Monday, June 07, 2010

Day 49 BP Oil Spill: Oil Recovery & BP Reimburses 14,000 For Losses

Jun 7: President Obama met with officials in Louisiana as he made a trip to the Gulf Coast on Friday afternoon to view the and be briefed on the latest efforts to stop the leak and cleanup the spreading oil slick. Also on Friday BP reported, that following the first full day since the cap was installed over the well, they had collected over 6,000 barrels of oil. Now, today (June 7) they are claiming to be recovering over 10,000 barrels of oil per day (bbl/day) -- a figure which BP Group Chief Executive Tony Hayward said was a "vast majority" of the oil being leaked.
    However, that estimate is based on the latest "official" estimate of between 12,000 and 19,000 bbl/day made by the Flow Rate Technical Group (FRTG) [See WIMS 6/1/10]. Other experts, including those the are participating on the FRTG, have estimate a flow rate that is much higher. Purdue University mechanical engineering professor Steven Wereley, a researcher that testified before Representative Markey's hearing on May 19, and is on the FRTG, has indicated the flow rate may be around 95,000 barrels/day with a plus or minus 20% degree of accuracy [See WIMS 5/29/10]. Also, the FRTG estimate was made before the riser pipe was sheared off to allow the cap placement -- a move that experts say could increase the flow by 10-20%.
    Following BP's "vast majority" claim, Representative Markey sent a letter to BP asking for clarification on the total amount of oil that is coming out of the well. In his letter to BP America CEO Lamar McKay, Markey says, "At this time, BP appears to know how much oil is being captured, which is encouraging. Yet BP still does not appear to know precisely how much oil is actually escaping, which is discouraging." Markey notes that BP will face potential fines of up to $4,300 per barrel of oil spilled.
    At a White House press briefing today with Adm. Thad Allen, the national incident commander and Press Secretary Robert Gibbs, Allen reminded that the FRTG had two estimates on the size of the leak -- one was a range of 12,000 to 19,000 bbl/day. The other one was a range of 12,000 to 25,000 bbl/day. He said, "We are now approaching production that will get up around 15,000 barrels a day" [speaking of the amount recovered]. WIMS contacted a member of the FRTG who indicated that the group will likely have a new leak flow estimate on Tuesday or Wednesday.
    On his visit to the Gulf the President said, "The most obvious area of progress was, coming out of the meeting last week, trying to bridge what seemed to be differences with respect to the berm, the barrier islands that Governor Jindal had proposed, and we now have that authority and dredging is beginning.  And now we want to make sure that BP is paying up, but it seems like we're making progress on that front.

    "We spent a lot of time here just talking about the logistics of the response on the shore as oil begins to come in.  And everybody here has particular concerns because we've got limited resources. . . One of the things that we've done to make sure that organizationally things are working the way they should is we now have a Coast Guard official who is stationed with each parish president and we actually have a BP representative who is stationed with each parish president, so that they have direct access to making sure that any information, any problems that they've got, are immediately being shot up to Thad and he can respond quickly.  And we want to set that up not just in Louisiana, but in Alabama as well as in Florida -- we want county equivalents to have that same kind of representation and rapid response.

    "We also talked about claims.  And this is an area where I think everybody has a lot of concern.  My understanding is, is that BP has contracted for $50 million worth of TV advertising to manage their image during the course of this disaster.  In addition, there are reports that BP will be paying $10.5 billion -- that's billion with a B -- in dividend payments this quarter. Now, I don't have a problem with BP fulfilling its legal obligations.  But I want BP to be very clear, they've got moral and legal obligations here in the Gulf for the damage that has been done.  And what I don't want to hear is, when they're spending that kind of money on their shareholders and spending that kind of money on TV advertising, that they're nickel-and-diming fishermen or small businesses here in the Gulf who are having a hard time. . ."

    As WIMS previously reported, BP indicated to it shareholders on June 4, that it has already spent over $1 billion in gross direct costs for the response, clean up and relief wells and spending at this rate is expected to continue for some time beyond successful completion of work to stop the flow of oil from the damaged well. Any fines and penalties would present additional costs; but the company said the costs of containment, removal and clean up are likely to be largely complete in 2010. BP reports that 34,656 claims have been opened, from which more than $45.9 million have been disbursed. No claims have been denied to date, and there are more than 516 claims adjusters on the ground. The Administration reports that it is providing aggressive oversight of the BP claims process from start to finish that will ensure that every legitimate claim is honored and paid in an efficient manner, and its strong commitment to providing residents with full, streamlined access to available assistance programs [See WIMS 6/4/10].

    The President said, "We've assigned federal folks to look over BP's shoulder and to work with state and local officials to make sure that claims are being processed quickly, fairly, and that BP is not lawyering up, essentially, when it comes to these claims. They say they want to make it right. That's part of their advertising campaign.  Well, we want them to make it right.  And what that means is that if a fisherman got a $5,000 check, and the next time he goes in, because it's a new month, suddenly BP is saying, well, we need some documentation and this may take six months to process, or 60 days to process -- or 30 days to process, for that matter -- that fisherman, with all his money tied up in that boat, just may not be able to hang on for another 30 days. He may lose his boat and his livelihood. . ."

    We've [the Federal Government] already submitted one bill [$69 million, See WIMS 6/3/10] and they haven't said that they're not paying it, so I don't want to anticipate problems. But we are already starting to see at the local level folks experiencing problems. And we don't want those problems to build up -- we want to nip that at the bud right now. And the fact that BP can pay a $10.5 billion dividend payment is indicative of how much money these folks have been making.  And given the fact that they didn't fully account for the risks, I don't want somebody else bearing the costs of those risks that they took.  I want to make sure that they're paying for it."

    On June 4, BP announced it will be sending a second advance payment during June to individuals and businesses along the Gulf Coast to compensate for the loss of income or net profit due to the cleanup of the Deepwater Horizon Incident in the Gulf of Mexico. With the second advance payments, BP estimates it will have spent about $84 million for loss of income or net profit through June, based on the claims it has received to date. This number will grow as additional claims are filed. About 14,000 individuals and businesses in Louisiana, Mississippi, Alabama and Florida have received an initial advance payment for loss of income or net profit to date.

    According to a BP release, "With the second payment, about 7900 individuals and businesses in Louisiana will have received about $50 million for loss of income or net profit by the end of June. The numbers for Alabama are about 3000 claimants receiving about $16 million, in Mississippi about 1900 individuals and businesses receiving about $10 million, and in Florida about 1200 claimants receiving about $8 million. BP expects these numbers will grow as claims continue to be filed during the month." BP said the second advance payment will be the same amount as the first payment received; no check will be reduced. The mailings will start this week (June 4). Individuals and businesses will receive their second payment about 30 days after their initial advance payment was received.
    BP said it has moved to pay advances as fast as possible and, therefore, is still conducting evaluations of losses by claimants. "Payment adjustments may be required in the future when evaluations are completed; however, BP will not seek repayment if it overpaid advances. Loss of income or net profit payments are made in advance because individuals and businesses need to pay their bills. Claimants, who have provided documentation that demonstrates their loss of income or net profit was larger through May than the initial advance payment received, also will receive a supplemental payment for those losses. This payment will be provided after direct consultation with a claims adjuster."

    Access the June 7 press briefing from Thad Allen (click here). Access the June 6 release from Rep. Markey (click here). Access the President's full remarks on June 4 in Louisiana (click here). Access the BP release on claims processing (click here). Access the BP response website for links to visuals on how the LMRP is supposed to work (click here). Access additional information updates and links to releases and briefings on the Administrations response from the Unified Command website (click here). Access EPA's environmental monitoring site (click here). Access the White House website on the BP spill which contains links to all Federal agency response websites and more (click here).