BP source: Showdown looms over spill costs

Thursday, June 10, 2010

BP source: Showdown looms over spill costs

MSNBC.com

Obama administration 'planning to take action' to ensure money available

Reuters

updated 7:27 p.m. ET, Wed., June 9, 2010

WASHINGTON - The Obama administration is threatening to impose new penalties on British energy giant BP over the worst oil spill in U.S. history, and the company believes it may be heading for a showdown with the White House, a BP source said Wednesday.

Turning up the heat on the beleagured company, a senior U.S. Justice Department official said that the department was "planning to take action" to ensure BP had enough money on hand to cover damages from the Gulf of Mexico spill.

U.S. Interior Secretary Ken Salazar told a Senate hearing he would ask the British oil giant to repay the salaries of any workers laid off because of the six-month moratorium on deepwater exploratory drilling imposed by the U.S. government after the spill.

BP's total bill so far, including cleanup costs, has reached $1.25 billion and the U.S. government has already said it will have to pay billions more in penalties.

The White House echoed Salazar's comments.

"The moratorium is as a result of the accident that BP caused. It is an economic loss for those workers, and ... those are claims that BP should pay," White House spokesman Robert Gibbs told a briefing.

BP is worried about widening demands by the White House on spill-related costs, the BP source said. While the company has said it will pay for the clean-up and direct damages to those affected by the spill, the moratorium was a government decision and costs related to it were a different matter, the source said.

At a congressional hearing on Wednesday, one lawmaker asked U.S. Associate Attorney General Thomas Perrelli whether the Justice Department had the ability to issue an injunction against BP to stop it paying its dividend.

"We are looking very closely at this and we are planning to take action," he said.

BP officials have said they have enough cash to handle the crisis. But the market has shown less confidence. With Wednesday's share price drop in New York, BP has given up more than half its market value since the crisis began.

The spill began on April 20 after an oil rig exploded, killing 11 workers and rupturing the deep-sea well. It has caused environmental devastation along the U.S. Gulf Coast and threatens lucrative fishing and tourist industries.

The Obama administration, facing growing voter discontent over its own handling of the crisis, has sought to distance itself from the company. President Barack Obama has also toughened his rhetoric in recent days and said in an interview this week he would fire BP CEO Tony Hayward if he worked for him.

In a further sign of the administration's pressure on BP, Coast Guard Admiral Thad Allen, who is leading the government relief effort, demanded that the company provide more information and transparency on how it was meeting damages claims by individuals and businesses affected by the spill.

Video: Anger over oil washes up in Washington

"The federal government and the public expects BP's claims process to fully address the needs of impacted individuals and businesses," Allen said in a June 8 letter to BP.

BP has paid out close to $50 million in damages claims so far along the Gulf Coast -- mostly to fishermen, shrimpers, oystermen and boat operators who say their livelihoods have been impacted by the spill.

Meanwhile, BP America President Lamar McKay, along with top executives from Exxon Mobil Corp, Chevron Corp, ConocoPhillips and Shell Oil Co, were called to testify at a June 15 congressional hearing that will look at the oil spill and America's energy future.