DALLAS — Louisiana Treasurer John Kennedy yesterday said he supports the $20 billion oil-spill escrow plan announced by President Obama and BP executives to handle claims arising from the Deepwater Horizon blowout in the Gulf of Mexico.
“I’m very pleased with the plan,” Kennedy said. “I’m much happier with the president’s announcement today than I was with his speech on Tuesday night. It’s a step in the right direction.”
Kennedy sent a letter to Gov. Bobby Jindal on June 11 urging the creation of a financial plan to protect the state from losses in case BP ended up in a merger or filed for Chapter 11 bankruptcy protection. He said Wednesday that while the creation of the claims fund eases some of his concerns over the cost of the oil spill to the state, he still has some questions.
“It’s good to know that a bankrupt BP couldn’t claw back the money it had paid us so far, but we don’t know all the details of the plan yet,” Kennedy said. “I want to make sure that $20 billion is not the limit, and I want to know how fast BP will put $20 billion into the fund.”
Large volumes of crude oil have been escaping from the subsea production equipment damaged when the Deepwater Horizon drill ship exploded in 5,000 feet of water about 40 miles off the Louisiana coast on the night of April 20.
On Tuesday, the government scientists who have been trying to determine the flow from the blowout released a new estimate that up to 2.5 million gallons, or 60,000 barrels, of oil is being released daily. That was up from the last week’s estimate of up to 30,000 barrels a day.
If BP is found guilty of gross negligence in the blowout, the higher estimates could result in fines of up to $258 million each day. The fine could not be paid from the $20 billion claims fund.
In his remarks, Obama said BP would have to provide additional funds if the $20 billion is not enough to satisfy claims by state and local governments and individuals and businesses harmed by the unfolding environmental disaster.
“It is important to emphasize this is not a cap,” Obama said.
In the agreement announced by the president, BP agreed to put $3 billion into the fund in the third quarter of 2010 and another $2 billion in the fourth quarter. The oil giant will contribute $1.25 billion per quarter until the $20 billion level is reached.
BP pledged $20 billion of its assets to the fund while it is building.
The fund will be available for claims including natural resource damages and state and local response costs. Fines and penalties will not be paid from the claims fund.
Funds in the account will be disbursed by the Independent Claims Facility administered by Ken Feinberg.
Feinberg currently is Obama’s administrator of financial executive compensation. He was special master for the Sept. 11 Victim Compensation Fund.
Kennedy said his opposition to the president’s six-month moratorium on the drilling of new deepwater wells is not affected by BP’s establishment of a $100 million fund to support oil rig workers who are laid off due to the drilling moratorium.
“My belief is that we would be a lot better off without the moratorium, and $100 million is not going to change my mind,” he said.
Kennedy said $100 million would not be sufficient to compensate the state’s workers and businesses for lost wages and sales.
The Republican treasurer said he has seen estimates that oil and gas exploration, production, and refining account for up to 65% of the state’s $200 billion a year economy.
“It isn’t just the rig workers,” he said. “There are supply boats and companies that provide equipment and supplies to the rigs, and all their workers. It is complex and deep, and there is no doubt the drilling moratorium is going to hurt us by more than $100 million.”
Jindal said the deepwater drilling moratorium will cost 6,000 jobs in Louisiana. A majority of the deepwater rigs affected by the ban operate off the Louisiana coast.
BP’s share price has fallen 48% since the blowout, erasing some $91 billion of its market valuation.