BP, Government Reach Agreement on Oil Spill Fund

Two men fish from a boat amidst oil from the Deepwater Horizon oil spill off East Grand Terre Island, where the Gulf of Mexico meets Barataria Bay, on the Louisiana coast, July 31, 2010.
AP Photo
A Justice Department official says negotiations with BP have been completed to ensure that the oil company follows through on a commitment to establish a $20 billion compensation fund for victims of the Gulf oil spill.

The official calls the conclusion of negotiations an important step forward for BP to honor the promises it made regarding the fund.

Speaking on condition of anonymity about the arrangements that will be announced later Monday, the official says the Obama administration looks forward to completing a security agreement with BP so that all necessary funds will be there.

Special Section: Disaster in the Gulf

BP said that as of Saturday, more than 145,000 claims had been submitted and more than 103,900 had been paid, totaling $319 million.

The security agreement is necessary in case something were to happen to a company subsidiary that established the trust.

The negotiations came as BP said Monday that its costs to respond to the spill have risen to about $6.1 billion.

That includes expenses for relief well drilling, the static kill and cementing procedure done on the blown out oil well, grants to Gulf coast states and claims paid to people who have lost income or profits because of the spill.

An estimated 207 million gallons of oil spilled into the Gulf of Mexico after the Deepwater Horizon rig exploded off Louisiana on April 20. The explosion killed 11 workers and sent crude into delicate coastal marshes and tar balls washing on to beaches.

But the flow of oil has stopped since the company and government experts sealed it with a new cap last month and pumped in mud and cement from above to plug the leak.

Now the government's point man on the Gulf oil spill says BP has resumed drilling a relief well meant to intersect the blown-out well and seal it for good.

Spike Lee Bashes U.S. Claim of Vanished Gulf Oil
Thad Allen on "Face the Nation"

Retired Coast Guard Adm. Thad Allen said Monday that cement forced down from the top of the crippled well last week has hardened enough that workers could begin drilling the final 100 feet of the relief well.

Engineers were drilling 20 or 30 feet at a time, then pausing to make sure they were still on the correct course to hit the broken well. It could be the end of the week before the wells intersect.

Federal officials have long said the relief well is the final step to ending the oil leak, which spewed an estimated 207 million gallons of crude into the Gulf of Mexico since the Deepwater Horizon oil rig exploded and sank in late April.

The oil is already back at its source, thanks to the "static kill," which involved thousands of gallons of mud and cement being poured last week through a cap that had been keeping the crude out of the water since July 15. The cement cap poured on top of the oil hardened enough over the weekend so engineers could begin digging the final 100 feet of the well again, according to a news release from the company.

Meanwhile, officials were watching a cluster of storms over Florida that could develop into a tropical disturbance. The National Hurricane Center says the storms could move over the Gulf this week near the well site and say there is a small chance the system could become a tropical depression or tropical storm.

Allen said Monday he is not currently planning to suspend cleanup work or drilling on a relief well meant to plug the damaged well for good.