In a private, closed-door meeting, Obama administration officials and BP executives agreed to the creation of a $20 billion BP escrow fund. The BP escrow fund is money the company sets aside for paying oil spill damages. It will be used to pay claims of lost income, businesses, and other damages by human victims of the Deepwater Horizon oil spill. The $20 billion figure is not a cap, though some are questioning whether the escrow fund is going to help or hurt efforts to stop the gusher and clean up the environmental, political and economic mess.
BP escrow fund not a liability cap
Estimates for the damages from the BP oil spill vary from as little as the amount of the BP escrow fund up to $100 billion. On the Today Show today, senior Obama adviser David Axelrod assured that “this is not a get-out-of-the-situation-free card.” Administration officials have also said that if the BP escrow fund ends up not being enough cash to pay damages, BP will still be held responsible for the cost.
Kenneth Fineburg to administer BP escrow fund
Currently serving as the “pay czar” of TARP fund banks, Kenneth Fineburg is being tapped to administer the BP escrow fund. A lawyer, Kenneth Fineburg has experience in administering disaster escrow funds – he administered the victims’ fund for the September 11, 2001 attacks.
BP escrow fund in response to complaints
The BP escrow fund, called for originally by President Obama, is being created because of problems with BP’s response to claims. While some residents say they got checks from BP for their damage claims “within days,” others are saying they have yet to see anything. BP has promised to pay “all legitimate claims” of damage from the oil spill. The question has come, though, on what a “legitimate” claim is or is not. Victims are being asked to provide up to two or three years of tax documents, among other documentation.
Will BP escrow fund distract from spill?
There are some commentators, though, who are concerned that the BP escrow fund will not be helpful. Last year, BP earned $5.6 billion in profits. However, Governor Haley Barbour of Mississippi has spoken out against the BP escrow fund. Her concern is that once BP pays into the escrow fund, it may wash its hands of the oil spill. Even if the company maintains efforts to cap and clean up the spill, the BP escrow fund may remove operating capital needed to deal with the spill and continue earning profits that will pay into the fund.
So what do you think? Is the BP escrow fund a good idea, or is it adding one more layer to an already complicated problem?