2 Gulf states and Obama tell BP to set aside special funds to pay for mounting oil claims

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Pressure mounts on BP to set up funds for claims

SCHRIEVER, La. — The White House and at least two Gulf states have demanded that BP create special accounts that would set aside billions of dollars to pay for the mounting claims related to the massive oil spill in the Gulf of Mexico.

President Barack Obama wants an independent, third party to administer the escrow account and compensate those with “legitimate” claims for damages, Obama’s top political adviser said Sunday. The amount of money set aside will be discussed during talks this week between the White House and BP, but Axelrod said it should be “substantial.”

Gulf states also were putting the squeeze on BP. The attorney general in Florida and the state treasurer in Louisiana want BP to put a total of $7.5 billion in escrow accounts to compensate the states and their residents for damages now and in the future.

“At the end of the day, my concern is Louisiana,” state treasurer, John Kennedy, told The Associated Press on Saturday. “BP ultimately will do what BP thinks is best for BP.”

The tough talk from the White House comes a day after the Coast Guard made public a testy letter sent to BP demanding the energy giant pick up its pace and present a better plan to contain the spill by the time Obama arrives at the beleaguered coast for a two-day visit on Monday.

BP’s chief operating officer, Doug Suttles, said Saturday that the company would respond to the letter by Sunday night. The company’s board also was to meet on Monday to discuss deferring its second-quarter dividend and putting the money into escrow until BP’s liabilities from the spill are known.

BP’s public image has taken a beating and its stock price has plunged since the April 20 explosion of a deep-sea rig that killed 11 people and triggered a massive oil spill that has coated parts of the Gulf Coast with stinking, dark piles of crude and created environmental and economic devastation.

At the same time, tensions between BP and the federal government have ramped up as the public outrage over the spill has grown. Obama has come under increasing criticism for his response to the disaster, with even some of his strongest admirers feeling his response at times has been and aloof.

Obama will meet BP executives, including the company’s chairman, on Wednesday, a day after he returns from the Gulf. The president also plans an Oval Office address to the American public on Tuesday night.

Louisiana and Florida want BP to set aside the money in escrow accounts to protect their interests amid talk of the possibility that BP may eventually file for bankruptcy. Alabama doesn’t plan to take such action, and Mississippi and Texas haven’t said what they will do.

But even with Florida and Louisiana, BP might have a hard time complying, and if it did, it could hasten the company’s spiral downward.

That’s because as of March 31, BP had $6.8 billion in cash and cash equivalents available.

Experts say BP wouldn’t necessarily need to use cash to fund the accounts the states are asking for. Instead, the company could borrow money to comply. That, however, presents a potential problem because the company’s borrowing costs are likely to be a lot higher due to investor concerns.

The company said in a statement to the AP that it’s considering the Florida request. It didn’t address the comments by Kennedy.

“We have received a variety of funding requests from different states and have been responding to them in due course based on the particular issues raised in each,” BP said, adding that it already has made grants totaling $245 million to four Gulf states and is committed to spending up to $360 million to fund construction of six barrier island berms in Louisiana.

As to the concerns raised about a possible bankruptcy filing, BP said only that as of Saturday it was “not in discussions with” and had “not engaged any bankruptcy experts.”

Along the Gulf coast, ominous new signs of the tragedy emerged on the beaches of Alabama. Cleanup crews worked throughout the night to clear the oil from the white sand in Orange Beach. On Sunday, plastic bags filled with oil and sand sat along the beach where oil was caked the night before. The remaining sand was stained dark brown.

“This is awful,” said Shelley Booker of Shreveport, La., who was staying in a condominium with her teenage daughter and her friends near the deserted beach about 100 miles from the site of the spill.

Scientists have estimated that anywhere between about 40 million gallons to more than 100 million gallons of oil have spewed into the Gulf since a drilling rig exploded.

BP said Sunday that a containment cap sitting atop a leaking pipe in the Gulf of Mexico captured about 631,680 gallons of oil Saturday, preventing that discharge from flowing into the ocean. The system has collected more than 5 million gallons of oil to date.

BP is hard at work trying to find new ways to capture more oil. To boost its capacity, BP also plans to trap oil using lines that will suck oil and gas from the well to a drilling rig where it will be burned. Suttles said this system could be working by early next week. Another ship should be in place by mid-July to process even more oil.

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Weber reported from Houston. Associated Press Writer Jay Reeves in Orange Beach, Ala., contributed to this report.