White House turns up heat on BP with flurry of new demands

Stephen Foley
Monday 14 June 2010 00:00 BST

The White House is ratcheting up pressure on BP over the Gulf of Mexico oil spill, as the company meets today to discuss the future of the dividend payments while it assesses the scale and costs of the unfolding environmental disaster.

President Barack Obama is demanding that the oil giant immediately puts billions of dollars into a reserve account and submit to an independent panel that will hand out compensation payments to those in the Gulf region who have lost their livelihoods. And the administration's officials also ripped up BP's plans for increasing the amount of oil being captured from the leaking well, saying they were insufficient.

The company was given a 48-hour deadline, due to expire last night, to come up with plans that would capture more of the oil, which is still leaking at a rate of 30,000 barrels a day.

Bob Riley, Alabama's governor, said that BP should make compensation payments quickly, generously and widely.

Asked on CNN who might receive payment – oil workers unable to work because there's no deepwater drilling, stores without shoppers, hotels without guests, fishermen without clean water to fish, states without expected revenue – the governor replied: "Every one of them. I don't think there is a dividing line. I don't think you can say that one group is going to get it and another one doesn't."

BP's dividend, worth up to £1.8bn every three months, accounts for about £1 in every £7 of dividends paid to British shareholders, and its suspension would be a blow to UK and international pension funds who rely on it. But the payout has become a lightning rod for political anger in the US, and more senior politicians called over the weekend for it to be scrapped.

Fifty-four Democratic senators wrote to BP's chief executive, Tony Hayward, demanding that BP put an initial $20bn into a ring-fenced fund. Although BP has pledged to pay clean-up costs and damages, "history has taught us that corporations often fail to live up to their initial promises", the lawmakers wrote. They demanded a response by Friday.

Options at today's board meeting include deferring the dividend or paying it in shares, which are believed to be more likely than scrapping it altogether. The issue may not be decided immediately.

President Obama's senior adviser, David Axelrod, added to the mounting financial pressure on the company by saying that the White House now supported the creation of a multi-billion-dollar reserve, or escrow, fund, to be set up immediately. "It has to be substantial enough to meet the claims that we expect to come," he told NBC's Meet the Press. "We need to make sure the interests of people in the Gulf are protected. Our mission is to hold [BP] accountable in every appropriate way... And we want to make sure that money is independently administered so that [they] won't be slow-walked on these claims."

White House lawyers have been examining ways to compel BP to set up the fund, should it decide not to voluntarily agree.

Mr Axelrod maintained the elevated level of rhetoric, which has included the White House spokesman Robert Gibbs promising to keep the President's "boot on the throat" of BP and the President himself saying he wanted to know "whose ass to kick". Mr Axelrod promised to "stay on them, as we have since the beginning".

Mr Obama will tour the Gulf region today and tomorrow, before addressing the nation for the first time about the clean-up operation and technical effort to slow the leak and capture as much of the oil as possible that has been gushing from the broken well one mile below the surface since an explosion that killed 11 workers on board the Deepwater Horizon rig on 20 April.

About 650,000 gallons are being captured and brought to the surface each day, but this is clearly not the "vast majority" that BP had earlier predicted. Underwater sensors were yesterday being put into place to try to better measure the amount of oil that is still escaping.

In a testy letter sent on Friday, the Coast Guard official James Watson said that BP's plans to bring in a new system by mid-July were inadequate, especially in light of revised estimates this week that indicated the size of the spill could be up to twice as large as previously thought.

"BP must identify in 48 hours additional leak containment capacity that could be operationalised and expedited," Mr Watson wrote in the letter, made public on Saturday.

He did not specify what sanctions might be triggered if BP failed to meet his demand.

Where next for BP?

Today President Obama heads to the Gulf Coast, his fourth trip since the Deepwater Horizon rig exploded. Over the course of two days, he will visit not only Louisiana, but also Mississippi, Alabama and Florida, which are in the direction of the spewing oil's drift. Meanwhile, BP's board holds an emergency meeting in London, where they are expected to discuss the suspension of dividends to shareholders.

Tomorrow Congress turns its guns on the oil giants, with the House Energy and Environment Committee grilling executives from Exxon, Chevron , Conoco, Shell and BP. President Obama is set to make a prime-time address to the nation from the Oval Office.

Wednesday Showdown at the White House. BP's chairman, Carl-Henric Svanberg, and other senior execs have been summoned to explain themselves to the commander-in-chief and other senior members of the administration. Tony Hayward is expected to attend.

Thursday Mr Hayward, the target of much American ire after saying he wanted the leak stopped because he "wanted his life back", can expect a roasting as the star witness appearing before a special hearing. The no doubt testy exchanges at the House Committee on Energy and Commerce are being broadcast live, and Mr Hayward will be hoping that his special media coaching pays off.

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