• Justice Department alleges 'gross negligence' by BP in Gulf oil spill

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    A worker uses a suction hose to remove oil washed ashore from the Deepwater Horizon spill in Belle Terre, La., on June 9, 2010.

    By Andrew Callus
    Reuters

    LONDON -- Hopes that BP can settle early out of court on liability for its 2010 U.S. Gulf of Mexico oil spill looked forlorn on Wednesday after U.S. prosecutors laid out a legal case for gross negligence on which tens of billions of dollars hang.

    In the two years that have passed since the spewing Macondo deep-water well was capped, the Department of Justice has made it clear BP may have a gross negligence case to answer -- implying a potential $21 billion fine on top of other payments,  some already made, others yet to be determined.

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    The British oil company has been vehement in denying such liability for the United States' worst offshore environmental disaster, which killed 11 people and poured crude into the sea for months. It repeated that position after the DoJ filing on Tuesday.

    Nevertheless, the parties have been in talks about a multi-billion-dollar settlement that could cover outstanding liabilities, and two months ago the Financial Times raised expectations there was a deal in the air by reporting that BP was hoping to pay $15 billion to put the case behind it, while the DoJ was holding out for $25 billion.

    The window of opportunity for a deal before the November presidential election and ahead of a trial scheduled to start in January has narrowed since then, and now investors see the weight of uncertainty on the British oil company's share price sticking around for a long time to come.

    "The market was hoping that some sort agreement would be reached, either before the presidential elections or ahead of the trial," said Ivor Pether, a fund manager at Royal London Asset Management.

    "We don't know when or whether they will reach agreement, but the aggressive language in today's DOJ statement might well reduce the chances of a swift settlement."

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    BP shares were down 4 percent on Wednesday morning after 39 pages of DoJ court papers homed in on a key well pressure test, saying the way it had been "so stunningly, blindingly botched in so many ways, by so many people, demonstrates gross negligence."

    Uncertainty over whether BP can continue to operate in Russia, and whether it can even exit its business there at a decent price, have combined with the oil spill wrangle to put BP's share valuation based on earnings at a discount to the sector in Europe, even though it is the second largest next to Royal Dutch/Shell .

    "While these (DoJ) accusations are not entirely new or surprising, they appear to be a firming of the DoJ language," said Credit Suisse analyst Kim Fustier in a note.

    "This suggests to us that a settlement acceptable to BP is not imminent, and lowers BP's chances of settling in the low end of the $15 (billion)-$25 billion range. Hence, if it cannot get to a satisfactory agreement we think it might be best for BP to continue to litigate, which would maintain the Macondo overhang for longer than we'd hoped. ... We believe a settlement or $20 billion or less would be a positive."

    Breakup talk revived
    Pressure for closure on the spill and in Russia is something chief executive Bob Dudley has become used to since he took over from Tony Hayward in the aftermath of the spill.

    And on Wednesday, one analyst revived suggestions that the company should be broken up to release underlying value on the business.

    "We reiterate that the best outcome for long-suffering BP shareholders, and indeed the only credible route to unlock our increased SoTP (sum-of-the-parts) value … is a demerger of remaining assets starting with the U.S.," said Investec analyst Stuart Joyner in a note.

    Joyner said that valuation would be more than 68 percent higher than BP's current share price, and suggests there could be $90 billion of hidden value in a stock valued at around $132 billion. Other analysts' calculations based on pre-Macondo comparisons with rival Shell have put total lost value at between $60 billion and $70 billion.

    "BP died when it failed to cap the Macondo spill in the first few days," said Joyner. "The CEO did a good job of saving BP from forced liquidation, but we do not believe he can revert to its pre-Macondo strategy." 

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  • For Iran oil trader, Western ties run deep

    As Western nations ratchet up sanctions against Iran in an effort to slow or stop its nuclear program, Reuters takes a look at how hard it will be for some oil companies — notably BP — to disentangle themselves from Tehran's business interests.

    The case study is the Naftiran Intertrade Co., or NICO, an oil-trading firm owned by the Iranian government, which is engaged in major oil development projects with BP, Shell and Norway's Statoil.

    NICO has been under U.S. financial sanctions since 2008, deemed an entity "owned or controlled by the Government of Iran." However, it remains an important source of foreign exchange for the National Iranian Oil Co., Reuters reports:

    To get around the sanctions, NICO uses offshore financial havens and a web of asset and industrial holdings in the West. While it was based in Jersey, the firm operated through a "service company" based in Switzerland. But even there, in a country that has not yet signed up to the trade sanctions against Iran, the company's future could be in doubt.

    Click here to read the Reuters piece in its entirety.

  • Gulf residents track washed up gunk

    By Kari Huus
    NBC News

    New Orleans photographer Jerry Moran isn’t the only person who thinks chemical dispersants are still being sprayed in the Gulf of Mexico.

    Last week, msnbc.com published a story on Open Channel documenting the apparent continued use of dispersants beyond the official cutoff date of July 19 by response teams working on the Gulf oil spill. Laboratory testing of samples from a large patch of reddish foam found floating near Horn Island, off the coast of Mississippi, on Aug. 9 found that the foam was indeed composed of chemical dispersant and BP oil.

    The documentation lent credence to anecdotal reports from coastal residents that use of the controversial chemicals did not cease in mid-July, as the Joint Command for the oil spill maintains.

    The previous Open Channel post prompted a submission by reader Shirley Tillman, who lives in the coastal town of Pass Christian, Miss.  Tillman, 60, has been walking the beach for years, and worked with her husband on a “vessel of opportunity” in the clean-up effort until mid-August.

    Since mid-July she has been photographing dead wildlife and gunk washing ashore. She feels certain the latter is dispersed BP oil.

     

    “When the tide is coming in, this stuff starts washing up,” said Tillman. “It’s white fluffy, foamy stuff —kind of like a meringue. This stuff clings together … like snot.”

    The photographs below, which she says were taken on the beach at Gulfport on Dec. 29, show what she is talking about.

    Shirley Tillman

    Foam on a beach near Pass Christian, Miss. on Dec. 29. Photographer and local resident Shirley Tillman believes it is oil and dispersant.

    According to the official account of the oil spill response, about 1.8 million gallons of the dispersant were applied to break up the oil slick -- about two-thirds sprayed on the surface by boats and planes and the rest injected near the broken wellhead about a mile beneath the surface.

    Shirley Tillman

    Sand on a beach in Pass Christian, Miss. The red gunk resembles dispersed oil, according to photographer and local resident Shirley Tillman.

    Tillman doesn’t buy the Joint Command’s insistence that the use of dispersants has been halted, and she is not alone in her belief that nighttime air traffic over the gulf is due to dispersant spraying by C-130 aircraft, which also were used during the initial response.

    “The air traffic is constant,” she said. Her theory:  “Spotter planes go out during the day, write down the problem spots are. … Then you can sit on the beach at night and watch (C-130s) going back and forth.”

    Unlike Moran’s goo, the gunk sighted by Tillman has not been laboratory tested to verify her suspicions that it is oil mixed with dispersant. Tillman said she is trying to get chemical testing for the samples she has retrieved from her beach.

    Do you have any information about recent use of dispersants in the gulf? If so, click below to send a tip to Open Channel:

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  • Is dispersant still being sprayed in the gulf?

    Jerry Moran / Native Orleanian Fine Photography

    This photo and laboratory tests indicating that this foamy substance is dispersed oil have raised questions about the government's assurances that the toxic chemical was not sprayed after the Deepwater Horizon well was capped.


    Kari Huus writes:The use of chemical dispersants in the wake of the massive BP oil spill ended on July 15, when the broken Deepwater Horizon well was capped, with only one exception four days later, according to federal agencies. But photos and chemical lab results obtained by msnbc.com suggest that the controversial chemicals have been sprayed much more recently than that.

    The photos and tests lend credence to persistent but unsubstantiated reports by Gulf Coast residents that the spraying of dispersants has continued well beyond the cutoff date acknowledged by the Deepwater Horizon response team.

    The image above — time stamped and embedded with geographical coordinates — was captured by New Orleans photographer Jerry Moran off the coast of Mississippi when he was out with scientists on Aug. 9

    “We were on our way back to Ocean Springs from Horn Island, about a mile or two off the coast … (and) we ran into these hundreds of yards long swaths of that cauliflower stuff,” said Moran.

    Moran said the foamy substance on the water’s surface looked just like what he encountered while covering the oil spill response when dispersant — a product with the brand name Corexit — was being applied daily to oil slicks. The smell was unmistakable, he said.

    “I almost passed out from the fumes,” he said. “It smelled like a gas station.”

    An environmental technician who was present took water samples, which were then sent to a certified lab -- ALS Laboratory Group in Fort Collins.

    The results, according to environmental investigator and engineer Marco Kaltofen, president of Boston Chemical Data Corp.: “Definitively Corexit and BP petroleum.”

    Kaltofen is among the scientists retained by New Orleans attorney Stuart Smith to conduct independent environmental testing data from the Gulf on behalf of clients who are seeking damages from BP. (Click here to read about their effort.)

    An independent marine chemist who reviewed the data said that their conclusion stands up.

    “The analytical techniques are correct and well accepted,” said Ted Van Vleet, a professor at the College of Marine Science at the University of South Florida. “Based on their data, it does appear that dispersant is present.”

    Why responders would continue to use chemical dispersants after the government announced a halt is a mystery. If the oil was gone or already dispersed, as the federal government and BP have said, what would be the point? And, because dispersants don’t work very well on oil that has been “weathered” by the elements over long periods of times, there would be little point in spraying it that situation.

    Doug Myers, science director for People with Puget Sound, a nonprofit marine restoration group in Olympia, Wash., has a theory: Oil emerging from the wellhead — about a mile beneath the surface — may have been prevented from rising to the surface by the high pressure and low temperatures of the waters at that depth.

    “The depth stratification of the ocean is possibly the reason that pockets of oil could be hovering off the bottom but far below the surface for a fairly long time,” he said. “If it’s been at depth and … at those temperatures, it’s likely it stayed in liquid form.”

    But if an upwelling current or other changes in conditions forced that oil to the surface, cleanup crews still working for BP would encounter fresh oil on the surface, he said.

    If dispersant has in fact been sprayed in substantial quantities since July 15, an explanation will probably not be forthcoming from the federal government.

    According to the official Deepwater Horizon response website, the EPA approved BP’s use of 1.84 million gallons, about two-thirds of the total for subsea use up to July 15, when the broken well was capped.

    “Use of dispersant stopped when the well was capped” on July 15, said Coast Guard Petty Officer Susan Blake, a spokeswoman at Unified Command Center for the ongoing spill response. “The only exception was on July 19th, when they used 200 gallons.”

    EPA communications officer Alisha Johnson requested and received copies of the photographs and chemical analysis of the water samples for review, but the agency did not respond to msnbc.com’s request for comment.

    The use of chemical dispersants in unprecedented volume and in an unprecedented manner at the bottom of the sea has stirred controversy.

    The dispersants — though nowhere near as toxic to humans as crude oil — are still toxic. And some scientists remain concerned about how dispersants might change the “fate” of oil. By breaking up the crude into tiny particles that sink into the water, they fear the contaminants could be more easily ingested by marine life and thus enter the food chain.

    On May 14, the EPA told BP to find a less-toxic type of dispersant than Corexit, but BP continued using the dispersant, arguing that it was the best option available. On May 26, 2010, EPA and the Coast Guard issued a directive to BP requiring them to decrease overall volume of dispersant by 75 percent and to cease use of dispersant on the surface of the water altogether unless provided prior written authorization from the Coast Guard.

    Response to the Deepwater Horizon disaster, which began with an explosion on the BP drilling rig on April 20, continues into the New Year. About 6,000 personnel, nearly 400 vessels, along with heavy equipment, skimmers and other machinery are still employed in daily cleanup operations.

    Do you have any information about recent use of dispersants in the gulf? If so, click below to send a tip to Open Channel: