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Federal and state officials want BP to do more

Oil is burned and skimmed by boats near the Deepwater Horizon oil spill Sunday in the Gulf of Mexico. The company is capturing about 630,000 gallons of oil a day and hopes to siphon more.

Associated Press

Oil is burned and skimmed by boats near the Deepwater Horizon oil spill Sunday in the Gulf of Mexico. The company is capturing about 630,000 gallons of oil a day and hopes to siphon more.

NEW ORLEANS — BP mounted a more aggressive response to the oil spill in the Gulf of Mexico on Sunday as the U.S. government stepped up the pressure on the company.

President Barack Obama is expected to arrive on the Gulf Coast today for a two-day visit — including a stop in Pensacola on Tuesday — that will be followed by a nationally televised address to the American people on Tuesday night and a sit-down with BP executives on Wednesday.

Obama will demand that BP create a special account with "substantial" reserves to pay gulf oil claims and will take other steps aimed at aiding the region, his top political adviser said Sunday.

No figure was specified, but a letter to BP chief Tony Hayward from 54 U.S. senators — nearly the entire Democratic caucus — called on the company to set aside $20 billion for cleanup and damages.

BP officials say that the board will today consider suspending or cutting the quarterly dividend, or paying it as an IOU. Executives said they could both meet their obligations from the spill and pay the regular dividend, but they conceded that political pressures could argue for suspending the dividend.

The White House wants the funds held in an escrow account administered by an independent third party to compensate those with legitimate claims for damages, Obama senior adviser David Axelrod said.

"We're not interested in undermining the integrity of their company, but this disaster is having an impact on their company," he said. "We believe that BP has the resources to meet the claims, and we're going to make sure that they do. They're a highly profitable company. They've got lots of assets. They have the prospect of continuing, but they have to meet their obligations here."

Louisiana's treasurer has told the Associated Press that the state wants $5 billion. Florida Attorney General Bill McCollum has requested $2.5 billion.

The Obama administration could use its legal authority under the federal oil pollution act, the landmark legislation passed a year after the 1989 Exxon Valdez spill, to force BP to set up such a fund to cover damages that are likely to be astronomical and could prove to be a burden even for BP, which posted a $6.1 billion profit last quarter.

"We are aware of the request," said BP spokeswoman Sheila Williams in London. She declined to comment further.

If BP goes along with the concept now, the administration has put itself in a position to take credit.

Obama has said BP should not be paying stockholders when gulf fishermen, oil workers and small business owners are saying they cannot get the company to pay their loss claims.

As one of the richest oil companies in the world, BP has nearly $7 billion in cash on hand and the capacity to borrow about $15 billion, according to Wall Street investment reports. The company is expected to generate $34 billion from continuing operations this year, from which it had planned the $10.5 billion in dividends and $20 billion for capital investments.

Amid some grumbling from Britain that the Obama administration and the United States are excessively bashing BP, Obama discussed the disaster on Saturday in a phone call with the new British prime minister, David Cameron. A White House statement afterward said that the two men agreed that "BP must do all it can to respond effectively to the situation."

The crisis has already become a crucial test for the Obama presidency as it takes a greater toll on his image with each day that more oil gushes into the sea.

"We're at a kind of inflection point in this saga, because we now know that, what essentially what we can do and what we can't do, in terms of collecting oil, and what lies ahead in the next few months," Axelrod said.

Meanwhile, BP continued its feverish efforts to stem the flow of oil in the gulf. One of the actions BP took Sunday was to use robotic submarines to position sensors inside the well to gauge how much oil is spilling.

The robots were expected to insert the pressure sensors through a line used to inject methanol — an antifreeze meant to prevent the buildup of icelike slush — into a containment cap seated over the ruptured pipe, BP spokesman David Nicholas said.

BP was installing the sensors at the request of a federal team of scientists tasked with estimating the flow, Nicholas said. He did not know when the request was made.

Scientists haven't been able to pin down just how much oil is leaking into the gulf, although the high-end estimates indicated the spill could exceed 100 million gallons. The government has stressed that the larger estimates were still preliminary and considered a worse-case scenario.

The Obama administration's point man on the oil spill, Adm. Thad Allen, on Sunday said government officials think the best figures are from a middle-of-the-road estimate, which would put the spill at around 66 million gallons of oil. That is about six times the size of the Exxon Valdez spill.

BP has been capturing about 630,000 gallons of oil a day, but hundreds of thousands more are still escaping into the gulf. The company has said that it could begin siphoning an additional 400,000 gallons a day starting Tuesday by burning it using a specialized boom being installed on a rig — and any new success would be welcome news for Obama as he returns to the gulf.

On the financial side, legal experts are divided over the government's power to force BP's hand by blocking a dividend. "I'm not aware of any legal precedent that would give the government any authority that would preclude British Petroleum from paying dividends," said Joseph A. Grundfest, a law professor at Stanford Law School.

BP's status as a foreign corporation further complicates matters, he said. "There's no suggestion that British Petroleum lacks the money necessary to pay all claims or damages that might result from this calamitous spill," Grundfest said.

But John C. Coffee Jr., a law professor at Columbia University, said courts have broad authority to issue injunctions. He also said the Justice Department or even state attorneys general could try to argue that the dividend would represent a "fraudulent conveyance" to keep money from flowing to claimants, though the burden of proof would be high.

Information from McClatchy Newspapers, the New York Times and the Associated Press was used in this report.

Federal and state officials want BP to do more 06/14/10 [Last modified: Monday, June 14, 2010 7:31am]

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