BP to reserve $20b for spill

The White House and BP tentatively agreed on Wednesday that the oil giant would create a $20 billion fund to pay claims for the worst oil spill in American history.

The fund will be independently run by Kenneth Feinberg, the mediator who oversaw the 9/11 victims compensation fund, according to two people familiar with the deliberations.

The agreement was not final and was still being negotiated when President Obama and his top advisers met on Wednesday morning with BP’s top executives and lawyers. The preliminary terms would give BP several years to deposit the full amount into the fund so it could better manage cash flow, maintain its financial viability and not scare off investors.

The talks have been complicated by the fact that BP’s ultimate liabilities for the cleanup and lost business are unknowable since the two-month-old leak of its well in the Gulf of Mexico could be spewing oil for months more.

To date, BP has spent more than $1 billion on containment, cleanup and claims from the Coast Guard, fishermen, oil workers and other businesses.

Since late last week, the negotiations have been closely held given the market sensitivity for BP, which has seen its stock lose about half its value since the spill.

BP’s next dividend for shareholders is another issue on the table. Some members of Congress have called for blocking any dividend payments, though the legality of such action is in dispute.

The tentative agreement comes a day after Mr Obama addressed the nation.