Obama wants BP escrow fund for spill damage

In an effort to seize greater control of the gulf oil catastrophe, President Obama is prepared to compel BP executives to set up a multibillion-dollar escrow account to pay damage claims in the region, a senior White House official said Sunday.

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.

“Our mission is to hold them accountable in every appropriate way,” Obama advisor David Axelrod said on NBC’s “Meet the Press” on Sunday. “He is going to be very clear about what our expectations are in terms of taking care of the people who’ve been damaged by this crisis.”

In a letter to BP Chief Executive Tony Hayward on Sunday, 54 senators, nearly the entire Democratic caucus, called on the company to set aside $20 billion for cleanup and damages, to be administered by an independent trustee.

The push for an escrow account is one of several strategies planned by the administration this week in an apparent effort to rebut mounting criticism from the left and right that Obama has failed to respond to the disaster with sufficient adroitness or passion.

Before meeting with BP executives Wednesday, the president will travel to the gulf on Monday for his fourth visit since the Deepwater Horizon drilling rig exploded April 20, killing 11 men and starting what has become the largest oil spill in U.S. history. On Tuesday night, the president plans to deliver a nationwide address on the spill and the government’s response.

The federal government and public have become increasingly frustrated with BP after its numerous failed efforts to stop the leak —- and as the original estimate of a 1,000-barrel-a-day problem has been dramatically revised upward. On Friday, federal officials said that number could be closer to 40,000 barrels a day.

During the weekend, Alabama saw the worst effects of the gusher yet on its coastal beaches, where waves of oil mixed with Sargasso seaweed up to 5 inches thick washed ashore. Crews in Gulf Shores, Ala., cleaned up much of it by Sunday morning, but tar balls remained on the sand and an oil sheen was visible on the water. The city government prohibited swimming at a beachfront usually packed this time of year.

“Everybody down here’s so frustrated with the situation, and there’s nothing they can really do about it,” said Grant Brown, the city’s director of recreation and cultural affairs.

Meanwhile, Jon Pack, a BP spokesman, said Sunday that the company would respond in a “very timely manner” to the Coast Guard’s demand to come up with a better plan to contain the oil, but he added that the company would not make the plan public.

BP’s board of directors was scheduled to meet Monday, according to Pack, who would not divulge the agenda.

BP executives have promised to pay all “legitimate” claims arising from the spill, despite a legal cap of $75 million for economic damage. But those promises have not reassured all those affected by the disaster, including fishermen, oil workers and business operators who have lost their livelihoods. Some have feared that BP could declare bankruptcy or be taken over by another company in an effort to limit its liability.

Administration officials downplayed the possibility of a BP bankruptcy but said they wanted a commitment from the oil giant to set aside a substantial fund so claims could be paid quickly.

BP could tap its estimated $7 billion in cash reserves or borrow. But borrowing costs could be higher after two agencies lowered BP’s credit rating from AA+ to AA this month. The company has lost about half of its market value since the disaster. BP said it had shelled out $1 billion toward the containment, cleanup and compensation effort.

On CNN’s “State of the Union,” Alabama Gov. Bob Riley said BP should compensate the tourist industry as well as fishermen and oil workers. “I really don’t care how they do it, whether they set up an escrow account or not,” he said.

“But we have to do something. If you look at what’s going on with the economy and the state of Alabama and Mississippi, Louisiana and now Florida, we’re going to have to have some level of compensation, because our tourist season here is essentially from Memorial Day to Labor Day. And with the beaches the way they are this morning, it’s going to be very, very difficult to sustain the economic balance that we’ve had in the past.”

Asked who should receive compensation among so many far-flung businesses, Riley said, “Every one of them.… I don’t think there is a dividing line.”

Mississippi Gov. Haley Barbour said sensational media coverage had scared away tourists who believe, wrongly, that his state’s beaches had been fouled.

But in Gulf Shores, in neighboring Alabama, there was no denying reality after the onslaught of gooey, viscous oil Saturday. Brown, the city recreation official, said the issue of how to attract visitors amid the mess had become “the million-dollar question.”

Brown said the city would emphasize the many inland water attractions that have not been affected by the spill. However, he said, “The beach is the main draw — and everybody loves to go to the beach.”

Brown laid out some of the long-term threats to the area, including the 40,000 tourism-dependent jobs in Baldwin County. City officials are worried, he said, that the oil could compromise the offshore sand that is dredged each year and used to broaden the resort town’s trademark pearly white beaches.

The drama was also unfolding in tiny, though no less dramatic, ways. Late Saturday, a sea turtle swam through the oily mess and laid a new nest on the south Alabama shore.

Although motorized vehicles are not supposed to help clean up the area used by the turtles, the beach was soon swarming with all-terrain vehicles and heavy equipment, and a vehicle ran over the new nest, said Mike Reynolds of Share the Beach, a volunteer group that protects turtle nests.

Reynolds said volunteers were able to find the nest and safely dig up 127 new ping-pong-ball-size eggs and rebury them in a safe spot.

This was the first nest laid in the area since the oil spill began. It will be fenced off to protect the eggs until they hatch in about two months.

As of Saturday, 374 sea turtles affected by the oil spill had been collected by wildlife authorities, 315 of them dead. Oil was visible on 42 turtles.

richard.fausset@latimes.com

david.savage@latimes.com

Times staff writers Richard Simon in Washington and Kim Murphy in New Orleans and Peter Nicholas of the Washington bureau contributed to this report.