June 14, 2010: Gulf oil response

>> THE GULF OIL BLOWOUT IS

CROWDING PRESIDENT BARACK

OBAMA'S AGENDA THIS WEEK.

HE'S IN THE REGION FOR AN

OVERNIGHT VISIT TODAY AND

TOMORROW HE'LL USE HIS FIRST

OFAL OFFICE ADDRESS TO

TARGET B.P..

THE PRESIDENT PLANS TO FORCE

BRITISH PETROLEUM TO CREATE

A COMPENSATION FUND FOR

ECONOMIC VICTIMS OF THE

SPILL.

>> INCREASINGLY FRUSTRATED

BY THE SLOW PACE OF GULF OIL

SPILL COMPENSATION,

PRESIDENT OBAMA WANT B.P. TO

CREATE AN INDEPENDENTLY

OPERATED ESCROW ACCOUNT

HOLDING AS MUCH AS $0

BILLION.

SENIOR ADVISOR DAVID AXELROD

SAYS THE PRESIDENT IS

CONFIDENT B.P. WILL

COOPERATE ONE WAY OR

ANOTHER.

>> WE WILL USE ALL THE LEGAL

AUTHORITY THAT WE HAVE.

AND WE BELIEVE THAT IT IS

ULTIMATELY IN THEIR INTEREST

AS WELL.

GIVEN THE LEVEL OF PUBLIC

OUTRAGE.

>> PRESIDENT OBAMA ALSO

WANTS B.P. TO SUSPEND ITS

$10 BILLION ANNUAL DIVIDEND

SAYING THE COMPANY SHOULDN'T

BE PAYING STOCKHOLDERS

BEFORE COMPENSATES GULF

FISHERMAN AND BUSINESS

OWNERS ESPECIALLY BECAUSE

THE REGION'S ECONOMY IS

ENTERING A CRITICAL PERIOD

SAYS ALABAMA GOVERNOR BOB

RILEY.

>> WE ARE GOING TO HAVE TO

HAVE SOME LEVEL OF

COMPENSATION BECAUSE OUR

TOURIST SEASON HERE IS

ESSENTIALLY FROM MEMORIAL

DAY TO LABOR DAY.

>> WHILE SOME LEGAL EXPERTS

SAY CALLING FOR THE CREATION

OF AN ESCROW ACCOUNT IS

LEGALLY SOLID, FORCING B.P.

TO SUSPEND ITS SHAREHOLDER

DIVIDEND COULD BE MORE

DIFFICULT.

THE ISSUE COULD COME TO A

HEAD WHEN OBAMA

BEATS-- MEETS WITH TOP B.P.

OFFICIALS LATER IN THE WEEK.

WITH ME NOW ARE ZYGMUNT

PLATER WHO CHAIRED ATLAS

KHALIL TASK FORCE IN THE

AFTERMATH OF THE EXXON

VALDEZ PILL AND JOE

PETROWSKI.

THERE HAS BEEN THE QUESTION

OF WHETHER THE PRESIDENT HAS

THE LEGAL AUTHORITY TO DO

THIS DOES HE DEFINITIVELY

HAVE THAT POWER.

>> NOTHING IS DEFINITIVE BUT

YES THERE ARE TWO BASES THAT

I CAN FIGURE OUT.

ONE IS THAT IF THERE IS A

LAWSUIT OF ALMOST ANY KIND

FILED BY THE FEDERAL

GOVERNMENT WHERE THERE IS A

BIG FINANCIAL PROSPECT, THEY

ASK ASK FOR A LIEN TO BE PUT

ON BY A JUDGE AND THAT'S

JUST A MATTER OF COURSE.

THE SECOND WAS SUGGESTED BY

MY COLLEAGUE, HE SAID IF YOU

LOOK VERY CAREFULLY AT THE

LEASES THERE IS A SURETY

BOND PROVISION NORMALLY IT

JUST SORT TOFF SECURE THE

ROYALTY PAYMENT BUT IT SAYS

FOR OTHER CIRCUMSTANCES AND

ACTIONS THAT ARISE.

AND THEY COULD EASILY CHANGE

THE SURETY BOND REQUIREMENTS

UNDER THE LEASES SO AS TO

COVER THE POTENTIAL FOR THE

SPILL.

OR A BLOWOUT.

AND THAT WOULD BE VERY

SUBSTANTIAL.

>> JOE, LET ME BRING NEW

HERE.

AND OF COURSE YOU'RE NOT IN

THE DRILLING BUSINESS.

ARE YOU ESSENTIALLY IN THE

DELIVERY BUSINESS.

SO WOULD YOU LOOK AT THIS

AND YOU SEE WHAT B.P. IS

DOING AND THIS TALK OF

DIVIDENDS TODAY STORKTS OF

TAKES US BACK TO THE BANKING

BONUS US THAT WE WERE

HEARING ABOUT LAST YEAR WHEN

WE WERE BAILING OUT BANKS

AND PEOPLE ARE ALREADY

WONDERING WHY THERE IS

CONCERN ABOUT PAYING OUT

DIVIDENDS WHEN THERE A

FISHERMAN, THE COMMERCE,

EVERYTHING THAT IS HAPPENING

DOWN THERE ON THE COAST.

SO ARE THEY LEGALLY

OBLIGATED TO BE CONSIDERING

DIVIDENDS.

WHY IS THAT DISCUSSION EVEN

HAPPENING AND ON THE TABLE.

>> I DON'T THINK THEY ARE

LEGALLY OBLIGATED TO PAY

DIVIDENDS.

THAT IS ALWAYS AT THE

DISCRETION OF THE BOARD OF

DIRECTORS AND THE

MANAGEMENT.

I DO REALIZE THAT I

UNDERSTAND A LOT

OF-- PENSIONERS ESPECIALLY

IN BRITAN ARE DEPENDING ON

B.P. PAYMENTS FOR THEIR

PENSIONS BUT I WOULD THINK

WHERE I RUNNING B.P. A

HIGHER PRIORITY WOULD BE TO

START TO CREATE THAT FUND.

AND WHETHER IT'S 20 BILLION

OR MORE AS IT COULD BE, B.P.

HAS WHERE THE WITH ALL TO

FUND SOMETHING THAT SIZE.

I HAD HEARD TALK EARLIER

THAT PEOPLE ASKING FOR AS

MUCH AS A HUNDRED BILLION

PUTTING ASIDE WHETHER THAT

IS GOING TO BE THE ULTIMATE

COST, I THINK THEY WOULD

HAVE VERY DIFFICULTY WITH

THE UPPER LEVEL NUMBER AND I

DON'T THINK IT WHAT BE IN

ANYONE'S INTEREST TO FORCE

B.P. AT THIS TIME INTO

BANKRUPTCY.

I THINK IT'S IMPORTANT THEY

STICK AROUND AND PAY WHAT IS

THEIR OBLIGATION AND

RESPONSIBILITY.

>> HAVE THEY FINALLY BEEN

BACKED INTO A CORNER IN A

SENSE HERE.

BECAUSE WE KEEP HEARING FROM

REPORTERS.

WE KEEP HEARING FROM THE

GOVERNMENT OFFICIALS DOWN

THERE.

WE KEEP HEARING FROM

EVERYONE HOW THEY ARE IN

CONTROL.

THE PRESIDENT MAY BE DOWN

THERE TODAY, BUT THERE IS

THE FIRST TIME THAT HE HAS

REALLY SHOWN CONCRETE

LEADERSHIP BY STAYING

OVERNIGHT, BY REALLY

IMMERSING HIMSELF IN IT.

BY DOING THE FIRST OVAL

ADDRESS TOMORROW.

IS HE REALLY TAKING CONTROL

OR ARE THEY STILL GOING TO

BE DRIVING OVER THIS.

>> WE SAW THIS IN ALASKA

TOO.

THE COMPANY HAS A MONOPOLY

REALLY ON AVAILABLE

EQUIPMENT AND READY MONEY.

AND THE QUESTION IS TO WHAT

DEGREE THE GOVERNMENT IS

GOING TO BE ABLE TO TAKE

COMMAND-- COMMAND.

OBAMA REALLY INHERITED A

TICKING TIME BOMB BECAUSE

THE PRIOR ADMINISTRATION,

PLURAL, HAD NOT MADE SURE

THAT THE CONTINGENCY PLAN

HAD REAL CONTROL CAPABILITY

FOR THE FEDERAL AND STATE

GOVERNMENT.

THAT OBVIOUSLY IS GOING TO

CHANGE IN THE FUTURE.

BUT NOW THEY'RE TRYING TO

PLAY CATCH-UP.

AND HAVING THE PRESIDENT

THERE REALLY HELPS.

AND IT'S A JAWBONING.

AS JOE WAS SAYING, IT SEEMS

TO ME THAT THE COMPANY IS

GOING TO FEEL OBLIGED TO DO

SOMETHING EVEN THOUGH THE

PENSIONER WAS LIKE THOSE

DIVIDENDS, YOU CANNOT HIDE

THE FACT THAT SOMETHING

TERRIBLE HAS HAPPENED AND

THE COMPANY IS GOING TO BE

HIT.

I'M GUESSING THAT THE

PRESIDENT'S APPEARANCE THERE

WILL BE PART OF THE PR

ATMOSPHERE THAT MAKES B.P.

MAKE CONCESSIONS WITHOUT

HAVING TO BRING THE LAWSUITS

OR DO THE LEGAL MANEUVERS

THAT I TALKED ABOUT.

>> WHERE DO THEY GO FROM

HERE?

THERE IS TALK ABOUT

BANKRUPTCY FILINGS.

IF THIS KEEPS ESCALATING AND

IF A HURRICANE COMES IN AND

REALLY DISRUPTS THE EFFORTS

DOWN THERE, THE CLEANUP

EFFORTS AND CONTAINMENT

EFFORTS, THAT BEEF COSTS

WILL BALLOON OUT OF CONTROL

AND THERE IS A POSSIBILITY

OF BANKRUPTCY.

DO YOU HAVE ANY SENSE HOW

THEY MIGHT NAVIGATE THIS

FINANCIALLY GOING FORWARD?

>> WELL, I DONE THINK

THEY'LL GO BANKRUPT.

I DON'T THINK IT'S IN

ANYONE'S INTEREST FOR THEM

TO GO BANKRUPT.

PRIOR TO THIS BLOWOUT THERE

ARE THEIR FREE CASH FLOW WAS

WELL IN EXCESS OF $50

BILLION A YEAR AND INCOME

WAS $20 BILLION.

THE REAL QUESTION IS WHAT

WILL THEY BE ABLE TO DO

GOING FORWARD.

HOW MUCH IS THERE FRANCHISE

IMPAIRED.

REMEMBER, ASSUMING WE'RE

GOING TO DO DRILLING AGAIN,

AND I HOPE WE DO, I HOPE

THIS DOESN'T END DRILLING

OFFSHORE, I THINK THAT WOULD

MAKE OTHER PEOPLE PAY FOR

B.P.'S MISTAKE.

>> AREN'T THEY TOO POWERFUL

TO BE IMPAIRED AT ALL.

AND I COME AT THIS AT THE

PERSPECTIVE, I HAVE BEEN

COVERING NEWS FOR SO LONG

THAT THE PUBLIC REALLY HAS A

SHORT MEMORY.

LOOK AT EXXON VALDEZ, A

WHOLE GENERATION DOESN'T

KNOW WHAT HAPPENED THERE.

>> THIS WON'T FORGOT

EVERYONE.

AND I THINK THEY MAY GO

BANKRUPT.

THE WAY I ESTIMATE IT, EXXON

PAID OUT BETWEEN $4 AND 5

BILLION.

DO YOU KNOW HOW MANY PEOPLE

LIVE ALONG THE COAST OF

ALASKA?

>> I DON'T.

>> BETWEEN 30 AND 40,000

PEOPLE.

DO YOU KNOW HOW MANY PEOPLE

LIVE IN THE IMPACTED AREAS

OF THE GULF.

>> CONSIDERLY MORE.

>> BETWEEN 4 AND 6.5 MILLION

DEPENDING ON HOW FAR AROUND

FLORIDA IT GOES.

A HUNDRED TIMES LARGER.

THE ECONOMY IS A GREAT DEAL

BIGGER.

AND IT'S A HELL OF A LOT

HARDER TO CLEAN A MARSH THAN

A ROCKY LEDGE.

SO MY THOUGHT IS THAT $25

BILLION IS A BARE MINIMUM

THAT B.P. WILL FACE.

BUT THEY WILL TRY, REMEMBER,

TO TRY TO FOB OFF A LOT ON

TRANSOCEAN AND ON

HALLIBURTON.

THEIR CONTRIBUTION

PROVISIONS.

>> THERE GOING TO BE A FIGHT

ABOUT THE INDEMNIFICATION

CONTRACTS AND STUFF LIKE

THAT.

BUT IF B.P. ENDS UP BEING

HIT FROM ALL OF THE DAMAGES

FROM THIS BLOWOUT, I'M

GUESSING THAT $25 BILLION IS

A VERY SMALL NUMBER.

>> JOE WHAT IS THE LEGACY OF

EXXON VALDEZ IN TERMS OF HOW

INDUSTRY OPERATES NOW.

BECAUSE WE'RE ALSO HEARING

HOW MANY SHORTCUTS B.P. WAS

TAKING.

HOW WE GOT TO THIS POINT

NOW.

>> WELL, IF THERE IS ANY

SILVER LINING ON SOMETHING

AS TRAGIC AS THIS IS THAT IT,

I AS A CEO SIT THERE AND SAY

THAT CONTINGENCY PLANNING IS

OUR NUMBER ONE PRIORITY.

>> WAS IT NOT A NUMBER ONE

PRIORITY, DO YOU THINK FOR

BEP BOOEP GOING INTO THIS.

>> I THINK ALL BUSINESSES

THERE COMES SOME COMPLACENCY.

WHAT WE'VE SEEN WHETHER IT

IS IN THE FINANCIAL CRISIS

OR WHAT HAS JUST HAPPENED

HERE, WE'RE NOT VERY GOOD AS

ESTIMATES WHAT IS CALLED

TAIL RISK ON WALL STREET.

AND WE PRESCRIBE TOO MANY

THINGS AS ONCE IN A THOUSAND

YEAR EVENTS.

AND THEY REALLY AREN'T.

AND WE TRAIN EVERY DAY.

BECAUSE WE'RE HANDLING

250,000 BARRELS, BRINGING IN

TO OIL TERMINALS HERE IN

BOSTON.

WE HANDLE VESSEL LOADS OF

OIL.

I THINK WE TRAIN OUR PEOPLE

VERY WELL.

BUT HAVING ALL OUR PEOPLE

SEE SOMETHING LIKE THIS IS

BETTER THAN ANY TRAINING

MANUAL TO SAY PAY ATTENTION,

THESE THINGS ARE REAL AND

CROSS EVERY T, DOT EVERY I.

AND BE A GOOD STUART.

>> NEXT STEPS ARE COMMITTEE

HEARINGS LATER THIS WEEK AND

OF COURSE THE PRESIDENT'S

ADDRESS.

LIKE I SAID, THE FIRST

ADDRESS FROM THE OVAL OFFICE

WHICH IS PRETTY MAJOR COMING

TOMORROW NIGHT.

JOE PETROWSKI, ZYGMUNT

PLATER, THANK YOU VERY MUCH

FOR COMING.

>> THANK YOU.

>> ONCOMING UP NEXT.