U.S. Officials Press BP to Reserve Billions for Cleanup Costs

Workers cleaning up BP oil washing ashore.
Workers cleaning up BP oil washing ashore.

A growing chorus of federal and state government officials is pressing BP (BP) to reserve billions of dollars in an escrow account to cover clean-up costs from the Deepwater Horizon catastrophe and compensate the affected states and individuals, according to reports by Reuters and The Associated Press.

U.S. President Barack Obama will address the nation Tuesday and outline his plan to legally compel BP to create such a fund to compensate victims, The New York Times said, after initial reports Friday that BP was considering voluntarily setting up such a account proved ''less certain than the White House initially thought." Politico wrote that President Obama will also demand that BP "accept an independent panel to handle damage claims by individuals and businesses hurt by the Gulf disaster."

Last week, the attorney general of Florida, Bill McCollum, sent a letter to BP insisting that the UK-based oil company put $2.5 billion in escrow to cover the costs of the oil spill for his state. Some estimates of the total costs of the spill run as high as $30 billion to $40 billion when direct cleanup costs and liability claims are included.

Appeasing American Concerns

According to The Times of London, "BP is considering putting several billion dollars into a ring-fenced cleanup fund to appease American concerns over the soaring cost of the Gulf of Mexico oil spill." The option is apparently one of several being considered by the BP board, among them cutting or suspending the company's dividend to preserve cash. BP's board will hold an emergency meeting Monday to address the issue, including preparation for a meeting with the President at the White House on Wednesday, The New York Times reported.

BP Chairman Carl-Henric Svanberg will lead the group of BP managers who will meet with Obama on Wednesday. In advance of the gathering, Coast Guard Rear Admiral James A. Watson wrote to BP's Chief Operating Officer Doug Suttles, saying that the UK-based energy company had 48 hours to come up with a more effective plan to collect crude that's leaking from the wreck of the Deepwater Horizon drilling rig. That letter was presented to BP on June 11.

The spill may be getting worse. Estimates of the rate at which the well is leaking were recently raised to at least 40,000 barrels a day -- or the volume of an Exxon Valdez spill every five days since April 20. BP's efforts to capture oil are containing about 15,000 barrels a day.