BP Stock Swoons as Coast Guard|Demands More Info From Its CEO

     NEW ORLEANS (CN) – After an oil industry insider told CNN on Wednesday that there “isn’t enough money in the world to clean up the Gulf of Mexico” and that BP may be forced into bankruptcy in about a month, BP stock tumbled by 15.8 percent on the New York Stock Exchange. Meanwhile, BP and federal officials met to address BP’s delay in processing large claims, and the Coast Guard admiral in charge of the federal response demanded that BP provide more information.

     Coast Guard Adm. Thad Allen wrote to BP CEO Tony Hayward on Tuesday that despite several federal requests for claims-related information from BP, such information continues to be scarce.
     “The Federal Government and the public expect BP’s claims process to fully address the needs of impacted individuals and businesses,” Allen wrote to BP. “We need more detail and openness from BP to fulfill our oversight responsibilities to the American people and ensure that you are meeting your commitment to restore the Gulf Coast.
     “The NIC [National Incident Command] and our state counterparts have made several requests for additional information which we have not received,” Adm. Allen wrote. “Access to this level of detail is critical to informing the public as to how BP is meeting its obligations as a responsible corporation. I expect a response from BP on this critical issue as soon as possible.”
     Matt Simmons, who CNN called an “energy insider,” predicted Wednesday that BP will run out of money in about a month from paying oil spill-related claims.
     Simmons told CNN’s money.com magazine, Fortune, that because there had not been a Gulf of Mexico oil spill in 41 years, BP optimistically canceled its insurance 3 years ago and since then has been self-insured.
     Simmons runs a Texas-based boutique investment bank, Simmons & Co., which specializes in the energy industry.
     “They have about a month before they declare Chapter 11,” Simmons told Fortune. “They’re going to run out of cash from lawsuits, cleanup and other expenses. One really smart thing Obama did was about three weeks ago he forced BP CEO Tony Hayward to put in writing that BP would pay for every dollar of the cleanup. But there isn’t enough money in the world to clean up the Gulf of Mexico. Once BP realizes the extent of this my guess is that they’ll panic and go to Chapter 11.”
     In the seven weeks since the explosion of the Deepwater Horizon, BP has lurched from one improvisation to the next in search of a way to mitigate the oil spewing from its broken well. This disaster is of unprecedented environmental magnitude in U.S. history and is certain to also have longstanding economic repercussions.
     BP bluffed the Minerals Management Service to get its deep-water exploration lease in 2009, by claiming in its application that it could control an oil leak 25 times larger than the one set off by the Deepwater Horizon. (See Courthouse News’ June 4 story.)
     When asked why BP did not have containment systems on standby, BP spokesman Robert Wine said there was no reason to think an accident of this magnitude was likely.
     “It’s unprecedented,” he told The Associated Press. “That’s why these caps weren’t there before.”
     Recent government estimates put the amount of oil lost so far at 23.7 million to 51.5 million gallons.
     “I think virtually everybody from BP to the state (of Louisiana) to the Coast Guard was caught flatfooted and did not expect a spill of this magnitude,” said Ed Overton, a professor of environmental sciences at Louisiana State University. “Everybody has been playing catch-up.”
     Hurricane season opened June 1, adding additional stress to the grim news in the Gulf of Mexico.
     A Coast Guard officer sent another letter on Tuesday, to BP’s Chief Operating Officer Doug Suttles, giving BP 72 hours to provide the government with its emergency plans in the event a hurricane in the Gulf. Adm. James Watson, the Coast Guard’s on-scene coordinator out of Robert, La., also asked BP for its plan for collecting the oil that is not being captured by its recently installed “top hat.”
     “Now that the so-called ‘top hat’ containment system has begun to capture and recover some of the oil escaping from the wellhead, it is imperative that you put equipment, systems and processes in place to ensure that the remaining oil and gas flowing can be recovered,” Watson wrote.
     Watson also demanded that BP have a plan to ensure that “in the event that a hurricane or other severe weather causes recovery vessels to go off station, those vessels” can be brought back as soon as possible after the storm passes and the mitigation can resume without delay.
     Simmons told CNN he believes the only way to close the spouting well might be to do what the Soviet Union did to a gushing oil well of their own several years ago: by setting off a bomb deep underground to melt surrounding rock and close off the faucet.
     “I think the government should ask BP to leave the United States and turn its operation over to the military,” Simmons told Fortune. “Put the U.S. Navy in charge. Have all the contractors report to the Navy – the cleanup efforts, the whole nine yards. Because as long as it’s in BP’s hands, they’re going to spin the information as much as they can.
     “There’s a lake at the bottom of the Gulf of Mexico that’s over 100 miles wide and at least 400 to 500 feet deep, of black oil,” Simmons said. “If a hurricane comes and blows this to shore, it could paint the Gulf Coast black. We should have been pumping this oil out onto other tankers weeks ago.”
     Suttles initially said the spill should be reduced to a “relative trickle” by next Monday or Tuesday. BP later tried to clarify that statement, saying that even though the company is optimistic it can make measurable progress in reducing the flow in the next week, it will take more time to reach the point that the spill is nothing more than a trickle.
     Adm. Allen was asked about the containment effort and uncertainties in estimating how much oil is escaping the loose-fitting cap placed over the well. He responded: “I have never said this is going well. We’re throwing everything we’ve got.”
     Workers this week piled sand 6 feet high along Louisiana’s barrier islands to protect environmentally delicate areas from the spill that has already coated islands and trapped pelicans with it thick brown sticky oil.
     Paul Bommer, a University of Texas petroleum and geosystems engineering professor and a member of the flow rate team, said the cap seems to have put a “dent” in the flow, but there is still a lot of oil coming out.
     The underwater “spillcam” video on Wednesday continued to show a plume of gas and oil spilling into the water.

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