Obama calls on BP to create compensation fund

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Henry Waxman – Letter to Tony Hayward - .PDF file.

US president Barack Obama has demanded BP create a compensation fund to deal with the Gulf of Mexico oil spill, which could add $20bn to the firm’s cleanup bill.

The US president yesterday used a televised speech from the Oval Office to throw his weight behind the idea, as BP’s CEO, Tony Hayward, prepared to face allegations the firm took shortcuts with safety.

Added to the fines of $4,300 per barrel of spilt oil under environmental law, the independently controlled fund, first suggested by US senators earlier this week, could increase the company’s bill from the US government to $34bn.

‘I will meet the chairman of BP and inform him that he is to set aside whatever resources are required to compensate the workers and business owners who have been harmed as a result of his company’s recklessness,’ said Obama.

A statement from BP said: ‘BP notes the comments made by president Obama last night. It confirms that the company will be meeting with the president this morning, US Eastern Standard Time, to discuss his proposal for arrangements to ensure that all legitimate claims in respect in the Gulf of Mexico oil spill are paid out in a fair and timely manner.’

BP’s attempts to contain the oil spill were temporarily disrupted for nearly five hours yesterday when lightning struck the Discoverer Enterprise drillship, causing a fire.

Congressmen investigating the spill have also accused BP of violating industry guidelines and choosing risky procedures to reduce costs, and have called Hayward to a hearing to face the allegations this Thursday.

The head of the investigation, Henry Waxman, sent Hayward a letter dated June 14 outlining five decisions that ‘posed a trade-off between cost and well safety’.

‘Time after time, it appears that BP made decisions that increased the risk of a blowout to save the company time or expense,’ the letter said.

Waxman, who is chairman of the House Energy and Commerce Committee, also highlighted emails that show BP chose to ignore several safety recommendations made by contractors and employees for financial or time reasons.

One BP official recognised the risks of one decision but said: ‘who cares, it’s done, end of story, will probably be fine.’

Another commented: ‘this has been [a] nightmare well which has everyone all over the place’.

The five decisions the committee is questioning are:

  • The use of a cheaper well design that had two barriers to the flow of gas instead of four
  • The use of six ‘centralizers’ to hold the well casing in the centre of the borehole instead of the 21 recommended by contractor Halliburton
  • The failure to assess the cement seal despite warnings from Halliburton and internal predictions of problems with the cement
  • The failure to fully test the mud in the well for gas influxes that could contaminate the cement seal before it was fitted
  • The failure to fit equipment that would prevent the seal from being blown out from below

A spokesperson for BP said the firm is looking forward to the hearing on Thursday.