BP ultimatum: Let us drill or funds will dry up
Oil giant BP is telling lawmakers that if it isn’t allowed to get new offshore drilling permits in the Gulf, it will not be able to afford to pay for the damage caused by the Deepwater Horizon oil spill, the New York Times reported in its Friday edition.
The Times reports the UK-based oil giant is on the warpath against a drilling reform bill passed by the House earlier this summer that would effectively bar BP from getting new drilling permits in the US.
The CLEAR Act, passed by the House in July, includes an amendment (PDF) that states any oil company that has received more than $10 million in safety fines, or has seen more than 10 workers killed in the past seven years, is barred from being granted new drilling permits. The Times notes that, currently, only BP fits that criteria.
BP officials reportedly insist that their warnings to Congress don’t mean that they are backing away from the $20 billion escrow fund the company established to pay damages to victims of the oil spill. But the Times reports that BP is using some of its voluntary payments as “bargaining chips” with lawmakers.
“As state and federal officials, individuals and businesses continue to seek additional funds beyond the minimum fines and compensation that BP must pay under the law, the company has signaled its reluctance to cooperate unless it can continue to operate in the Gulf of Mexico,” the Times reports.
â€œIf we are unable to keep those fields going, that is going to have a substantial impact on our cash flow,â€ BP America executive VP David Nagle told the newspaper. That situation would make it “harder for us to fund things, fund these programs.â€
The Times reports that 11 percent of BP’s oil production is in the Gulf of Mexico, and the fields there account for about a quarter of the company’s profit. BP’s profits for 2009 were about $14 billion. Thus, Gulf fields would account for about $3.5 billion of BP’s profits for last year — an amount that seems unlikely to greatly influence the company’s ability to pay out the $20 billion escrow fund, or the smaller voluntary payments measured in millions.
Business Insider Features Editor Gus Lubin describes BP’s move against the proposed law as either “very aggressive or desperate.”
For many businesses and individuals affected by the spill, the numbers debate in Washington is purely theoretical; they say they aren’t seeing the money they’ve been promised.
In a meeting with oil spill victims in New Orleans Thursday, Kenneth Feinberg, the Obama administration official responsible for paying out BP’s escrow fund, got an earful from frustrated residents.
“Mr. Feinberg took over and was supposed to be so generous with the funds, and I got my first check and it was half of what BP was paying me,” boat captain George Rick said, as quoted at WDSU TV.
And still others haven’t been paid at all.
“With this new claims process they were going to speed it up,” said boat captain Kenneth Kreeger. “Where’s the speed? The speed came to a stop, just like your business, just like my business.”
Feinberg vowed to personally review some cases but insists the claims facility is working around the clock.
But before a check can be mailed, Feinberg said he needs more documentation to prove each claim is legitimate.
“One major problem I’m running into here is the lack of documentation, of proof, to verify these claims,” he said.
BP was also recently criticized for tripling its spending on advertising during the oil spill.
â€œWhile BPâ€™s advertising campaign is being executed like clockwork, business and state claims have languished,â€ Florida Democrat Kathy Castor said.