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(CBS/ProPublica) The federal government's investigation into the cause of the explosion on the Deepwater Horizon oil rig in the Gulf of Mexico that led to the massive oil spill could have serious financial consequences for BP beyond how consumers will react to its handling of the cleanup effort.
Special Section: Disaster in the Gulf
The investigation's findings will help the Environmental Protection Agency decide whether to ban the oil company from federal government contracts, sources told the ProPublica news agency. Such a move would ultimately cost the company billions in revenue and could end its drilling in federally controlled fields.
Days ago, in an unannounced move, the EPA suspended negotiations with the petroleum giant over whether it would be barred from federal contracts because of the environmental crimes it committed before the spill in the Gulf of Mexico. Officials said they are putting the talks on hold until they learn more about the British company's responsibility for the plume of oil that is spreading across the Gulf.
The EPA said in a statement that, according to its regulations, it can consider banning BP from future contracts after weighing "the frequency and pattern of the incidents, corporate attitude both before and after the incidents, changes in policies, procedures, and practices."
Several former senior EPA debarment attorneys and people close to the BP investigation told ProPublica that means the agency will re-evaluate BP and examine whether the latest incident in the Gulf is evidence of an institutional problem inside BP, a precursor to the action called debarment.
Over the past 10 years, BP has paid tens of millions of dollars in fines and been implicated in four separate instances of criminal misconduct that could have prompted this far more serious action. Until now, the company's executives and their lawyers have fended off such a penalty by promising that BP would change its ways.
That strategy may no longer work.
Federal law allows agencies to suspend or bar from government contracts companies that engage in fraudulent, reckless or criminal conduct. The sanctions can be applied to a single facility or an entire corporation. Government agencies have the power to forbid a company to collect any benefit from the federal government in the forms of contracts, land leases, drilling rights, or loans.
The most serious, sweeping kind of suspension is called "discretionary debarment" and it is applied to an entire company. If this were imposed on BP, it would cancel not only the company's contracts to sell fuel to the military but prohibit BP from leasing or renewing drilling leases on federal land. In the worst cast, it could also lead to the cancellation of BP's existing federal leases, worth billions of dollars...
Wednesday, May 26, 2010
Apparently "Top Kill" Is Getting Underway...
A new disclaimer!
via BP Live SpillCam
Throughout the extended top kill procedure – which may take up to two days to complete - very significant changes in the appearance of the flows at the seabed may be expected. These will not provide a reliable indicator of the overall progress, or success or failure, of the top kill operation as a whole. BP will report on the progress of the operation as appropriate and on its outcome when complete.
Maybe if you were showing us what you were DOING at the BOP, and properly communicating with the American people, making effective use of this wonderful American trifle we like to call the News Media, there would be less need for speculation.
That said, good luck BP Brain Trust. We're all counting on you.
By JAKE SHERMAN | 5/25/10 11:03 AM EDT
Eighteen Democratic senators have asked the Justice Department to investigate the operator of the Deepwater Horizon offshore drilling rig after the company announced it would dole out $1 billion to shareholders as oil continues to pour into the Gulf of Mexico.
Transocean, according to the letter from the senators, plans to distribute dividends to its stockholders. And the senators are concerned that the payments might make it harder to collect liability payouts related to the massive oil spill.
Transocean, according to the letter, also says it will make a $270 million profit on the insurance policy for the rig. And the senators claim the rig was insured for more than it was worth...
SPECIAL REPORT-Civil fine in Gulf spill could be $4,300 a barrel
* Clean Water Act allows per-barrel fines for oil spillers
Stocks | Bonds | Global Markets
* Civil fines may raise liability, not subject to cap
* Extent of fine depends on whether there was negligence
* Liability, including fines, may top $10 billion
By Joshua Schneyer
NEW YORK, May 25 (Reuters) - Just how many barrels of oil are gushing into the Gulf of Mexico from the Deepwater Horizon spill is a billion dollar question with implications that go beyond the environment. It could also help determine how much BP (BP.L) and others end up paying for the disaster.
A clause buried deep in the U.S. Clean Water Act may expose BP and others to civil fines that aren't limited to any finite cap -- unlike a $75 million limit on compensation for economic damages. The Act allows the government to seek civil penalties in court for every drop of oil that spills into U.S. navigable waters, including the area of BP's leaking well.
As a result, the U.S. government could seek to fine BP or others up to $4,300 for every barrel leaked into the U.S. Gulf, according to legal experts and official documents...
One of BP's company men on the Deepwater Horizon when it exploded, Robert Kaluza, has declined to testify before the investigative panel in Kenner, citing his Fifth Amendment right not to incriminate himself, the Coast Guard said...
...The chief mechanic on the Deepwater Horizon testified Wednesday that he was at a planning meeting 11 hours before the rig exploded at which the BP company man overruled drillers from rig owner Transocean and insisted on displacing protective drilling mud from the riser that connected the rig to the oil well
"I recall a skirmish between the company man, the OIM (offshore installation manager), the tool-pusher and the driller," said Brown, one of 115 rig workers who survived the explosions that occurred just before 10 p.m. April 20. "The driller was outlining what would be taking place, whereupon the company man stood up and said, 'No, we'll be having some changes to that.' It had to do with displacing the riser for later on. The OIM, tool-pusher and driller disagreed with that, but the company man said, 'Well, this is how it's gonna be,' and the tool-pusher, driller and OIM reluctantly agreed."
But Brown acknowledged that he wasn't paying close attention to the discussion before the "skirmish" began.
Others have suggested that the argument was actually over whether the crew needed to perform a negative pressure test on the well, even though that was not part of the drill plan. Documents released in congressional hearings show the negative test, which Transocean employees pushed for, was run and then repeated and eventually showed a good result, apparently allowing them to proceed with displacing the drilling mud.
Brown said he did not know the name of the BP company man.
The BP official listed as company man April 20, Donald Vidrine, withdrew from today's hearings, citing health issues, the Coast Guard said.
A top BP official on the rig, Robert Kaluza, asserted his Fifth Amendment right not to incriminate himself in declining to testify tosday. Kaluza's attorney, Shaun Clarke, issued a statement Wednesday saying his client "did no wrong on the Deepwater Horizon, and we will make damn sure that this comes out at the appropriate time."
Brown said the top Transocean man on the rig, Offshore Installation Manager Jimmy Harrell, spoke in a low grumbling voice as they left the 11 a.m. planning meeting with BP the day of the accident.
Brown recalled Harrell saying, "Well, I guess that's what we have those pinchers for."
Brown said he assumed Harrell was talking about the shear rams on the blowout preventer, the devices that are supposed to slice through a drill pipe in a last-ditch effort to close off the well in case of an emergency.
Brown also testified that he'd heard from his fellow crewmembers that the well was "taking too long" and BP was "in a hurry to complete it."
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