ENVIRONMENT
08/11/2010 05:55 pm ET Updated May 25, 2011

BP Links Compensation With Continued Oil Production In The Gulf

BP has managed to link the fate of its $20 billion oil spill victims compensation fund with its continued ability to pump oil from the Gulf of Mexico.

The voluntary trust agreement negotiated with the Department of Justice is not with the British-based multinational, or even with BP America, but with a fairly remote subsidiary, BP Exploration & Production Inc. (BPEC) -- a Delaware corporation that operates BP's Gulf oil leases.

So if BP's drilling revenues from the Gulf suddenly vanished, so, presumably, would the compensation fund, said Tyson Slocum, director of Public Citizen's Energy Program.

"This is a very advantageous agreement from BP's point of view," Slocum told the Huffington Post. "Because their big concern is that the Deepwater Horizon incident would result in sanctions that would significantly reduce BP's involvement in lucrative Gulf operations."

"But if you tie the compensation fund to Gulf of Mexico production, you are helping to guarantee BP's continued involvement in that market," he said.

Technically, the agreement (exclusively available on the Huffington Post) sets up yet another subsidiary to hold the collateral for the compensation fund. That collateral is to consist of "first priority perfected security interests in production payments pertaining to the Grantor's U.S. oil and natural gas production."

"It will create a problematic situation if one arm of the federal government is attempting to hold BP criminally accountable and includes sanctions that would include loss of leasing rights -- while another arm of the administration is seeking to enforce the trust agreement," Slocum said.

Although the same people would not be making decisions about criminal sanctions and victim compensation, Slocum acknowledged, they all ultimately work for the same person.

"The president's objective I think all along has been to secure financing from BP," said Slocum. "Secondary to that is holding this company criminally negligent for the death of 11 workers and for the largest environmental disaster in American history."

Now, he said, "I think there is a conflict between the two."

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Dan Froomkin is senior Washington correspondent for the Huffington Post. You can send him an e-mail, bookmark his page; subscribe to his RSS feed, follow him on Twitter, friend him on Facebook, and/or become a fan and get e-mail alerts when he writes.