Hurricane Alex may have steered clear of the oil spill, but rough seas and strong winds in the Gulf of Mexico continued to hamper cleanup efforts Wednesday and will delay the installation of a system that could double the amount of crude collected each day from BP’s Macondo well.
The conditions forced the Coast Guard and BP to halt all surface skimming, controlled burns of oil on the water and aerial spraying of oil-dispersing chemicals on the massive slick, and damaged large sections of oil containment boom protecting coastlines, Coast Guard Rear Adm. Paul Zukunft said.
The suspension in the cleanup, which could last through Friday, raises the threat of more oil coming ashore, he said. But the cleanup will resume immediately once weather permits, he said.
Choppy seas also stymied efforts to connect a third oil-collecting vessel to the gushing well. Teams had hoped to have the vessel called the Helix Producer in place by Wednesday, boosting current collection capacity of 25,000 barrels per day on two ships to a combined 53,000 barrels per day. But the new target day for hookup is next Wednesday, Zukunft said. Scientists now estimate the well is spewing up to 60,000 barrels per day — about 2.5 million gallons.
“We’ve been held hostage by the oil,” Zukunft said in a media briefing Wednesday, “and now the weather is holding us hostage.”
In recent days, oil companies including Shell, ConocoPhillips, Exxon Mobil Corp. and others have evacuated workers from offshore facilities in the western and central Gulf as Alex strengthened into a hurricane and headed for the Texas-Mexico border.
But the storm has not forced BP to abandon a critical drilling relief well drilling operation at Macondo – in mile-deep waters about 40 miles off the Louisiana coast. A relief well intercepting the Macondo and plugging it is the best hope for permanently sealing the gushing well.
On Wednesday, the first of two relief wells was within 16 feet of the Macondo well bore, which extends more than two miles beneath the floor of the Gulf. Crews will continue over the next several weeks to send electronic sensors into the well to find a good strike point for intercepting Macondo and plugging it with heavy mud and cement, said Coast Guard Adm. Thad Allen, leader of the federal spill team.
A backup relief well has reached a depth of about 7,000 feet below the seabed.
Allen also defended federal response efforts to the spill amid mounting criticism of the Coast Guard and BP for delays in deploying skimming vessels, containment boom and other resources needed to fight the worst oil spill in U.S. history.
No Jones Act issues
He dismissed rumors that federal spill coordinators have turned away foreign vessels willing to aid in the cleanup due to the Jones Act, a protectionist 1920 law that prohibits foreign-flagged boats and crews from doing port-to-port duty within three miles of the US coast.
“We at no time, in the course of this response, have been inhibited by anything having to do with what we would call Jones Act or Jones Act waivers,” he said. “All the vessels that are operating outside of three miles do not require Jones Act waivers, and we’ve been able to use foreign-flagged vessels out there as we have needed.”
Offers of assistance have poured in from 44 countries and four international associations, and federal spill teams have accepted some and are still going through others, Allen said.
He also said a new Coast Guard and Environmental Protection Agency rule put into effect Wednesday will loosen requirements for accessing Navy skimmers and other equipment from around the U.S. that could be used in the response effort.
He said that rule, along with procurement of skimmers several weeks ago, has allowed the response team to triple the number of skimmers on the water in the past two weeks. About 500 skimmers now are involved in the operation.
Separately, Allen said his team had received reports of tar balls washing ashore in Texas around Galveston and South Padre Island, and that the material will be tested to determine if it came from the Macondo spill.
Oil prices dropped slightly today and closed out their first losing quarter since the final three months of 2008.
The biggest factor in the decline was concern about the various leaks that sprung in the global economic recovery. Europe’s financial crisis, signs of slowing growth in China and eroding consumer confidence in the U.S. all flashed warnings signs about energy demand. BP’s oil spill in the Gulf has little impact on prices.
Oil dropped 9.7 percent from the end of the first quarter, when it traded at $83.76. As a result, drivers got a pleasant surprise: gasoline prices fell instead of rising ahead of the busy summer driving season. The average price of a gallon of gas declined to $2.755 from $2.798. Most analysts had expected a run up above $3 by July 4.
Gasoline prices were flat today as cautious consumers weigh a vacation trip against economic worries. Prices rose about 1.4 cents from a week ago and are up 12.2 cents from a year ago, according to Wright Express and Oil Price Information Service.
Demand for gasoline remains weak and inventories are still higher than a year ago amid the recession. Americans continue to worry about jobs and the pace of the economic recovery.
AAA expects the number of travelers out for the long weekend to rise 17 percent from a year ago. Nearly 35 million people will travel at least 50 miles from home.
“The U.S. consumer doesn’t really appear to be one going back on the road and really driving and taking vacations at a high level,” analyst Addison Armstrong said. “The ones who are driving aren’t that bothered by prices at the pump.”
Gasoline inventories rose by 500,000 barrels last week to 218.1 million barrels, according to the Energy Department’s Energy Information Administration. In the past four weeks, gasoline demand has averaged 9.3 million barrels a day, an increase of about 1.5 percent from the year-ago period.
Oil prices, too, were little changed as supplies fell 2 million barrels last week to 363.1 million barrels, according to the EIA.
Benchmark crude for August delivery fell 31 cents to settle at $75.63 a barrel on the New York Mercantile Exchange. The price has ranged between $75 a barrel and $78 a barrel for about a month.
In other Nymex trading in July contracts, heating oil fell 3.96 cents to settle at $1.9817 a gallon and gasoline lost 1.14 cents to $2.0606 a gallon. August natural gas rose 6.8 cents to $4.616 per 1,000 cubic feet.
Brent crude fell 43 cents to settle at $75.01 a barrel on the ICE futures exchange.
DENVER — The Interior Department has fined BP America $5.2 million for allegedly submitting false reports about energy production on an Indian reservation in Colorado.
The Interior Department said today that the U.S. unit of BP repeatedly misreported royalty rates for natural gas on Southern Ute Indian tribal lands. Interior spokesman Patrick Etchart said BP was not taking more natural gas than reported. Instead, BP at times reported erroneous royalty rates, or listed gas coming from the wrong wells, he said.
BP America spokesman Daren Beaudo said most of the errors came when BP listed royalty payments for “natural gas” instead of “coal-bed methane gas,” a more specific designation with a different royalty schedule. The errors led BP to underpay the Southern Utes about $200,000, which has been repaid, Beaudo said. Beaudo couldn’t say how long the error went on.
Tribal leaders didn’t return calls seeking comment.
Etchart said the $5.2 million fine is in addition to the underreported royalties and would be split between the federal government and the Southern Utes.
Southern Ute auditors said they discovered incorrect reports in 2007 and reported them to BP, which blamed the misreporting on a computer glitch and promised to make changes. However, BP’s reporting errors continued after the audit pointed out the problems, leading to the fine.
“We are committed to collecting every dollar due from energy production that occurs on federal and American Indian lands, and accurate reporting is crucial to that effort,” said Michael R. Bromwich, head of the Interior Department’s Bureau of Ocean Energy Management, Regulation and Enforcement. The ongoing errors indicated the misreporting was “knowing or willful,” Bromwich said in a written statement.
Beaudo said the problem has now been settled. “All of the errors that were identified have been corrected,” he said.
Tribal leader Chairman Matthew J. Box praised the settlement in a statement but couldn’t immediately be reached for further comment.
Bromwich took office last week. He has been tasked with making changes to the Minerals Management Service, which has been criticized for lax oversight of offshore drilling before BP’s Gulf of Mexico oil spill.
The Interior Department said the fine is unrelated to the Gulf spill. BP can appeal the Colorado fine of $5,189,800 but Beaudo said the company hasn’t decided if it would.
The fine represents $200 per day for 29,949 days BP was in violation of reporting standards. Etchart said, however, that a company could rack up multiple violation days on a single calendar day for more than one error, so he wasn’t sure what period that represented.
Now it’s accused of lying to Native Americans. The former Minerals Management Service — which now bears the unwieldy name of the Bureau of Ocean Energy Management, Regulation and Enforcement - fined BP $5.2 million for making inaccurate reports about the output from wells on tribal lands in Colorado.
The case is unrelated to the Gulf of Mexico spill.
BOEMRE (Ugh. Really? That’s the acronym? Can’t we just call it "Bo” or something?) director Michael Bromwich said:
It is simply unacceptable for companies to repeatedly misreport production, particularly when it interferes with the auditing process.
It’s not the first time BP has run afoul of Native Americans. Its original name for the Thunder Horse semisubmersible platform was Crazy Horse, which didn’t sit well with the Lakota Sioux.
This time, though, it’s going to take more than sweet grass and tobacco to make things right.