Pipe Down, Limeys!

The Brits are growing antsy over American efforts to halt BP dividends until the oil spill is fully paid for. While BP certainly is a large and profitable company, Credit Suisse has estimated that total costs could approach $37 billion dollars, composed of $15 to $23 billion in cleanup costs and $14 billion in claims. This calculation assumes that oil stops leaking in August upon the completion of relief well drilling, which might not be the case as the Ixtoc Spill shows. This similar, but much shallower, spill continued to leak for three months after the first relief well was completed. While claims are currently capped at $75 million, BP has stated that they will pay all valid claims (not that I believe them), and the cap could be lifted. In either case, BP owes American society the full amount of these claims.

BP is expected to earn $34 billion this year, of which $20 billion is reserved for capital investments and $10.5 billion is slated for dividends. BP also currently has $7 billion of cash on hand and $15 billion of borrowing capacity. Assuming full dividends are paid, a maximum of $25.5 billion of total liquidity would be available this year to pay claims and cleanup costs. This amount falls far short of the current estimate of $37 billion or more that BP owes America for the costs and damages of the spill.

Paying the dividend to shareholders before the spill is fully paid for would amount to fraudulent conveyance if BP is in fact unable to meet its obligations, or decides to pursue bankruptcy voluntarily. In other words, paying the dividend is stealing from Americans who have been harmed by this spill, and from American taxpayers who are currently funding a large part of the cleanup efforts. It is essential that BP does not pay the dividend and escrows funds for damages and the cleanup.

Britain, your call to allow BP to keep paying dividends harms the victims of this disaster and America. I kindly request that you keep silent, unless you would like to foot the bill in BP's place.

[New York Times]