Monday, August 23, 2010

Obama mortgages the Gulf of Mexico to BP

By Patrick Martin
12 August 2010

In a deal that has sweeping, long-term implications for millions of people living and working along the US Gulf Coast, the Obama administration has agreed to base the payments by BP to the oil disaster fund on the oil giant’s profits from its drilling operations in the Gulf.

On Monday, BP made its first deposit into the disaster fund, which is overseen by “claims czar” Kenneth Feinberg, while top executives visited the White House to discuss the longer-term financial commitment. The initial sum was $3 billion, with another $2 billion to be paid during the fourth quarter of 2010. Thereafter, BP will deposit $1.25 billion each quarter for the next three years, bringing the total up to its original pledge of $20 billion

The company’s CEO, Robert Dudley, and Lamar McKay, a top US executive for BP, met Monday at the White House with chief of staff Rahm Emanuel, retired admiral Thad Allen, who headed the government disaster response, and other administration officials.

A White House statement declared that the Obama aides “impressed upon BP the importance of living up to their commitment to long term recovery, and underscored that the administration will remain vigilant in ensuring that promise is met.”

The actual nature of the Obama-BP talks, however, is better demonstrated by the 40-page agreement whose text was released by the White House late Wednesday afternoon.


After depositing the first $3 billion into the fund, BP must provide collateral to guarantee the remaining $17 billion it has pledged to deposit over the next three and a half years. BP initially claimed that no such collateral was necessary, because it will be able to make the payments from operating cash flow and sales of selected corporate assets.

BP will give as security “interests in production payments pertaining to the [company’s] U.S. oil and natural gas production,” the bulk of which is located in the Gulf of Mexico.

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