Yesterday, I visited Caminada Bay in Grand Isle, Louisiana — one of the first places to feel the devastation wrought by the oil spill in the Gulf of Mexico. While I was here, at Camerdelle’s Live Bait shop, I met with a group of local residents and small business owners.

Folks like Floyd Lasseigne, a fourth-generation oyster fisherman. This is the time of year when he ordinarily earns a lot of his income. But his oyster bed has likely been destroyed by the spill.

Terry Vegas had a similar story. He quit the 8th grade to become a shrimper with his grandfather. Ever since, he’s earned his living during shrimping season — working long, grueling days so that he could earn enough money to support himself year-round. But today, the waters where he has worked are closed. And every day, as the spill worsens, he loses hope that he will be able to return to the life he built.

Here, this spill has not just damaged livelihoods. It has upended whole communities. And the fury people feel is not just about the money they have lost. It is about the wrenching recognition that this time their lives may never be the same.

These people work hard. They meet their responsibilities. But now because of a manmade catastrophe — one that is not their fault and beyond their control — their lives have been thrown into turmoil. It is brutally unfair. And what I told these men and women is that I will stand with the people of the Gulf Coast until they are again made whole.

That is why, from the beginning, we have worked to deploy every tool at our disposal to respond to this crisis. Today, there are more than 20,000 people working around the clock to contain and clean up this spill. I have authorized 17,500 National Guard troops to participate in the response. More than 1,900 vessels are aiding in the containment and cleanup effort. We have convened hundreds of top scientists and engineers from around the world. This is the largest response to an environmental disaster of this kind in the history of our country.

We have also ordered BP to pay economic injury claims, and this week, the federal government sent BP a preliminary bill for $69 million to pay back American taxpayers for some of the costs of the response so far. In addition, after an emergency safety review, we are putting in place aggressive new operating standards for offshore drilling. And I have appointed a bipartisan commission to look into the causes of this spill. If laws are inadequate, they will be changed. If oversight was lacking, it will be strengthened. And if laws were broken, those responsible will be brought to justice.

These are hard times in Louisiana and across the Gulf Coast, an area that has already seen more than its fair share of troubles. The people of this region have met this terrible catastrophe with seemingly boundless strength and character in defense of their way of life. What we owe them is a commitment by our nation to match the resilience they have shown. That is our mission. And it is one we will fulfill.

Thank you,

President Barack Obama

Paid for by Organizing for America, a project of the Democratic National Committee — 430 South Capitol Street SE, Washington, D.C. 20003. This communication is not authorized by any candidate or candidate’s committee.

http://www.heraldtribune.com/article/20100605/ARTICLE/6051061/-1/RSS02

The blobs — some are as small as nickels and dimes, others more than 7 inches in diameter — marked the ominous arrival of the Gulf of Mexico spill that has been creeping toward Florida’s vast coastline since the April 20 explosion of a BP oil rig near Louisiana.

It marked the first time a spill of this magnitude has scarred Florida. Yet the oil that washed up across the Panhandle is expected to be only a sliver of what will be seen across the state in coming weeks.

The impact of the oil spill could potentially be devastating to beachfront communities all along the Florida coast, including the Atlantic if the Gulf currents take the oil spill around the Florida Keys. It could undermine the state’s economy, which remains critically linked to the tourism trade, and could decimate fragile beaches, marshes and coves.

University of Central Florida economist Abraham Pizam said the oil slick could become the worst disaster in the history of Florida tourism.

“It could be the beginning of a major catastrophe for this state,” said Pizam, dean of the Rosen College of Hospitality Management at UCF. “Florida survives on the back of the hospitality industry. For us it’s do or die.”

State Sen. Don Gaetz, R-Niceville, said he is hopeful the tourism industry can recover but believes it will take time.

“Picking up tar balls is going to be a way of life on at least some Florida beaches for months and maybe years,” said Gaetz, in line to become the Senate president in 2012, whose district includes the popular beach town of Destin, where oil is expected soon. “People here have faced extraordinary natural disasters. We’ve rebuilt. We’ve come back and I think we’ll come back from this as well.”

But Gaetz conceded this has the potential to be an unprecedented challenge for Florida

“How could anyone prepare for a catastrophe of this magnitude?” he asked. “This is like a year-long hurricane. The consequences could be much more far reaching than anything I’ve thought about so far.”

In the Pensacola region, the state is countering the spill with an of strategies, among them a flotilla of skimming vessels, booms to block the oil flow into inlets, conservation efforts to save injured animals, and cleanup crews to respond quickly to reports of oil.

Yet the arrival of the tar balls Friday showed those efforts may only deflect and not blunt the oil, which is being pushed toward Florida’s coastline by a strong prevailing wind from the southwest.

State environmental officials said the immediate threat is expected to continue through Tuesday, stretching from Escambia County eastward to other Gulf areas, including Santa Rosa and Okaloosa counties.

Tourists, residents and local officials woke up Friday morning in this beachfront community to find tar balls along the beach. Floating tar mats were found and removed from the Pensacola Pass, which leads into the bays and estuaries surrounding Pensacola.

In less than five minutes, Kaycee Klisart, a bartender at The Dock, a beachside bar, picked up enough tar balls to fill a 16-ounce cup, saying the largest were about the size of her palm although they dissolved when she handled them.

“This is really my livelihood,” Klisart said about the potential impact on the local tourist trade.

Klisart said the beach was “crowded but not like it would be.”

But she also said as a mother of a 10-year-old and a 13-year-old she would not let her children go into the water, although local officials, who are testing the waters, said they remained safe as of Friday.

Lee Mullikin, a retired contractor, and his wife, Pamela Kaster, a retired carpenter’s helper, who have been coming to Pensacola Beach for years, went swimming Friday morning and reported seeing no oil in the water, although they had seen lifeguards picking up small objects earlier in the day.

Mullikin, who went through Hurricane Katrina in New Orleans, said he remembers tar balls on the beach in the late 1970s.

“We’ve come full circle,” he said. “There’s an air of apprehension. It’s like we’re on a death watch here.”

County Commissioner Grover Robinson waded knee deep into the Gulf waters, calling the tar balls an “inconvenience.”

“The beach was open and it looked like a beautiful Escambia County day otherwise,” Robinson said. “We’ve gotten through a number of tragedies and catastrophes. We will do that and we will overcome this issue.”

Robinson said local officials are relying on a strategy to stop the oil at the Pensacola Pass, with plans for as many as 17 booms to block oil if it gets through the pass and starts to threaten the inland marshes and bays.

BP-hired cleanup crews were visible at Pensacola Beach, carrying shovels, plastic bags and gloves as they searched the beach for tar balls.

“We’re doing everything possible,” said Lucia Bustamante, a spokeswoman for BP.

She said 120 workers had been deployed to scour the beaches, beginning Thursday night, with more available if needed and more cleanup crews ready in Panama City if the oil moves further east.

“We have enough resources,” she said.

Mike Sole, secretary of the state Department of Environmental Protection, told local emergency officials that the state had requested more vessels to skim the oil before it reaches the shores and BP has agreed to provide another 20 boats — although Sole said it was not clear when they would arrive.

Dire predictions were the order of the day, as environmentalists woke up in tears and economists worried about the oil spill’s impact on the state’s $66 billion tourism industry.

Environmental activist and Navarre Beach resident Linda Young cried for an hour in the morning, 20 years after founding an anti-oil drilling group in the Panhandle in the hopes of never experiencing a day like Friday.

“It feels like one of your best friends is dying,” said Young, director of the Clean Water Network of Florida, after photographing tar balls on the beach near her home.

Young said the stakes for Florida are enormous as oil keeps gushing from the blown well.

“This is just the beginning. It’s coming wave after wave, and there’s no place on Florida’s coast that’s not at risk,” Young said. “It’s just a nightmare that you can’t wake up from. The full impact of the spill may be felt for years.”

The feds had banned fishing there, including portions of the Florida Keys National Marine Sanctuary, on Wednesday after projecting an oil sheen from the Deepwater Horizon oil spill would move into that area within the next several days.

The agency on Friday essentially moved the fishing ban boundary 100 miles west throughout the Gulf. The ban had been 20 miles from the Dry Tortugas park boundary. The move reopened an additional 3,000 square miles elsewhere in the Gulf.

“This is extremely good news,” said Capt. Bill Kelly, executive director of the Florida Keys Commercial Fishermen’s Association. “We hope that Mother Nature continues to watch out for us. … My telephone was ringing off the hook yesterday. These guys [fishermen] were scared, and understandably so. There were all kinds of rumors running around about the feds shutting down fishing in the Florida Straits. I think people realized how quickly the economy of the Florida Keys could be shut down.”

Kelly said he has urged federal fishery managers for more stringent water-sampling and fish-testing before they close off areas to fishing.

Several members of the Florida Keys National Marine Sanctuary Advisory Committee have contacted sanctuary Superintendent Sean Morton asking what criteria is used to ban fishing, he wrote to members on Friday. The National Oceanic and Atmospheric Administration (NOAA) is the parent organization over both the National Marine Fisheries Service and the Florida Keys National Marine Sanctuary.

The criteria is based on computer models that produce trajectory maps of where the oil is likely to be in 24, 48 and 72 hours, based on weather, satellite imagery, ocean buoy data and ocean currents, Morton said. The trajectory is “truth-tested” by daily flights over the Gulf.

The feds review the data daily and by noon determine whether a fishing ban is needed and where, Morton said. 

They will continue to monitor the trajectory of the oil spill, sheens and tar balls, and close and open areas as needed, said Roy Crabtree, southeast regional director of the National Marine Fisheries Service.  Crabtree, who oversees fishing rules throughout the Gulf, said he understands the need to ensure areas free of oil remain open to fishing, as fishermen are being hit by more regulations than ever before.

“It’s been a tough year for fishermen,” Crabtree said. “We are taking this day by day.”

Also on Friday, the U.S. Department of Commerce issued a Fishery Failure Determination for Florida, which opens the door for the state’s fishermen to receive federal funding because of lost wages. Gov. Charlie Crist requested the determination on Thursday. 

“The quick response of the federal government to this request is a positive step toward protecting Florida’s hardworking citizens,” Crist said in a prepared statement Friday. “We are continuing to keep a close watch on the oil spill and are prepared to respond to any impacts we may experience. Florida is still open and we encourage everyone to go fishing and enjoy Florida seafood products.”

Commerce Secretary Garcy Locke granted Crist’s request to establish a regional economic transition program, which allows fishermen and other businesses to qualify for economic injury loans through the U.S. Small Business Administration.

tohara@keysnews.com

http://www.petroleumworld.com/

HOUSTON
Petroleumworld.com, June 4, 2010

Here are some potential scenarios facing BP:
BP RUNS OUT OF CASH – UNLIKELY
BP and the White House have said the oil giant has the financial muscle to cover the cost of cleaning up the oil spill and compensating those affected.
All analysts consulted by Reuters agree on this, and that the key determinant of how much it does finally cost depends on how long the oil continues to flow.
Analysts and investors have started to factor in that the spill lasts until August, when a relief well is expected to be completed. The relief well would end the spill even if earlier efforts to cap the ruptured well have failed.
BP’s market capitalization has fallen by around $65 billion since the Deepwater Horizon rig sank on April 22 after exploding two days earlier, unleashing a torrent of oil into the Gulf of Mexico .
Most analysts believe this more than factors in the total cost to BP.
“It’s not going to be anything in that ball park,” Alex Morris, oil analyst at Raymond James in Houston said.
Estimates for the total cost start at around $5.3 billion, an estimate from Dutch bank ING, assuming the current effort to fit a cap on the well to capture the oil works.
However, estimates run to up to $37 billion — the forecast from investment bank Credit Suisse.
As costs, especially those for damages, will be absorbed over a period of years, BP is seen as able to handle them.
The company generated cash of $7.7 billion from operating activities in the first quarter. Even after capital investment of $3.8 billion, it had $3.9 billion of free cash.
Most analysts believe the company can foot the bill without cutting its dividend or raising debt levels.
However, Credit Suisse said if its $37 billion estimate is accurate, the company can only maintain its dividend by raising its gearing ratio by 10 percentage points, something it may not wish to do.
And even if BP can afford to maintain its dividend, it may cut it as a political gesture to bolster its flagging reputation. Democratic Senators Charles Schumer and Ron Wyden said on Wednesday BP should cut its dividend until the full costs for cleaning up the spill can be calculated.
BP, which owns 65 percent of the leaking well, its partners Anadarko Petroleum, which owns 25 percent and Japan ‘s Mitsui & Co, which owns 10 percent, are legally liable for the clean-up on the basis of their shareholdings. BP has undertaken to cover all damages itself.
CEO Hayward said in an interview with Britain’s The Daily Mail newspaper on Wednesday that clean-up costs could hit $3 billion if the leak continues until August.
This is based on BP’s estimate of around $950 million spent in the first 41 days after the explosion.
However, Credit Suisse estimated in a research note on Wednesday that clean-up costs could total $15-23 billion. Other analysts put the number as low as the $2 billion estimated by Panmure Gordon’s Peter Hitchens.
BP has agreed to compensate all those affected by the spill for all legitimate costs, even though under the law BP and its partners are only liable to pay up to $75 million. BP has undertaken to pay this money itself, rather than in conjunction with its partners, so the full liability may fall to it.
BP has offered no estimate but Hitchens at Panmure said on Wednesday he estimates compensation claims will be $10 billion. Credit Suisse estimates this at $23 billion.
BP BECOMES A TAKEOVER TARGET – UNLIKELY
The collapse in its share price means BP could become a takeover target, Dougie Youngson, oil analyst at brokerage Arbuthnot said on Tuesday.
However, most analysts do not expect this to happen.
Exxon Mobil, Royal Dutch Shell and Chevron are the only fully publicly traded oil companies larger than BP and deemed financially strong enough to buy it.
The U.S. government blocked the takeover of Asia-focused U.S. oil company Unocal by China’s CNOOC for strategic reasons, so most analysts doubt it would allow BP — the largest oil producer in the Gulf of Mexico — to be taken over by a state-backed oil company.
Antitrust issues could arise over BP’s refineries if it were acquired by Exxon, Shell or Chevron, Alex Morris said. This could force the sale of the refineries but in the current depressed refining environment that would be difficult.
BP’s significant U.S. gas production assets could also cause regulatory problems for any of the above, Jason Kenney at ING said.
However, the biggest barriers to an acquirer making a move are the unknown liabilities that arise from the spill.
“It would be hard to see one of the other supermajors taking on such an unknown liability,” Raymond James’s Morris said.
Similarly, selling of BP piecemeal may not attract buyers because the individual parts would still be liable for the spill.
Washington may also block any deal seen to strengthen anyone in the oil industry.
“The last thing that President (Barack) Obama needs today is “bigger oil,” ING’s Kenney said in a research note.
CEO HAYWARD LOSES HIS JOB – UNLIKELY, FOR THE MOMENT
Inevitably, there have been questions over whether Hayward should stay. He told the Daily Mail “…it would be ridiculous to resign at this point” and most analysts have defended the CEO’s position.
John Hofmeister, former president of Shell Oil Company, Shell’s U.S. unit, and author of “Why We Hate the Oil Companies,” told Reuters it was unreasonable to blame the CEO.
“Ultimately the CEO is accountable and responsible … but the individual on the rig may have a made a bad judgment.”
Investors had been happy with Hayward’s efforts as CEO. In the almost three years before the Deepwater Horizon rig sunk, he had improved refinery operations, boosted oil production and cut a lot of management overheads.
“People were happy with him — he had done a good job turning around BP,” Alex Morris said.
So far, investors and analysts seem to be backing Hayward.
However, documents and testimony submitted to government investigations into the incident have prompted some in Washington and Louisiana to question BP’s decisions about the drilling of the oil well.
Hayward took up his role promising to standardize and streamline the way BP built facilities and drilled oil wells. If the structures he put in place are deemed to have led to any decisions that contributed to the accident, then the CEO’s position could come under pressure.
BP IS BARRED FROM DOING SOME BUSINESS IN THE U.S. AT LEAST TEMPORARILY – SOMEWHAT LIKELY
Some commentators have called for BP to be banned from drilling in the United States, which would seriously damage the company’s business given that 40 percent of its assets are in the United States and it depends on the country for its growth plans.
Analysts are divided on whether some debarment is likely.
“There are going to be heavy fines. The regulator is going to be tough on them getting permits but all companies have to be treated by the rules. This isn’t Venezuela ! ” said Morris.
However, under federal law BP would have to be banned from government contracts for a period of time if convicted of a criminal offense under the Clean Water Act. The company could also be barred from contracts if civil judgments are entered against it for violations of environmental laws.
BP has already faced partial bans on receiving federal contracts because of past violations of U.S. laws. After the pipeline leaks at its Prudhoe Bay Unit in Alaska and a fatal explosion at a Texas refinery, the company was ineligible to receive federally funded contracts for services from those two facilities.
The company had been negotiating with the U.S. Environmental Protection Agency over those bans but those talks were halted after the oil spill in the Gulf of Mexico .
While BP could face such a penalty in the latest oil spill, one law professor and private practitioner, Anthony Sabino, noted that there were not a lot of other oil producers so it might only be a short-term debarment.
That could be viewed as a punitive and politically motivated action, but regardless such a ban would likely “be a short-term hit and not substantial,” he said.
BP TO FACE FINES AND PENALTIES – LIKELY
In addition to facing billions of dollars in costs from the economic liability and damages, BP could also potentially face billions of dollars in civil and criminal penalties if the Justice Department’s investigation finds wrongdoing.
Some legal experts have said that proving some criminal charges may be more difficult because it requires showing intent, negligence or other malfeasance. However, some environmental laws have simple criminal violations, including the one banning harm to migratory birds.
For each barrel of oil that prosecutors can prove has spilled into the Gulf, BP could be fined $1,100 or as much as $4,300 if they are able to prove negligence was the cause.
Prosecutors could use estimates from a team of scientists and experts who found between 12,000 barrels per day and 19,000 bpd are flowing from the broken well. That could equal as much as $81.7 million in fines per day at the high end. With 44 days of oil spewing from the well, that would equal $3.6 billion as of Wednesday.
Additionally, U.S. laws protect endangered species and migratory birds, with fines of up to $25,000 per violation. Already more than 100 birds have been found oiled or dead, according to the Unified Area Command for the spill response efforts. There are also criminal fines associated with such violations, which could be as much as $50,000.
If other companies are also found to be responsible for the spill as well, the penalties could potentially be imposed on each violator. In some cases, most significantly the Exxon Valdez spill in 1989, companies try to negotiate a settlement with the federal government, as is expected with BP.
Two years after the Valdez spill, Exxon settled U.S. civil and criminal charges in a plea agreement that included just over $1 billion in penalties, damages and restitution.
At the time, the $125 million in criminal penalties was the largest of its kind while $900 million went to reimburse federal and state governments for responding to the spill and later restoration projects. The federal government and state of Alaska in 2006 sought another $92 million from Exxon, however that request has not been resolved.
BP TO FACE GROWTH HEADWINDS IN THE FUTURE – LIKELY
BP’s targets for expanded production will become tougher to achieve following the oil spill, and its financial performance will suffer from higher costs — even after spill costs and fines are paid.
BP said earlier this year it was targeting oil and gas output growth of 1-2 percent over the medium term. This plan relies heavily on BP’s U.S. projects and especially the Gulf of Mexico , where it was leading the push into ever-deeper waters.
The dislocation caused by dealing with the spill, including the diversion of vessels from other fields means BP will face a particular challenge in keeping its drilling plans on track.
A moratorium imposed by Obama on new deepwater drilling after the spill will also slow development plans at BP and across the industry.
Even when the oil spill has been dealt with and the drilling moratorium is lifted, BP’s damaged reputation is likely to mean more scrutiny from regulators than other companies, analysts said.
This means it will likely take longer than it would have expected in the past to bring fields to production.
“The Gulf of Mexico position was much heralded by management as a differentiated position for BP relative to its peers only 12 months ago … the full monetization of these assets is likely to take longer,” Morgan Stanley oil analyst Theepan Jothilingam said in a research note.
Lower-than-expected production would hit BP’s financial performance but in addition to this, higher costs could weigh on BP’s profits. Analysts at Bernstein estimated the company could face 10 percent higher operating costs in the United States after the spill, in part due to the need to impose tougher safety standards.
 
Story by Tom Bergin , additional reporting by Jeremy Pelofsky and Ayesha Rascoe in Washington from Reuters

Reuters Thu Jun 3, 2010 8:34am

Special thanks to Richard Charter