Obama to demand BP pay for oil spill damage
Washington, June 16, 2010
US President Barack Obama, seeking to demonstrate strong leadership on the Gulf of Mexico oil spill, will demand on Wednesday that BP set aside billions of dollars to pay damages from the catastrophe.
A day after he vowed to fight the spill "with everything we've got", Obama was to meet at the White House at 1415 GMT with the energy group's executives, the first time he as done so since the crisis began nearly two months ago.
The spill -- called by Obama the worst environmental disaster America has ever faced -- threatens to distract him from a domestic agenda of bringing down nearly double-digit US unemployment and reforming Wall Street.
Facing perhaps the biggest challenge of his presidency, Obama accused BP of "recklessness" in a televised address from the Oval Office.
Obama wants BP to establish a fund to guarantee it would cover the billions of dollars needed to clean up the mess and compensate people and businesses affected.
The meeting with BP executives, along with the Oval Office speech and a two-day trip Obama took to the Gulf this week, were aimed at showing a hands-on approach to dealing with the spill.
Opinion polls show most Americans believe Obama has been too detached and has not been tough enough toward BP.
Obama and Vice President Joe Biden will meet with BP Chairman Carl-Henric Svanberg and other executives.
Setting the tone for what could be a strong message to BP, Obama said on Tuesday he would tell the BP chairman "he is to set aside whatever resources are required to compensate the workers and business owners who have been harmed as a result of his company's recklessness.
"And this fund will not be controlled by BP. In order to ensure that all legitimate claims are paid out in a fair and timely manner, the account must and will be administered by an independent, third party," Obama said.
BP said in a statement its executives look forward to a constructive meeting. "We share the president's goal of shutting off the well as quickly as possible, cleaning up the oil and mitigating the impact," the company said.
James Guiang, senior portfolio manager at Millennium Global Natural Resources Fund, said BP needed to cut a deal with Obama.
"Whenever you go up against a government, you're not going to win," he said.
Obama also used his speech to call for legislation to break the US addiction to fossil fuels, and shares of solar groups in Germany, a big supplier of cells, rose on hopes of higher alternative energy uptake by the world's largest economy.
Shares in BP, which have lost nearly half their value since the spill began, were down 0.3 per cent at 340p by 1110 GMT, underperforming the European oil sector index.
The cost of insuring BP debt against default rose, with five-year credit default swaps hitting a record wide of 600 basis points, according to Markit. Rating agency Fitch downgraded BP's rating by six notches on Tuesday. Dutch bank ING said it expected Standard & Poor's and Moody's to follow through with more rating cuts.
Adding to the company's woes, a construction worker was killed at a BP refinery at Rotterdam in the Netherlands after a wall collapsed on him, a company spokesman said.
The company has already clocked up potential fines of up to $9 billion for the oil spill, based on a possible $4,300 per barrel fine for polluting major waterways. With tens of thousands of barrels leaking each day, the fines are rising.
Analysts say BP will likely also lose out on government contracts, while its targets for expanded production will become tougher to achieve as it draws more scrutiny from regulators for new projects.
Its $7 billion deal with Devon Energy to buy Brazilian assets is under the scanner of the country's regulators, the Times reported. BP dismissed reports the deal would not proceed.
And Bank of America Merrill Lynch has ordered its traders not to enter into oil trades with BP that extend beyond June 2011, a market source familiar with the directive told Reuters. Neither BofA or BP would comment.
BP chief executive Tony Hayward, a target of criticism that the company played down the disaster, was not expected to attend the meeting with Obama. But he will likely face a grilling by US lawmakers on Thursday when he makes his first appearance at a Capitol Hill hearing.
Lawmakers on Tuesday heard from oil company executives who said BP had not adhered to industry standards in building its deep-sea well that ruptured in an April 20 explosion that killed 11 workers and unleashed the torrent of crude.
The spill has soiled 120 miles of US coast, imperilling the local fishing and tourism industries and killing wildlife.
A team of US scientists has increased its high-end estimate of the amount of crude oil flowing from the BP well by 50 per cent, to a range of 35,000 to 60,000 barrels per day.
Obama predicted, however, containment efforts should succeed in capturing up to 90 per cent of the oil gushing from the well.
It was unclear what legal tools the Obama administration could use to force BP to set up an escrow account, but a White House official said: "The president has authority under existing law to assure that the legal obligations of the responsible party have been satisfied.
"We are satisfied that ... the president can use this authority to accomplish the purposes served by an escrow fund and independent claims payment procedure." - Reuters