BP makes 1st deposit in compensation fund

BP has made an initial $3 billion US deposit into what is eventually to be a $20-billion fund to compensate victims of the oil spill at one of its wells in the Gulf of Mexico.

The company and the U.S. Justice Department announced Monday that they have finished negotiations on the terms for implementing the fund.

Associate Attorney General Tom Perrelli called the first payment "an important step toward honoring its commitment to the president and the residents and business owners in the Gulf region."

Perrelli said BP still needs to ensure that all the necessary funds will be available if something happens to the BP subsidiary that established the trust and that the department expected to complete arrangements on that with the company in the near future.

Bob Dudley, CEO of BP's Gulf Coast Restoration Organization, said that establishing the trust and "making the initial deposit ahead of schedule further demonstrates our commitment to making it right in the Gulf Coast."

BP had initially said it would make the deposit by the end of September.

The company will deposit an additional $2 billion before the end of 2010, and after that, $1.25 billion will be deposited every three months until the fund reaches $20 billion.

Kenneth Feinberg, the Obama administration's pay czar, takes over processing claims from the compensation fund later this month.

Spill response cost rises to $6.3B US

The announcement came as BP said the costs of responding to the spill had risen to about $6.3 billion.

That includes expenses for relief well drilling, the static kill and cementing procedure done on the blown out oil well, grants to Gulf Coast states and claims paid to people who have lost income or profits because of the spill.

BP PLC said that as of Saturday, more than 145,000 claims had been submitted and more than 103,900 had been paid, totalling $328 million.

Also on Monday, BP slowed the drilling of its relief well to ensure it intersects the broken well bore.

Engineers were drilling the final 30 metres in six- to nine-metre increments, stopping at each stage to check they are still on track, said retired Coast Guard Adm. Thad Allen, the government's point man on the cleanup operation.

Engineers hoped to intersect the leaking well by the end of the week.

The oil is already being kept in its underground reservoir by a temporary measure. Last week, mud and cement were poured through a cap that had been keeping the crude out of the water since July 15. The cap hardened enough over the weekend to create a solid seal, BP said.

BP has always said that the only permanent solution to sealing the leak is the relief well.