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Maria Cantwell Tries to Get BP to Define “Legitimate Claims”

One of the highlights of the first of several Deepwater Horizon hearings in Congress this week came when Maria Cantwell tried to get BP American President Lamar McKay to commit to what BP would pay as “legitimate claims.” She asked about:

  • Long term and short term harms to the fishing industry
  • Business loss to tourism
  • State and local governments for lost tax revenue
  • Long term damages to LA fishing industry and it’s brand
  • Additional troubles with fisheries
  • Shipping impacts
  • Impacts on further drilling operations
  • Impacts to the pristine beaches in this area

He balked about the tax revenues, the brand of LA’s fishing industry, and further drilling operations.

In any case, he certainly didn’t commit to what he meant by “legitimate claims.”

Oil and Water and Leaky Hydraulics Don’t Mix?

I wanted to call your attention to this excellent story from the Houston Chronicle describing some of the potential causes of the Deepwater Horizon spill. The short version appears to be that they were switching the drill chamber over from mud to water, which exposed what may be a potentially faulty concrete job, which brought gas to the surface. When that happened, and the blowout preventer was activated, the BOP failed, potentially because of leaky hydraulics.

As the Chron story explains, BP should not have been replacing the mud with water unless they were very sure of the cement job done the day before.

Experts say well-capping poses special hazards. One arose that day as crews were replacing the mud with seawater in pipes going from the ocean floor to the rig.

Deep gases exert astounding upward pressure on a well. “Drilling mud,” a heavy fluid used to lubricate the drill and bring up bits and pieces of rock, is used as the main line of defense against the upward pressure, or a disastrous eruption of gas.

The mud was being displaced so the riser could be detached from the rig and the wellhead, and the well could be capped with a final cement plug. But seawater is much lighter than mud. The pressure the riser was applying to the well would have lessened by as much as 38 percent, experts said.

That could prove significant.

Investigators likely will be considering whether the drill hole and the casing pipe were secured properly with cement a day earlier.

“The big question is how confident were they in the casing cementing job,” said Elmer “Bud” Danenberger, who recently retired as chief of offshore regulatory programs for the Minerals Management Service. “They shouldn’t have begun this (riser) operation until they were confident in that.”

Now, as the MMS recently found, problems with the cementing process have been one (but not necessarily the only) cause in a plurality of blowouts in recent years. Though most of those cementing-related blowouts occurred in far shallower waters than this well.

Cementing problems increased significantly during the current period as these problems were associated with 18 of the 39 blowouts, compared with 18 of the 70 blowouts with identified contributing factors during the previous study. During the current period, all but one of the blowouts associated with cementing problems occurred in wells with water depths less than 400 ft.

The Chron notes that HAL claimed it had tested its cement job in its “we worked to spec” statement from last week, but had not released the results of that test. Read more

$75 Million Buys BP Six Years of Lobbying or One Giant Oil Spill

As you’ve no doubt heard, BP’s own liability for the damages the Deepwater Horizon spill will cause may be limited to $75 million (though it will have to pay for cleanup).

The federal government has a large rainy day fund on hand to help mitigate the expanding damage on the Gulf Coast, generated by a tax on oil for use in cases like the Deepwater Horizon spill.

Up to $1 billion of the $1.6 billion reserve could be used to compensate for losses from the accident, as much as half of it for what is sometimes a major category of costs: damage to natural resources like fisheries and other wildlife habitats.

Under the law that established the reserve, called the Oil Spill Liability Trust Fund, the operators of the offshore rig face no more than $75 million in liability for the damages that might be claimed by individuals, companies or the government, although they are responsible for the cost of containing and cleaning up the spill.

That’s obviously puny. But to give you a sense of just how puny it is, consider that, at its current levels of spending on lobbying, BP will spend as much every six years on politicians in DC.

BP is one of the most powerful corporations operating in the United States. Its 2009 revenues of $327bn are enough to rank BP as the third-largest corporation in the country. It spends aggressively to influence US policy and regulatory oversight.

In 2009, the company spent nearly $16m on lobbying the federal government, ranking it among the 20 highest spenders that year, and shattering its own previous record of $10.4m set in 2008. In 2008, it also spent more than $530,000 on federal elections, placing it among the oil industry’s top 10 political spenders.

But the puny amount for which BP will be liable for damages didn’t stop them from potentially trying to make their liability even punier. The early contracts it drew up to pay Alabama fishermen to help contain the spill included a $5000 damage limit, which presumably wouldn’t even cover the cost of a fishing boat.

Alabama Attorney General Troy King said tonight that he has told representatives of BP Plc. that they should stop circulating settlement agreements among coastal Alabamians.

The agreements, King said, essentially require that people give up the right to sue in exchange for payment of up to $5,000.

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