This Was Not a Fun Day for BP

Jim Brown
 
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BP officials probably felt like they needed to be in a foxhole today because they were taking fire from all directions and the volume is increasing.

First on the list was a ruling by the Coast Guard to delay the relief well until mid September. At $500,000 a day in rental and parked right in the bullseye for any hurricanes the next four weeks is going to be an expensive and dangerous wait.

The delay is due to a Coast Guard decision to have BP remove the failed blow out preventer from the original well and replace it with a new stronger version. In theory the new BOP will prevent any future problems when the relief well drills into the original well and pumps in thousands of barrels of mud and cement under very high pressure. The Coast Guard was afraid the high pressure would break the cement plug at the top of the well and the start the well leaking again.

They are also removing the failed BOP because it is a crucial piece of evidence in the tragedy. They have been instructed by the Coast Guard to make very sure they do not damage the BOP in any way when it is removed.

In Washington BP was under attack on several fronts. Transocean attorneys sent a strongly worded complaint to BP saying BP was withholding information critical to the decision process in determining the reasons for the well's failure. This is the same complaint lodged by lawmakers and several plaintiffs in various suits. BP responded as it has to all prior complaints saying they have a commitment to cooperate with these investigations. Unfortunately that commitment has not been forthcoming. It is as if they believe they can stonewall all the investigations by refusing to turn over data or limiting the amount of data they disclose. This is building into a serious problem for BP because lawmakers can make it very painful for the company until they get what they want.

Transocean said BP only released a limited number of documents to Transocean and only after Transocean had to sign a complicated confidentiality agreement at BP's request. Transocean said BP was knowingly and purposefully withholding critical evidence in an attempt to prevent any other company other than BP from investigating the disaster. According to Transocean, BP has refused at least seven of its requests for information. BP has not turned over any information since June 21st and has not even acknowledged the company's request since August 3rd.

The Senate Energy and Natural Resources Committee said it also had a "state down" with BP over data it was trying to get from the company. BP tried to get Senate staffers to sign a confidentiality agreement as well but the committee refused. After some emotionally charged sessions BP has begun to release some data. A team of scientists released a research report on Thursday saying there was still a plume of oil in the gulf that was 22 miles long, 1.2 miles wide and 650 feet deep. Scientists said the oil droplets in the plume were being degraded by microbes relatively slowly, which means it could persist for some time.

Markey's panel criticized the NOAA report released last week that said 75% of the oil had already disappeared. The new report released on Thursday was conducted by the highly reputable Wood's Hole Oceanographic Institute. Markey blasted NOAA for trying to put a positive spin on the news so it would go away.

BP also filed a notice that said flaring would occur at its 265,000 bpd refinery in the Los Angeles area. This occurs when plants have equipment problems or maintenance issues. The notice was filed with the California EPA.

You may remember a couple weeks ago BP was given the largest fine ever of $50.6 million in reference to the refinery explosion in Texas. Today a mother filed suit against BP saying the pollution from that Texas City refinery killed her child and she is asking $10 billion in punitive damages. The child died from a sudden onset of lung problems on June 23rd. The suit is only one of THOUSANDS being filed over excess pollution from that plant. The Texas attorney general is conducting a probe of BP and the excess pollution and there is a $10 billion class action suit already filed. BP said it released 500,000 pounds of excess pollution in April-May including 17,000 pounds of benzene. BP said an equipment malfunction caused the release.

It was not a good day for BP and it is probably a preview of how their days are going to play out in the future. Just plugging the well is not going to solve their problems. The number of court cases is increasing daily and regulators and lawmakers are becoming increasingly impatient with the stonewalling. I expect BP shares to continue to decline on every new headline.

Jim Brown

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