Schumer, Wyden Ask BP to Halt Payments to Shareholders

This afternoon, Sens. Charles Schumer (D-N.Y.) and Ron Wyden (D-Ore.) called on BP, the British oil company responsible for the catastrophic Deepwater Horizon spill in the Gulf of Mexico, to halt its dividend payments to shareholders until the well is capped and damages determined.

London papers reported today that BP hoped to assure its shareholders that they would continue to get dividend payouts, as the stock declined 15 percent yesterday when the company’s “top kill” effort to seal the leak failed over the weekend. The company’s liability could be as high as $37 billion, Credit Suisse said, and Schumer and Wyden want BP to know what it owes to American citizens and taxpayers before remitting funds to shareholders.

The threat to BP from high liabilities and a falling shareprice might be existential. Reuters blogger Felix Salmon notes, “The most likely fate for BP at this point isn’t death but rather takeover. There’s been a lot of speculation along those lines, and with BP’s leadership looking even weaker than its stock price, the rest of Big Oil is surely salivating at the prospect of picking BP up without much difficulty. What’s more, BP could easily be broken up, like ABN Amro, and divvied up according to its various geographical units.”

BP has spent around $1 billion on cleanup and economic hardship payments to Gulf residents and workers thus far. But today, analysts said that the leak might last until Christmas — six months from now. And in the best-case scenario, BP hopes to plug the leak no sooner than August.

Here is Wyden and Schumer’s letter to Tony Hayward, BP’s chief executive officer:

Dear Mr. Hayward,

We write to you out of concern that you will be announcing a dividend to your shareholders prior to fully covering the cost of the cleanup for the oil spill in the Gulf of Mexico.  Today, several media outlets are reporting that you are expected to hold a conference call this week pledging to maintain BP’s dividend.

We find it unfathomable that BP would pay out a dividend to shareholders before the total cost of BP’s oil spill clean-up is estimated.  The total cost of the clean-up estimates could reach $37 billion if the well leaks until relief drilling is completed in August, according to Credit Suisse Group AG.  While we understand the need to reassure shareholders that the disaster in the Gulf will not substantially impact BP’s long term financial health, we are concerned that such action to move money off of the company’s books and into investors pockets will make it much more difficult to repay the U.S. government and American communities that are working around the clock to stem the damage caused by this devastating oil spill.

We urge you to reconsider your dividend pledge until accurate costs of clean-up and liability claims can be estimated. We are certainly not opposed to BP paying dividends after the well is capped, clean-up has been completed, and the victims have been justly compensated. But the families of those who have perished in this disaster, the industries that have been devastated from the ecological damage along the coasts, and the individuals who are sacrificing their health and safety to stem the damage deserve to know that BP will fulfill its obligations to them before its shareholders.

Sincerely,

U.S. Senator Charles E. Schumer

U.S. Senator Ron Wyden