Good News About America

BP announced today that it has made the initial $3 billion deposit into the $20 billion recovery fund, nearly two months ahead of the September 30th due date. No final cost estimate has been offered, but the company’s expenses due to the spill have already exceeded six billion dollars.

BP drilling crews have also nearly finished a relief well that should allow them to permanently plug up the formerly leaking well; drilling temporarily stopped so engineers can check that it is still correctly aimed at the broken well. The well was previously sealed by pouring thousands of gallons of mud and cement through the containing cap that has been containing the oil since mid-July, but that is considered a temporary fix; the new well, which should intersect next weekend, will allow the leak to be permanently sealed.

One of the big stories today, of course, is how BP finally stopped the oil leak; I previously talked about it here and here.

The good news is that supposedly the well is completely sealed off, with no oil leaking. It remains to be seen whether the pressure inside the well will remain steady; a steady pressure would indicate that oil is not leaking around the cap. Meanwhile, one of the relief wells is 150 feet away from intersecting the leaking well; after the test is complete, drilling will resume so the leaky well can be finally killed.

The other major piece of good news is that the financial reform bill finally passed the Senate, as three republicans  - Susan Collins and Olympia Snowe of Maine and Scott Brown of Massachusetts – joined with democrats to break the GOP filibuster.  (Democrat Russ Feingold voted against the bill on the grounds that it isn’t strong enough). The republican leadership, of course, immediately called for repeal.

Public interest groups praised the legislation, which has been languishing in the Senate since the House passed it in June. The law attempts to avoid the need for another wall street bailout by setting up an advance warning system for banks that are deemed too big to fail, setting new limits on speculation by banks, and regulating the derivatives market. It also launches a new customer protection agency.

Many regulations called for by the law still need to be drafted over the next two years; it is expected that those opposed to reform will be donating heavily to republicans in order to water them down as much as possible.

Under a deal reached between BP and the White House today, BP will pay $5 billion annually for the next four years into an escrow account to cover damage claims related to the oil spill; $3 billion will be paid this summer and $2 billion in the fall, followed by $1.25 billion each quarter until the full amount is reached. Additionally, they must set aside an equivalent amount in US assets as collateral until the account is fully funded. BP also agreed to donate $100 million to support unemployed oil industry employees during the six-month moratorium on deep-water drilling. Although Congress has not yet overturned the $75 million cap on damages, BP has already paid $81 million in claims, and the new escrow account does not come with a liability waiver; the final cost of damages from the oil spill could reach as $40 billion.

BP also agreed to suspend approximately $7.5 billion in dividend payments over the next three quarters. By giving them several years to deposit the $20 billion, President Obama avoids chasing off investors in BP and potentially bankrupting the company; by agreeing, BP is able to improve their image and avoid a prolonged fight with the US government. The $100 million fund should take pressure off of newly unemployed oil workers.  Meanwhile, the $20 billion fund will be managed by Kenneth Feinberg, who oversaw the 9/11 victim’s compensation fund, and it is expected that it will be more efficient at handling individual claims than the current process handled by BP.