BP agrees to expedite oil spill payments

by Associated Press

Published: June 11,2010

Tags: disaster, energy, environment, offshore drilling, oil and gas, oil spill

GULF OF MEXICO — BP said yesterday it plans to boost its ability to capture the oil gushing from a ruptured well in the Gulf of Mexico by early next week as the Obama administration announced that the oil giant agreed to speed up payments to people whose livelihoods have been washed away by the spill.

Fishermen, property owners and businesspeople who have filed damage claims with BP are angrily complaining of delays, excessive paperwork and skimpy payments that have put them on the verge of going under as the financial and environmental toll of the seven-week-old disaster grows.

Under federal law, BP PLC is required to pay for a range of losses, including property damage and lost earnings, and the company has disputed any notion that the claims process is slow or that it has been dragging its feet.

But yesterday, Tracy Wareing, of the National Incident Command office, said administration officials raised a “pressing concern” during a meeting Wednesday with BP executives about the time the company has been taking to provide relief payments.

She said the company would change the way it processes such claims and expedite payments. Among other things, it will drop the current practice of waiting to make such payments until businesses have closed their books for each month.

The dispute over the claims process played out as BP stock continued to slide amid fears that the company might be forced to suspend dividends and find itself financially overwhelmed by the cleanup costs, penalties, lawsuits and damage claims generated by the biggest oil spill in U.S. history.

But markets were also beginning to heed warnings from analysts who said Wednesday’s 15.8 percent sell-off of BP shares in New York was an overreaction. BP shares dropped as much as 11 percent to a 13-year low at the open in London yesterday, before recovering some ground. In New York, shares of BP jumped 9.1 percent to $31.85 in Thursday morning trading.

The latest fall came after Interior Secretary Ken Salazar promised a Senate energy panel to ask BP to compensate energy companies for losses if they have to lay off workers or suffer economically because of the Obama administration’s six-month moratorium on deep-water drilling.

Congressional leaders stepped up that pressure on BP yesterday, with House Speaker Nancy Pelosi telling reporters at the White House “every taxpayer in America must know that BP will be held accountable for what is owed.”

Despite anger with BP, some lawmakers and Louisiana residents reiterated their call to end the six-month deep-water drilling moratorium, saying it will cause economic hardship in the region.

“Every one of these 33 deep-water wells employs, directly, hundreds of people and indirectly thousands,” Louisiana Sen. Mary Landrieu said in an interview yesterday on ABC’s “Good Morning America.”

At the bottom of the sea, the containment cap on the leaking well is capturing 630,000 gallons a day and pumping it to a ship at the surface, and the amount could nearly double by next week to roughly 1.17 million gallons, the Coast Guard has said.

The government has estimated 600,000 to 1.2 million gallons are leaking per day, but a scientist on a task force studying the flow said the actual rate may be between 798,000 gallons and 1.8 million. A task force member said an estimate come Thursday or Friday.

Using the government’s worst case scenario, the amount of oil that has spilled since April 20 rig explosion that killed 11 workers would fill up enough gallon milk jugs to stretch 4,525 miles, nearly the distance between the spill site and London, the world headquarters of BP.

In the best case scenario, the spill would fill enough gallon milk jugs to stretch 2,210 miles, slightly more than the distance between the spill site and Seattle.

A second vessel expected to arrive within days should greatly increased capacity. BP also plans to bring in a tanker from the North Sea to help transport oil and an incinerator to burn off some of the crude.

Kent Wells, BP’s senior vice president of exploration and production, said yesterday that a semi-submersible drilling rig was expected to be up and running early next week and would capture and burn about 420,000 gallons of oil daily.

A drill ship already at the scene can process a maximum of 756,000 gallons of oil daily that’s sucked up through a containment cap sitting on the well head.

The additional system will use equipment previously used to shoot heavy drilling mud down the well in an attempt to stop the flow — though this time the process will work in reverse. Oil will flow in lines from beneath the blowout preventer, a stack of piping on the sea floor, to the semi-submersible drilling rig called the Q4000.

Oil and gas siphoned from the well will flow up the rig, where it will be sent down a boom, turned into a mist using compressed air and ignited using a burner. BP opted to burn the oil because storing it would require bringing in even more vessels to the already crowded seas above the leaking well.

“It was going to become too congested, it was not the safest way to do it,” Wells said.

Testing on the oil-burning system should begin over the weekend, and full production should start early next week, Wells said. Work is also expected to begin this weekend to build a more robust containment system meant to better withstand the force of Gulf hurricanes.

Cleanup of the gooey oil continued along the Gulf Coast. In Orange Beach, Ala., reddish-brown globs of oil the size of credit cards littered the beach at the tide line as a blue farm tractor loaded with shovels and other cleanup equipment chugged down the beach.

County commissioners in Florida’s southern Escambia County approved $700,00 in emergency funding to promote the Pensacola area’s beaches as tar and oil sheen began breaking through a boom designed to protect inland waterways.

Outside the meeting, about two dozen men, some in fishing waders, carried signs criticizing BP. One of the men, Dennis Miller, who has been fishing for more than four decades, said they are frustrated because there is nothing to do.

“We’re just worried,” Miller said. “We’re trying to figure out what we’re going to do when they shut the whole Gulf down. And we know that’s coming.”

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