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Justice Department bears down on BP's Gulf Coast Claims Facility and administrator Feinberg

In a "bluntly worded" letter to Ken Feinberg, Associate Attorney General Thomas J. Perrelli made clear that it's not Feinberg's job to be tightfisted with BP's GCCF money.  His job, in fact, is to distribute it fairly among the Gulf residents hurt by the spill.

Perrelli is the third-ranking official in the Justice Department and the man overseeing the Department's case against BP.  

Perrelli's letter stated that "The impact of the spill on the lives of the people of the Gulf cannot be overstated," saying that Feinberg's meting out of the fund was far too miserly; that not only were those directly harmed by the spill entitled, but also those communities where "pervasive" effects of the Macondo disaster had an impact "on the overall economy."

Feinberg has only paid out about $3.5 billion of the fund's $20 billion.  Perrelli urged Feinberg to unclench his fists and stop worrying about BP's money.  

Any money not paid out in claims by the Facility goes back into BP's coffers.  Doesn't help the look of things, either, that BP dipped into the fund themselves to pay $10 million to some unidentified buddies of theirs.  (For details, see Wednesday's AUV.)

Perrelli also said that Feinberg needs to be more transparent, and that his Gulf Coast Claims Facility should take a second look at the emergency advance payments the fund paid to victims to determine if the process was fair.

"Your immediate attention to these issues will go a long way toward fulfilling BP's commitment, and the GCCF's responsibility, to provide a fair and efficient process that serves the needs of the people of the Gulf," Perrelli said.

While Feinberg told the AP, in a phone interview, that he'd consider Justice's advice, he didn't indicate any upcoming changes in the process by which funds are distributed.

"I welcome their input. It's always constructive," Feinberg said. "I plan as I move forward to take into account the constructive suggestions of the department and the administration."
Feinberg wouldn't say Friday how much he thinks will be consumed from the fund when the claims process ends. It is scheduled to run until 2013, though Feinberg is now in the process of issuing final payments to eligible claimants for past, current and future damages. He has not committed to spending the entire $20 billion and has suggested previously that as long as he does his job there is nothing wrong with the idea of money being returned to BP.

Feinberg's dubious commitment to those whose lives and livelihoods have been decimated by the BP torrent of oil is well documented here.  Of the roughly 485,000 claims filed, half have been denied, either for insufficient documentation or for (without explanation) being deemed "ineligible."

Perrelli told Feinberg the issue was "a matter of urgency."

BP royalty payments in Gulf spill face scrutiny

BP's fines to the Department of the Interior and payments to a non-profit environmental organization were based on the amount of oil recovered and the price of oil at the time.  BP had committed to pay any money it made from sale of the recovered oil to the National Fish and Wildlife Foundation.

The figures BP used to determine those earnings are now being called into question.

The company eventually sent $22 million to the foundation to help sea turtles and migrating birds. It also paid $5.2 million in royalties to the federal government on oil that was collected and shipped to refineries.

But now the Interior Department is examining whether the company's royalty payments were enough, based on the market price of oil during the spill and the amount of oil that BP recovered.

The presidential commission investigating the spill has reported that about 980,000 barrels of oil were taken directly from the wellhead or skimmed from the ocean surface during the disaster. Based on the average market price during the spill, the oil could have generated revenue of as much as $71 million — meaning that both the royalties and charitable contributions could have been millions of dollars higher.

Of course, whatever amount the DoI and BP are quibbling over, it's small fry compared to clean-up and recovery costs to be paid by BP.  Still, typically, Daren Beaudo, spokesman for BP, denies any inaccuracy in the royalties and donations.

Beaudo said the company was not able to sell all of the oil that was recovered from the well, either because it was fouled or because large amounts were burned until a recovery system could be put in place. He also said the price obtained for the crude varied, though the company would not disclose the prices or who refined the crude.
If[...] investigations determine that BP acted with negligence or in violation of government regulations, the Interior Department can collect royalties from BP on all of the estimated 4.9 million barrels of oil that escaped from the well. Most of that crude could not be recovered.

If all of that oil were valued at the average market price last summer, it would be worth $356 million, and BP and its partners would owe royalties of $67 million to the federal government.
"It has been impossible to hold the extractive industries accountable," said Danielle Brian, executive director of the Project on Government Oversight, which has extensively investigated the Interior Department's handling of royalties. "This is the people's oil. It is on public land. The land is only being leased to the oil companies."

Brian said there was no question that the Interior Department should demand royalties on all of the lost oil, because it represented a loss of public assets. She also wrote a letter last week to President Obama, raising a series of concerns about estimates made last summer of the amount of oil that BP claimed was collected.

BP's oil accounting has been controversial from the first days of the well blowout last April. The company initially said it didn't believe any oil was escaping from the well after the Deepwater Horizon rig burned and sank. When oil slicks began appearing, BP estimated just 1,000 barrels a day were coming out of the well.
If BP had sold all of the 980,000 barrels recovered from the Macondo well, its 65% share of the resulting $71 million in revenue would have been $46 million. The BP royalty to the government would have been $8.6 million, rather than the $5.2 million it paid. (Anadarko paid $2 million in royalties and Moex $790,000, according to the Office of Natural Resources Revenue.) In a statement Thursday, Beaudo said BP's actual sales volume was 590,000 barrels.

Anadarko spokesman John Christiansen said the company did not believe it was entitled to any profits from the spill and said it would donate any revenue to gulf communities. Anadarko said it returned a check for about $10.6 million to BP, but it was not immediately clear what BP did with that money. The two companies have substantially larger disputes to resolve: Anadarko has refused BP's demand for $2.6 billion to pay for a share of cleanup costs, citing what it called in a statement last June "BP's reckless decisions and actions."

What about those oil spill estimates?  

Few concerned have been satisfied by the 5,000-barrel-a-day figure, feeling it was a gross underestimation of the amount of oil spilled into the Gulf of Mexico over 87 days.

Now, scientist Ian MacDonald of Florida State University has come up with some insights into how that number was reached, and how very wrong it is.  Back in May, he wrote a Times editorial with colleagues that posited the inaccuracy of the flow measurements.  Now he's documented those findings in a paper.

[...T]his claimed rate was questioned by scientists, especially Dr. MacDonald, and by advocacy groups, notably a small environmental organization called SkyTruth. Eventually their concerns were proved correct, the 5,000-barrel estimate was discredited, and a government-appointed scientific panel produced an estimate of the flow rate from the broken oil well that was more than 10 times greater. The bad estimate was a big blow to the Obama administration’s credibility, and it heightened public suspicion of virtually everything else the government said about the spill.

Dr. MacDonald[...] worked with the office of a congressman who investigated the spill, Edward J. Markey of Massachusetts, to obtain and analyze worksheets and other background documents that went into the original estimate. He found that, as reported in this newspaper at the time, the first version of the bad estimate was created by the National Oceanic and Atmospheric Administration. Shortly thereafter, BP did its own calculations.

The NOAA number, based on aerial and satellite surveillance, was roughly 5,000 barrels per day, and BP’s analysis of similar data seemed to confirm it. A second BP approach produced a remarkably wide range: a possible flow rate of 5,000 to 60,000 barrels per day.
"Without knowing the background, a manager presented with this would probably be inclined to say that 5,000 barrels of oil per day was a pretty good number," Dr. MacDonald told me.

But Dr. MacDonald, in his research, ferreted out critical flaws in some of the calculations supporting that number. For instance, the unidentified NOAA technician or scientist who made that agency’s quick one-page analysis apparently failed to follow procedures laid out in NOAA’s own field manual for how to estimate the volume of an oil slick.

According to Dr. MacDonald’s research, the technician probably misinterpreted satellite photos of the slick and also made unsupported assumptions that tended to lower the estimate.

In its calculations, Dr. MacDonald found, BP appeared to follow the procedures prescribed in its "Regional Oil Spill Response Plan" for the Gulf of Mexico — but the fundamental assumptions incorporated into those calculations were nonetheless flawed. BP apparently converted visual analysis of the oil slick’s thickness into estimates of oil volume using a table of numbers from the response plan.

But the numbers in the table were far too low, failing to match up with the accepted international standards for how to do this sort of thing, Dr. MacDonald discovered in his research.

As we here well know, after thousands of bleary-eyed hours of watching, BP had cameras trained on the volcano of oil pouring out of the broken (and later cut) riser.  When Congressman Markey demanded that BP make those feeds public, many who watched questioned the 5,000-barrel-a-day estimate.

"In choosing to believe this rate, the authorities ignored the strongly contradictory evidence offered by videos of jetting oil and refused to consult independent experts who could have provided better analyses," Dr. MacDonald wrote in his article.

The bottom line is that, in the early weeks of the spill, the single most important piece of information needed in the response was badly off-base. The haunting question is whether engineers, had they known the true rate of flow from the outset, would have skipped many of the failed efforts to cap the well in those first weeks, cutting straight to the aggressive approach that eventually worked — after some 4.9 million barrels, or 206 million gallons, of oil had flowed into the Gulf of Mexico.

We may never know the answer. But this much is clear: If another large oil spill happens in American waters, government and industry are going to be under enormous pressure to come up with credible estimates from the outset, not only as a matter of principle but also to guide the response to the spill.

One hopes that federal agencies are doing some hard thinking now about who would make such estimates, by what methods, and how the work would be vetted before any calculation is released to the public.

But wait: there's more

U.S. regulators may file charges against BP

The charges relate to alleged manipulation of the gas market in 2008, the latest investigation into the oil majors trading activities.

BP was previously fined by the U.S. Department of Justice for price fixing in the propane market in 2004 and by the New York Mercantile Exchange 2003 for crude trades.
"The U.S. Federal Energy Regulatory Commission (FERC) and the U.S. Commodity Futures Trading Commission (CFTC) are currently investigating several BP entities regarding trading in the next-day natural gas market at Houston Ship Channel during October and November 2008," BP said in its fourth-quarter 2010 earnings report.

The company said the CFTC notified BP that it planned to recommend alleging market manipulation. The CFTC and FERC declined to give details on the investigation.
BP was fined $373 million by U.S. Department of Justice, including $50 million for [the] Texas refinery explosion and $303 million for price-fixing in the propane (LPG) market in 2004.

In 2003, the New York Mercantile Exchange fined BP $2.5 million for crude oil trades in 2001 and 2002 after allegations including wash trading, and conduct detrimental to the interests and welfare of the exchange.

Maybe if Dudley ignores it, it'll go away

"2010 will rightly be remembered for the tragic accident and oil spill in the Gulf of Mexico, and it is clear that as a result BP is a company in transition. I am determined that we will emerge from this episode as a company that is safer, stronger, more sustainable, more trusted, and also more valuable.  2011 will be a year of recovery and consolidation as we implement the changes we have identified to reduce operational risk and meet our commitments arising from the spill. But it will also be a year in which we have the opportunity to reset the company, adjusting the shape of our business, and focus on growing value for shareholders."

Bob Dudley is working his overpaid ass off these days hyping the idea that BP, under his recently attained stewardship, is all about safety.  Nothing but safety.

Oh, and profits.  

But mostly profits safety.

He's not quite the salesman he was cracked up to be when hired to fill Tony Hayward's top-siders.

Dudley stood in front of reporters in London Tuesday and promised that his top two priorities were making BP the safest oil company in the world and restoring public trust in it. However, within 24 hours a series of fresh charges against BP showed just how big that challenge is.

First, an investigation by the Wall St Journal showed how internal disputes over safety at BP’s Alaskan operations have continued, even after the Deepwater Horizon disaster.

Then, it emerged that the U.S. Commodity Futures Trading Commission plans to charge BP over alleged manipulation of natural gas prices.

And on Wednesday morning, the safety watchdog of the U.K. offshore oil industry revealed that it had rapped BP for significant safety lapses at three North Sea oil platforms, including one where the company was aware of dangerous corrosion on a piece of equipment on a North Sea platform, but continued to operate it until it failed catastrophically.
If BP wants to avoid the single problem that Dudley said could still jeopardize BP’s recovery, the executives charged with restoring the company’s reputation must make sure the vaunted new safety approach travels all the way from the board room to oil platforms in the North Sea, trading floors in Houston and pipelines on Alaska’s North Slope.

That "single problem" Dudley referred to was quite the issue.  "Every day we operate safely we earn more trust, but a single problem could jeopardize the recovery," Dudley e-mailed his staff back in October.  So far, few seem to be focused on the trust BP has earned, while many are alarmed at continuing safety issues.

BP looks to offload its albatross

Along with its Carson City, CA refinery, BP plans to dump its Texas City, TX refinery, where fifteen workers died and another 140 were injured in an explosion.  BP says they're offloading the refineries to raise money to pay for the Gulf spill.  Assuming those sales go through, it leaves their Whiting, Indiana refinery as their largest such facility.  Of course, despite spending $3.8 billion on upgrades and expansion, they've yet to turn the ignition key.  Seems there are delays due to... safety concerns.  It's déjà vu all over again.

That massive maze of pipes and towers around the bend of Lake Michigan where BP’s Whiting, IN refinery is in the midst of a $3.8 billion "modernization" project has not exactly been a beacon of good news. Issues of increased Lake dumping and vented carcinogens have garnered regional concern. And this week BP announced that the project is behind schedule, with the completion date now pushed back from 2012 to 2013 due to "many variables." No doubt fixing up the aging 6th largest refinery in America is a complicated problem, causing executives plenty of stress.

The upgrade of the refinery along Lake Michigan will equip the complex to become a top processor of high-sulfur crude taken from Canadian tar sands. The project, designed to deal with the higher level of impurities found in that crude, was expected to be completed and operating by late 2012.
Iain Conn, chief executive of BP's refining and marketing division... said the upgrades at Whiting will allow it to run heavier crude oils and improve its product yields. He said BP also benefits from the refinery's proximity to Canadian crude sources and pipelines.
In June 2007, Indiana environmental officials issued BP a new wastewater permit for the Whiting refinery expansion, angering environmentalists because it allows the refinery to increase discharges into Lake Michigan of ammonia and pollution called suspended solids.

BP later announced that it would find ways to keep the expanded refinery's discharges to the limits set under its previous water permit.

And just this past Thursday:

BP Plc’s sulfur recovery unit at its Whiting refinery in Indiana "tripped" yesterday, resulting in the release of hydrogen sulfide and sulfur dioxide into the air, according to a filing with the National Response Center.

U.S. refineries must notify the center if they release hazardous substances in excess of reportable quantities.

That's not the end of the neighborhood's worries.

There is a very distinct hum and vibration emanating from the plant causing some restless nights for some angry residents. Complaints were first called in to BP just before Christmas. Weeks later, citizens were expressing their frustrations at a community meeting hosted by the mayor.
[...T]he source of the nuisance has yet to be identified, according to Director of BP Government Affairs Tom Keilman.

"We are systematically investigating the sound inside and outside the refinery and in the neighborhoods to determine the source," Keilman says. "We are utilizing a third-party acoustic consultant to determine the source."

Safety Troubles for BP in the North Sea

Lest we think BP only trashes countries not of its origin, the mother country is none too pleased with their safety practices, either.

BP has been reprimanded for putting workers in danger when tonnes of boiling hot heating fluid leaked during a "catastrophic failure" of equipment on the Schiehallion floating production, storage and offloading vessel last year.
[...The incident] comes a day after BP chief executive Bob Dudley said he was putting safety and risk management at the heart of the company following the blowout last year at the Macondo well in the US Gulf, leading to the deaths of 11 men.

The leak on the Schiehallion FPSO happened on 24 September, leading to a three-month shutdown for repairs.

The fluid was at a temperature of 123 Degrees Celsius [253.4 F] when it escaped through a pinhole crack in a heating line.

BP said the leak was contained on deck and that nobody was injured. No fluid escaped into the sea, it added.

The HSE said BP was aware the wall of the heating line was thinning severely three days before the leak happened but decided to carry on with operations.

"No operational risk assessment was carried out to determine whether this was safe for continued operation or should be shut down," the HSE said.  "You carried on operation of this line...and the line failed catastrophically."

The Health and Safety Executive (HSE) said the firm’s operational risk assessments were "not suitable and sufficient"...  HSE officials also said two of the three lifeboats on a BP platform manned by 76 workers were out of use, and the third lifeboat only had space for 56 people in case of evacuation. BP said a helicopter had been sent to the ETAP installation as temporary cover and maintained everyone could have been evacuated in an emergency.

The HSE also said workers on the Clair platform worked on a turbine after turning off the fire detection and suppression systems.

The firm said its North Sea safety performance had improved last year, but the failures highlighted by the HSE led to concerns last night that middle managers in the oil industry treat safety procedures as "window dressing" and prioritise production to improve their own career prospects.
In an improvement notice issued to BP and published yesterday, the HSE criticised the firm’s assessment of risk to its offshore employees in the North Sea.

In the notice, the HSE revealed BP knew the walls of a pipe carrying heating fluid on the FPSO Schiehallion were thinning on September 21 last year, but continued work for three more days until it "failed catastrophically" and the pipe burst.
Jake Molloy, the RMT union’s regional organiser, said middle managers across the industry "bend the rules or cut corners" to move up the career ladder.

"The fault lies solely with the installation managers in all of these cases," he said. "There should be no question about shutting the system down in these situations, and I find it astonishing that some people decide to continue production.

"The middle management are stuck between the rock of safety and the hard place of production, and more often than not make the wrong decision."
A BP spokesman said the firm accepted the HSE’s findings and said action had been taken to improve risk management, including a "comprehensive response" to the Schiehallion incident.

"BP's safety performance in the North Sea during 2010 improved considerably and was industry-leading," he said.  "We continue to pursue all opportunities to minimise operational risk."
The spokesman added BP "doesn't recognise the issue" of a poor attitude to safety among offshore managers. Our absolute priority is to manage safe operations; this is clear throughout the North Sea business," he said.  "Our improving safety performance in the North Sea is the best reflection of our management priorities."

BP investors turn on Dudley, others

A group of BP investors have filed a derivative claim against BP, accusing their high-level officers of being more concerned with cutting budgets than improving safety, and ignoring "red flags" leading up to the explosion of the Deepwater Horizon.  

[...I]nvestors claim BP executives and directors breached their fiduciary duties to the company by ignoring safety and maintenance for years before BP’s Macondo well exploded April 20. The investors seek reforms in BP management and damages from the executives and board members to be paid to the company.

"Despite repeated guilty pleas, warnings, employee deaths and injuries, and criminal and civil penalties imposed on the company by numerous federal and state regulators, the defendants continued to systematically cut budgets," the investors’ lawyers said in a court filing yesterday. "The defendants’ decisions and deliberate inaction caused one of the largest environmental disasters in the history of the U.S."

The investors’ suit... is combined with other shareholder actions in federal court in Houston. The Louisiana pension fund initially filed the derivative lawsuit in May, within weeks of the explosion, and was joined by similar claims by other investors.
U.S. District Judge Keith P. Ellison in Houston is overseeing three categories of BP investor claims consolidated in his court -- derivative suits brought on behalf of the company, shareholder securities fraud suits claiming diminished share value and claims by BP employees alleging losses from mismanagement of their retirement savings funds.

Typically, BP spokesman Daren Beaudo was unavailable for comment.

The lawsuit names as defendants current and former executives and board members including Chief Executive Officer Robert W. Dudley, former CEO Anthony B. Hayward and Chairman Carl-Henric Svanberg.
The executives and board members pursued or allowed BP to pursue a reckless course that led to the Deepwater Horizon incident, the investor lawyers said.
"In 2009 alone, defendants cut BP’s operational costs by 15 percent," according to the complaint. "This reduction in budgets and manpower further undermined the company’s ability to operate safely as personnel were stretched even thinner and resources that should have been devoted to maintenance, monitoring and addressing crucial safety failures in every aspect of the company’s operations were diverted."
The investors are seeking reimbursement of costs for pursuing the lawsuit, including attorneys and experts’ fees, along with unspecified damages to be paid to BP by the individual directors and executives for the company’s losses as a result of the alleged breaches of fiduciary duty.

The lawsuit also asks that the defendants account for profits and benefits, including salaries, bonuses and stock options, obtained through their alleged misconduct. Any money recovered would be placed in a trust for the company’s use.

The article excerpted here is outstanding, and well worth reading in full.


Last week Alabama Attorney General Luther Strange bumped out the two plaintiff's law firms who brought what was at the time the only suit against BP, replacing them with himself.  The firms were hired by the man who previously held Strange's seat, Troy King.  As a candidate, Strange had publicly stated that he doubted the efficacy of a suit against BP, and that he felt King had rushed into it.  Now he says he believes it's the right thing to do, based on the Justice Department's intent to bring civil charges against the company.

The problem is that Strange has deep and lasting ties to Transocean, named alongside BP in the suit now being adjudicated by US District Judge Carl Barbier.

Strange was a lobbyist for the oil industry, representing Transocian in 1998.

Strange's ties to the company that became Transocean date back to the 1980s. And that's because Transocean essentially was born in Birmingham, which long has been Strange's home base. Reports the Mobile Press-Register:

   Transocean's corporate roots are planted in Alabama. The company was born in 1973 as Sonat Offshore, a subsidiary of Sonat Inc., a Birmingham-based natural gas utility that was an Alabama economic powerhouse for much of the 20th century.

   Strange was hired by Sonat in 1980 as a young lawyer straight out of Tulane University. He was promoted to head of the company's Washington office in 1985 and represented Sonat in Congress until 1994, when Strange left the company but continued to represent it as a contract lobbyist.

Is Luther Strange handling the BP litigation so he can help manage the damages for one of his former clients? Alabamians should give that question some serious thought. Republicans on the Alabama Supreme Court, known as the "Exxon Eight," already have cheated the state out of more than $3 billion in a fraud verdict against ExxonMobil. Don't be surprised if the fleecing of regular Alabamians continues on Luther Strange's watch.

We're already seeing signs that the Alabama State Bar might be working as an accomplice for Strange. Reports Reuters Legal:

   In a letter dated Aug. 19, Alabama State Bar General Counsel J. Anthony McLain advised Strange that his work with Transocean would present a conflict only if Strange had obtained confidential information during his employment with Transocean that could be used against the company in litigation. Strange maintains he has no conflict. BP declined to comment on the issue.

Talk about turning an issue on its head. It's highly unlikely that the fine folks at Transocean have anything to worry about with Luther Strange. After all, he's their boy. It's the regular citizens of Alabama who have cause for concern about our state's new AG.

Isn't it interesting that Tony McLain, of the Alabama State Bar, sees no possible conflict if Luther Strange uses his 30-year ties to Transocean to help fleece the public?

Looks like it's business as usual in Alabama.

Blob of Glup found off Florida Panhandle

Just off the Florida Panhandle coastline, within site of Perdido Key, scientists have discovered an underwater mass of dead sea life that appears to be growing as microscopic algae and bacteria get trapped and die.

Early samples indicate the glob is at least three feet thick and spans two-thirds of a mile parallel to the coast.

No one knows where it came from or where it will go.

Scientists haven't yet been able to determine whether it's a result of the Macondo well blowout, but have so far been unable to detect any oil in it.

"It seems to be a combination of algae and bacteria," said David Hollander, a chemical oceanographer with the University of South Florida, describing the substance as "extraordinarily sticky" and toxic.

While scientists have drawn no conclusions about the gooey mat's origin, they are not ruling out a potential connection to the oil spill. Oil gummed and slicked that part of the Gulf for 30 to 40 days during the three-month well gusher.
"We don't know all the ramifications, the implications of a spill like this," Hollander said.

The mass was found while Hollander and other scientists were checking the sea floor for oil left by the Deepwater Horizon spill and received a tip about something strange off Perdido Pass.  The group is planning to revisit the mass again in a few weeks to check its progress.  On their first trip, they didn't have the equipment necessary to reach the bottom of the glup, where sediments might have offered more information about its formation.

The environment near the blob is a relatively pristine sloping shelf, where wave action usually sweeps away sediments.

Tests show it had no connection to land, was less than a year old and almost 100 percent biological. Tests also showed that tiny organisms had been getting stuck to the blob and dying as a result.

George Crozier, executive director of the Dauphin Island Sea Lab in Louisiana, said such material is foreign to the northern Gulf coast environment.

"It sounds a lot like an organic deposit, the source of which is frankly very difficult to ascertain," Crozier said.

He speculates that a bloom of algae may have feasted on something - possibly oil - ran out of food and then died. The decaying algae might have then sucked all the oxygen out of the water and killed whatever was in the way.

The blob is equally puzzling to local ecologists who study the coastal resources near Perdido Pass.

The floor of the Gulf is being examined like never before, as scientists track what happened to oil from BP's high-pressure multi-billion dollar prospect that became the worst ecological disaster in US history.

"The scrutiny and the eyes and the awareness and the attention on the water these days, people are noticing things they've never noticed before," said Phillip West, coastal resources manager for the city of Orange Beach, Alabama.

But all of the damage caused by the oil and the 1.8 million gallons of chemical dispersants used to break it up will be difficult to trace, especially as time passes.

In his nine years with Orange Beach, West said he has never heard of a substance matching Hollander's description. Occasional mats of decayed marsh muck turn up, but those are far different.

West also is not ruling out a potential link to the oil.

"Ecology tells us there are chains of events that occur for inputs or disturbances in the environment. One thing can lead to another," West said.


TNK-BP, Roseneft, and the Kremlin

The great chess game of Russian energy politics forced BP into an extraordinary series of moves and counter-moves this week.

At the heart of the contest is the British energy major’s desire to get its hands on the trophy of deepwater Arctic oil. Causing the controversy is BP’s £10bn deal with Russia’s state-owned oil company, Rosneft, that will allow it to explore for that technically difficult prize.

It is an alliance that Mr Dudley believes will transform the company’s future. The companies have already shaken hands over a deal to explore Russia’s north coast together and swap £5bn of shares.

It's all very cozy and warm between BP and Rosneft.  Out in the cold, however, are BP's partners in their other Russian holdings, TNK-BP.  Four billionaires (Alfa-Access-Renova or AAR) are co-owners in TNK-BP, which is responsible for a staggering full third of all BP's annual output.

It didn’t take long for the businessmen to make their extreme unhappiness known. They describe BP as an unfaithful spouse jumping into bed with another partner - and then proposing that all three live happily together. Insisting that BP has violated their current deal, they want to force BP to conduct its Arctic exploration through TNK-BP.

Although TNK-BP is an onshore oil and gas specialist, they are furious that BP’s deepwater expertise should go to Rosneft rather than themselves. The British company could easily lend its deepwater experts to TNK-BP, they argue. Landing the first blow on BP’s grand plan, they have obtained a court injunction stopping further talks with Rosneft. The two sides will now go for United Nations arbitration under Swedish law in London.

While maintaining BP is not guilty of any wrongdoing (or outright betrayal), Bob Dudley has made comments to the effect that resolution may lie in that salve for all ruffled oligarch feathers: cold hard cash.  He brushed off AAR's legal actions against BP as merely a "time out," and stated that everything was hunky-dory between BP and their absurdly wealthy partners.

That's what Smooth Bob says, anyway.  Others have let it be known that it's nowhere near that friendly behind closed doors, but that both sides will work it out and TNK-BP will weather this storm.

There is no doubting that TNK-BP is a cash cow – and that BP is valuable to both Rosneft and the billionaires for its technical expertise.

But as both sides stare at each other across the table, there is still great uncertainty over the ultimate strategies of the Kremlin, Rosneft, the billionaires and BP itself.

Is this simply an argument over a point of principle in a shareholder agreement? Is it a power struggle over TNK-BP? Or is it a bigger battle over Russia’s energy resources between the state and the billionaires?

As the manoeuvring continues, it is becoming less clear whether BP is a major player on a par with the Kremlin grand-masters or just a pawn on the board.

Conspiracy theories abound in the City and Moscow. There are rumours that the Russian government wants to buy the billionaires[...] out of TNK-BP.

Rosneft has denied holding talks with AAR, in spite of the fact that it's been reported to the Russian media by several sources.  

There has even been a suggestion that the Kremlin supports the businessmen in their attempt to wring some money or assets out of BP - as long as Rosneft gets to complete the deal in the end.

It is also unclear how deep the bad feelings between BP and the billionaires actually run. Some believe that AAR is simply posturing to see how much it can get, given its history for tussling over assets. AAR denies this, saying it is simply trying to ensure TNK-BP is involved in the deal. Others say the relationship is more permanently wounded.

This isn't the first time Smooth Bob has ticked off his Russian associates.  While in charge of TNK-BP in 2008, he was chased out of Russia and into hiding.

According to Wikileaks diplomatic documents released this week, Mr Dudley was exiled for daring to challenge the corporate governance practice of the oligarchs.



BP has been criticised by the non-governmental organisation Platform, which claims the oil company had with other British and American oil companies "worked hand in glove with dictatorship."

The environmental and social justice group also said Hesham Mekawi, the BP Egypt chairman, has praised "the stability of the country" and claimed BP had allowed the American Chamber of Commerce in Cairo - of which it is a member - to put pressure on US Congress not to support a recent motion calling on Mubarak to hold fair elections and respect human rights.

BP's decision to resume paying dividends is rankling Gulf Coast residents who see it as another sign the company wants to move on even though many are still suffering from last year's massive oil spill.

Oil company BP is installing a corrosion-monitoring system for steel pipes at its 11 refineries around the world, following several years of testing the RFID [Radio Frequency Identification] sensor system at two refineries to track the corrosion of the metal walls of its oil-bearing pipes. The solution[...] allows the oil company to attach the battery-powered wireless sensors to the pipes' exterior, thereby enabling it to remotely measure the thickness of each pipe's walls.

BP Plc hired a lobbying firm led by former Republican aides in Congress and at the White House after the party won control of the U.S. House and the company stopped the worst offshore oil spill, according to federal records.

Fierce, Isakowitz & Blalock, a firm led by Republicans while Democrats controlled Congress and the White House in 2009-2010, registered last month to lobby for BP on "oil and gas production," according to a document filed with the Senate Office of Public Records. Officials from London-based BP didn’t return calls seeking comment and the firm declined to comment.
Craig Holman, a lobbyist for Public Citizen, [says BP] is "hiring insiders who carry a great deal of influence on Capitol Hill and in the White House," Holman said. "There is no better way of buying oneself back into the graces of Capitol Hill and the White House than through their former emissaries."

Shell announced on Thursday it would forgo exploratory drilling in the Alaskan Arctic for this year, the result of a ruling last month that revoked the oil giant’s federal clean-air permits that allowed drilling ships and support vessels to operate in the sensitive region.
Attorneys representing Alaska Natives and conservation groups in January succeeded in challenging clean-air permits granted by the Environmental Protection Agency to Shell for exploratory drilling in the Beaufort and Chukchi seas.

The federal Environmental Appeals Board ruled that EPA's analysis of the effect to Alaska native communities of nitrogen dioxide emissions from the drilling ships was too limited and ordered the agency to redo the work.

The U.S. offshore drilling regulator wants to know when the oil industry will be ready to handle out-of-control wells.
Almost four months after a federal moratorium on deep-water exploration in U.S. waters was lifted, drilling remains off-limits because energy companies haven’t proved they have ships and other equipment ready to handle catastrophic blowouts.
"The most critical missing piece in the process of approving applications for permits to drill in deep-water is the demonstration of well control and subsea containment capability," Michael R. Bromwich, director of the Bureau of Ocean Energy, said.

The Bureau of Ocean Energy said on Jan. 25 that deep-water drilling permits wouldn’t be forthcoming until explorers demonstrate they can respond to and contain out-of-control wells.

Another delay was announced Tuesday for BP's Liberty project in the Beaufort Sea. The project, which employs directional drilling from a man-made island three miles offshore, has been criticized by environmentalists as too risky for the Arctic.
The company said it would conduct a design and engineering review to evaluate the billion-dollar project's safety systems.

Cathy Foerster, a commissioner on the Alaska Oil and Gas Conservation Commission, told a legislative committee in Juneau last week that the AOGCC will subject BP's Liberty well designs to "more stringent oversight than normal," because of certain similarities of the long horizontal wells to the deep water well that blew out in the Gulf of Mexico last spring.

Foerster said there could be difficulties in detecting the unexpected entry of gas into the extended-reach well, and the commission, which regulates well safety in Alaska, wants to insure that BP's drilling team has this capability.

A subsidiary of BP Australia has been fined $25,000 for breaching workplace laws in five states.

The House Committee on Natural Resources will ask BP Plc Chief Executive Officer Robert Dudley and Transocean Ltd. and Halliburton Co. officials to testify about the BP spill, a spokesman for Chairman Doc Hastings said.

"Hastings intends to continue committee oversight" of the spill by asking administration officials and industry leaders to testify [according to a Committee spokesperson.]
Representative Ed Markey of Massachusetts, the top Democrat on the committee, today asked Hastings, a Washington Republican, to invite the executives to appear before the committee.

Sales of Gulf of Mexico seafood are getting a boost from the military after being hammered by last year's BP oil spill, which left consumers fearing the water's bounty had been tainted.

Milt Ackerman, president of Military Solutions Inc., says 10 products including fish, shrimp, oysters, crab cakes, and packaged Cajun dishes such as jambalaya and shrimp etouffee are being promoted at 72 base commissaries along the East Coast. Military Solutions is supplying seafood to the businesses.

Mississippi Attorney General Jim Hood said Saturday he is asking BP for transparency with how local victims' oil spill claims are being treated.

"All we are looking for is transparency. BP agreed in the first meeting to give us access to their ESI database. This is the database they were using to manage their claims; so that if we had a complaint from a consumer, we could go look at the database, see what they submitted and what's paid," Ford said.
"So, we just ask the federal courts to step in because I'm just going to end up in a lawsuit with him, and he's going to end up in a lawsuit with lawyers in every state," Hood said.


PLEASE visit Pam LaPier's diary to find out how you can help the Gulf now and in the future. We don't have to be idle! And thanks to Crashing Vor and Pam LaPier for working on this!

Previous Gulf Watcher diaries:

2-02-11 06:00:00Gulf Watchers - EPA Caving to BP on Spill Size - BP Catastrophe AUV #467peraspera
1-31-11 17:03:26Gulf Watchers - Crisis in Egypt to spur Return to Drilling? - BP Catastrophe AUV #466shanesnana
1-30-11 24:44:01Gulf Watchers - Where BP Goes, Disaster Follows - BP Catastrophe AUV #465Yasuragi
1-28-11 18:24:32Gulf Watchers Block Party - What's So Funny?ursoklevar

The last Mothership has links to reference material.

Previous motherships and ROV's from this extensive live blog effort may be found here.

Again, to keep bandwidth down, please do not post images or videos.

Originally posted to Yasuragi on Sun Feb 06, 2011 at 09:00 AM PST.

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