Wednesday, June 16, 2010

There Will Be Escrow Funds

BP's voluntary agreement to put $20B into an escrow fund earmarked for spill damages is, I think, a rather underappreciated development. It means that BP now has an incentive to resolve spill claims quickly rather than slowly. And keep in mind that "slowly" for an oil company means "until the claimants start dying". It took twenty years for Exxon-Mobil to pay out any claims from the Valdez spill. But now BP is in a situation where it has more interest in getting as many claims processed as possible, with the hope that those claims will total less than the size of the escrow fund and they can get a few bucks back. This is absolutely the right approach and it will mean that the residents of the Gulf Coast will see justice significantly faster than Alaskans.

3 comments:

Brian Schmidt said...

I agree somewhat, but OTOH, that money in escrow will earn interest. BP can still try to outlive claimants, bargain them down, and get the remaining money on the other end, plus interest. They'd rather have the flexibility to do something with the money now, but they have countervailing reasons for not settling quickly.

Details are important on what conditions BP could withdraw money from escrow.

Anonymous said...

Easy solution: force them to park the escrow funds in U.S. bonds...

Anonymous said...

Folks, BP isn't in charge of the escrow fund. Ken Feinberg is. That renders this post moot.