A proposal to use revenue from BP’s oil and gas wells in the Gulf of Mexico to ensure the solvency of a $20 billion escrow fund for victims is a bad idea because it will create a conflict of interest for the government and make it a partner in Gulf oil production, Public Citizen told the administration today.

In a letter sent to President Barack Obama, Public Citizen noted that the proposed arrangement creates two main conflicts:

1)    The proposal would inhibit the government’s ongoing criminal probes of the company. The government would be reluctant to mete out harsh sanctions to BP – such as banning the company from federal leases in the Gulf – if the victims’ fund relies on BP revenue from the Gulf.

2)    BP’s management problems are well-known and deep. The company has one of the worst environmental and worker safety records in the business. If the escrow fund is conditional on offshore drilling profits, would the administration address BP’s systemic safety problems that the Deepwater Horizon incident has exposed?

“The proposed arrangement is wildly inappropriate, as it will make the government and BP virtual partners in Gulf oil production,” said Tyson Slocum, director of Public Citizen’s Energy Program. “It will give the government a financial incentive to become an even bigger booster of offshore oil drilling in the Gulf – which was the fatal flaw of the Minerals Management Service at the time of the BP disaster.”

Public Citizen urges the administration to change the way the fund is structured to ensure the government can remain unbiased and prioritize the public’s interest – not BP’s interests.

The letter is available at http://www.citizen.org/Page.aspx?pid=4060.

The written agreement between BP and the White House is available at http://www.citizen.org/documents/2010-8-9TrustAgreement.pdf

More quotes from Tyson Slocum on why the funds structure is problematic:

Bloomberg: ” It’s to their advantage to have an upper hand with an open-ended criminal investigation still pending,” Tyson Slocum, director of the group’s energy program, said in an interview. “The upper hand is an agreement that directly links a continued robust presence by BP in the Gulf of Mexico to financing an Obama administration priority, the victims’ fund.”

Huffington Post:  “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.”

Tyson Slocum is the Director of Public Citizen’s Energy Program

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