So how will Florida really know when BP has paid enough to cover this economic disaster?
Wake up and good morning. Let's celebrate -- absolutely -- the successful capping (for now) of the BP oil gusher in the Gulf of Mexico. Forever may it hold. But let's focus today on the future of BP, namely: Will the oil exploration company have the long-term capacity to pay for the astounding bills it will undoubtedly need to pay to make things right along the gulf? (Photo: The Telegraph.)
Analysts already have quoted price tags exceeding $60 billion and now $100 billion is becoming a more popular ballpark figure for BP's screw-up. The trick, of course, is BP does not have infinite resources and once we get up into those stratospheric ranges there's is growing doubt the company will be able to pay up.
Consider the remarks of Oppenheimer & Co. analyst Fadel Gheit who last month put the financial damage from the environmental catastrophe as high as $60 billion. While BP could survive a $60 billion liability, Gheit told Bloomberg News, "I am less certain they can survive $100 billion or more." Here's the full story.
It's all well and good that BP already agreed to a $20 billion catch-all fund to cover claims. But it's just a down payment.
While Floridians are busy watching TV clips of tar balls washing up on Panhandle beaches and politicians demanding a couple million dollars here and there for more tourism advertising, BP CEO Tony Hayward (AP photo, right) is running around the globe doing two things. He's looking for deep pocket investors in the Middle East to buy shares of BP and bolster the company's capital base. And he's talking to other oil companies about buying pieces of BP in an attempt to raise more cash for the inevitable gusher of claims the company will be facing now and in the coming years.
There's just one problem. Anybody who buys a piece of BP -- and companies like Exxon Mobil, Apache Oil and Royal Dutch Shell are showing interest -- faces a legal problem. If BP can't pay for all its claims later, those folks demanding to be paid may say that BP fraudulently sold off assets that should have remained available for covering the oil spill damages.
That holds doubly true should BP end up declaring bankruptcy. As the Bloomberg News story explains:
"Laws prohibiting fraudulent transfers could allow victims to sue a buyer to recover money deemed essential to pay claims, and successor liability could leave a purchaser with BP’s obligations, if BP files for bankruptcy. A proposed change to federal bankruptcy laws could force a buyer to wait for BP to get approval from victims for the sale, or persuade a judge it will have enough assets to pay claims in full."
This may all sound like legal mumbo jumbo now, but this is the crux of our future dealings with BP. What happens in 2011 or 2012 or 2013 if and when massive amounts of oil from the BP spill starts washing up all over Florida's coasts? Is BP still on the hook years from now? Is BP even still around. At some point, BP will lobby for a final settlement in order to be done with the exposure to the spill.
(An Irish bookmaker is taking bets CEO Hayward won’t last the year running BP, due to his egregious mishandling of the oil spill in Gulf waters. More here.)
We better be totally, 100 percent sure that Florida's gotten what it deserves to fix the damage (is that even possible?) before what's left of BP is handed its Get Out of Jail free card.
-- Robert Trigaux, Times Business Columnist