Wednesday, June 09, 2010

Day 51 BP Oil Spill: More Pressure On BP; Oil Recovery Increases

Jun 9: As Congress held five hearing on the BP Gulf spill, the Administration appeared to be putting more pressure on BP to increase and continue oil recovery continuously, and to make its claims process more transparent. One Senator says its time to convert BP's pledges of payment into a binding agreement. Finally, the major unknown of how much oil is leaking from the well, remains. Officials continue to say that new estimates will be available very soon. In the meantime they continue to use the 12,000 to 19,000 barrels per day estimate of the Flow Rate Technical Group (FRTG).
    National Incident Commander Admiral Thad Allen sent a letter to BP CEO Tony Hayward regarding clarification of the claims filing, review and processing procedures. The letter indicates that the oil spill is having a "devastating impact" on the environment and  economy in the Gulf Coast. The letter indicates that although BP has "accepted responsibility for the spill and that you are committed to paying all related expenses. Allen said, the Federal Government and State partners need to ensure that all affected parties receive "just and timely reimbursement for their economic damages." He said, "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 parties were to meet today to address the issues in Allen's letter.
    On June 8, Federal On-Scene Coordinator Rear Admiral James Watson sent a letter to BP COO Doug Suttles. The letter indicates that, "Now that the so-called 'top hat' containment system has begun to capture and recover some of the oil escaping from the wellhead, it is imperative that you put equipment, systems and processes in place to ensure that the remaining oil and gas flowing can be recovered, taking into account safety, environmental and meteorological factors."
    The letter appears to ramp up the pressure on BP to not stop its oil recovery efforts or delay efforts in any way because of equipment or logistical concerns. Watson says, "I am instructing BP to establish system(s) capable of safely collecting the oil and gas flowing from the Macondo 252 well. The system(s) established must have appropriate redundancies to maintain complete collection rates in the event that operational problems are encountered in any part of the system. For example, if multiple oil recovery vessels are employed for collection/recovery efforts, redundancies must ensure that the failure of a vessel(s) does not reduce the capacity of the system for continuous recovery of oil. There should be no interruptions of the recovery effort while awaiting another recovery vessel to arrive on scene. Further, plans and processes must be put into place to ensure that, in the event that a hurricane or other severe weather causes recovery vessels to go off station, those vessels (or alternate vessels) can be brought back on station as quickly as possible after the storm passes and that collection efforts can resume without delay."

    On June 8, and again today at a Senate hearing, Senator Byron Dorgan (D-ND) said it is time to make BP's commitment to paying for the damage caused by its oil spill in the Gulf binding. Dorgan is the second ranking Democrat on the Senate Energy Committee and chairs a key energy appropriations subcommittee. In a release, Dorgan explained, "BP has consistently said it will provide the funding necessary to pay for the damages caused by the oil spill in the Gulf Coast. But when I asked the Justice Department, in a recent hearing, whether the BP pledge would be binding on the company the answer from the Justice Department was that it is not binding."

    He said, "On this 50th day of the oil spill with the incalculable costs of the disaster still rising, I think it is time to nail down a binding commitment that BP will provide the full funding for the cleanup as well as the economic costs that have resulted from the oil gushing into the Gulf of Mexico. I propose that the Justice Department enter into a formal arrangement with BP that would have them pay $10 billion into a Gulf Coast Recovery Fund that would be jointly managed and dispersed by a Special Master selected by the government and a Counselor selected by BP. . .

    "BP has averaged $15 billion a year in profits over the past ten years. Asking them to make a payment of much less than one year's profits into a Gulf Coast Recovery Fund that will be jointly managed with public as well as private sector management will be a start to nailing down the commitment that I believe is necessary to respond to the growing costs of this disaster. Some estimate that the ultimate costs will far exceed the $10 billion that I propose be the first commitment from BP. If that is so, BP should be prepared to meet that as well. But for now, there needs to be more certainty to the BP pledge, and this approach is the first step in determining whether the BP pledge is going to be met in full. . ."

    BP announced that as part of its commitment to restore the environment and habitats in the Gulf Coast region, it will donate the net revenue from oil recovered from the MC252 spill to create a new wildlife fund to create, restore, improve and protect wildlife habitat along the coastline of Louisiana, Mississippi, Alabama, and Florida. The creation of this fund is over and above BP's obligations under the Oil Pollution Act of 1990. BP's net revenue from the sale of oil recovered from skimming operations and the well containment systems will be deposited into this newly-created fund. At this point, BP said it cannot predict the total of amount of net revenue that will be deposited into the wildlife fund. The amount of funding will be contingent upon the amount of oil collected during operations and the price at which the oil is sold. BP will provide regular updates on the amount of proceeds being deposited into the fund.

    Tony Hayward, BP's chief executive officer said, "We believe these funds will have a significant positive impact on the environment in this region." BP indicated that on May 24, 2010, it also announced a commitment of up to $500 million for an open research program studying the impact of the Deepwater Horizon incident, and its associated response, on the marine and shoreline environment of the Gulf of Mexico.
    BP reported that for the last 12 hours on June 8 (noon to midnight), approximately 7,160 barrels of oil were collected and 13.9 million cubic feet of natural gas were flared. On June 8, a total of approximately 15,000 barrels of oil were collected and 29.4 million cubic feet of natural gas were flared. Total oil collected in the last four days since the containment system was implemented is approximately 57,500 barrels.
    Access the letter from Allen to Hayward (click here). Access the letter from Watson to BP (click here). Access a release from Sen. Dorgan (click here). Access a release on the BP commitment on recovered oil and the wildlife fund (click here). Access additional information updates and links to releases and briefings on the Administrations response from the Unified Command website (click here). Access the BP response website for links to visuals more information on the recovery work (click here).