Make Compensatory Payments in the Gulf Coast NOW!

We need not wait for a lawsuit or even a federal investigation to start doing something to help the thousands of victims of the oil spill in the Gulf region. The Obama administration should appoint a special master, someone with the same credibility and mediation skill that Ken Feinberg had when he was appointed to administrator the 9-11 Fund. There are many skilled mediators with the experience to oversee the allocation of large compensation funds to thousands of claimants following a court decision regarding corporate liability for an accident or a disaster. In this case, since BP has already indicated that it accepts responsibility for what has happened, it makes no sense to wait.

Once the Oil Spill Master has been appointed, BP should make a payment of at least $2 billion into a Compensation Fund. This could be administered by any one of several large foundations at no or very low cost. Any commercial enterprise that has been adversely affected by the spill (or the failed efforts to clean it up) need only produce a record of what its revenues were during this same period last year and sign a statement indicating that it is unable to operate normally because of the spill, and it would be eligible for immediate aid. The funds would take the form of a non-taxable gift from the foundation. The Special Master and his or her staff would allocate compensation funds to make up for real losses (not emotional distress or punitive damages). Everything allocated over the next six months could be incorporated into whatever the court's final tally is regarding BP's liability and penalties. In the meantime, this would keep the economy of the region alive, protect those at the bottom of the income scale, and allow quick action to protect sensitive environments.

I realize that the Special Master and his or her staff would have to be on the lookout for fraudulent claims, and this would take a little time. But the Special Master could employ private investigators and hold anyone receiving funds criminally liable for any fraudulent claims they might make.

Government agencies could apply to this Fund for money to undertake independent clean-ups of beaches and environmentally sensitive areas along the cost. They might even apply for funds that coastal cities and towns could use to undertake clean-ups. The Special Master would probably need to create a small science advisory committee (calling on university scientists in the region) to quickly review proposed clean-up plans. Since these are not, for the most part, technically complex, the Special Master would only need to determine whether responsible and capable parties had been selected to undertake the clean-ups.

Environmental organizations and industry trade groups might also be allowed to apply to the Fund if they could put together a plan that convinces the Special Master that the money they are requesting will be used to (1) create jobs for those whose livelihoods are immediately threatened by the BP disaster; (2) take short term clean-up actions that will protect fragile environments and threatened species; (3) take short-term actions that will keep the regional economy alive.

By all accounts, BP will eventually owe upwards of $20 billion. So, handing over to a federally-appointed Special Master one-tenth of that amount will hardly affect whatever court battles are to come. The Exxon Valdez penalties (of $6 billion) were ultimately cut in half by higher appeals court. None of that money was allocated for decades after the disaster because of the drawn-out legal appeals process. Those who needed the help the most got nothing in the short term.

Let's not wait for a court decide what BP's liability is. I don't think the company will in any way risk extending its liability by offering to put up $2 billion (less than half of its regular monthly profits) before any court makes a decision about the scope of responsibilities. In fact, a preemptory move of this kind would probably enhance the company's standing in the eyes of the court and in the eyes of the public. The longer we wait to take compensatory action, the more extensive the damage will be.