Globe & Mail: We’ve seen the spewing oil: where’s the public outcry?

http://www.theglobeandmail.com/report-on-business/commentary/eric-reguly/weve-seen-the-spewing-oil-wheres-the-public-outcry/article1598369/

It’s the worst oil spill in American history, but the protests against BP and deepwater drilling have been surprisingly tame

Eric Reguly
Published on Wednesday, Jun. 09, 2010 6:31PM EDT
Last updated on Wednesday, Jun. 09, 2010 7:43PM EDT
Where is the rage? Yes, U.S. President Barack Obama would have BP (BP-NYSE) boss Tony Hayward dismissed and the pictures of oil-soaked pelicans are heart breaking to anyone who can be bothered to look at them. Yes, the discovery of vast submarine plumes of oil have agitated scientists, if not the oblivious sunbathers.

Yet almost two months after BP’s Macondo well erupted, the oil continues to gush into the Gulf of Mexico and there seems to be little sense of genuine crisis. In spite of its wildly optimistic statements about the ability to stop the leak that has created the worst oil spill in American history, BP continues to make fortunes. Its dividend remains intact, as does the employment of its CEO, Mr. Hayward. Workers, from fishermen to hotel owners, who depend on clean gulf waters are, of course, upset. But they seem happy to take the few bucks thrown at them by BP’s front men while dreaming of richer payoffs once the lawsuits are settled.

The Tea Party Republicans, of the drill-baby-drill party, are blocking efforts to raise the liability limits for oil spills. The “Boycott BP” Facebook page has 475,000 supporters. It sounds like a lot until you consider that the U.S. population is 300 million and that Facebook claims more than 400 million “active” users. BP gas station owners say they notice little drop off in sales.

Compare this to two far less severe environmental events, where widespread public concern, mixed with a healthy dose of rage, made corporate giants buckle and triggered sweeping changes.
The first was the 1969 oil spill off the California coast, near Santa Barbara. A drilling rig operated by Union Oil of California (later Unocal, now part of Chevron) botched a well. About 100,000 barrels of oil escaped over 10 days, creating a slick that blackened beaches in the Santa Barbara Channel. The images, broadcast on a relatively new invention – colour TV – greatly upset Americans, as did the pictures in the same year of Ohio’s effluent- and chemical-laden Cuyahoga River in flames. They demanded environmental protection legislation and President Richard Nixon responded. In came the National Environmental Policy Act, followed by the Environmental Protection Agency and the Clean Air Act.

A recent New Yorker article by Elizabeth Kolbert said “BP’s Deepwater Horizon spill makes the Santa Barbara spill look like a puddle.” The BP leak, which started April 20, dumps as much oil every few days as the Union Oil well did for the entire time it was out of control. But beyond the deepwater drilling moratorium and the inevitable tighter drilling regulations, there is little sense that U.S. energy policy faces wholesale change. Offshore oil will continue to be America’s greatest energy growth story, for the simple reason oil reserves elsewhere are dwindling rapidly and cars are not about to disappear from American roads.

The second environmental event was Royal Dutch Shell’s attempt to sink the Brent Spar offshore rig deep in the Atlantic Ocean in 1995. The rig, essentially a floating oil tank, was no longer needed. Shell realized it would be cheaper to pull the cork on the 14,500-tonne monster than tow it ashore and break it apart with torches.

Greenpeace got wind of the plan, learned that the Brent Spar contained 100 tonnes of oil sludge that wouldn’t be removed before it was to be sunk and went into full economic terrorism mode. It and other environmental groups urged a boycott of Shell products and gasoline stations. Their effort became an international cause célèbre when Shell used water cannons to prevent a Greenpeace helicopter from landing protesters on the rig.

Shell gas stations everywhere lost business. In Germany, sales fell an estimated 20 to 30 per cent, though a former Shell executive told The Globe and Mail the true figure was closer to 50 per cent. Shell went into a panic and agreed to dispose of the Brent Spar on land. The water cannon pictures were bad enough; the lost income was even worse.

Shell was so stung by the bad publicity that it launched an ambitious green energy program to try to clean up its oily image. It worked for a while. Then, three years ago, Shell sold most of its solar power business and went back to its roots. BP, which once stood for “beyond petroleum,” is also cutting back on clean-energy spending.

Given the damage caused by the blowout of the BP well, whose relief wells will not be finished before August, it’s remarkable that the anti-BP and anti-deepwater drilling protests have not been widespread, energetic and angry. Forty-one years ago, a relatively minor spill ushered in the great American environmental movement. Fifteen years ago, a boycott forced one of the world’s mightiest oil companies into a humiliating U-turn. And this year?
 Don’t count on much happening. The spill, it appears, is the price Americans are willing to pay for their oil addiction.

Special thanks to Richard Charter

Marketwatch: BP hit by doubts over ability to pay for costs of oil spill

http://www.marketwatch.com/story/bps-market-value-halves-as-spill-costs-loom-large-2010-06-09?dist=afterbell
June 9, 2010, 6:58 p.m. EDT
BP hit by doubts over ability to pay for costs of oil spill
By Steve Gelsi & Alistair Barr, MarketWatch

SAN FRANCISCO (MarketWatch) — BP PLC shares slumped Wednesday, leaving its market value halved in fewer than seven weeks, while the oil giant’s bonds were crushed as questions mounted over whether it can afford to clean up the worst environmental disaster in U.S. history.
Oil-industry insider Matt Simmons, head of the Texas-based, energy-focused investment bank Simmons & Co., told Fortune magazine Wednesday that BP (BP 32.28, +3.08, +10.55%) (UK:BP. 360.10, -31.45, -8.03%) will run out of cash from lawsuits, cleanup costs and other expenses.

“They have about a month before they declare Chapter 11” bankruptcy, Simmons said.

High-resolution video of oil leak

BP releases new video from the busted oil well on the Gulf of Mexico seabed.
“One really smart thing that [President Barack] Obama did was about three weeks ago, he forced BP CEO Tony Hayward to put in writing that BP would pay for every dollar of the cleanup,” he added. “But there isn’t enough money in the world to clean up the Gulf of Mexico. Once BP realizes the extent of this, my guess is that they’ll panic and go into Chapter 11.”

BP’s U.S.-traded shares slumped 16% to close at $29.20 on heavy volume. It’s the lowest level for the stock since 1996. The shares traded above $60 before April 22, the day the Deepwater Horizon drilling platform sank off the coast of Louisiana.
BP’s 2013 bonds, which carry a 5.25% coupon, slumped on Wednesday, pushing the yield above 8%.
BP already has spent more than $1 billion dealing with the spill, and some analysts estimate the disaster could cost up to $40 billion. The company also has said it will pay for all cleanup costs and will cover all “legitimate” claims. Read more about the pressure on BP.

Art Hogan, market strategist for Jefferies & Co., said traders at the firm cited speculation that BP was talking to bankruptcy lawyers as one instigator of the selloff on Wednesday.
“It’s hard to calculate the ultimate cost of the spill,” Hogan commented. “No one even knows how much oil is coming out of the well and there could be more impact from a hurricane. With all the new technology nowadays with remote-controlled robots and video cameras, it’s happening in real time in front of everyone all day long. It’s a torrential disaster.”

BP spokesman John Pack said the company remains on solid financial footing, with 18 billion barrels of proven reserves. “I have no idea where that rumor is coming from,” he replied, when asked if BP was talking to bankruptcy lawyers.

Pack pointed to a statement made last week by BP’s chief executive. “Under the current trading environment, we are generating significant additional cash flow,” Hayward said. “In addition, our gearing is currently below the targeted range, and our asset base is strong and valuable, with more than 18 billion barrels of proved reserves and 63 billion barrels of resources. All of this gives us significant flexibility in dealing with the costs of this incident.”
The Deepwater Horizon platform exploded on April 20, killing 11 people. It sank two days afterwards, triggering the worst environmental disaster in American history.

Twelve angry jurors

Gregory Evans, a partner at Milbank Tweed Hadley McCloy LLP who has represented large corporations in environmental suits, said BP may have to pay billions of dollars in an environmental lawsuit.
“The [liability] exposure is very high for BP, because there appear to be statements that would indicate this was potentially more than negligence,” he commented. “As we know from Exxon Valdez and other serious catastrophic mass tort cases for environmental-damage litigation, juries can become very angry with management and express that anger in very high punitive-damages awards.”

‘Juries can become very angry with management and express that anger in very high punitive-damages awards.’
Gregory Evans, Milbank Tweed Hadley McCloy

Still, punitive damages will likely be kept on par with whatever BP pays for compensatory damages, a rule laid down by the U.S. Supreme Court in its decision to reduce damages in the Exxon Valdez (XOM 61.84, +1.81, +3.02%) case, Evans noted. Those damages were awarded after many years of court battles, and also included payments from insurance companies.

Evans said he had no reason to believe that BP would file for bankruptcy in the near future, but even if it did, claims against it would still be paid under a provision called the estimation process. “The estimation process in bankruptcy can be efficient and it can lead to full payment of claims,” he added.

Ahead of BP’s big slide on Wednesday, analysts at Tudor Pickering Holt indicated that talk had been escalating about a bankruptcy, but concluded that BP is worth more to the government and to investors if it keeps operating.
“There is a frenzy for sources/experts/analysts to one-up each other on the assessment of fines and liability and talk about BP as a donut-hole stock (zero),” the Tudor analysts said. “We have a really hard time getting there from a practical perspective, as BP is worth more alive than dead to the U.S. government and all those that want milk from this future cash cow.”

Steve Gelsi is a reporter for MarketWatch in New York.
Alistair Barr is a reporter for MarketWatch in San Francisco.

Special thanks to Richard Charter

Miami Herald: Barbour: Moratorium on Gulf oil drilling bad idea

http://www.miamiherald.com/2010/06/13/1678474/barbour-moratorium-on-gulf-oil.html

BY EMILY WAGSTER PETTUS
ASSOCIATED PRESS WRITER
JACKSON, Miss. — Mississippi Gov. Haley Barbour said Sunday he’ll tell President Barack Obama that the six-month moratorium on exploratory deepwater drilling in the Gulf of Mexico could hurt the U.S. economy and force oil companies to take their equipment to other countries.

Obama is scheduled to arrive Monday morning in Gulfport, the first stop on a two-day trip to Mississippi, Alabama and Florida. He’ll meet with local officials about how the states are affected by oil that has been spewing into the Gulf since the Deepwater Horizon drilling rig exploded 50 miles south of Louisiana nearly eight weeks ago.

While parts of Louisiana’s shoreline and marshes have been coated with globs of oil, Mississippi’s manmade beaches remain largely untouched except for tar balls. Oil has affected some of Mississippi’s barrier islands near Alabama.

Barbour, a Republican, said he will meet with the Democratic president in Gulfport. Barbour skipped Obama’s three previous appearances at Louisiana sites affected by the oil spill, although governors from other Gulf states met with the president.

Appearing Sunday CBS television’s “Face the Nation,” Barbour repeated what he has said publicly several times the past few weeks – that he doesn’t believe there should be a moratorium on exploratory oil drilling in the Gulf of Mexico.

“There have been more than 30,000 oil wells drilled in the Gulf of Mexico in the last 50 years. This is the first time something like this has ever happened,” Barbour said. “And we need to get to the bottom of it, find out what happened, make sure it doesn’t happen again. But I think it is very reasonable to continue to drill.”

The Deepwater Horizon spill is huge, but not unprecedented in the Gulf. The world’s largest peacetime oil spill happened in 1979, when the Ixtoc disaster off Mexico’s coast spewed 140 million gallons of oil into the Gulf in 10 months. Massive slicks reached beaches in Mexico and Texas.

Barbour said oil companies would move equipment to other countries if there’s even a temporary halt to drilling the in Gulf.

“We produce 30 percent of our oil in the United States in the Gulf of Mexico,” Barbour said. “If you shut that down, and it will have an enormously negative effect on the national economy.”

After the April 20 explosion of the Deepwater Horizon, the Obama administration put a six-month moratorium on exploratory drilling in Gulf waters deeper than 500 feet. That halted work at 33 exploratory rigs already operating. Rigs in shallow waters were allowed to keep operating.

Barbour on Sunday also said “very sensational” media coverage of the BP oil spill has hurt Mississippi tourism. He said some coverage does not make distinctions between what’s happening in Louisiana, which has been hardest hit, and other states.

“And the people of the United States have the impression the whole Gulf of Mexico is ankle-deep in oil, which is simply not the case,” Barbour said. “By God’s grace, we haven’t had any oil yet reach the shore of Mississippi. We’ve had a couple of incursions on our barrier islands, but we have lost the first third of the tourist season.”

Mississippi officials said Friday that some areas south of Pascagoula were closed to commercial and recreational fishing because oil from the spill.

The irregularly shaped area runs from the south shore of Horn Island east to the Alabama state line. Waters between the shore and the islands off Biloxi and Gulfport are not included, but the closure area moves north to near the shore around Pascagoula Bay and then to the Alabama line.

Special thanks to Richard Charter

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