Coast Guard Ups Pressure on BP Over Oil SpillJun 10, 2010 | Parker Waichman LLP
The Coast Guard is taking a tougher approach in its oversight of BP’s oil spill response. According to The New York Times, the Coast Guard wants the oil giant to put additional containment measures in place around its ruptured well within the next few days.
BP was able to deploy a containment system at the site of the Deepwater Horizon oil spill last week, but even though it has been capturing as much as 15,000 barrels of crude per day, oil continues to gush into the Gulf of Mexico from the undersea well. Government scientist had put the flow rate at 12,000 to 19,000 barrels a day prior to the system’s deployment. The continuing rush of oil from the sea floor has many fearing that the flow is much higher than that, and there is some speculation that deploying the new containment system actually increased the rate.
In a letter to Doug Suttles, BP’s chief operating officer for exploration and production, the Coast Guard’s Rear Adm. James A. Watson has given the company three days to provide plans for “parallel, continuous and contingency collection processes,” according to the Times report. Among other things, the Coast Guard wants BP to devise a method to reduce disruptions from hurricanes.
BP continues to maintain that it will eventually be able to capture most of the oil. On NBC’s “Today” show, Suttles said a new containment system now being installed could capture another 5,000 to 10,000 barrels. According to the Times, the new system will use pipes and other equipment installed for the failed “top kill” effort to siphon some oil and gas out of the well closer to the seabed.
In the near future, BP plans to replace the current containment cap with a tighter-sealing one. According to the Times, the new cap calls for the construction of a riser system that could be quickly connected and disconnected in the event of a hurricane.
The Coast Guard is also paying more attention to BP’s processing of oil spill claims. Recently, fisherman, businesses and others entitled to reimbursement for losses due to the oils spill have expressed anger at the slowness of the claims process.
In a separate letter, Coast Guard Adm. Thad Allen, who is overseeing the cleanup, demanded “more detail and openness” about how the BP is handling claims. Allen reminded BP that it “is accountable to the American public for the economic loss caused by the oil spill.”
BP’s oil spill costs are also starting to mount, raising fears about the company’s long-term survivability. The cost of the response effort to date has been around $1.43 billion. Recently, respected oil industry analyst Matt Simmons told “Fortune” magazine that a bankruptcy is a real possibility.
“They’re going to run out of cash from lawsuits, cleanup and other expenses,” Simmons said. “Once BP realizes the extent of this, my guess is that they’ll panic and go into Chapter 11.”
BP has lost more than half its market value since the April 20 explosion aboard the Deepwater Horizon rig, which killed 11 workers and spawned the worst oil spill in U.S. history.