Monday, June 14, 2010

BP's Troubled Waters

Obama and others are demanding cash -- now. Ironically, it may turn out that BP will hire many unemployed workers to clean the mess now accumulating in the Gulf. For taxpayers, this is good news. Instead of collecting government benefits, formerly unemployed workers might begin collecting paychecks from BP. Moreover, all the businesses harmed by the leaking oil will most likely receive full compensation from BP. Of course to ensure BP's ability to write checks to injured parties, the government should consider opening more territory to oil drilling. That way BP will have the funds to pay all its bills, even if the bills are inflated by opportunists.

BP Submits Capture Plan, Obama Seeks Escrow Account

June 14 (Bloomberg) -- BP Plc sent a revised oil-capture plan for its leaking Gulf of Mexico well to the Obama administration as the government demanded an escrow account for damages claims related to the biggest petroleum spill in the nation’s history.

BP said 53,000 barrels of oil a day can be captured by the end of June, two weeks sooner than previously proposed, according to a copy of the plan provided by the administration. BP also proposed having the capacity to get up to 80,000 barrels by mid-July. The London-based company has been collecting about 15,000 barrels a day from the leak for the last week.

The U.S. Coast Guard asked BP to capture more oil after a federal scientific panel said twice as much oil is leaking as previously estimated. White House Adviser David Axelrod yesterday called on BP to establish an escrow account for claims. Senate Majority Leader Harry Reid is requesting BP set up a $20 billion fund administered by an independent trustee, according to a draft letter issued by his office.

“We want to make sure the money is escrowed for the businesses and want to make sure the money is independently administered so it’s not slow-walked,” Axelrod said yesterday on NBC’s “Meet the Press.”

BP’s board meets today to discuss whether to reduce or defer its second-quarter dividend. The shares fell as much as 6.6 percent in London trading.

No Decision Expected

“The board will be looking at a number of options when it meets,” Sheila Williams, a spokeswoman for BP, said yesterday. “No decision is expected this week.”

Jon Pack, a BP spokesman in Houston, said he was unaware of the revised recovery plan and couldn’t immediately comment on it.

BP and the Coast Guard expect some leakage to continue at least until mid-August, when the first of two so-called relief wells can plug the bottom of the damaged well.

The company will start taking oil and natural gas from the damaged well to a ship on the surface through a separate pipe in the next few days, and a “more permanent and flexible” system with floating risers is set to begin operations around the end of the month, according to a statement today.

“Plans are being developed to further develop these systems and also for further options to provide additional containment capacity and flexibility, in line with requests made by the U.S. Coast Guard,” BP said. The company was able to capture 127,000 barrels from June 4 until June 12.

Obama Address

Obama will address the nation at 8 p.m. tomorrow, after he returns from a two-day visit to Alabama, Mississippi and Florida, said Ben LaBolt, White House spokesman.

The president is scheduled to meet June 16 at the White House with BP’s chairman, Carl-Henric Svanberg, and other company officials. BP Chief Executive Officer Tony Hayward is also expected to attend, Coast Guard Admiral Thad Allen said yesterday.

Establishing the reserve account will be a subject for “discussion,” Axelrod said. “But it has to be substantial. BP has the resources to meet the claims and we’re going to make sure they do.”

Allen said having an independent administrator for the escrow account would make sure that the response to claims “happens quicker.”

“We’ve been very concerned about the claims process,” he said yesterday on CBS’s “Face the Nation” program. “This is not a core function of an oil-producing company.”

$37 Billion Cost

The cleanup costs and legal liabilities resulting from the leak may reach $37 billion, according to Credit Suisse Group AG. BP said today it has spent $1.6 billion so far on the response to the spill.

BP fell 23.85 pence, or 6.1 percent, to 368.05 pence at 2:19 p.m. in London trading. The shares are down 44 percent since the April 20 explosion aboard the Deepwater Horizon drilling rig in the Gulf, resulting in the deaths of 11 workers.

BP’s revised plan calls for keeping more oil-recovery ships at the spill site and adding vessels that can process and shuttle the captured oil ashore.

Oil gushed from the well at a daily rate of 20,000 barrels a day to 40,000 barrels through June 3, when BP removed a kinked pipe that may have been curtailing the flow, a panel of government scientists said June 10. One research team said the rate might have been 50,000 barrels a day.

Installing Sensors

BP, at the request of the government’s flow-rate group, was installing pressure sensors yesterday on the well to help determine the leak rate, said Mark Proegler, a company spokesman.

In its application for the well, BP told the government it was prepared for a worst-case oil spill of 250,000 barrels a day.

The spill has closed as much as 37 percent of the Gulf of Mexico to fishing, cut the number of offshore drilling rigs in the nation by half and polluted 140 miles of shoreline from Louisiana to Florida.

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