UPDATE 2-Apology to BP's Hayward triggers uproar
* Texas Republican decries White House "shakedown"
* White House quickly denounces
* "Outrageous," says VP Biden
* Some other Republicans also criticize $20 billion fund (Recasts with Barton retracting statement, adds Biden, Gibbs comments)
WASHINGTON, June 17 (Reuters) - A Republican U.S. representative apologized to BP CEO Tony Hayward on Thursday, saying BP (BP.N) (BP.L) was victim of a White House "shakedown" by having to set up a $20 billion Gulf oil spill fund, a comment that angered both Democrats and Republicans.
Joe Barton of Texas, a major recipient of oil and gas industry campaign contributions, received such ridicule for his unusual apology to the oil giant that he later retracted his statement.
At the start of a congressional hearing featuring testimony from Hayward, Barton said it was "a tragedy of the first proportion that a private corporation can be subjected to what I would characterize as a shakedown, a $20 billion shakedown."
"I'm speaking totally for myself, I'm not speaking for the Republican Party ... but I'm ashamed of what happened in the White House yesterday," Barton told Hayward.
Hours later, Barton retracted his statement, after Vice President Joe Biden condemned the comments as "outrageous" and the Republican leaders of the House of Representatives issued a joint statement denouncing them.
"I apologize for using the term 'shakedown' with regard to yesterday's actions at the White House in my opening statement this morning, and I retract my apology to BP," Barton said.
He added: "I regret the impact that my statement this morning implied that BP should not pay for the consequences of their decisions and actions in this incident."
Barton's statement had put his own Republicans on the defensive and gave hope to Democrats searching for any way to fend off expected losses to Republicans in Nov. 2 congressional elections.
At the White House, President Barack Obama shook his head in response and said, "I don't know why anyone would say that," said spokesman Robert Gibbs.
Obama on Wednesday pressured BP to set up the compensation fund for the Gulf spill during a meeting at the White House.
"I find it incredibly insensitive, incredibly out of touch," Biden told reporters. "There's no shakedown. It's insisting on responsible conduct and a responsible response to something they caused."
Barton's position was politically perilous because Americans largely blame BP for the devastating spill and want the huge company to pay for it.
His stance was bound to be unpopular in the Gulf region, where the spill is wreaking havoc on the economy -- fishermen are out of work and hotel and restaurants are struggling in an area heavily dependent on tourism.
Republican House leaders John Boehner, Eric Cantor and Mike Pence disassociated themselves from Barton.
"Congressman Barton's statements this morning were wrong. BP itself has acknowledged that responsibility for the economic damages lies with them and has offered an initial pledge of $20 billion dollars for that purpose," they said.
Even Hayward disagreed with Barton's description of the escrow account as a "slush fund."
"I certainly don't think it was a slush fund," he told the hearing.
The White House's Gibbs said Republicans should ask themselves whether Barton should be their party's leading representative on the House Committee on Energy and Commerce. There was some talk of Barton losing his position.
BARTON NOT ALONE
But Barton was not alone among Republicans who question the $20 billion fund.
Georgia Representative Tom Price, chairman of the Republican Study Committee, a group of conservative House members, issued a statement arguing the same point.
Price said BP's willingness to go along with the White House's new fund suggests that the Obama administration is "hard at work exerting its brand of Chicago-style shakedown politics."
And former Texas Republican Representative Dick Armey, who was House majority leader and is a leading voice in the conservative Tea Party movement, told a Christian Science Monitor breakfast this week that Obama lacks the constitutional authority to set up such a fund.
In addition, conservative Republican Representative Michele Bachmann of Minnesota told the Heritage Foundation think tank that the escrow account was a "redistribution-of-wealth fund."
Barton is the biggest recipient of oil and gas industry campaign contributions in the House of Representatives, according to the nonpartisan Center for Responsive Politics.
Its data showed that Barton has collected $1,447,880 from political action committees and individuals connected with the oil and gas industry since 1989.
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