New oil spill total is bad news for BP, wildlife
GRAND ISLE, La. (AP) - The mind-boggling news that the oil leak at the bottom of the sea may be twice as big as previously thought could have major repercussions for both the environment and BP's financial health, killing more marine life and dramatically increasing the amount the company must pay in fines and damages.
Scientists now say the blown-out well could have been spewing as much as 2 million gallons of crude before a cut-and-cap maneuver started capturing some of the flow, meaning more than 100 million gallons may have leaked into the Gulf of Mexico since the start of the disaster in April. That is more than nine times the size of the 1989 Exxon Valdez disaster, previously the worst oil spill in U.S. history.
The larger estimates, while still preliminary and considered a worst-case scenario, could contribute to breathtaking liabilities against BP. Penalties can be levied against the company under a variety of environmental protection laws, including fines of up to $1,100 under the Clean Water Act for each barrel of oil spilled.
Based on the maximum amount of oil possibly spilled to date, that would translate to a potential civil fine for simple discharge alone of $2.8 billion. If BP were found to have committed gross negligence or willful misconduct, the civil fine could be up to $4,300 per barrel, or up to $11.1 billion.
"It's going to blow the record books up," said Eric Schaeffer, who led the Environmental Protection Agency's enforcement office from 1997 to 2002.
A larger spill also could lead to increased environmental hazards, with shrimp, crabs and fish such as marlin and swordfish especially hard hit.
"Certainly if there are greater volumes of oil than were originally estimated, that doesn't bode well," said Jim Franks, a fisheries biologist at the University of Southern Mississippi Gulf Coast Research Laboratory. "Do we expect twice the impact? I don't know how to judge that, but that much more oil could not be good at all for fish and wildlife resources. I would anticipate far-reaching impacts."
Days after the spill began, government officials told the public that the ruptured well a mile below the Gulf was leaking 42,000 gallons a day. Then, officials said it was actually five times bigger. That estimate didn't last long either. The new estimates are based on spillcam video as well as such things as satellite, sonar and pressure readings.
The lead scientist in the effort said the most credible range at the moment is between 840,000 gallons and 1.68 million gallons a day.
Another part of the equation is how much more oil started to leak last week after the riser pipe was cut, a step that BP and government officials said could increase the flow by 20 percent. The pipe cut was necessary to install a cap over the well; the cap has captured an estimated 4 million gallons so far.
If the higher-end estimates prove accurate, the leak amounts to an Exxon Valdez every five days or so. At that rate, in just over three weeks from now it will eclipse the worst oil spill in peacetime history, the 1979 Ixtoc disaster in Mexico, which took 10 months to belch out 140 million gallons of oil into the Gulf.
And there's more bad news. The oil gushing from the Gulf contains large amounts of natural gas. Samantha Joye, a professor of marine sciences at the University of Georgia, said that can contribute significantly to oxygen levels plummeting in the water as microbes eat the methane clouds.
In addition to the potential for billions in fines, BP is responsible for paying all cleanup costs and up to $75 million for economic damages. But it could face far heavier expenses if gross negligence is found or if it is determined that there was a violation of a federal safety, construction or operating regulation, Schaeffer said.
"You bet the trial lawyers are sharpening their swords around that language," he said.
And that's not including the tens of billions of dollars in shareholder wealth that has already evaporated with the plunge of BP's stock since the disaster.
New York City Mayor Michael Bloomberg became a lonely defender of BP, declaring the world should not rush to point fingers at the British oil giant. The billionaire tycoon often sides with CEOs and businesses entangled in public relations disasters.
"The guy that runs BP didn't exactly go down there and blow up the well," Bloomberg said on his weekly radio show. "And what's more, if we want them to fix it and they're the only ones with the expertise, I think I might wait to assign blame."
That the BP oil spill may be twice as bad as earlier estimates was hard news to hear but no surprise to Christain Delos Reyes, a 39-year-old oyster dredger.
"Crabs start real small. You know they're all going to die. It'll kill all the oysters. In my opinion, I don't think it'll ever be all right," Reyes said. "I think it's destroyed."
Wanda Kirby, 65, owns the Sandpiper Shores Motel in Grand Isle, La., a couple of hundred feet from where a long strand of bright orange boom slices across the beach to block the oil.
"Whether it's five gallons or five million, I don't care. We don't really need to be wasting time measuring it," she said. "We just need to stop it."
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Weber reported from Houston. Associated Press writers Jay Reeves, John Flesher, Brian Skoloff, Tamara Lush, Ray Henry and Kevin McGill contributed to this report.
Standard travel insurance does not cover oil spill
NEW YORK (AP) - People who are canceling their beach vacations on the Gulf Coast due to the oil spill are getting an unpleasant surprise.
Most experts say travel protection insurance will not cover their airfare. That's because the spill is classified as a man-made disaster, not a natural one.
In contrast, complications from natural disasters, such as when airports are closed by volcanic ash or hurricanes, are covered by standard travel insurance.
Because airports are not affected by the oil spill, most travelers who seek refunds directly from airlines will probably encounter rules similar to those in effect for insurance policies. A traveler who elects to cancel a flight to a beach destination because of the oil spill will probably have to swallow any nonrefundable fares and pay rebooking fees.
Louisiana leaders want Gulf drilling to resume
June 10
NEW ORLEANS (AP) - At the same time they are venting their fury on BP over the Gulf of Mexico spill and its calamitous environmental effects, Louisiana politicians are rushing to the defense of the oil-and-gas industry and pleading with Washington to bring back offshore drilling - now.
As angry as they are over the disaster, state officials warn that the Obama administration's temporary ban on drilling in the Gulf has sent Louisiana's most lucrative industry into a death spiral.
They contend that drilling is safe overall and that the moratorium is a knee-jerk reaction, akin to grounding every airplane in America because of a single crash. They worry, too, that the moratorium comes at a time when another major Louisiana industry - fishing - has been brought to a standstill by the mess in the Gulf.
"Mr. President, you were looking for someone's butt to kick. You're kicking ours," Lafourche Parish President Charlotte Randolph said in pleading for the moratorium to end.
Meanwhile, a government task force of scientists said that before BP cut and capped the blown-out well a week ago, it may have been spewing as much as 2.1 million gallons of oil per day - or twice as much as the government's previous worst-case estimate. The bigger number is just an estimate, and scientific teams are still coming up with more complete numbers.
The oil-and-gas industry is the backbone of the Louisiana economy, bringing in billions of dollars in revenue for the government and accounting for nearly one-third of the nation's domestic crude production.
It took a heavy blow when the government imposed a six-month offshore drilling moratorium in the wake of the spill that has sent tens of millions of gallons of oil into the Gulf in the biggest environmental disaster in U.S. history. The government imposed the ban while it reviews the safety of deepwater drilling in light of the BP disaster.
Louisiana lawmakers have railed against the moratorium, saying it could put more than 100,000 people out of work, shutter businesses and destroy livelihoods. A bill asking the administration to shorten the moratorium passed the Legislature unanimously.
But persuading the administration to take such action could prove to be extraordinarily difficult at a time when globs of oil are fouling marshes and beaches, images of oil-soaked birds are a fixture in the news and no apparent end to the spill is in sight.
Interior Secretary Ken Salazar has acknowledged the potential damage to energy companies and their employees and promised a Louisiana senator the administration would demand that BP compensate businesses for their losses.
The moratorium put a halt to the 33 deepwater exploratory rigs in operation in the Gulf in addition to all new deep-sea drilling permits. Platforms that are already producing oil along with rigs in shallow waters are allowed to remain in operation.
"Every one of these deepwater wells employs directly hundreds of people and indirectly thousands," said Sen. Mary Landrieu of Louisiana. "This is one company. This is one well. It's a terrible situation and no one is making light of it, but what I'm saying, as strongly as I can, to this president is the economic analysis is devastating to many companies, thousands of companies.
BP hopes that it can stem the flow of oil soon and remove some of the heat that has been put on the company and energy industry by politicians, the American public and investors, who have dumped BP stock and driven its price down to the lowest level in 14 years out of fear that the spill could spell the company's ruin.
BP is capturing more oil from the bottom of the sea each day, and expects to siphon even larger quantities by early next week once more heavy equipment arrives. Coast Guard Adm. Thad Allen, who is overseeing the crisis for the government, said BP could be taking in 1.17 million gallons a day by next week, up from the current daily rate of 630,000.
Meanwhile, President Barack Obama on Thursday met with the families of the 11 rig workers who were killed in the April 20 explosion as researchers released their latest findings about the size of the spill, saying that from 1 million to 2.1 million gallons a day may have been leaking before the cap was installed June 3. That is much higher than previous estimates.
U.S. Geological Survey Director Marcia McNutt, who is coordinating the estimates, said the most credible daily flow rate at the moment is between 840,000 gallons and 1.68 million gallons. Researchers do not have figures for after the cap was installed. "Our scientific analysis is still a work in progress," McNutt said.
At the same time, Gulf Coast leaders are tallying up the economic damage.
Trade groups estimate that the 33 deepwater rigs idled the moratorium employed 5,900 to 9,200 people. Rig workers earn up to $1,800 per week, so that amounts to a loss of tens of millions dollars in salaries. In addition, those jobs support an additional 26,000 to 46,000 industry workers.
"It's going to put us out of business," said Glenn LeCompte, owner of a Louisiana catering company that provides food to offshore rigs. "My payroll probably runs about $150,000 a week. That payroll is going to disappear."
Gulf communities already are seeing the livelihoods of thousands of fisherman, property owners and tourism workers jeopardized by the spill. Fishing and tourism contribute $10 billion to Louisiana's $210 billion economy, while energy contributes $65 billion.
"Those two things, fishing and oil, coexist together and form a way of life down here," said Jefferson Parish Council Chairman John Young.
The Energy Department estimates that 25 million barrels of oil production will be lost in 2011 because of the six-month moratorium. That's less than what the country burns in two days, but production will drop even more if the ban is extended to a year or more, as a number of analysts expect.
Many of the drilling jobs could end up going to Brazil, which recently discovered numerous oil fields off its coast. Brazilian oil company Petrobras wants to tap those fields but lacks the rigs.
"They're licking their chops saying, 'We'll take them"' from the U.S., said industry analyst Collin Gerry.
Barry Graham, general manager of Barry Graham Oil Service LCC, which operates 21 petroleum support vessels from Alabama and Louisiana, said he is hoping to avoid layoffs among his 150 employees.
"It's like sitting here waiting for the storm to approach," he said. "You sit and wait for a hurricane when you get the news it's coming. That's what this feels like - just waiting to get hit."
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Associated Press Writers Melinda Deslatte in Baton Rouge, Mary Foster in Port Fourchon, Brian Skoloff in Morgan City, Ray Henry in New Orleans, Harry R. Weber in Houston and Seth Borenstein in Washington contributed to this report. Kahn contributed from New York.
Congress frees cleanup money for Gulf oil spill
WASHINGTON (AP) - Congress is making more money available to the Coast Guard to pay for its response to the BP oil spill in the Gulf of Mexico.
The bill that now goes to President Barack Obama removes the $100 million limit that the Coast Guard can spend on the spill from a government trust fund used to pay cleanup costs. The Coast Guard would run out of money to fight the spill next week if the spending cap is not lifted, said Rep. James Oberstar, D-Minn., chairman of the House transportation committee.
Lawmakers said the federal government will require BP to reimburse the Coast Guard's expenses, but the service needs congressional authority to spend more than $100 million on the largest oil spill in U.S. history.
"While these funds will allow us to continue mounting an all-hands-on-deck, relentless response, our commitment to holding BP accountable for all costs associated with this disaster - both to the federal government and to all affected individuals and businesses suffering losses as a result of this event - has not wavered," Homeland Security Secretary Janet Napolitano said in a statement.
The House voted 410-0 on Thursday to lift the spending cap. The Senate passed the bill on a voice vote Wednesday.
The trust fund, which has about $1.6 billion, is financed by a tax of 8 cents per barrel on oil produced by or imported into the U.S. The House passed a bill last month to increase the tax to 34 cents a barrel. The Senate is considering a bill to increase the tax to 41 cents a barrel.
Rep. John Mica of Florida, the top Republican on the transportation committee, said he supports making the money available to the Coast Guard but wants more assurances that BP will repay the government.
The Coast Guard has so far sent BP two bills. BP paid a $1.8 million bill last week, a few days after receiving it. The Obama administration sent BP a $69 million bill last week. By law, BP has 30 days to pay, said Craig Bennett, director of the Coast Guard's National Pollution Funds Center.
"I have no doubt that BP is going to pay the $69 million," Bennett said.
BP officials have said they will pay all legitimate claims.
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Associated Press writer Eileen Sullivan contributed to this report.
Red tape vexes Gulf residents seeking BP payments
GRAND ISLE, La. (AP) - The reefs that David Walter makes for anglers to drop into the Gulf of Mexico are fake, but his frustration as he tries to win compensation from BP for lost income is real.
State regulators stopped issuing permits for the reefs on May 4 because of the oil spill, effectively killing off $350,000 in Walter's expected business. It sent him into a labyrinth of archived invoices and documents lost by BP. Finally, an offer came: $5,000.
"I said that's not fair because if you say that, then I have to go out of business and I lose everything," said Walter, whose company is based in Alabama.
Fishermen, property owners and businesspeople who have filed damage claims with BP are angrily complaining of delays, excessive paperwork and skimpy payments that have put them on the verge of going under as the financial and environmental toll of the seven-week-old disaster grows.
Out in the Gulf, meanwhile, the oil company on Wednesday captured more of the crude that's been gushing from the bottom of the sea since April and began bringing in more heavy equipment to handle it.
The containment effort played out as BP stock continued to plunge amid fears that the company might be forced to suspend dividends and find itself overwhelmed by the cleanup costs, penalties, damage claims and lawsuits generated by the biggest oil spill in U.S. history.
In a federal filing Thursday, the company said the cost of its response to the oil spill has grown to $1.43 billion.
BP tried to reassure investors before the London Stock Exchange opened Thursday, saying it was in a strong financial position and it saw no reason to justify the U.S. sell-off, and many analysts agree that the company can withstand the crisis.
Shares in BP plunged Thursday in early trading in London. The stock had dropped as much as 11 percent to a 13-year low at the opening as experts warned dividend payouts would likely be postponed. However, it recovered some ground by midmorning, trading 4.3 percent lower at $5.47, as analysts suggested the sell-off was overdone.
Shrimpers, oystermen, seafood businesses, out-of-work drilling crews and the tourism industry all are lining up to get paid back the billions of dollars washed away by the slick, and tempers have flared as locals direct outrage at BP over what they see as a tangle of red tape.
"Every day we call the adjuster eight or 10 times. There's no answer, no answering machine," said Regina Shipp, who has filed $33,000 in claims for lost business at her restaurant in Alabama. "If BP doesn't pay us within two months, we'll be out of business. We've got two kids."
BP spokesman Mark Proegler disputed any notion that the claims process is slow or that the company is dragging its feet.
Proegler said BP has cut the time to process claims and issue a check from 45 days to as little as 48 hours, if the necessary documentation has been supplied. BP officials acknowledged that while no claims have been denied, thousands and thousands had not been paid by late last week because the company required more documentation.
At the bottom of the sea, the containment cap on the ruptured well is capturing 630,000 gallons a day and pumping it to a ship at the surface, and the amount could nearly double by next week to roughly 1.17 million gallons, said Coast Guard Adm. Thad Allen, who is overseeing the crisis for the government.
A second vessel expected to arrive within days should greatly boost capacity. BP also plans to bring in a tanker from the North Sea to help transport oil and an incinerator to burn off some of the crude.
The government has estimated 600,000 to 1.2 million gallons are leaking per day, but a scientist on a task force studying the flow said the actual rate may be between 798,000 gallons and 1.8 million. A task force member said an estimate come Thursday or Friday.
Crews working at the site toiled under oppressive conditions as the heat index soared to 110 degrees and toxic vapors emanated from the depths. Fireboats were on hand to pour water on the surface to ease the fumes.
Allen also confronted BP over the complaints about the claims process, warning the company in a letter: "We need complete, ongoing transparency into BP's claims process including detailed information on how claims are being evaluated, how payment amounts are being calculated and how quickly claims are being processed."
The admiral this week created a team including officials from the Federal Emergency Management Agency to help with the damage claims. It will send workers into Gulf communities to provide information about the process. He also planned to discuss the complaints with BP officials Wednesday.
Under federal law, BP is required to pay for a range of losses, including property damage and lost earnings. Residents and businesses can call a telephone line to report losses, file a claim online and seek help at one of 25 claims offices around the Gulf. Deckhands and other fishermen generally need to show a photo ID and documentation such as a pay stub showing how much money they typically earn.
To jump-start the process, BP was initially offering an immediate $2,500 to deckhands and $5,000 to fishing boat owners. Workers can receive additional compensation once their paperwork and larger claims are approved. BP said it has paid 18,000 claims so far and has hired 600 adjusters and operators to handle the cases.
The oil giant said it expects to spend $84 million through June alone to compensate people for lost wages and profits. That number will grow as new claims are received. When it is all over, BP could be looking at total liabilities in the billions, perhaps tens of billions, according to analysts.
BP stock dropped $5.45, or 16 percent, Wednesday - easily its worst day since the April 20 rig explosion that set off the spill and killed 11 workers. In the seven weeks since then, the company has lost half its market value.
The latest slide came after Interior Secretary Ken Salazar promised a Senate energy panel to ask BP to compensate energy companies for losses if they have to lay off workers or suffer economically because of the Obama administration's six-month moratorium on deep-water drilling. In an interview Thursday on ABC's "Good Morning America," Louisiana Sen. Mary Landrieu reiterated her call to end the moratorium, saying it will cause economic hardship in the region.
"Every one of these 33 deep-water wells employs, directly, hundreds of people and indirectly thousands," she said.
Not everyone had complaints about the claims process. Bart Harrison of Clay, Ala., filed his first claim on Wednesday morning for lost rental income on his coastal property and expected to have a check for $1,010 within a few hours. The only documentation required was tax returns and rental histories for his units, which were both easy to provide.
"The guy I talked to was knowledgeable and respectful," Harrison said. "It seemed like he really wanted to write a check and please me since it was my first time in."
