As the Deepwater Horizon drilling rig continues to spill over 1 million gallons of oil into the Gulf every day, Republicans are demanding less regulation for companies like BP and Transocean while also looking for a taxpayer-funded bailout of BP.1 Yeah, I'm serious.
After a month of oil spewing into the Gulf, the cost of cleaning up BP's mess is $542 million and counting. But a group of Republican senators lead by Lisa Murkowski of Alaska want the company to pay for only the first five days of the cleanup and put taxpayers on the hook for everything else.2
That's right, Murkowski and her pals want to "Bail out BP."
We need to tell Murkowski and her Senate colleagues that this is not OK. Can you send a message to your senators that it's time to end offshore drilling and focus on clean energy instead?
We need to tell Murkowski and her Senate colleagues that this is not OK. Can you send a message to your senators that it's time to end offshore drilling and focus on clean energy instead?
BP makes over $3.9 million EVERY HOUR.3 In the 31 days since the rig exploded, they've earned over $2.8 billion. Meanwhile, BP lawyers are working overtime to make sure that they are on the hook for only $75 million of the cleanup cost. And Murkowski and her allies think that's just fine because, to them, fewer rules are a good thing.
First, they wanted less regulation for Wall Street and the banks (look where that got us). Now, they want to do the same for oil companies. It's outrageous. We need oversight that protects our communities and environment -- not another taxpayer-funded bailout of the oil companies.
Congress needs another wake-up call to remind them that we're watching. Congress can't continue to let corporate America avoid responsibility and then bail them out when they can't clean up their own mistakes.
Tell your senators to say no to the BP bailout and to focus on clean energy solutions instead.
Thanks,
-Drew
Drew Hudson
TrueMajority / USAction
First, they wanted less regulation for Wall Street and the banks (look where that got us). Now, they want to do the same for oil companies. It's outrageous. We need oversight that protects our communities and environment -- not another taxpayer-funded bailout of the oil companies.
Congress needs another wake-up call to remind them that we're watching. Congress can't continue to let corporate America avoid responsibility and then bail them out when they can't clean up their own mistakes.
Tell your senators to say no to the BP bailout and to focus on clean energy solutions instead.
Thanks,
-Drew
Drew Hudson
TrueMajority / USAction
1 - cbsnews.com/8301-503544_162-
2 - reuters.com/article/
3 - washingtonpost.com/wp-dyn/
2 - reuters.com/article/
3 - washingtonpost.com/wp-dyn/
My letter to Sens Webb & Warner on this issue 21MAI10
Dear Senators,
The oil rig disaster in the Gulf of Mexico is a timely reminder that oil is a dirty and dangerous source of energy.
But some of your colleagues, lead by Sen. Murkowski, are proposing less regulation for companies like BP and Transocean and leaving taxpayers on the hook for cleanup costs when things go wrong. This is an outrageous bailout of BP and other big oil companies. BP, Transocean and Halliburton can not get away with sticking the cost of this cleanup and the environmental and economic damage on the American taxpayers like Exxon did after their spill in Prince William Sound. This is not going to be another BOHICA experience (Bend Over Her It Comes Again), we will not tolerate it and Sens Murkowski and Inhofe must not be allowed to place the corporate interest of these companies ahead of the physical, economic and environmental health of the nation.
Instead of risking our air, water, health and safety by perpetuating our addiction to oil, it's time to build a clean-energy economy that means more jobs, less pollution and real energy independence.
Please, oppose all plans to expand offshore drilling and limit oil company liability for spills and focus on clean energy instead.
Thanks,
Craig Schwanke
May 18, 2010 7:58 PM The oil rig disaster in the Gulf of Mexico is a timely reminder that oil is a dirty and dangerous source of energy.
But some of your colleagues, lead by Sen. Murkowski, are proposing less regulation for companies like BP and Transocean and leaving taxpayers on the hook for cleanup costs when things go wrong. This is an outrageous bailout of BP and other big oil companies. BP, Transocean and Halliburton can not get away with sticking the cost of this cleanup and the environmental and economic damage on the American taxpayers like Exxon did after their spill in Prince William Sound. This is not going to be another BOHICA experience (Bend Over Her It Comes Again), we will not tolerate it and Sens Murkowski and Inhofe must not be allowed to place the corporate interest of these companies ahead of the physical, economic and environmental health of the nation.
Instead of risking our air, water, health and safety by perpetuating our addiction to oil, it's time to build a clean-energy economy that means more jobs, less pollution and real energy independence.
Please, oppose all plans to expand offshore drilling and limit oil company liability for spills and focus on clean energy instead.
Thanks,
Craig Schwanke
GOP Blocks Oil Spill Liability Bill
Posted by Stephanie Condon
Sen. James Inhofe (R-Okla.) on Tuesday blocked a bill Democrats have put forward to raise the liability cap from $75 million to $10 billion. He said on the Senate floor he agrees the cap should be raised, but the Senate should "wait and see where the cap should be."
"If you have it too high you are going to be singling out BP and the other four largest majors and the nationalized companies, such as China and Venezuela, and shutting out the independent producers," he said.
Sen. Lisa Murkowski (R-Alaska) blocked the legislation last week.
President Obama released a statement saying he is disappointed by the Republicans' objections.
"This maneuver threatens to leave taxpayers, rather than the oil companies, on the hook for future disasters like the BP oil spill," he said. "I urge the Senate Republicans to stop playing special interest politics and join in a bipartisan effort to protect taxpayers and demand accountability from the oil companies."
Roll Call reports that Sen. Bob Menendez (D-N.J.), one of the sponsors of the legislation, reportedly asked, "This is really about whose side do you stand on? Do you stand up with the taxpayers or with multibillion-dollar oil companies?"
Sen. Frank Lautenberg (D-N.J.), another co-sponsor, similarly derided the GOP.
"What we're watching here is a sham," Lautenberg said, Politico reports. "We see our friends on the other side--correct that, the people on the other side... not friendly in this case, [and we want them] to stand up and say, 'Yeah. You did it? Pay for it.'"
Meanwhile, Senate Majority Leader Harry Reid said yesterday that a $10 billion cap is inadequate.
Cost of oil spill could exceed $14 billion
LONDON (Reuters) - The total bill related to the oil spill drifting toward Louisiana from a well operated by BP Plc in the Gulf of Mexico, could exceed $14 billion, analysts said. 2MAI10
Since an explosion almost two weeks ago on the Deepwater Horizon rig, a disaster scenario has emerged with hundreds of thousands of gallons of crude oil spewing unchecked into the Gulf and moving inexorably northward to the coast. The responsibility for the cleanup operation lies with the owners of the well, led by 65 percent shareholder, London-based oil company BP Plc.
BP said last week that it was spending $6 million a day on the clean up but admitted this figure would rise sharply when the slick hits land.
Neither the company or its 25 percent partner, explorer Anadarko Petroleum, have put an estimate on total costs, although BP CEO Tony Hayward told Reuters in an interview on Friday that he would pay all legitimate claims for damages.
The final bill for cleaning up the spill could be $7 billion, Neil McMahon, analyst at investment firm Bernstein said.
Analysts at Morgan Stanley put the figure at $3.5 billion, while analysts at Citigroup, Evolution Securities and Panmure Gordon put cleanup costs at under $1.1 billion.
Compensation that must be paid to those impacted by the slick could also amount to billions of dollars.
The cost to the fishing industry in Louisiana could be $2.5 billion, while the Florida tourism industry could lose $3 billion, Bernstein predicted.
BP will also have to spend $100 million to drill a relief well to try and stem the flow of the well, while the loss of the Deepwater Horizon well represents a hit of around $1 billion for its owner, Swiss-based drilling specialist Transocean.
COMPENSATION FOR WORKERS
Eleven workers are missing, presumed dead, following the rig explosion and compensation will have to be made to their families.
BP was forced to pay out $2 billion in compensation after 15 workers died in an explosion at its Texas City refinery in 2005, although Peter Hitchens at Panmure said it was likely liabilities related to the rig would be Transocean's responsibility.
BP and its partners in the oil block where the leaking well is located will have to cover the cleanup costs and damages on a basis proportionate to their shareholdings, which will leave BP with 65 percent of the bill.
The company self-insures through its own insurance company, named Jupiter. Contrary to press reports, Jupiter does not lay off risks onto reinsurers or syndicates at Lloyds of London, a spokesman said on Sunday.
Hence, BP will end up paying any costs out of its own pocket.
However, it is possible BP and Anadarko could seek to reclaim any damages from Cameron International Corp, the supplier of the well head equipment which has been blamed for the accident or companies involved in maintaining the drilling machinery.
The oil is leaking because a shut-off valve that should automatically kick in when a problem occurs, has not functioned.
The valve, known as a blow-out preventer, was supplied by Cameron and operated, as an integral part of Transocean's rig.
Oil services provider Halliburton said it performed a variety of work on the rig.
If BP could prove that Halliburton or Cameron did something wrong, they could lay part of the blame on them, Mike Breard, an energy analyst with Hodges Capital Management in Dallas said last week.
Shares in BP have fallen around 13 percent since the accident, wiping out $20 billion of the company's market value.
Shares in Anadarko, Transocean, Cameron and Halliburton have also been hit.
If regulators find any wrongdoing or incompetence on the part of the companies involved, it could levy fines, although analysts said that going by previous fines, these would likely be in the range of tens of millions -- immaterial to the total bill.
In such a situation, the courts could also award punitive damages.
Exxon Mobil was hit with $5 billion in punitive damages after the its tanker Valdez leaked 258,000 barrels of heavy crude into Prince William Sound in Alaska in 1989. The award was based on the fact Exxon had not taken due care when it employed a man with a drinking problem to skipper its tanker.
However, the damages against it were subsequently reduced to around $500 million on appeal.
All analysts agreed that the final bill for the Deepwater Horizon incident will depend on how much damage is caused.
Bernstein said the experience from the first Gulf War in 1991 suggested the damage across Louisiana, Alabama, Mississippi
and Florida could be less than many expect because of the warm water in the area.
"The Iraqi army opened valves on the Sea Island terminal, dumping up to 450 million gallons (around 11 million barrels) of crude into the sea in order to obstruct a potential landing by coalition forces," McMahon said in a research note.
"While the magnitude of the spill was vastly greater than the Exxon Valdez, it actually did relatively little long-term damage, as it dispersed in the warm waters," he added.
(Reporting by Tom Bergin, editing by Bernard Orr)
BP facing a wave of pressure, but not from its balance sheet
By Steven Mufson
Washington Post Staff Writer
Tuesday, May 11, 2010; A12
Standing outside BP's Houston offices Thursday, Interior Secretary Ken Salazar said that the company's "life is very much on the line here."
BP's financial wounds from April 20 drilling-rig explosion might be serious, but they probably won't be fatal. One analyst report, issued by Citigroup, even declared in its title, "Reaction to the Gulf of Mexico oil leak is a buying opportunity."
Even though most investors have soured on BP, driving down its stock price by 19 percent and wiping out $36.7 billion of its market value since the explosion, the business remains a behemoth. The company has a market value of $152.6 billion, bolstered by a global marketing network, a lucrative oil venture in Russia, a promising contract to boost production in a giant Iraqi field and scores of other large interests. It remains the largest oil producer in the Gulf of Mexico. Measured by revenue or assets, it is among the world's five largest companies.
Citigroup analysts said stockholders' reactions seem "disproportionate to the likely costs to the company." It noted that punitive damages against Exxon for the 1989 Exxon Valdez oil-tanker spill were originally set at $5 billion in 1994 but were reduced on appeal. The company agreed last year to pay less than $1 billion, including interest.
For now, at least, BP's prodigious costs combating the oil spill in the Gulf are outweighed by prodigious profits.
On Monday, BP said it spent $350 million in the first 20 days of the spill response, about $17.5 million a day. It has paid 295 of the 4,700 claims received, for a total of $3.5 million. By contrast, in the first quarter of the year, the London-based oil giant's profits averaged $93 million a day.
The amount of oil leaking into the Gulf of Mexico has been estimated at 5,000 to 25,000 barrels a day. In the first quarter, BP produced 2.5 million barrels of crude oil a day worldwide -- and it received $71.86 for every barrel.
BP has strong borrowing capacity, too. Analysts say it could get as much as $20 billion without exceeding its debt targets. "Even a pretty large digging into the pockets would be within our capacity to handle," said Andrew Gowers, a BP spokesman.
The company does, however, have large needs -- with a $20 billion capital spending plan for this year and $8.4 billion needed for acquisitions, mainly of assets from Devon Energy.
Now, cleanup costs must be added. Relief wells being drilled to intercept the damaged one could cost more than $100 million each. Scores of lawsuits have been filed. Legislation passed in 1990 after the Exxon Valdez accident makes BP and its partners responsible for cleanup costs and up to $75 million in damages.
BP officials said Monday that they expect to exceed that. "A $75 million liability is not where our head is at this moment," said David Nagel, an executive vice president.
On Friday, Standard & Poor's affirmed BP's credit rating but revised its outlook to "Negative" from "Stable." "Provided BP can stem the well and clean the spill within a reasonable time, the company has adequate liquidity and financial headroom to meet immediate costs," said a report by S&P credit analyst Simon Redmond. "However, it is still too early to estimate with any degree of confidence the full future impact on BP from the spill."
BP will survive, analysts say, but damage caused by the rig disaster that killed 11 workers was still huge. Fadel Gheit, an oil analyst at Oppenheimer, said the accident was "a major disaster with catastrophic implications not only for the companies involved, but also for the offshore oil industry and the economies of the Gulf Coast."
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