers and other businesses from Louisiana to Florida.

The negotiations since late last week have been closely held given the market sensitivity for BP, whose stock has lost about half its value. BP’s next dividend for shareholders is another issue on the table. Some members of Congress have called for blocking any dividend payments, though the legality of such action is in dispute, or for putting the dividend in another escrow account pending payment of claims to victims. Either option would be problematic for many institutional investors and pension funds with stock in BP.

Here’s a White House fact sheet on the deal.