The latest updates on BP, both via Bloomberg. We noted that Rolling Stone had reported that the median of estimates by scientists who has access to the leak data was 55,000 barrels, and there were reasons to take the dire estimates seriously. The latest estimates are allegedly based on a more careful reading of the information, but one has to wonder whether the officialdom has decided to release more realistic numbers, say out of a desire to put more pressure on BP, or a recognition that the truth will ultimately come out.
From Bloomberg:
BP Plc’s well in the Gulf of Mexico is gushing as much as 60,000 barrels of oil a day, the government said, raising for the fifth time an official estimate that had begun at 1,000 barrels a day in April.
The new estimated range, from 35,000 to 60,000 barrels a day, has a greater degree of accuracy because scientists collected more data from a single leak, rather than several from a damaged riser pipe removed June 3, Energy Secretary Stephen Chu and Interior Secretary Ken Salazar said today in statement posted on the spill response website.
A drillship leased by BP, the Discoverer Enterprise, has been collecting about 15,000 barrels of oil a day, sending it ashore for processing by tanker while oil continued to leak from the well, a mile below the surface.
So far, the Blooomberg piece on the impasse in negotiations on the BP dividend escrow has no detail beyond the fact that the size of the fund and the selection process for the administrator are still in play. Right now, the Washington Post has one key tidbit: that BP wants a cap on liability. I don’t see why the Administration should accept that, given that the leak is ongoing. In fact, a cap could arguably demotivate BP. The use of the term “escrow” means any unused funds will be returned to BP. The device is to assure that BP does not mistakenly distribute cash to shareholders (who legally are below creditors in the legal payment hierarchy) while the amount of damages for the leak is in play. It also repeats the issue BP has already put onthe table, that it does not want to be made to compensate for lost wages to workers idled by the moratorium on deep water drilling in the Gulf.
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A cap on liability?
Memo to BP: Cap the well, we’ll cap the liability.
Bingo!
I don’t know how they can try to figure out a long term plan to restore the gulf while the well is still spewing oil. It’s hard not to cynically conclude that extracting money (on both sides) isn’t more important than fixing the problem.
(I’ve finally finished ECONned! Well done Yves! I need to re-read the appendix that describes the Magnetar trade again. I have a PhD in electrical engineering, but the convoluted nature of the CDS strategy is tougher to navigate than Maxwell’s Equations.)
Glad you liked it! Please tell your friends.
Is there any good reason we should believe this latest official estimate?
There are a number of terms, phrases and analogies for what is being done with the flow rate of the well. And this is the same game they played with AIG (not to mention the ongoing game with Fanny/Freddie)…
Call it “boiling the frog”, “creeping normalcy” or whatever, but the upper echelons of power have determined that if the first estimate is 1/8th the real rate/bailout required/whatever they can ratchet it up over the course of weeks or months, doubling it each time.
* 1/8th of the real number sounds bad to start with, but manageable (the best people are on the case you see, so it’ll be “contained”)!
* 1/4th of the real rate… oh… the experts have the situation well in hand, and it turns out it’s worse then originally thought but they’ve got it covered, really!
* 1/2 of the real rate… What? That’s a big number… that must have been the updated number they mentioned last week… I didn’t seem that high though… huh…
* 1/1 of the real rate… That’s another big number… bigger then I can imagine so how is that different then the last big number they mentioned
If AIG came out saying they needed $160 billion, the answer would have been a flat NO. But $5-10 billion, ope $30 billion, ope $60 billion… seems to work just fine.
Same deal with the GoM, 5000 barrels sounds bad, ope 10-15,000, ope 35,000… wait they are collecting 15,000 barrels a day, so that sounds good! Didn’t they say it was only leaking 10-15,000 barrels?
Just like the revisions to the employment reports, we need to have a history of their previous estimates and dates they were made listed directly behind the current estimate. Then the plebs would be better at seeing the game.
Cn
Maybe Tony can pull a Gen. Petraeus and faint during negotiations.
I would be the last person to defend BP, but some of the best coverage of the disaster from an engineering/technical standpoint is on The Oil Drum website. As I am not an engineer, much of the technical discussion goes over my head, but I get the gist of it.
What is being argued over there is that in this type of uncontrolled leak there is a lot of erosion that goes on and as the well erodes it makes the well wider which allows for even more oil to flow through it. There is a lot of fluid engineering here, especially in the comments section of the post, but you’ll get the idea…
http://www.theoildrum.com/node/6609
It’s serious geology time now, as more and more oil is taken out at such speed from the reservoir, the integrity of entire well and sea floor can be compromised. They better stop lying about the oil pressure/flow and start installing more precise pressure gauge. They have to accurately follow the pressure and monitor everything closely. They also have to start phoning seriously smart people to build model of that oil reservoir and see the integrity of the structure under various scenarios.
If that well blows, we might as well change gulf of mexico to Gulf of Oil. There isn’t going to be big enough clean up operation to get rid of all oil in there.
I have a friend who leads teams on oil wells. He says there is no doubt that BP knows the pressure and amount of oil traveling through the well. They must, he says, because they are drilling a relief well and would have to know the flow rate in order to do that successfully.
Apparently they have like the best driller in the world drilling the relief well. Relief wells fail 90% of the time but this particular person has a 90% success rate.
My guess that BP gets a liability cap otherwise drilling business will have to join China and chase down deals in the 3rd world or this could be a watershed event for the U.S. changing the entire mining culture and the political support they have created the past 50 years. Highly unlikely!
Regarding flow rates I vote the government knew true rates from the beginning.
Greg: you can click on the handle of each poster over on the oil Drum and it gives you how long they have been posting on the site and what if any background within the business they have acquired. Lots of new posters on the site best to check their references.
One place we have already begun to take action is at the agency in charge of regulating drilling and issuing permits, known as the Minerals Management Service. Over the last decade, this agency has become emblematic of a failed philosophy that views all regulation with hostility – a philosophy that says corporations should be allowed to play by their own rules and police themselves.
Go Barack. He gets it. What is the problem with this guy?
This is simply outrageous that the US government is ‘negotiating’ as with equals with the miscreant BP.
BP can (maybe) plug the well, so can other companies; the work done now is by contractors, not BP itself.
The impossibly timid and hesitant Obama regime still doesn’t get it. The government HAS to govern.
http://www.theoildrum.com/node/6593#comment-648967
Check this one out …
Yeah, I had just worked my way to that and read it before comments here. It is the single most frightening thing I’ve read in many years, and perhaps moreso since I have an engineering background and can imagine the dynamics described quite easily.
In addition to an engineering background, I’ve spent a fair amount of time down on the Texas gulf coast, and often played in the waters as a child. So, when I imagine what could happen, it isn’t just a far off thing, like as if it were in Alaska. It’s like contemplating a nearby city you often visit becoming entirely uninhabitable — a massive, nearby catastrophe.
A crazy idea to squeeze BP to pay.
Obama gave a speech on national television tonight on the oil spill which makes you wonder why he gave a speech on national television. It contained nothing new.
This brings up the dynamic of the whole thing. There have been many calls for Obama to get tough with BP, but in fact, he has not. Federal agencies continue to bend over backwards to accommodate BP. So really why should BP cave to Obama on the escrow account when Obama has been caving to them on everything up to this point? I’m not saying there won’t be an escrow account, but this is classic Obama: make a big announcement and then start walking it back, walking it back, until almost nothing is left.
I hate to re-post this (below) but there is no way BP can pretend to think there is a cap for its liability for their spill — unless someone is corrupted and allows them to get bailed out, or someone allows them to walk away, or someone suggests that BP not going to be held liable, or to suggest that BP will not be required to provide “any relief as the public interest and the equities of the case may require”.
There should not be a cap, but then again, we watched Wall Street walk away from a multi-trillion dollar taxpayer robbery, and we continue to see that no one is being held accountable and that no investigations will really take place — so, BP … hmmm, a cap, that seems like a fairly easy thing to pull off — so yah, they will probably walk away and sort of follow the Exxon Playbook and get a slap on the wrist and probably, no one will be held accountable, the dog and pony TV shows will grow old and people will stop watching the dea walruses wash up on the shore. Same ol same ol…. pretty boring really.
TITLE 33 > CHAPTER 40 > SUBCHAPTER I > § 2716a
§ 2716a. Financial responsibility civil penalties
(b) Judicial
In addition to, or in lieu of, assessing a penalty under subsection (a) of this section, the President may request the Attorney General to secure such relief as necessary to compel compliance with this [1] section 2716 of this title, including a judicial order terminating operations. The district courts of the United States shall have jurisdiction to grant any relief as the public interest and the equities of the case may require.
http://www.law.cornell.edu/uscode/html/uscode33/usc_sec_33_00002716—-000-.html
Well, there’s a natural cap – what BP can pay.
Under certain conditions it’s better for BP to go the strategic default route – and those are the conditions where then the rest of the clean-up would have to be picked up by taxpayer.
Be very very careful what you wish for, lest you get it.
From the taxpayers perspective destroying BP serves the short-term pleasure of seeing the villain punished, at the long term cost of extra gov’t spending that can’t go somewhere else.
I wonder how much of the “cap” talk from BP is a counter strategy to the silly requirements that BP pays the wages of workers laid off due to the ban on deep-water drilling.
Thanks for the The Oil Drum’s link, wsws also has a good daily coverage of the estimates
‘Or is it something deeper? Whether it’s Wall Street or health insurers or oil companies, we are approaching a turning point. The top executives of powerful corporations are pursuing profits in ways that menace the nation.’
http://robertreich.org/post/703369788/obamas-address-to-the-nation-a-missed-opportunity-to
HBO’s speech: A cowardly cover-up of BP’s crimes
http://www.wsws.org/articles/2010/jun2010/oval-j16.shtml
The more this goes, the more I am inclined toward Robert Reich’s proposal of putting BP in temporary receivership
BP is not a US company, and at best the US could seize/nationalise its US assets. I’m sure the lawyers would love it, but I doubt it would make much difference to solving the problem.
Go Rolling Stone! Now if we could only get that huge vampire squid to suck on the end of that oil pipe … :)
Well finally they have a plan to cap this thing, but given their track-record so far, I’m not holding out a ton of hope for this. I was in Tampa when that tanker caught fire (I was driving over the Skyway right when it happened, saw the smoke) and the beaches are still washing up tar balls. I think it has effectively ruined the economy of southern LA, MI and AL towns. I have a ton of family there and they are really desperate.