Cost of Gulf Oil Spill Mounts as BP, U.S. Government Errors Complicate Cleanup

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As the clock on the Gulf oil spill ticks past 60 days, the costs are approaching
$22 billion, with no end in sight.  Now, there is growing evidence that errors committed by both the U.S. government and BP PLC (NYSE ADR: BP) may have complicated efforts to clean up the mess.

The Coast Guard and BP each had written plans for responding to a massive Gulf oil spill, but both now say their plans failed to anticipate such a disaster threatening so much coastline at once. Furthermore, a miscommunication and disagreements between officials on federal, state, and local levels resulted in a lack of coordination and delays.

The federal government, which under the law, is in charge of fighting large spills, "had to make things up as it went along," The Wall Street Journal reported.

Federal officials changed their minds on key moves, sometimes more than once. Chemical dispersants to break up the oil were approved, then judged too toxic, then re-approved. The Obama administration criticized, debated and then partially approved a proposal by Louisiana politicians to build up eroded barrier islands to keep the oil at bay. And critical mistakes were made in deciding where and when to lay the boom designed to keep the oil from reaching shorelines and precious wildlife breeding grounds.

In the initial days after the spill, contractors were hired by BP to lay boom east of New Orleans.  But rough seas convinced the contractors to mostly stay ashore, forcing local shrimp fisherman, who had no experience in laying boom, into action.

To make matters worse, the government didn't have the right kind of boom.  The contractors had adequate supplies of boom made for flat, open water, but they lacked even minimum supplies of boom built for the open ocean and its rougher seas, The Journal reported. 

After Alabama authorities scoured the globe for the kind of boom they needed, they found it in Bahrain and flew it to the Alabama coast. Days later, the Coast Guard gave it to Louisiana.

Alabama Governor Bob Riley was furious. The Coast Guard and Alabama authorities instead deployed lighter boom. And on June 10, oil breached Alabama's Perdido Bay, an important fishing and tourism inlet.

"We have to learn to be more flexible, more adaptable and agile," says Coast Guard Adm. Thad Allen, the federal government's response leader, told The Journal.

Because two decades have passed since the Exxon Valdez oil spill in Alaska, he said, "you have an absence of battle-hardened veterans" in the government with experience fighting a massive spill, he said. "There's a learning curve involved in that."

BP and the government now are struggling to patch up an acrimonious relationship that has left both parties scrambling to quell the public uproar over the lack of progress in cleaning up the spill.

BP Chief Executive Officer Tony Hayward said yesterday (Thursday) that he was "deeply sorry" for the explosion and spill when he testified before Congress.  His testimony came a day after a White House meeting with President Barack Obama, where the company announced it would suspend its dividend for the rest of the year and create a $20 billion fund to cover costs related to the Gulf spill. 

The concessions prompted Obama to say BP is a "strong and viable company, and it is in all of our interests that it remains so."

However, U.S. Rep. Joe Barton, R-TX, said the fund amounted to a "shakedown."

"It is a tragedy of the first proportion that a private corporation can be subjected to what I would characterize as a shakedown, in this case, a $20 billion shakedown," Barton said in opening statements to the Congressional committee before Hayward's testimony.

Meanwhile, shares of BP rebounded in London trading and the cost to insure its debt fell on the news of the dividend suspension and the cleanup escrow fund. Shares were mostly flat in New York Stock Exchange trading. BP stock has slumped 45% since the Deepwater Horizon rig exploded on April 20, wiping about $81 billion off the company's market value.

BP so far has spent about $1.6 billion on containing and cleaning up the spill. The company's spending for cleanup and liabilities may reach $40 billion, Standard Chartered PLC estimated last week.

Yesterday's U.S. stock market reaction may have been muted by the latest in a series of public relations blunders by BP.

In a speech announcing the company's newest efforts to appease American frustration with the lack of progress on the cleanup, BP's Swedish Chairman Carl-Henric Svanberg continued the pattern.

"I hear comments sometimes that large oil companies, or greedy companies, don't care. But that is not case in BP, we care about the small people," Svanberg said in an emotionless drone.

Needless to say, assurances from the tall Swedish millionaire that he will take care of them did not go down well with the small people themselves and eroded the goodwill BP had just purchased for a hefty $20 billion price tag.

Svanberg later apologized for his clumsy choice of words, and a BP spokesman attributed it to an error in translation.

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  1. youheard itherefirst | June 17, 2010

    Greetings, there is a viable and economical way to plug the leak in the gulf. It is similar to balloon angioplasty, but on an industrial scale with a bit of tweeking but it will work IF THEY DO IT!!!! don't hold your breath though folks, I've been emailing news organizations, congress the senate and the white house along with bp telling them about this solution. It's like screaming into a hurricane though, no one can hear me and everyone is so busy with talking points and trying to gain some political ground, no one seemingly wants the leak plugged.
    Anyway, to plug the leak, as I stated earlier it is similar to balloon angioplasty, if you are unfamiliar with what that is, search youtube, they have video.. The tweeking is the balloon will have to be inside the thread feeder, when in place deep inside the leak, deploy the balloon and fill with some proprietary concrete/cement mixture, let it setup and LEAK FIXED.
    So simple even an elected official could comprehend it.. tell your friends, loved one's and anyone else that you know about this fix and lets get the leak plugged and move on with our lives. Have a nice day,… OH and for the people who will inevitably scoff that such an easy idea will work, could it really hurt to try? because to date, they've not done a whole lot with the leak so why not try balloon angioplasty on the leak.

    • Geoff Orchard | June 22, 2010

      I thought of an idea on day one that could be used in a number of situations.
      Create a double skinned cutain 50 odd metres in diameter and 100 metres high. Lower it down over the leak attached to a pipe at least as wide as the leak if not larger. There will be no change in pressure causing hydration because the top is still open. Once in place pour something heavy – concrete, ball bearings or whatever – between the skins to form a seal at the seabed.
      Then pull the top of the curtain in towards the pipe whilst pumping at a rate to keep the pressure inside the curtain the same as the outside. Once the system is stabilised you can spend time improving the seals or placing a second curtain around the first to minimise the leak still further. The pumps could be connected to supertankers which would ferry the oil to a refinery on shore to be turned into something useful.
      Even if the idea doesn't get all of the oil it will get most of it and buy time to allow for a more permanent solution without creating a catastrophe.
      I dunno, I am no engineer but your idea and mine seem to be viable alternatives to what they have done so far which have not come to anything.
      By the way this idea is freeware – you may use it for no cost but please acknowledge the creator.
      I do hope the best minds in the world can get their collective shit together soon before the problem becomes too big to solve without serious disruption to normal living on this planet.
      Have a good day
      Geoff

  2. Bob Casto | June 17, 2010

    About the Oil Spill. Has anyone out there thought about the Federal Inspection Reports? Who are these Inspectors? How long ago did they Check the Valve? I don’t think We the People will get the Truth of what Information is in these Reports? The Reports Must be Reviewed by an Independent Engineering Company Before having all these meaningless meetings that are costing We the People Millions of Dollars a Day. All this could be Said and Seen by Each Persons who wanted to see by Video Phone Conferencing? Without these Reports I Ask Who’s At Fault? Who is Responsible for the Death of the 11 Lives Lost?

  3. Dan | June 22, 2010

    How many times do we need to witness a situation that once again CLEARLY illustrates the incompetence – and inherent inefficiencies – of big government? First, they failed to properly inspect; second, they failed to implement their own plan devised years ago; and now they can't even coordinate efforts when they do actually attempt to remedy the situation. Is this what we can expect from Big Brother when the health care legislation goes into effect? Let me save you some time in pondering that one: YES!

  4. 20 Bill | September 30, 2010

    20 bill

  5. Neil | September 30, 2010

    Money

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