Ethic Issue for Bp Spill

BP to fund $20bn Gulf of Mexico oil spill payout

Wednesday, 16 June 2010 23:17 UK

Oil giant BP is to put $20bn (£13.5bn) in a compensation fund for victims of the Gulf oil spill and will not pay shareholders a dividend this year.

Barack Obama announced the compensation deal after talks at the White House with senior BP executives.

Shortly afterwards, BP chairman Carl-Henric Svanberg said dividends would not be paid for the rest of this year.

The payout fund is to be run by Kenneth Feinberg, a lawyer who oversaw compensation after the 9/11 attacks.

In his current role as Mr Obama's "pay tsar", Mr Feinberg sets salary limits for executives at firms in receipt of federal bailout funds.

Mr Obama said a $120m fund would also be set up to compensate oil industry workers.

He said he had heard growing concerns about the pace of compensation payments, and that the new fund would ensure all "legitimate" claims were paid.

"If you or your business has suffered economic loss as a result of this spill you will be able to file a claim," the president said.

Although BP has agreed to fund $20bn - roughly equivalent to one year of BP's annual profits - reports said there could be no cap on the amount BP might be asked to contribute to the fund.

The company will pay $5bn into the fund, called an escrow fund, before the end of 2010, plus $1bn per quarter for the following three years.

Speaking after the talks, Mr Svanberg expressed regret over the spill, saying BP felt "sorrow and sadness for the tragic accident which should never have happened".

BP chairman Carl-Henric Svanberg after White House meeting "Words are not enough. We understand we will and we should be judged by our actions," he said. "We will live up to all our legitimate responsibilities."

The last time that BP suspended a dividend payment was during World War II. The company was due to make a $2.6bn dividend payment on Monday, which has now been cancelled.

In addition, BP...