Heritage Foundation: details of the $20 billion BP "deal"

This just came in from myheritage.org


Yesterday, history repeated itself. This time it was the executives of BP who were summoned directly to the White House to have a little chat with the President and Attorney General Eric Holder (who has threatened BP with criminal prosecution). The exact conversation may never be known, and by the end of their “no-nonsense business meeting” BP emerged from the Roosevelt Room to announce that they would “voluntarily” place $20 billion into an escrow account to begin covering claims associated with the Deepwater Horizon oil disaster and contribute another $100 million to a foundation that will support oil workers made unemployed by President Barack Obama’s indefinite ban on offshore oil drilling.

Don’t buy for a second any of the mainstream media’s line about this being good for BP. The White House made clear yesterday that the $20 billion was just a down payment and in no way represented a cap on BP’s liability. In fact, the President explicitly said that the fund would not preclude individuals or states from pressing claims in court, and that it would remain separate from BP’s liability for the damages to the environment. And these damages may include the costs of cleanup for damage far beyond what BP caused. The Washington Post today reports that a gulf restoration plan of the sort promised by President Obama could cost as much as $30 billion. That’s $50 billion in damages so far. And that does not include any future money, on top of the existing $100 million donation, the White House may press BP to pay to cover the unemployment caused by President Obama’s offshore drilling ban.

Yes, BP did get the White House to say they do not want to see BP driven into bankruptcy. But who does that promise really serve?

Clinton administration Deputy Attorney General turned BP lawyer Jamie Gorelick explains: “We know what it looks like when a company is driven into bankruptcy. The claims that come first are the creditors, then the employees, then the environmental claims, and then the likes of shrimpers. This would not be a good result for anyone.” Now look at how the deal between the White House and BP is structured. BP is not handing over a $20 billion novelty check tomorrow. Instead they are set to pay $3 billion in the third quarter of this year, $2 billion in the fourth, and then $1.25 billion per quarter thereafter. In the meantime, BP has identified $20 billion worth of assets in the United States that the federal government now has a lien on. In the event of a bankruptcy, guess who gets to jump in line and have their claims honored first? Still guessing? Then ask Chrysler’s secured creditors.

$20 billion, that's what? less than a tenth of their yearly turnover. It's a pain, but cutting their high dividends, which were around the 5% mark for a year or two will fix the problem.

BP won't go bankrupt over a little oil, as the fourth largest Company in the world, and 2nd Largest British Company $20 billion is not a crippling figure; even if additional fees are charged.

From another forum:

What, then, one might inquire, is the $20 B fund supposed to cover?


The total cost of the Gulf spill will probably be $3-4 billion. $1 billion spent so far. So, why the $20B? Indeed!

I will post the BP financials here later.

I found these on another forum elsewhere:

... start reading balance sheets, income statements and cash flow statements.

Here is the BP balance statement for three years.


The balance sheets are just a statement of what the company is worth. Assets and liabilities. They have about $100 billion in cash, inventory and receiveables. So they are in very good shape.

[You can make a balance sheet for yourself, and everyone should do that. The numbers are smaller, but you have the same categories. For your personal income statement, pull the data off your tax return; individuals don't usually use accrual accounting like businesses must; individuals use cash accounting, so the tax return will work fine. What everyone should do is prepare a cash flow statement; very essential. ] [The thing is that whether you are an individual with revenues of $40K or a corporation with revenues of $40 billion, the categories are essential the same.]

BP has annual sales revenue of slightly more than $200 billion. [go the yahoo page above and on the lower left click on income statement]

BP has had profits of $16 - 20 billion per year for the past three years. That's slightly less than 10%. That's after paying $8 -12 billion per year in income taxes.

It has consistently paid about half of that in dividends: about $10 billion. So there is still plenty of money available to work with the Gulf oil spill. [Go to the yahoo statement and click on the cash flow statement]

The drop in share price is essentially meaningless. It just means that right now, you can buy a share of BP for $30 versus more than that three months ago. That is the free market price on the NY Stock Exchange.

BP has not lost any value.

Not to diminish the problems of oil spill cleanup, but they have happened before. There IS a history of how these things have been cleaned up. The process of eliminating an oil spill is very complex, but it is not just the biological processes; it is also the oxidation by mixing with air. Hurricanes will accelerate the oxidation process.

Anyone notice this little item:

Clinton administration Deputy Attorney General turned BP lawyer Jamie Gorelick explains:

[quote="Monte_RCMS, post:1, topic:202272"]

Clinton administration Deputy Attorney General turned BP lawyer Jamie Gorelick explains: "


Anybody notice this?

[quote="Monte_RCMS, post:5, topic:202272"]
Anybody notice this?


Does this suprise you?

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