Should BP Anticipate Hold Up?

A number of US Senators are calling for BP to create an escrow fund from which those affected by the spill off of Louisiana could be compensated. This very well could be a good idea. It might insure that funds will be available to all claimants and it might relieve BP from long term commitments. But how vulnerable does it leave BP to possible hold up problems?

Suppose experts estimate the price tag at $20 billion (or $30 billion or whatever) and BP funds this. What would keep the government from coming back later and claiming that the actual costs are greater? In fact, I would expect that whatever deal is reached would include contingencies under which BP would have to pony up more funds. It is just too difficult to foresee all of the costs from such a singular event. But this leaves BP vulnerable to later claimants to arguing that the conditions are met when they might not be. Anticipating this BP is likely to drag its feet. It might low ball estimates and put up more onerous conditions than optimal knowing that it will have to relax them later. In the end, it would not free them from long term commitments and they are likely to suffer continued reputation loss for decades.