BP Settlement Claims

Gulf Coast Disaster News

The world holds its breath to see if BP's cap stems oil spill

June 4, 2010, 1:58 pm

Originally posted by Edward Helmore - London Evening Standard - June 4, 2010

Today may provide the first bit of good news that Tony Hayward the boss of BP has received in what feels like a very long time. He's waiting to see if, finally, oil has stopped gushing out of a fractured pipe into the Gulf of Mexico.

Overnight, a containment cap was fitted to the belching hole on the sea-bed. He won't know for sure if it's worked until tomorrow. Meanwhile, the shares, down almost 40 per cent in the last few weeks, have climbed slightly in anticipation of the announcement the world has been waiting for. Having lambasted the company, President Obama, too, is thought to be preparing to adopt a more conciliatory tone.

But even if the flow ceases, that is nowhere near the end of BP's problems. There is still a massive oil slick to contend with and the British firm faces years of compensation claims. BP's reputation in America is shattered, possibly never to recover. Questions remain about its ability to do business in a country where it is reviled.

Parish president of Plaquemines on the Louisiana coast Billy Nungesser speaks for many when he launches into BP chief executive officer Tony Hayward.

"I'd like to [take] him offshore, dunk him under the surface of the water, pull him up with that black gooey stuff on him and have him say, 'Our research shows no oil beneath the surface. It's all coming to the top'."

Nungesser, a large, voluble man, doesn't stop there.

"His whole attitude stinks. He's a disgrace. This guy is their [BP's] spokesman. No wonder they have problems."

Since April 20, when at first a shower of mud and then an explosive fireball of gas and oil alerted terrified workers on the Deepwater Horizon rig that it was about to be engulfed in flames and smoke, the oil has just kept gushing - 46 million gallons and counting.

After the loss of the rig and 11 lives, BP's ambitious global drilling programme is now more closely associated with incompetence and pollution than any "Beyond Petroleum" PR campaign.

The very survival of the firm is in question as BP struggles to reassure Washington and investors that the situation will be brought under control. But no one can be certain that it can, even though BP successfully sliced off a pipe with giant shears on Thursday.

If the cap holds, the oil will take about four hours to rise to the surface where it will be collected on the Discoverer Enterprise drill ship, while the associated gas will be burned off in a flare. There is still a risk that oil may escape, and the cap itself could simply fill up with crystals of gas and water.

There have been more radical proposals for staunching the leaking well, such as a nuclear blast that would melt the rock and seal the bore. Proponents of the idea say a nuclear blast was deployed successfully to put out a well fire in the Soviet Union; opponents say, reasonably enough, that detonating a nuclear bomb would turn an oil spill into a radioactive oil spill.

After weeks of minimising and downplay, Hayward and BP were isolated from the US government and faced the public's anger alone. Hayward must also face the shareholders who, already witnessing the firm's fall in value by $74.4 billion, or nearly 40 per cent, received further bad news when the company's credit rating was downgraded yesterday.

The Obama administration, recognising the political danger in the spill, cast BP adrift: a civil and criminal investigation into the spill is under way; BP executives are no longer welcome to share the news-briefing podium with government officials.

Hayward, currently stationed in Houston, cuts a forlorn figure. Several weeks since he sought to minimise the scale of the leak - a claim that former labour secretary and Berkeley professor Robert Reich says was treated, in part, as credible because Hayward has a British accent - the executive is now cast as a second-tier villain from a second-rate James Bond movie.

"There's no one who wants this over more than I do," he told reporters at the weekend. "I'd like my life back." (Given the death of the oil rig workers, Hayward later conceded his comments were hurtful and thoughtless.)

In truth, Obama and Hayward have much in common: both see themselves as "green" energy promoters; both are threatened on a personal level by the damage. Both are accountable; both powerless to stop it. Neither has been able to present convincing compassion or outrage.

With the oil slick now only seven miles off the Florida Panhandle tourist coastline, BP is faced with escalating damage claims as well as calls for its shares to be suspended and for it to be taken over by US regulators. Reich's proposal that it is time for Obama to put BP's North American operations into "temporary receivership" illustrates the collapse of trust in the firm, which has more leases in the Gulf of Mexico than any other oil company.

The Obama administration may be loath to confiscate them as a "nationalisation without compensation" but it could argue that BP failed in its "stewardship of the environment" and hand over its leases to rival oil companies.

Internal BP documents leaked earlier this week appear to show it knew of serious problems and safety concerns with the Deepwater Horizon rig far earlier than it described in congressional hearings last week.

Critics such as Nungesser accuse the firm of a pattern of half-truths and minimisation after the event.

"BP is a fix-it-as-they-go company," says Brent Coon, a claims lawyer representing one of the survivors of the rig blast. "It is surprising that a company as big as they are doesn't take care of things until they break."

Or not. Documents show BP was struggling to control the well in March - a month before the rig blew up. As far back as June last year, engineers warned of potential problems with the well casing and the blowout preventer that ultimately failed.

What happened is still subject to investigation. What is clear is that the cement plug placed in the well by US oil services firm Halliburton did not hold and the emergency blowout preventer failed.

Alwin Landry, master of a boat tethered to the rig on the night of the explosion, said he noticed mud dripping on him like "black rain". Suspecting that he had a broken hose or a ruptured derrick, he called for help, but while waiting for a response, he testified, he heard a high-pitched hissing sound, followed by a large explosion. Debris flew through the air. Moments later, he said, he saw three people jump from the rig into the Gulf of Mexico. "Mayday," he heard from the rig, followed later by, "Abandon ship."

Defending BP's record this week, Hayward said BP had the largest array of sub-sea intervention equipment ever assembled, including 18 submersible robots and two drilling rigs, but conceded that the firm could have deployed its resources more rapidly after the explosion.

"If our current efforts were to fail and we have to wait for the relief wells to be drilled and had six months of clean-up, we estimate the cost at $3 billion," he said, adding that the company's cash flow of $7.5-$8 billion would be adequate to absorb the cost and maintain the company's dividend. But this is an optimistic view; one recent research group put the likely total at $40 billion.

With more than one quarter of US shrimp production shut down, deep-water breeding grounds of bluefin tuna and sperm whale badly polluted, and summer tourism on the redneck gold coast from Mississippi to Florida facing a disastrous season, anger is mounting - and rapidly.

A group calling itself Seize BP says it has organised demonstrations in more than 50 US cities today and tomorrow.

In a statement that signals the administration's hardening attitude toward the firm, Obama said the failure of Mississippi Canyon 252 oil site may come down to "corporations taking dangerous short-cuts that compromised safety". He continued with an implicit warning that regulations will follow. "If we refuse to take into account the full cost of our fossil fuel addiction - if we don't factor in the environmental costs and national security costs and true economic costs - we will have missed our best chance."

Since BP is foremost among oil firms drilling in remote or inaccessible places - a business strategy that is accompanied by an unenviable record in huge spills and deadly explosions - Obama's comments are certain to be greeted with dismay by BP shareholders.

If BP is prosecuted on civil charges, it can expect to be fined $1,200 per barrel spilt - if convicted on criminal negligence charges, the per-barrel cost rises to $4,300. Not surprisingly, Transocean, the drilling rig's operator, has already attempted to invoke an 1851 statute that would limit its liability to just $27 million.

The environmental costs could be even greater with the US National Oceanic and Atmospheric Administration warning this week that oil is moving closer to the fragile grassland habitat of the Mississippi and Alabama coasts. Further, there are predictions that an unusually violent hurricane season could push much of the sub-sea slick ashore.

The American Bird Conservancy has identified 10 key regions on the Gulf coast where birds could be harmed and damage exacerbated if a hurricane strikes. "What is difficult to measure is the loss of future generations of birds when birds fail to lay eggs or when eggs fail to hatch," says George Fenwick, the organisation's president. Ocean biologists are concerned the oil could linger in deep layers in the sea, generating oxygen-depleted "dead zones" that kill marine life.

On land, Al Sunseri, proprietor of P&J Oyster Co, the oldest continually operated oyster dealer in the US, says he might go under. "This could be the end of our 134-year-old business," he said. "I have a son and I don't know if he'll be able to carry this on next generation."

But how much worse can it get for BP and the Gulf? After the failure of the "junk shot" last week, BP hopes the latest containment cap will hold until a relief well is completed - maybe sometime in August but it could be Christmas if it doesn't work. The largest blowout to date - Petróleos Mexicanos Ixtoc I - took nine months to plug in 1979. The company's first attempt with a relief well failed, so it had to drill a second. More than 140 million gallons of crude oil spilled into the Gulf of Mexico.

That will hardly come as any consolation to Nungasser. Tempers are flaring and Hayward's apologies are no longer enough. "It's a good thing I didn't know he was here in Louisiana yesterday," Nungesser blasted, "because one of us would have went to jail."

Brent Coon discussing Oil Spill Settlement

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