On Wednesday the White House released a statement explaining that BP had agreed to set aside $20 billion for an escrow account through which legitimate claims of damages resulting from the Gulf oil spill would be paid. Kenneth Feinberg, who formerly headed the September 11th Victim Compensation Fund, will be the independent claims administrator, and both individuals and businesses may file claims.
It’s an important step in amending the tragedy currently wreaking havoc on the Gulf region. But is it enough? Who will the claimants be? And why did BP, after years of balking at regulations, submit so quickly to this demand for a cash payout? To find out, The Root reached out to experts in public policy, ecology and disaster management, and even Louisiana Senator Mary Landrieu.
Brian C. Murray, Ph.D., director for economic analysis at the Nicholas Institute for Environmental Policy Solutions and research professor at Duke University:
The Root: How do you think this escrow account is going to affect BP’s stability?
BCM: I do think this money is going to sort of stabilize things for BP, because it starts to define what the limits of their liability might be. Their stock value went down 50 percent since the spill, and that’s much more than it’s going to cost to clean up the spill. There was obviously a degree of uncertainty about BP and how they were handling operations, and that was casting questions in the market about their ability to continue as a company. $20 billion is a lot of money, but compared to the market cap of BP, it’s not a lot.
TR: With the spill far from being over, why is the government in such a hurry to establish this account?
BCM: I think the logic is they do not want to wait until BP goes bankrupt to go looking for money. That’s the rationale for doing this earlier in the process, because it’s going to take many, many years to work this out. If you just wait, then you run the risk that BP will be bankrupt or won’t have the resources to pay. And then where are you?
TR: What do you think of the escrow idea in general?
BCM: This sort of account is exactly what we should get out of all drilling operations. We should start looking at these things as almost like insurance. In the future, if you’d like to drill off our shores, you’ll have to put forth a large sum of money so that if something goes wrong, as it has so many times in the past, you’ll be forced to pay at least something.
Gregory V. Button, Ph.D., professor of anthropology at the University of Tennessee, Knoxville and a former lead researcher on the Exxon Valdez oil spill:
TR: Is $20 billion too small an amount for the escrow account?
GVB: I am at a loss to think of what an appropriate number is, but I will say that I’m inclined to err on the larger side. And while I think it’s a good idea to set up an escrow account, this spill is by no means over. It could go uncontrolled for as long as December, and even if they were able to cap that oil today, the long-term harm of what’s already happened could continue to unfold for many years to come. It puts you in a difficult position to even try and predict what the final outcomes will be. We are literally in uncharted waters. This spill has the potential — and I stress potential — to be the worst oil spill in world history. It’s pretty hard at this point to gauge how much this is going to cost without a lot more investigation.