BP’s spill tab at $2 billion and counting

Deep-well moratorium draws challenge in court

Workers drive a pole into place Monday in Pass Abel, near Grand Isle, La. The pole will keep several barges, which will be lined up end to end, in place to serve as a barrier against oil.
Workers drive a pole into place Monday in Pass Abel, near Grand Isle, La. The pole will keep several barges, which will be lined up end to end, in place to serve as a barrier against oil.

— BP said Monday that it has spent $2 billion in two months fighting its Gulf of Mexico oil spill and compensating victims, with no end in sight.

The British oil giant released its latest tally of response costs, including $105 million paid out so far to 32,000 claimants. The figure does not include a $20 billion fund that BP PLC last week agreed to set up for Gulf residents and businesses hurt by the spill.

The White House said it sent BP and other parties being held responsible for the spill a $51.4 million bill, the third in the nine weeks since the Deepwater Horizon oil rig collapsed.

BP and others have already paid the first two bills, totaling nearly $71 million, a Monday night statement reported.

Kenneth Feinberg, who has been tapped by President Barack Obama to run the fund, said many people are in desperate financial straits and need immediate relief.

“Do not underestimate the emotionalism and the frustration and the anger of people in the Gulf uncertain of their financial future,” he said.

The fund may not be enough to pay all damage claims, Feinberg said.

“The president made it clear he wants full compensation,” Feinberg said on CNN. “The $20 billion might not be enough, maybe it will.Whatever it takes, these individuals and businesses must get paid.”

Scores of people and companies have sued BP for the April 20 rig explosion that killed 11 workers and set off the worst offshore oil spill in U.S. history. Scientists estimate anywhere from 1.6 million to 3 million barrels has spilled from the blown-out well on the seafloor. A barrel is 42 gallons.

Companies that ferry people and supplies to offshore oil rigs asked a federal judge Monday to lift a sixmonth moratorium on new deep-water drilling projects imposed in the aftermath of the spill.

After hearing two hours of arguments, Judge Martin Feldman said he will decide by Wednesday whether to overturn the ban imposed by the Obama administration after the Deepwater Horizon rig explosion off the Louisiana coast.

Also Monday, attorneys general in 11 Atlantic Coast states asked BP for assurances that legitimate claims from their residents will be paid if oil from the spill reaches their shores.

The prosecutors also said in a letter that they want BP to preserve all documents related to the spill and response. The documents could be needed if any of the states were to sue.

The states acknowledge that the chance of oil reaching their shores is small. Similar letters were sent to Halliburton, Transocean Ltd. and Cameron Inc., which were either involved in the blown well or supplied equipment for it.

Prosecutors from Connecticut, Delaware, Georgia, Maine, Maryland, Massachusetts, New Hampshire, New York, North Carolina, South Carolina and Rhode Island signed the letter.

It’s likely to be at least August before crews finish two relief wells that are the best chance of stopping the spill.

Feinberg, who ran the claim fund set up for victims of the Sept. 11, 2001, terrorist attacks, said he is determined to speed payment of claims.

“We’ve got to accelerate the process” for processing claims by people and businesses damaged by the oil spill, Feinberg said. “For emergency payments, we’ve got to err on the side of the claimants.” He said he plans to meet with BP executives later Monday and will be on the gulf coast today.

Shares of BP, which have lost about half their value since the rig Deepwater Horizon burned and sank off the Louisiana coast, were down nearly 5 percent Monday in London trading at $5.06. The rig was owned by Transocean Ltd. but run by BP.

BP Chief Executive Tony Hayward canceled a scheduled appearance at a London oil conference today, citing his commitment to the Gulf relief effort. The last-minute pullout followed stinging criticism of Hayward’s attendance at a yacht race on the Isle of Wight off the coast of southern England on Saturday.

As part of the federal response, the Interior Department halted the approval of any new permits for deepwater drilling and suspended drilling at 33 existing exploratory wells in the Gulf.

But a lawsuit filed by Hornbeck Offshore Services of Covington, La., claims the government arbitrarily imposed the moratorium without any proof that the operations posed a threat. Hornbeck says the moratorium could cost Louisiana thousands of jobs and millions of dollars in lost wages.

Plaintiffs’ attorney Carl Rosenblum said the six-month suspension of drilling work could prove more economically devastating than the spill itself.

“This is an unprecedented industrywide shutdown. Never before has the government done this,” Rosenblum told the judge Monday.

Government lawyers said the Interior Department has demonstrated that industry regulators need more time to study the risks of deep-water drilling and identify ways to make it safer.

“The safeguards and regulations in place on April 20 did not create a sufficient margin of safety,” said Justice Department attorney Guillermo Montero.

Louisiana Gov. Bobby Jindal’s office filed a brief supporting the plaintiffs’ suit. A lawyer for the state told Feldman that the federal government did not consult Louisiana officials before imposing the moratorium, in violation of federal law.

Catherine Wannamaker, a lawyer for several environmental groups that support the moratorium, said six months is a reasonable time for drilling to be suspended while the government studies the risks and regulations governing the industry.

“The risks here are new,” she said.


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The Obama administration is looking for ways to come up with more than the $100 million that BP pledged to aid oil rig workers who’ve lost jobs because of the government’s moratorium on deep-water drilling, administration officials said.

The officials, who spoke on condition of anonymity, refused to say whether the administration would seek more money from BP or its partners in the leaking well.

While Obama has asked Congress for legislation for a new program to provide unemployment assistance for such workers, officials said, the administration is seeking to avoid having taxpayers foot the bill.

BP is arguing that its partners in the oil well project must share responsibility for the disaster costs. BP owned 65 percent of the well, while Anadarko Petroleum Corp. had a 25 percent stake and a subsidiary of Mitsui & Co. Ltd. of Japan had a 10 percent stake.

Anadarko said Friday that the joint operating agreement made BP responsible for any damage caused by gross negligence or willful misconduct. BP shot back Monday that all the partners shared in liability for oil spill damage.

Robert Dudley, BP’s new man in charge of cleaning up the oil spill, signaled that the company will keep U.S. assets while it sells other interests to help cover costs related to the disaster.

For BP to “remain strong and viable in the U.S., it has a great deal of work to do,”Dudley said. A U.S. backlash against BP puts at risk a business built through $100 billion of acquisitions, an operation representing about 26 percent of the company’s global oil and gas production.

BP is reviewing its holdings for potential asset sales, Dudley said. The company plans to initially raise $10 billion. Properties to be considered include those not large enough to justify being held by an oil company the size of BP.

“We are going to have to sharpen the portfolio to pace ourselves for what has happened in the U.S.,” he said.

Meanwhile, the best hope of stopping the oil rests on teams drilling the wells about 40 miles from shore: They must hit a target roughly the size of a salad plate about three miles below the water’s surface.

If the workers aboard Transocean’s Development Driller II or its sister rig DDIII miss or move too slowly, oil will keep pouring into the sea.

No one on the rig has done this before because such deep sea interventions are rare. But workers brushed off worries and the pressure to succeed.

Coast Guard Adm. Thad Allen, the top federal official in the spill response, has said construction on the relief wells remains ahead of schedule. But setbacks are routine on a drilling rig.

“It’s business as usual, man,” said Eric Jackson, a rig worker. “Everybody tells us to be, ‘Hey, don’t let the pressure get to you.’ This is what we do for a living, man. We drill wells. It’s the same as any other day.” Information for this article was contributed by Michael Kunzelman of The Associated Press, by Roger Runningen, Viola Gienger and Stanley Reed of Bloomberg News.

Front Section, Pages 1 on 06/22/2010

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