BP agrees to pay $20 billion for oil spill claims

Going beyond the federal cap of USD 75 million, oil major BP has agreed to set aside a whopping USD 20 billion to pay as damage claims for the worst environment disaster in the Gulf of Mexico, a move welcomed by US lawmakers.

US president Barack Obama announced yesterday that an agreement had been reached with the BP to create a USD 20-billion fund to pay claims for the oil spill and said the firm will continue to be liable for the disaster.

"Currently, under federal law, there is a USD 75 million cap on how much oil companies could under certain circumstances be required to pay for economic damages resulting from a spill such as this. That amount obviously would be insufficient.

"That's why I'm pleased to announce that BP has agreed to set aside USD 20 billion to pay claims for damages resulting from this spill," Obama said.

In his remarks at the State Dining Room following his meeting with the BP executives - the first after the oil spill started in the Gulf of Mexico last month -- Obama said the USD 20 billion will provide substantial assurance that the claims people and businesses have will be honoured.

"It's also important to emphasise this is not a cap. The people of the Gulf have my commitment that BP will meet its obligations to them," he said.

US lawmakers welcomed the agreement and said it is the very least BP can do.
"If it takes more than 20 billion dollars, BP will have to cover the full amount for the families, workers, and small business owners of the Gulf Coast," Democratic House Speaker Nancy Pelosi said.

Obama said BP has publicly pledged to make good on the claims it owes to people in the Gulf, and "so the agreement we reached sets up a financial and legal framework to do it".
The USD 20 billion fund will not be controlled by either BP or by the government and will be put in an escrow account administered by an impartial, independent third party.

"Additionally, BP voluntarily agreed to establish a USD 100 million fund to compensate unemployed oil rig workers affected by the closure of the deepwater rigs," Obama said.
The President exuded confidence that BP will be able to meet its obligations to the Gulf Coast and to the American people and made it clear that the US will continue to hold it and all other responsible parties accountable.

"BP is a strong and viable company and it is in all of our interests that it remain so. So what this is about is accountability," he said.

"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," he said.

Obama said his administration has directed BP to mobilise additional equipment and technology, and in the coming days and weeks, these efforts should capture up to 90 per cent of the oil that is leaking out of the well.

"... we will continue to press BP and draw on our best minds and resources to capture the rest of the oil until the company finishes drilling a relief well later in the summer that is expected to stop the leak completely," he asserted.