WASHINGTON (AP) — President Barack Obama and BP reached agreement Wednesday on a $20 billion fund to compensate victims of the disastrous oil spill in the Gulf of Mexico, and the giant British company’s chairman apologized to America for the worst environmental accident in the nation’s history.

BP is suspending its dividends to shareholders to help pay for the costs, said chairman Carl-Henric Svanberg.

Obama announced the agreement after a four-hour meeting with BP officials. He also said the company had agreed to set up a separate $100 million fund to compensate oil rig workers laid off as a result of his six-month moratorium on deepwater drilling.

“The structure we are establishing today is an important step toward making the people of the Gulf Coast whole again, but it will not turn things around overnight,” Obama said. He said the vulnerable fishermen, restaurant workers and other people of the Gulf “are uppermost in the minds of all concerned. That’s who we’re doing this work for.”

Likewise, Svanberg, speaking for a company that has been assailed from every corner for the past two months, said, “I hear comments sometimes that large oil companies are — are greedy companies or don’t care, but that is not the case in BP. We care about the small people.”

The claims system sets up a formal process to be run by a specialist with a proven record. Instead of vague promises by BP, there will be a White House-blessed structure with substantial money and the pledge that more will be provided if needed. The news was applauded in the Gulf — a rare positive development in a terrible two-month period since the April 20 explosion that killed 11 workers and unleashed a flood of oil that has yet to be stemmed.

Company officials talked separately outside the White House.

Svanberg announced the dividend suspension and expressed sorrow for victims of the spill. “This tragic accident … should have never happened,” he said, and he also used the occasion to “apologize to the American people.”

Obama said the independent fund will be directed by lawyer Kenneth Feinberg, who oversaw payments to families of victims of the Sept. 11, 2001, terrorist attacks. There will be a three-member panel to adjudicate claims that are turned down.

“This is about accountability. At the end of the day, that’s what every American wants and expects,” Obama said.

BP would pay $5 billion a year over the next four years to set up the $20 billion fund.

“The people of the Gulf have my commitment that BP will meet its obligations to them,” Obama said. “This $20 billion amount will provide substantial assurance that the claims people and businesses have will be honored.”

He emphasized that the $20 billion was “not a cap” and that BP would pay more if necessary.

The eight-week disaster in the Gulf, with oil still pouring from the broken well, is jeopardizing the environment as well as the livelihoods of tens of thousands of people across the coastal areas of Louisiana, Mississippi, Alabama and Florida.

BP has taken the brunt of criticism about the oil spill because it was the operator of the Deepwater Horizon rig that sunk. It also is a majority owner of the undersea well that has been spewing oil since the explosion, which killed 11 workers.

But when the day of reckoning finally comes, BP may not be the only one having to pay up. That’s because Swiss-based Transocean Ltd. owned a majority interest in the rig. Anadarko Petroleum, based in The Woodlands, Texas, has a 25 percent non-operating interest in the well.

Word of the fund was well received on the Gulf Coast. Applause broke out during a community meeting in Orange Beach, Ala., when Mayor Tony Kennon briefed participants on the White House meeting.

“We asked for that two weeks ago and they laughed at us,” Kennon said. “Thank you, President Obama, for taking a bunch of rednecks’ suggestion and making it happen.” Obama visited Orange Beach on Monday.

In Washington, Senate Majority Leader Harry Reid, D-Nev., also sought to take some credit. “While this fund will in no way limit BP’s liability, it is a good first step toward compensating victims,” he said. Reid and other Senate Democrats proposed a $20 billion BP-financed fund earlier in the week.

Feinberg, the official who will direct the effort, is currently known as Obama’s “pay czar,” setting salary limits for companies getting the most aid from a $700 billion government bailout fund. He also ran the $7 billion government compensation program after the 2001 terrorist attacks. It was a job that lasted nearly three years as he decided how much families should get, largely based on how much income victims would have earned in a lifetime.

As pay czar, Feinberg has capped cash salaries at $500,000 this year for the vast majority of the top executives at the five major companies that received bailout funding: American International Group, GMAC Financial Services, Chrysler Financial, Chrysler and General Motors.

The president met at midday with the top BP leaders to press the London-based oil giant to pay giant claims.

Wednesday’s White House meeting came the morning after Obama vowed in a TV address that “we will make BP pay for the damage their company has caused.”

For the president, Wednesday’s meeting with a few company officials behind closed doors was a bookend to his attempt to reach millions at once. Using a delivery in which even the harshest words were uttered in subdued tones, Obama did not offer much in the way of new ideas or details in his Tuesday night speech. He recapped the government’s efforts, insisted once again that BP would be held to account and tried to tap the resilience of a nation in promising that “something better awaits.”

Obama’s forceful tone about BP’s behavior shows how far matters have deteriorated. The White House once described BP as an essential partner in plugging the crude oil spewing from the broken well beneath nearly a mile of water. Now Obama says BP has threatened to destroy a coastal way of life.

An Associated Press-GfK poll released Tuesday showed 52 percent now disapprove of Obama’s handling of the oil spill, up significantly from last month and about the same as President George W. Bush’s rating after Hurricane Katrina. Most people — 56 percent — think the government’s actions in response to the oil disaster really haven’t had any impact on the situation.

Copyright 2010 The Associated Press.