BP Pressed to Set Aside $20 Billion for Oil Spill Costs

Photo Credit: Courtesy U.S. Coast Guard

WASHINGTON, DC, June 14, 2010 (ENS) - Senate Democrats sent a letter to BP CEO Tony Hayward today calling on the company to set aside $20 billion in a special account to be used to pay for economic damages and cleanup costs of the ongoing oil spill in the Gulf of Mexico.

"We are writing to express our profound concern over the Deepwater Horizon oil disaster and our deep regret for the severe consequences the continued outflow of oil into the Gulf of Mexico is having on our nation and the way of life for millions of Americans," the letter states. "This tragedy has already taken the lives of 11 men, wounded 17 others, and caused billions of dollars in damages."

"The oil slick resulting from the spill stretches across 2,500 square miles and has damaged miles of environmentally sensitive beaches and marshes stretching across four states. Although this disaster continues to unfold, it is already very clear we are facing a catastrophe of historic proportions that will take decades to fully rectify," the senators state.

"While we are pleased that BP has admitted liability for these damages and vowed to provide full remuneration for economic losses and clean-up costs, history has taught us that corporations often fail to live up to their initial promises," the senators write, reminding BP of fellow oil company ExxonMobile's avoidance of the costs of the Exxon Valdez spill.

"After the Exxon Valdez tanker spilled more than 11 million gallons of oil into Alaska's Prince William Sound, damages totaled more than $7 billion; although Exxon continued making massive profits after the accident, it fought liability at every step and ultimately paid far less than the billions of dollars worth of damages it had caused many, many years later," the letter says.

Congress is now gathering information and holding hearings to develop legislation to address the Deepwater Horizon disaster. In both the Senate and the House legislation has been introduced to raise the cap on liability for oil spills from $75 million to $10 billion. The liability could be made retroactive, ensuring that BP is on the hook for the economic damages resulting from the Gulf Coast spill.

In their letter, the senators say a $20 billion account is needed now because while legislative action is forthcoming, the damages from the Deepwater Horizon oil spill are "immediate."

"In order to ensure BP fully and quickly covers the costs of this disaster, we are calling on BP to immediately establish a special account of $20 billion, administered by an independent trustee, to be used for payment of economic damages and clean-up costs," the senators write. "Establishment of this account would serve as an act of good faith and as a first step towards ensuring that there will be no delay in payments or attempt to evade responsibility for damages."

In view of the "urgency of the matter, the senators requested a response to this letter no later than Friday, June 18.

The letter comes as President Barack Obama is on his way to the Gulf Coast, his fourth trip to the area since the Deepwater Horizon oil rig exploded April 20 and sank two days later, leaving the broken wellhead to gush thousands of barrels of oil into the water every day. A federal oil flow rate task force estimated June 10 that 20,000 to 40,000 barrels of oil per day was flowing from the damaged wellhead before the riser pipe was cut to install the containment cap now capturing some of the leaking oil.

The highest estimate amounts to over two million barrels of oil that have leaked into the Gulf of Mexico, a much higher figure than BP and the government had previously estimated.