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BL: BP, Government Risk Larger Spill to Stem Leak, Browner Says
Steve Geimann and Jim Polson
May 30 (Bloomberg) -- BP Plc and U.S. government officials have decided to risk accelerating the largest oil spill in the country’s history in a bid to capture more of the crude before BP’s leaking well can be plugged in August, White House Energy Adviser Carol Browner said.
Sometime during the next seven days, BP plans to saw away sections of a damaged pipe so that much of the oil can be diverted to a ship on the surface, Managing Director Robert Dudley said today on NBC’s “Meet the Press.” The step, endorsed by federal officials, risks increasing the leak by 20 percent, Browner said today in a “Face the Nation” interview on CBS.
The joint decision comes after a three-day effort to plug the well by jamming it with drilling mud from the surface, a technique called a “top kill,” failed, Browner said.
“This is war. This is like Dunkirk,” said Jason Kenney, an Edinburg-based analyst for ING Commercial Banking, said today in an interview. “BP and the government have no choice but to proceed,” said Kenney, who rates BP at “buy” and doesn’t own the shares.
Kenney also today raised his estimate of how much the spill may cost BP to $22 billion, if the event persists to August, compared with $5.3 billion if the top kill effort had succeeded. The higher figure reflects escalated litigation costs on the assumption that a prolonged spill will increase damages to fisheries and the Gulf economy, he said.
Undiminished Cash Flow
“BP can digest whatever cost this is going to take,” Kenney said. The Deepwater Horizon well was exploratory, so cash flow from BP’s production is undiminished, he said. Any solutions BP finds to stop or limit the pollution will be the basis for new regulatory standards covering deepwater drilling, Kenney said.
The well has spewed from 12,000 barrels to 19,000 barrels of oil a day, a government panel estimated May 27. The leak began after the Horizon, leased by BP from Transocean Ltd., the largest deepwater driller, exploded April 20 when the well blew out. Eleven workers died in the blast. The rig sank two days later.
Failure of the top kill effort means BP and the government must intensify steps to keep oil from reaching the shoreline, especially tidal marsh in Louisiana that can be killed by crude, Browner said.
“The worst is that we have oil leaking until August” when BP can complete the first of two relief wells intended to plug the damaged well securely from the bottom, Browner said.
‘Assault on the People’
“Every day that this leak continues is an assault on the people of the Gulf Coast region, their livelihoods, and the natural bounty that belongs to all of us,” President Barack Obama said in a statement yesterday after the top kill effort failed. “It is as enraging as it is heartbreaking.”
Probability of the riser cap working is “absolutely better” than the top kill, Dudley said on NBC’s “Meet the Press.” “Success,” he said, is “full containment.”
“Once the cap is on, the question is how snug is that fit,” Browner said. “If it’s a snug fit, there could be very, very little oil” escaping.
Government experts estimate the spill will increase over the four- to seven-day process BP will need to affix the cap, she said.
BP’s Other Options
The effort involves underwater robots shearing away sections of damaged pipe, cutting away pipe from the top of the existing blowout preventer, then installing caps to divert oil through a pipe to waiting ships on the surface, according to a BP illustration posted today on the spill command’s website. That may enable BP to capture as much as 90 percent of the oil and gas escaping from the well, Dudley said on “Face the Nation.” The actual amount can’t yet be estimated, he said.
BP is also looking at other options, including the installation of a second blowout preventer atop the first, Dudley said. The valves of the second piece of equipment would be designed to shut off the pipe.
A proposal to lift the financial liability limit for oil companies such as BP was today endorsed by Representative Edward Markey, a Massachusetts Democrat. It was first suggested by House Speaker Nancy Pelosi during an interview on Bloomberg Television’s “Political Capital With Al Hunt.”
“I do not believe that large energy companies should be able to escape having unlimited liability for the catastrophes which they create,” Markey said on CBS. “If the oil industry wants to drill in ultra-deep waters, we need ultra-safe technologies as well.”
‘Make Them Responsible’
Louisiana Governor Bobby Jindal said the federal government should require BP to pay for 40 miles (64 kilometers) of new, manmade islands to protect his state’s tidal marshes from the spill. If BP is the responsible party for the spill, “make them responsible,” Jindal said.
The U.S. Army Corps of Engineers approved building six of 24 segments of sand barriers the state sought to help block the oil. The approved barriers cover 40 miles out of the 100 miles the state seeks to protect, the governor said. Jindal said the U.S. ordered BP to pay for one segment, or two miles.
BP Chief Executive Officer Tony Hayward has said BP will pay all costs and legitimate damage claims.
BP fell 5 percent to 494.8 pence in London trading on May 28 and has lost 25 percent of its market value since the blast.
To contact the reporter on this story: Steve Geimann in Washington at sgeimann@bloomberg.net; Jim Polson in New York at jpolson@bloomberg.net.
Last Updated: May 30, 2010 16:07 EDT
Business ExchangeTwitterDelicious
>>China Real Estate Bubble Bursts in Bond Market: Credit Markets
By Katrina Nicholas
May 31 (Bloomberg) -- Dollar bonds sold by China real estate companies this year are the worst performers among Asian non-financial corporate debt denominated in the U.S. currency amid concern the nation’s property market is overheating.
Yields on the $3.9 billion of bonds issued by Kaisa Group Holdings Ltd., Country Garden Holdings Co. and seven other developers since January widened by an average 2.26 percentage points relative to Treasuries as of last week, according to data compiled by Bloomberg. That’s more than the 2.05 percentage- point increase in spreads for the seven dollar-denominated bonds sold by other companies in Asia outside Japan.
Investors are demanding greater yields to lend to China property firms, a sign they expect borrowers will have a harder time meeting debt payments amid a government clampdown down on lending. Goldman Sachs Group Inc. and Credit Suisse Group AG cut their profit estimates for Chinese real estate companies after a 12.8 percent rise in real estate prices in April from a year earlier spurred the state to increase regulation.
“New issues by Chinese developers will stall for the time being,” Vince Chan, the Hong Kong-based chief credit strategist with Amias Berman & Co. LLP, a fixed-income advisory and brokerage firm founded by two former Citigroup Inc. bankers, said in a phone interview. “Investors need handsome rewards for getting exposed to weaker fundamentals.”
Widening Spreads
The amount of dollar bonds issued by China developers represents 45 percent of all corporate dollar debt sales in Asia outside Japan this year, Bloomberg data show. The yield spread on $350 million of 13.5 percent notes sold by Shenzhen-based Kaisa last month widened the most of the nine issues, expanding to 16.52 percentage points from 11.07 percentage points, Nomura Holdings Inc. prices on Bloomberg show.
Kaisa is developing 18 projects in Shenzhen, Dongguan and other cities in the Pearl River Delta, most of them high-rise residential complexes that combine recreational and commercial space, according to its website. An investor who bought the company’s 2015 bonds at par would have lost 15.5 percent.
Elsewhere in credit markets, the extra yield investors demand to own company debt instead of Treasuries widened 5 basis points last week to 193 basis points, or 1.93 percentage points, Bank of America Merrill Lynch index data show. The spread, which peaked at 511 on March 30, 2009, is up from this year’s low of 142 on April 21. Average yields rose to 4.06 percent, the highest based on weekly closes since the period ended March 5.
Sales Slow
Corporate bond issuance worldwide slowed this month to $66.1 billion, down from $183 billion in April and the least since December 2000, according to data compiled by Bloomberg.
“Companies have to be prepared to strike and strike quickly,” Rick Martin, the London-based director of treasury at Virgin Media Inc., the U.K.’s second-largest pay-television company, said at a May 28 briefing in London. “The key is to have the team ready and primed and able to pull the trigger at short notice. I can’t think of a time when the forces have been so polarizing.”
The cost to insure U.S. corporate debt against default rose last week. Credit-default swaps on the Markit CDX North America Investment Grade Index Series 14, which investors use to hedge against losses on corporate debt or to speculate on creditworthiness, increased 25.1 basis points this month to a mid-price of 117.2 basis points. The index typically rises as investor confidence deteriorates and falls as it improves.
Credit-default swaps pay the buyer face value in exchange for the underlying securities or the cash equivalent should a company fail to adhere to its debt agreements. A basis point on a credit-default swap contract protecting $10 million of debt from default for five years is equivalent to $1,000 a year.
Emerging Market
In emerging markets, spreads narrowed 16 basis points last week to 321 basis points, trimming the monthly increase to 63, according to the JPMorgan Emerging Market Bond Index.
China has added to regulations designed to cool the property market several times this year, including raising banks’ reserve requirements three times since January, restricting pre-sales by developers and curbing loans for third- home purchases. It also raised minimum mortgage rates and tightened down-payment requirements for second homes.
Goldman Sachs lowered its 2010 net income estimates for Chinese developers by an average 13 percent and reduced earnings forecasts for the next two years by 25 percent, analysts led by Yi Wang wrote in a May 19 report. Credit Suisse pared earnings- per-share estimates by as much as 15 percent for 2010 and 20 percent for 2011, citing the government’s clampdown.
Demanding a ‘Premium’
“With the negative headlines coming out of this sector, investors are less likely to be drawn to participate in new issues because of a high coupon,” Tan Chew May, a credit analyst for Aberdeen Asset Management Asia Ltd., which oversees $1.5 billion of Asian dollar debt, said in a phone interview from Singapore. “With the trend of widening spreads, new names are forced to come at premium.”
China property developers paid coupons as high as 14 percent to issue dollar debt this year, compared with an average 9.2 percent for other companies in Asia and 6.2 percent for U.S. property companies. On average, Chinese property companies are paying a 10.875 percent coupon.
Glorious Property Holdings Ltd., which has 26 real estate projects in cities including Shanghai, Beijing, Harbin and Changchun, postponed its first sale of dollar-denominated bonds in April. The Hong Kong-listed company cited poor credit market conditions for the delay.
Renhe’s Delayed Sale
Renhe Commercial Holdings Co., a developer of underground shopping centers based in Harbin, China, sold five-year, 11.75 percent dollar notes on May 18 to yield 974 basis points more than Treasuries after delaying the sale for two weeks.
The relatively strong finances of China developers means some companies can afford to pay double-digit coupons, according to Andy Mantel, Hong Kong-based founder of hedge fund manager Pacific Sun Investment Management Ltd.
Country Garden, which builds villas, townhouses and apartments in China, sold bonds in April with an 11.25 percent coupon. The company, controlled by China’s second-richest woman, Yang Huiyan, said contracted revenue in the first quarter rose 82 percent on sales in the Guangdong area.
“The sector is relatively better financed than it was two years ago when there were serious liquidity issues,” Mantel said in a phone interview. “Investors might not make any money on the actual bond, but they’ll get their interest payments.”
Fantasia’s Coupon
Fantasia Holdings Group Co.’s $120 million of five-year bonds pay the highest coupon at 14 percent. The company develops commercial and residential complexes in China’s Pearl River Delta and Chengdu-Chongqing Economic Zone regions.
It raised HK$3.18 billion ($408 million) from an initial share sale in Hong Kong in November, boosting cash reserves to $497 million from a deficit, Bloomberg data show.
“Sales and pre-sales have increased cash balances for most companies by over 20 to 30 percent while fresh debt issuance has extended maturity profiles,” analysts led by Raghav Bhandari at CreditSights Asia Research Ltd. wrote in a note to clients May 20. “Companies are in a much better position to handle this period of strain than they were a year ago.”
“People are attracted by the high coupons of the sector, but are fearful of the regulatory announcements and how it might affect the credits,” Sean Henderson, head of Asia debt syndication at HSBC Holdings Plc., said in a phone interview from Hong Kong. “More recently, the overall market backdrop has taken the whole high-yield sector lower.”
Widening Spreads
The yield spread on speculative-grade company dollar bonds in Asia was 179 basis points this month as of May 27 compared with 57 basis points for investment-grade companies, JPMorgan indexes show. High-yield debt is rated below Baa3 by Moody’s Investors Service and BBB- by Standard & Poor’s.
Credit-default swaps insuring against Country Garden defaulting on its debt rose 343 basis points to 10.39 percentage point this month through May 18. The contracts suggest investors are pricing in a 50 percent chance of default.
Similar contracts insuring Agile’s debt have soared 3.85 percentage points since mid-April, when China’s central bank pledged to implement new lending rules to cool real estate “madness.” At current rates investors are pricing in a 48 percent chance of default.
Chinese property bonds are unlikely “to recover meaningfully anytime soon,” Amias Berman’s Chan said. “If we start to see the regulatory measures taking effect in the next few months then there may be a reversal of fortunes. But optimistically I think it’ll be the third or fourth quarter before things stabilize.”
To contact the reporter on this story: Katrina Nicholas in Singapore at knicholas2@bloomberg.net
Last Updated: May 30, 2010 18:00 EDT
HOWDY! Hope everyone's weekend going well
POSTED elsewhere: Anybody here think BP wants to stop leak? 8 minutes ago
Anybody here really think that BP even wants to stop the leak before they get the other line drilled?
If they really wanted to stop this leak weeks ago, they can place a large heavy Kevlar sandbag over the larger leaking pipe on the ocean floor to slow down the pressure escaping, then insert a proper mud mixture of Barium sulphate - Barite, or with Calcite, Hematite then pump it in with proper pressure to counteract the formation pressure and clog the hydraulic head weight of the well, then seal it off. If they don't slow down the big leaking pipe, the mud will escape under it's current high pressure and diameter.
#1 There is 4000 Million barrels of oil in the current leaking Tiber oilfield alone, not to mention trillions of cf of NG. It's a massive find and they don't want to lose it.
#2 That's not the only deep drill site in the Gulf they have going with huge Oil & NG deposits. If Tiber is closed due to this leak, then what about the other sites they and several others have in the deep water Gulf?
THINK THINK THINK >>
* Containment box was designed to save some of the leaking oil. Did they make any effort to stop the leak before the recent mud pump?
* After box failed a line was inserted to also save some of the lost oil while most of it was still leaking.
* The recent mud pump went way beyond the original 10-12 hours, and the pipe on the ocean floor is way to big to stop leaking with top kill. While this mud pump is being delayed, the other drill is drilling down to relieve the pressure and to bring up the oil. They will relieve it as long as possible and seal the current leak, but likely refuse to shut down the new line using applicable reasons.
* Yesterday the TV showed Obama at the beach with BP workers cleaning up the beach. All seemed good on TV, however CNN reported that when Obama left, so did the workers that BP hired.
* BP said "it a tiny spill."
* Yesterday BP said "it's a natural disaster."
* I see miles of legal plays while nothing is being cleaned.
THERE IS MUCH MORE MORE IMPORTANT STUFF GOING ON THAN MEETS THE EYES. Anybody want more info?
http://messages.finance.yahoo.com/Stocks_(A_to_Z)/Stocks_B/threadview?m=tm&bn=26496&tid=116085&mid=116085&tof=16&frt=2
FAIL: BP says so far, Gulf well plug isn't working
By BEN NUCKOLS, Associated Press Writer – 25 mins ago
COVINGTON, La. – A risky procedure to stop the oil spewing into the Gulf of Mexico has yet to show much success, and BP is considering scrapping it in favor of a different method to contain the worst oil spill in U.S. history, an executive said Saturday.
The comments from BP PLC chief operating officer Doug Suttles came amid increasing skepticism that the "top kill" operation — which involves pumping heavy drilling mud into a crippled well 5,000 feet underwater — would halt the leak.
The top kill began Wednesday, and "to date it hasn't yet stopped the flow," Suttles told reporters at Port Fourchon. "What I don't know is whether it ultimately will or not."
If the top kill fails, BP would cut off the damaged riser from which the oil is leaking and cap it with a containment valve that's already resting on the seafloor. BP is already preparing for that operation, Suttles said.
Since the top kill began Wednesday, BP has pumped huge amounts mud into the well at a rate of up to 2,700 gallons per minute, but it's unclear how much is staying there. A robotic camera on the seafloor appeared to show mud escaping at various times during the operation. On Saturday, the substance spewing from the well appeared to be oil, experts said.
BP has also tried several times to shoot assorted junk into the well's crippled blowout preventer to clog it up and force the mud down the well bore. That, too, has met with limited success.
Interior Secretary Ken Salazar, addressing reporters after he spoke at a high school graduation ceremony in Denver, echoed what Suttles said and said officials were evaluating the next step. He said the relief well was the ultimate solution, but said something was needed to stop the spill until then.
"We're doing everything with the best minds in the world to make sure that happens," he said.
The oil spill began after the Deepwater Horizon drilling rig exploded in April, killing 11 people. It's the worst spill in U.S. history — exceeding even the Exxon Valdez disaster in 1989 off the Alaska coast — dumping between 18 million and 40 million gallons into the Gulf, according to government estimates.
Experts and other observers were growing increasingly skeptical that BP would be able to plug the well. Eric Smith, associate director of the Tulane Energy Institute, said Saturday that the top kill appeared headed for failure.
"They warned us not to draw too many conclusions from the effluent, but ... it doesn't look like it's working," he said.
BP had pegged the top kill's chances of success at 60 to 70 percent. The company says the best way to stop the flow of oil is by drilling relief wells, but those won't be completed until August.
Chris Roberts, a councilman in Louisiana's Jefferson Parish, said he was frustrated by BP's failures and perceived lack of transparency.
"We're wondering whether or not they're attempting to give everybody false hope in order to drag out the time until the ultimate resolution to it" — the completion of the relief wells, Roberts said.
Meanwhile, Coast Guard and Minerals Management Service officials heard a sixth day of testimony during hearings into the disaster in Kenner.
David Sims, BP's drilling operations manager for exploration and appraisal in the Gulf of Mexico, testified he was aware of well problems experienced by the Deepwater Horizon's drilling crew in the weeks and months leading up to the explosion. He said there were no serious problems the day the rig exploded.
___
Online: http://www.deepwaterhorizonresponse.com/go/site/2931/
___
AP Radio correspondent Shelly Adler and Associated Press writer Ivan Moreno contributed to this report.
http://news.yahoo.com/s/ap/20100529/ap_on_bi_ge/us_gulf_oil_spill
Oil spill: BP accused of using Gulf of Mexico as 'toxic testing-ground'
Louisiana officials have accused BP of turning the Gulf of Mexico into a toxic testing-ground after winning permission for experimental chemical methods of fighting the oil slick
By Jacqui Goddard, Miami
Published: 3:11PM BST 15 May 2010
State officials are angry that federal regulators gave the company permission to try out new chemical techniques to break up and hold back the growing tide of oil.
Despite registering concerns about the potential implications for the environment, marine life and human health, Governor Bobby Jindal's administration was cut out of deliberations over the use of dispersants that break up the oil, as the Environmental Protection Agency granted BP permission to release large quantities underwater.
"We don't have any data or evidence behind the use of these chemicals in the water. We're now basically using one of the richest ecosysystems in the world as a laboratory," complained Alan Levine, the head of Louisiana's Department of Health and Hospitals.
Tony Hayward, BP's chief executive officer, told WAFB Channel 9 news station that the chemical has undergone "lots of testing" and is biodegradable. "We believe it's a very effective way of containing this spill until such time as we can eliminate the leak," he added.
But Robert Barham, the state's Secretary of the Department of Wildlife and Fisheries, stated that it has not been used at such depths before - BP's leak stems from a pipe one mile below the surface - and that its potential impact and consequences are unknown. This includes how it travels through the water over time.
"We're very disappointed in their approach," he said of BP and the EPA. "The federal procedures call for a consensus between federal authorities, the responsible party and the states involved. When we met and expressed our concerns, apparently they decided to go without us."
Efforts to minimise the flow of oil from the ruptured well are continuing today. Technicians stationed on ships anchored above the leaking pipeline - which was sheared off when the Deepwater Horizon drilling rig exploded and sank on April 20 - have been attempting to insert a second, smaller pipe into the break to divert the flow to tankers on the surface. Over the coming days, they also plan to perform a "junk shot", a procedure in which debris including shredded tyres and broken golf balls will be fired into the well at high pressure to create a plug.
The oil industry is facing a growing backlash over the crisis, with President Barack Obama publicly criticising executives on Friday for creating a "ridiculous spectacle" at congressional hearings into the incident. Officials from BP, which leased the rig, Transocean, which owned it, and Halliburton, which was assisting operations to complete the well when tragedy struck, were guilty of "falling over each other to point the finger of blame at somebody else", he said.
Decrying the "cosy relationship" between the oil industry and the federal body that regulates it, the Minerals Management Service, he vowed changes to a regime under which drilling permits were "too often issued based on little more than assurances of safety from the oil companies."
Environmentalists accused the president of acknowledging his administration's errors too late, accusing the Department of the Interior of having turned the Gulf of Mexico into a "sacrifice area" where Big Oil's profits won priority over marine protection laws.
More than 100 seismic surveys and 300 drilling permits have been issued under Interior Secretary Ken Salazar's watch without the prior environmental consideration that is required under the Marine Mammal Protection Act and the Endangered Species Act, according to the Centre for Biological Diversity. The legislation protects marine life such as whales and dolphins by making it inherent on oil companies to prove that they have taken measures to minimise the environmental impact of drilling and other activities.
"The Department of the Interior is well aware of its obligations under the law," said Miyoko, the Centre's ocean's director, "as well of the harm to endangered whales that can occur from oil industry operations, yet it has simply decided it cannot be bothered. You or I have to follow the law, but Interior Secretary Salazar seems to think that he and the oil companies he is supposedly overseeing do not."
Mr Sakashita added: "Under Salazar's watch, the Department of the Interior has treated the Gulf of mexico as a sacrifice area where laws are ignored and wildlife protection takes a back seat to oil company profits."
Mr Salazar will appear before a hearing on Capitol Hill on Tuesday, to face his first grilling since the crisis began.
The House Committee on Oversight and Government reform has also announced that it is opening an investigation into potential oversight lapses at the Minerals Management Service.
Meanwhile questions remained as to how much oil is really spilling into the sea, with a number of scientists and expert analysts stating that the official figure of approximately 5,000 barrels a day (210,000 gallons) is a gross underestimate. Some believe that it could be 10 times that figure, though none have been granted access to the site to take official readings and there has been scepticism over BP's claims not to know.
John Amos of Skytruth, an environmental monitoring group, said: "There are instruments and technologies available to measure this kind of flow on the sea floor."
He added: "On satellite imagery day in and day out we continue to see an oil slick that's several thousand square miles in size out there and the good news is that it hasn't made serious landfall yet. That may be partly down to the response but also down to wind and current conditions. There's an element of luck in there. But I'm not sure how much longer we can get lucky."
http://www.telegraph.co.uk/finance/newsbysector/energy/oilandgas/7728577/Oil-spill-BP-accused-of-using-Gulf-of-Mexico-as-toxic-testing-ground.html
WSJ: BP Risks Big Fines and Loss of Major U.S. Contracts
MAY 28, 2010
By NEIL KING JR. And MELANIE TROTTMAN
BP PLC could face heavy fines and threats to its lucrative business relations with the U.S. government in the fallout from the Gulf oil spill.
White House lawyers are beginning to wrestle with whether BP's actions leading up to the disaster warrant barring the company from future federal contracts or oil leases, a process called debarment.
BP is the single biggest supplier of fuel to the Department of Defense, with Pentagon contracts worth $2.2 billion a year, according to government records. BP is also the largest producer of oil on federal waters in the Gulf of Mexico, which makes it a significant contributor of revenue to the government.
Separately, the government's new estimate Thursday that oil is flowing from BP's damaged Gulf of Mexico well at a rate of 12,000 to 19,000 barrels of oil a day into the Gulf of Mexico —far higher than the previous government estimate of 5,000 barrels a day—could expose the London-based oil giant to heavier fines under the U.S. Clean Water act.
Under the act, the Environmental Protection Agency could seek civil penalties of up to $32,500 per violation each day, or $1,100 per barrel spilled if there is no gross negligence found. If there is gross negligence, the agency could seek fines of up to $4,300 per barrel, which could total $51.6 million a day using the lower 12,000—barrel estimate.
The government could also seek criminal penalties, which could be up to twice the price-tag put on any losses associated with the damage and cleanup costs, said David Uhlmann, a University of Michigan law professor who served as chief of the environmental crime section of the Justice Department from 2000 to 2007. These penalties would be beyond BP's own damage and costs, estimated to be in the billions of dollars.
BP spokesman David Nicholas declined to comment on the potential for any government-imposed penalties. "The immediate focus is on stopping the oil spill and getting the situation under control. The investigation, deliberations and outcomes will happen in due course," he said.
Federal officials say no formal inquiry to bar BP from federal contracts has begun. A Justice Department spokesman said it is too early to discuss potential enforcement actions under the Clean Water act.
But U.S. officials say the Justice Department, the Interior Department, the Environmental Protection Agency and other key agencies are sharing information on the Gulf spill, including evidence that could become part of a debarment investigation.
"We are monitoring the situation in the Gulf and will take appropriate action as needed," said one U.S. official.
Assistant Attorney General Ronald Weich said in a letter sent to eight senators Wednesday that a team of Justice lawyers was now "examining a full range of affirmative legal options that may be available to the United States." The team, he said, was "providing daily legal advice" across the government.
The EPA has already barred BP's Texas City oil refinery from receiving federal contracts after BP was convicted in 2009 stemming from a 2005 explosion there. A BP facility in Alaska also was suspended from receiving federal contracts after it was convicted in 2007 on a misdemeanor charge stemming from a large oil leak from a pipeline there a year earlier.
The EPA was in negotiations with BP lawyers over those actions until late last week. The EPA said in a statement Wednesday that it had suspended those talks "pending the receipt of information from ongoing federal investigations into the oil spill."
"This may very well be the largest debarment case ever faced by the government, and with the largest consequences," said Robert Meunier, who directed the EPA's debarment office for years until 2008.
Cutting BP off from future government contracts, though, would be an unprecedented and highly complicated move, lawyers say.
BP supplies the military with nearly 12% of its fuel needs, making it the Pentagon's largest fuel supplier, with Royal Dutch Shell coming in a close second, according to the Defense Logistics Agency.
"It is not hard to block a debarment if an argument exists that it would harm the government, especially on national security grounds," said Robert Burton, a Washington lawyer who worked as the Bush administration's top procurement official.
Whether the Interior Department will eventually move to restrain BP's activities in the Gulf will hinge largely on any steps the Justice Department might take, U.S. officials say.
"Nothing is off the table," said one U.S. official. "But this is all just getting started."
Write to Neil King Jr. at neil.king@wsj.com and Melanie Trottman at melanie.trottman@wsj.com
http://online.wsj.com/article/SB10001424052748703630304575270822261954614.html
>>Matt Simmons: Obama needs to NUKE the site, "Top Kill" won't work:
May 28 (Bloomberg) -- Matt Simmons, founder and chairman emeritus of Simmons & Co., talks with Bloomberg's Mark Crumpton and Lori Rothman about BP Plc's leaking oil well in the Gulf of Mexico. BP said in a statement today that it has spent $930 million responding to the spill, which began after an April 20 rig explosion that killed 11 workers. The well has been spewing an estimated 12,000 to 19,000 barrels of oil a day into the Gulf, a U.S. government panel said yesterday. (Source: Bloomberg)
Hmmm...that link has since been removed. FYI
>>BP: That's $500 Billion in claims, estimated $50 Billion in damages...
Forget the noise, focus on the numbers:
Claims: half-a-trillion dollars or more. "About 110 suits have been filed so far, according to Becnel, and dozens more appear to be on the way."
Damages: "Becnel estimates that the actual damages, as opposed to total claims, will run $20 billion to $50 billion."
______________________________________________
From BP's Balance Sheet:
Total Cash (mrq): 6.84B
Total Cash Per Share (mrq): 2.19
Total Debt (mrq): 32.15B
Book Value Per Share (mrq): 33.25
BP Income Statement:
Revenue (ttm): 265.58B
Revenue Per Share (ttm): 85.01
Qtrly Revenue Growth (yoy): 54.50%
Gross Profit (ttm): 63.48B
______________________________________________
Q: Can BP afford the cost of suits, fines and ongoing damages and survive? Is there the potential the company seeks bankruptcy protection?
>>22 Mile Undersea Oil Plume Could Poison Marine Foodchain:
Scientists fear these oil clouds will create giant dead zones in the Gulf by suffocating large marine life and poisoning tiny creatures at the bottom of the food chain.
The plumes could poison and suffocate all kinds of sea life for up to a decade...
"The plume reaching waters on the continental shelf could have toxic effects on fish larvae, and we may also see a long term response as it cascades up the food web..."
scroll down for all stories
Barrons: Obama Will Need a Gusher of Money From BP
By JIM MCTAGUE | MORE ARTICLES BY AUTHOR(S)
BP's cleanup tab may be a lot bigger than expected.
BP IS GOING TO BE TAKEN TO THE CLEANERS, and President Barack Obama will be at the wheel of the delivery van. For the sake of his electioneering Democrats, the president must squeeze every dime he can from the company before November to appease voters appalled by his administration's languid response to what could be the greatest man-made environmental disaster since World War II. Dozens of Democratic candidates, including Senate Majority Leader Harry Reid, already are down in the polls, owing to the unpopularity of the party's health-insurance reform bill. The outlook for the Dems will be even grimmer come November if the Big Spill poisons the electoral waters more.
The financial risk to BP (ticker: BP) seems as bottomless as its Gulf oil well. Obama told reporters at a press conference Thursday that the spill was "bad for their [BP's] bottom line." He added, "They will be paying a lot of damages. We are going to stay on them about this."
Hell hath no fury like a wounded politician. A USA Today/Gallup Poll reported Thursday that 53% of the public believes the president's handling of the crisis has been poor, versus 43% who say that it's been good. He claims that the disaster's politics don't affect him, but it's obvious that this isn't the case. At his news conference, he answered questions tentatively and defensively and, in my opinion, projected weakness. It's a far cry from the bold and brash candidate Obama, who coined the phrase "Yes, we can!" While trying to defend his handling of the Big Spill during the press conference, he meekly admitted, "We can always do better."
BP is expected to pay for economic losses due to tourism declines along the Gulf coast as well as actual cleanup costs. Experts claim the bill will come to around $10 billion. That seems way low. The affected states -- Louisiana, Mississippi, Alabama and Florida -- take in a total of some $83 billion a year from tourism. The states don't break out the portion coming from coastal areas, but a conservative guess would be 10%, or $8.3 billion. Then comes the fishermen, boatyards, sunscreen manufacturers, you name it. In other words, cleanup and economic compensation could cost far, far more than $10 billion.
MY WHIMSICAL GREASED-PALM INDEX IS UP. This semi-satirical gauge, which I cooked up in 2003 to measure the stock performance of companies whose employees make generous political contributions in presidential and congressional races, is running just a percentage point behind the big gains of the Standard & Poor's 500 on a year-over-year basis through May 27. The GPI rose 23% as the S&P clocked a 24%. And from Jan. 1 to May 27, the GPI rose 1%, beating the S&P's 1% loss.
The cynical thesis behind the GPI holds that these companies are purchasing political goodwill -- a valuable intangible asset that is reflected in their stocks' performance.
As we have seen this year, Congress does occasionally bite the hands that feed it. Witness Goldman Sachs Group (ticker: GS), whose employees traditionally have given more than any other staffs. Congress has been raking top Goldman execs over the coals for sins both real and imagined, consequently beating down the stock price. Goldman staff, in turn, have become noticeably more tight-fisted. They donated $809,000 in the most recent Congressional cycle, ranking 17th on the GPI, compared to a whopping $7 million in 2007-08 and $3 million in 2003-04.
Goldman workers are not alone. Donations by corporate employees are down in general this cycle, no doubt a reflection of the tough times as well as political disappointments.
The Greased-Palm Index consists of all publicly-traded companies among the top 100 overall campaign donors at the end of April of an election year, as reported by the Center for Responsive Politics (Opensecrets.org). In the 2008 cycle, the GPI lost 13.7% year-over-year, versus a loss of 6% for the S&P 500. But it beat the S&P in the previous two election cycles.
Usually, there are about 40 companies in the GPI. This cycle, owing to mergers and the pinch of the Great Recession, there are just 29 publicly-traded companies on the list -- and donations from corporate laborers have tumbled. AT&T (T) staff gave the most to this year's congressional candidates, at $2.6 million. That's a relative pittance. In 2008, they offered up $6.7 million to presidential and congressional candidates, and were ranked No. 5 on the GPI.
Missing from the GPI this cycle are some very large companies: Google (GOOG), my employer News Corp. (NWSA), Disney (DIS) and FedEx (FDX), to mention a few. For those of you who wish to view the entire GPI as compiled for me by Teresa Vozzo, our indispensable researcher, shoot me an e-mail. With the market behaving badly, whimsy might be the best strategy.
E-mail: jim.mctague@barrons.com
http://online.barrons.com/article/SB127508657755298517.html?ru=yahoo&mod=yahoobarrons
BL: New Home Sales Set to Plummet in Phoenix, Las Vegas as Tax Credit Expires
By Prashant Gopal
May 28 (Bloomberg) -- New home sales in Phoenix and Las Vegas, two U.S. markets hardest hit by foreclosures, are set to plunge as a federal tax credit for homebuying expires, according to data from real estate researcher Metrostudy.
A sample of subdivisions in both cities showed sales contracts for new homes “pulled back sharply in May and contract cancellations spiked,” Houston-based Metrostudy said in an e-mail. Would-be buyers canceled about 40 percent of new home contracts in San Diego in May, up from 10 percent in April, the company said. Data on new signings in that city weren’t immediately available.
Sales indicators fell after April 30, the last day for homebuyers to sign contracts in time for a federal tax credit of as much as $8,000 for first-time purchases and $6,500 for certain “move-up” buyers. The deadline may have hurried customers to snap up properties when they otherwise would have waited, said Brad Hunter, chief economist based in Palm Beach Gardens, Florida, for Metrostudy.
CBH Homes, a Meridian, Idaho-based builder whose average house price is about $145,000, countered the post-tax credit slump with a one-month “Tax Credit After Party.” It’s offering as much as $8,000 in savings for signing a contract in May.
“Think you missed out on the tax credit? THINK AGAIN,” the company says on its website.
“Buyers have a certain mindset,” Holly Haener, director of sales and marketing for CBH, said in a telephone interview. “They want to see that savings.”
Phoenix Falls
In Phoenix, contracts in the subdivisions surveyed by Metrostudy fell almost 49 percent for the week ended May 24 from the same period a year earlier, Hunter said. More than 8 percent of Phoenix households received a notice of default, auction or foreclosure in 2009, ranking the city the eighth worst in the country, according to Irvine, California-based research company RealtyTrac Inc.
Signed contracts in Metrostudy’s Las Vegas subdivisions dropped 12 percent for the week ended May 24 from a year earlier. They climbed 220 percent in the last week of April, an indication of buyer interest in capturing the tax credit before it ended, Metrostudy said.
Las Vegas had the highest rate of foreclosure filings in the U.S. last year, with 12 percent of households receiving a notice, according to RealtyTrac.
U.S. Property Sales
The tax credit helped push U.S. new home sales up 15 percent in April to the highest annual pace since May 2008, the Commerce Department said May 26.
“We had this large spike before the tax credit expiration and now we see the downside of that,” Hunter said in an interview. “Based on this research, it seems that a post-credit pullback is under way.”
Larry Seay, chief financial officer of Meritage Homes Corp. of Scottsdale, Arizona, said demand has dropped across the company’s markets, which include Phoenix, Denver, Houston, Las Vegas, and Orlando, Florida.
“The tax credit during the first four months of the year did positively impact sales,” Seay said. “We’re seeing a bit of a fall since then.”
Meritage is prepared to weather any temporary decline because it is selling a greater proportion of lower-cost properties.
Companies should avoid price cuts or incentives that drive down already slim margins, said Jason Forrest, president of Fort Worth, Texas-based Shore Forrest Sales Strategies, a consultant for builders.
“The solution is to create a strategy and a sales message,” Forrest said.
To contact the reporter on this story: Prashant Gopal in New York at Pgopal2@bloomberg.net.
Last Updated: May 28, 2010 14:11 EDT
RUH ROH: US Stocks, Oil, Euro Tumble; Dow Ends Worst May Since 1940?
BusinessWeek - Rita Nazareth - Elizabeth Stanton - 1 hour ago
May 28, 2010, 4:50 PM EDT
By Rita Nazareth and Elizabeth Stanton
May 28 (Bloomberg) -- U.S. stocks slid, capping the worst May for the Dow Jones Industrial Average since 1940, while the euro slumped and Treasuries rose as a downgrade of Spain’s debt rating and escalating tensions on the Korean peninsula triggered a flight from riskier assets.
The Dow tumbled 122.36 points, or 1.2 percent, to 10,136.63 at 4 p.m. in New York and lost 7.9 percent this month. The Standard & Poor’s 500 Index sank 1.2 percent to 1,089.41, led by financial shares on the Spanish downgrade and energy companies after U.S.
President Barack Obama extended a moratorium on new deep-water drilling. Oil erased gains after rallying as much as 1.6 percent to more than $75 a barrel. Ten-year Treasury yields decreased 7 basis points to 3.3 percent. The euro slipped 0.7 percent to $1.2273.
Equities and commodities extended losses after Fitch Ratings stripped Spain of the AAA rating it’s held since 2003, saying the nation’s economic growth will slow as it attempts to cut its debts. Earlier losses followed disappointing U.S. economic data and a North Korean general’s warning of “all-out war” if any accidental clashes with South Korea break out.
“Spain’s downgrade just adds to more uncertainty,” said Quincy Krosby, chief market strategist for Newark, New Jersey- based Prudential Financial Inc., which oversees about $667 billion. “There are too many geopolitical events. We have a three-day weekend in the U.S., and traders will definitely want to lighten their books.”
‘All-Out War’
Losses in U.S. stocks widened earlier after North Korean Major General Pak Rim Su disputed the results of the international investigation that found his nation sank a South Korean warship. “Any accidental clash that may break out in the waters of the West Sea of Korea or in areas along the Demilitarized Zone will lead to all-out war,” he said, according to North Korea’s official news organization.
About 9.2 billion shares changed hands on all U.S. exchanges, 4 percent below the average for the year as trading slowed before the Memorial Day holiday.
“With volumes being as they are today ahead of the holiday weekend, there is not much in the way of conviction among traders,” said Mark Turner, head of U.S. sales trading at Instinet LLC, which handles about 4 percent of U.S. equity trading volume.
“So any headline has the potential to move the market. And the situation in North Korea has especially been in our crosshairs.”
The retreat in the S&P 500 today came after the benchmark index rallied 3.3 percent yesterday as China assured investors it was committed to maintaining European investments even as a sovereign debt crisis rattles confidence in the region.
Benchmark indexes pared declines late in the day after Goldman Sachs Group Inc. strategist David Kostin raised his estimates for S&P 500 earnings to $78 a share for this year and $93 a share for 2011, up from $76 and $90, to reflect “strong” first quarter earnings and better-than-estimated profit margins.
The S&P 500 trimmed its advance for the week to 0.2 percent, while the MSCI World Index of shares in 24 developed nations rose 0.6 percent over the past five days. The U.S. gauge sank 8.2 percent in May and the global gauge lost 9.9 percent, the worst month since February 2009 for both and the biggest slide in May for the S&P 500 since 1962.
The Stoxx Europe 600 Index erased gains, dropping 0.3 percent today after rallying as much as 0.7 percent. The MSCI Asia Pacific Index climbed 1.5 percent.
BP Plc slid 5 percent in London after Europe’s second- largest oil company said procedures to plug a leaking well in the Gulf of Mexico may last another day or two. BP added rubber golf balls and scraps to the mud it was pumping into its leaking Gulf of Mexico oil well in an effort to stop the spill.
Baker Hughes Inc., Halliburton Co., Transocean Ltd. and Schlumberger Ltd. slumped at least 4.9 percent to help lead declines in U.S. energy shares.
Obama is suspending exploration in two areas off Alaska, canceling pending lease sales in the Gulf of Mexico and proposed sales off Virginia’s coast, extending by six months a moratorium on deepwater drilling permits and suspending operations at all 33 exploratory wells being drilled in the Gulf.
The gain in Treasuries extended the drop in 10-year yields this month to 36 basis points, the biggest monthly loss since December 2008, as government data showed consumer spending in the U.S. unexpectedly stalled, fueling speculation the economic recovery will be slow.
The benchmark note yield touched 3.06 percent on May 25, the lowest level since April 29, 2009. Its 17 basis point gain yesterday was the most since June.
A gauge of U.S. corporate credit risk climbed the most in 15 months in May as Europe’s sovereign debt crisis sparked concern that economic growth may slow, making it harder for companies to refinance.
The Markit CDX North America Investment Grade Index Series 14, which investors use to hedge against losses on corporate debt or to speculate on creditworthiness, increased 1.34 basis points today and 25.2 basis points this month to a mid-price of 117.17 basis points as of 4:19 p.m. in New York, according to Markit Group Ltd. The index, which typically falls as investor confidence improves and rises as it deteriorates, climbed the most since February 2009, according to CMA DataVision.
Credit markets faltered in May as corporate bond sales fell to the least in a decade amid speculation Greece and other nations in Europe won’t be able to meet their debt payments and as the dispute between North Korea and South Korea raised the risk of a broader conflict.
Crude oil for July delivery fell 58 cents, or 0.8 percent, to settle at $73.97 a barrel on the New York Mercantile Exchange. Oil’s 14 percent decline in May was the biggest monthly decrease since December 2008, when prices touched $32.40 a barrel.
Copper for July delivery lost 1.7 percent to $3.1045 a pound in New York. Gold futures rose in New York, capping a second straight monthly gain, on demand for an alternative to holding the euro. Gold for August delivery climbed 60 cents to $1,215 an ounce in New York.
--With assistance from Whitney Kisling and Susanne Walker in New York, Margot Habiby in Dallas and Paul Dobson and Stuart Wallace in London. Editors: Michael P. Regan, Nick Baker
To contact the reporters on this story: Rita Nazareth in New York at rnazareth@bloomberg.net; Elizabeth Stanton in New York at estanton@bloomberg.net.
To contact the editor responsible for this story: Nick Baker at nbaker7@bloomberg.net
>>The tort lawyer and the BP oil disaster
Oil giant will have to deal with Louisiana’s ‘firehouse dog’
By Ken Wells
updated 9:27 a.m. ET, Fri., May 28, 2010
Daniel Becnel Jr., speed dialing over a speaker phone, places a call to a lawyer for a defendant in the British Petroleum-Deepwater Horizon rig explosion and oil spill.
"This is the king of torts calling," he says when he reaches the attorney's executive assistant.
"Oh," she says. "Then it must be Danny Becnel.
Becnel, adjusting his gold-rimmed glasses, nods appreciatively from his mahogany desk strewn with an impressive pile of legal papers. It's from here, in a French colonial-style office in Reserve, La., population 10,000, that he orchestrated the filing of the first federal lawsuit eight days after the Apr. 20 blowout, and where he tracks the legal squadrons gathering to sue BP and its contractors for claims that experts say could add up to a half-a-trillion dollars or more. About 110 suits have been filed so far, according to Becnel, and dozens more appear to be on the way.
"So where the hell is Jimmy?" Becnel says to the assistant on the phone.
The sought-after party is in a meeting, but the assistant promises a quick return call. Before hanging up, she says: "Danny, would you give me some inside scoop, because I really enjoy hearing things before they get to the lawyers here."
"Now, why do you think I know stuff?" he asks.
She laughs: "Because you're the one who has the direct-dial phone to the White House."
As the spill spreads, waves of lawyers have followed. Becnel, as is his custom, is surfing out front. So far, he and partnering law firms have filed nine federal suits—representing Louisiana commercial fishermen, a New Orleans area oyster restaurant, and Key West charter boat operators, among others—and they're preparing to file three or four more.
Becnel, 65, is soft-spoken. In his khakis, open-collar shirt, and fondness for breaking out dog-eared volumes on industrial safety, he might be mistaken for an engineering professor. In fact, he has represented plaintiffs in some of the highest-profile class actions in American history, from fen-phen diet pills and Big Tobacco to Dow Corning breast implants and the recent Toyota sudden-acceleration cases. He demurs as to whether he actually has a direct line to the White House, though he openly admires the President, and Bradley Becnel, one of his four children, is an advance man for the Obama Administration, helping set up Presidential visits all over the world.
Addressing reports circulating on a spill litigation website that U.S. Navy submarines are tracking the oil spill, Becnel says it was his attorney brother, Robert Becnel, who contacted his "close personal friend" U.S. Navy Secretary Ray Mabus about the need for the government to monitor where the oil is going. (A Defense Dept. spokesman says the Navy has provided skimmer boats and other equipment to the spill-containment effort but knows of no submarine involvement.)
Becnel has plenty of competition in the BP litigation stakes. The spill, says Jerrold Parker, a Bonita Springs (Fla.) lawyer, may turn into "the largest disaster in American history" and is already a mass tort bonanza. A recent seminar sponsored by the Louisiana State Bar Assn. at New Orleans' downtown Sheraton Hotel, at which Becnel was one of the speakers, attracted about 300 tort attorneys from around the country. "Ultimately, you're talking about thousands of lawyers being involved," says Richard J. Arsenault, a dean of the Louisiana tort bar who is working several cases with Becnel.
People who know him aren't surprised to find Becnel in the center of the litigation. "[Becnel is] like a firehouse dog," says James Roussel, a longtime acquaintance and sometimes legal adversary of Becnel's who is a defense lawyer with the New Orleans arm of Baker Donelson Bearman Caldwell & Berkowitz. "When the bell rings, he's out the door."
What makes the BP case so extraordinary is the potential for the spill to damage the economies of the five Gulf states — Alabama, Florida, Louisiana, Mississippi, and Texas—and the livelihoods of tens of thousands of citizens who live there. Should the oil start moving up the East Coast, damage claims will spread with it.
According to the latest National Oceanic & Atmospheric Administration estimates, the spill forms a surface slick at least 130 miles long and 70 miles wide that stretches from about 30 miles west of the Mississippi River to the offshore waters of western Florida. Roughly 45 miles of Louisiana's coastline of marshy bays and sandy barrier islands have already been coated with oil, a state of Louisiana website reported on May 26. Oil-sickened pelicans are being pulled out of the water around Grand Isle, the state's one sandy beach resort about 60 miles below New Orleans. Oil from the blown-out rig, which independent scientists have told Congress could be gushing at ten times the BP estimate of 5,000 barrels a day, has entered the Gulf Stream and could be headed toward the tip of Florida, the coast of Cuba, and beyond, according to the European Space Agency, which has been monitoring the spill by satellite.
$50 billion in total claims?
Becnel estimates that the actual damages, as opposed to total claims, will run $20 billion to $50 billion. That would dwarf the $5 billion judgment that was rendered in the 1989 Exxon Valdez Alaska spill, which involved more than 32,000 plaintiffs, before it was reduced to about $500 million by a 2008 Supreme Court decision. BP recently waived a $75 million limit on environmental damages relating to the spill and has pledged to cover costs, whatever they are. The numbers and class of people who have claims are going to be "extraordinary," says Camilo K. Salas III, a New Orleans lawyer who is working with Becnel on some of the litigation.
Already, charter boat captains and resort operators from as far away as Texas and Florida have sued as clients scared off by the spill canceled trips. Many of Louisiana's 15,000 commercial fishermen are filing claims as the spill shuts down and pollutes shrimping and oyster grounds in an industry valued at about $2.5 billion a year. The spill couldn't have come at a worse time for shrimpers, who were entering the peak spring season when the leak began.
The district attorney of Terrebonne Parish, La.—where long tongues of oil were just discovered drifting into Lake Barre, a popular sports fishing and shrimp-trawling area—has filed suit to recover damages on behalf of the parish's wildlife. Two environmental groups, the Gulf Restoration Network and the Sierra Club, have sued the U.S. Minerals Management Service for its alleged failure to require companies drilling in the Gulf to have adequate worst-case scenario plans for dealing with spills. Meanwhile, the Louisiana Municipal Police Employees' Retirement System has sued BP, accusing the company of damaging shareholders by opting to maximize output at its rigs such as the Deepwater Horizon instead of complying with safety regulations.
Long established lawyers like Becnel lure clients through word-of-mouth or through a network of attorneys who work the nationwide mass-tort circuit. Other lawyers have to hustle. In Chauvin, La., a fishing community south of Houma where BP is staging some of its spill-containment operations, lawyers have been swarming community meetings and docks trying to sign up hundreds of commercial fishermen for their lawsuits, says Kimberly Chauvin, co-owner of Mariah Jade Shrimp Co. "It's like sharks feeding on guppies down here. The lawyers are the only ones who ever come out winners in situations like this."
One of Becnel's cases involves a Mandeville (La.) sports fisherman named Tom Garner, who has filed a class action in New Orleans federal district court on behalf of Louisiana's millions of outdoor enthusiasts who use the wetlands in this fishing- and hunting-mad state for recreation (Louisiana's license plates bear the slogan "Sportsman's Paradise"). In his suit Garner says "the ever-growing oil spill has already caused serious and permanent environmental damage to the Louisiana coast," depriving both recreational and commercial users access to an ecosystem that is also "the first line of defense from storms and hurricanes."
The suit further alleges that the explosion, sinking of the rig, and oil spill were a direct result of BP's negligence in "providing blowout preventers that did not work properly and were not calibrated" and by "conducting well and well cap cementing operations improperly by removing mud from the well before cementing the well, a procedure which is never done."
Becnel thinks the company's legal woes will worsen if further evidence shows it operated in a culture that put profit before safety; he cites congressional testimony earlier this month suggesting BP ignored signs that a cement job meant to maintain well pressure was faulty and that the blowout preventer may have been previously damaged."They were in a hurry to finish this job, because it was so expensive," says Becnel. "In the rush, they made a chain of bad decisions." BP declined to comment.
Becnel takes pride in having refused to move his law operations 35 miles downriver to New Orleans, where most of the local tort lawyers have splashy offices. He often describes himself as a "country lawyer," although he hasn't fooled anyone with that bit of mythology in quite a while. "Danny's a wheeler-dealer," says Roussel of Baker Donelson. "He's a good guy, but the country lawyer thing is kind of a shtick. Some people don't like him. They don't think he's very effective. They are somewhat jealous of him." Roussel says Becnel's sense of self-worth can be grating. "One thing about Danny—nobody has a higher impression of him than he does of himself."
Becnel says that he simply works harder than most of his colleagues. "Most tort lawyers are lazy," he says. "I'm always working. You know how many hours a night I sleep? Four."
He turns to his colleague, Salas, who is in his office: "What time do you start getting calls from me some mornings?"
"Four a.m.," says Salas.
A long history of court victories
Whatever other lawyers say about him, Becnel has a pile of victories that speak volumes. He won a million-dollar judgment in a 1972 car accident case when he was three years out of Loyola University law school, and since then, Becnel has been involved in six billion-dollar-plus settlements. Those include the national tobacco litigation, in which he was part of a large team of lawyers sharing a $1.65 billion fee in California alone, and the Dow-Corning breast-implant defect cases, in which his firm was among several that won a global $7.2 billion 2001 settlement that was later reduced when Dow-Corning took the case to bankruptcy court. He was also a lead lawyer in the post-Katrina, $330 million settlement against Murphy Oil over a tank spill during the storm that unleashed more than 1 million gallons of oil in several neighborhoods in St. Bernard Parish below New Orleans.
Becnel says he first heard about the Deepwater Horizon blowout from a personal-injury attorney friend who tracked him down by phone at the Wynn Las Vegas hotel where he was attending a two-day, $1,395 seminar called "Mass Torts Made Perfect." "I said to my friend, 'You take the personal injury cases, and we'll handle the environmental litigation,' " says Becnel. Since then, Becnel has asked a federal judicial panel to consolidate the lawsuits into a class action to avoid what he calls "judicial chaos." He also filed motions in New Orleans federal district court for an expedited hearing on the matter of where the suits will be heard. (So far they have been denied.) BP and its contractors are trying to get the cases transferred to Houston; The Louisiana bar and a huge chorus of local residents argue the suits ought to stay put.
"If it goes to Houston, there will be a huge uproar down here," says Roussel, who declined to handicap the decision either way. If an expedited hearing isn't granted, the issue will be heard July 29 in federal court in Boise, Idaho.
While Becnel says he takes all of his cases personally, this one has particular resonance. Born in New Orleans, he grew up in a middle-class family in Garyville, La., near Reserve. His father, D. Elmore Becnel, was a military prosecutor after World War II who settled back in Louisiana as small-town lawyer. His mother was a nurse.
Back then, Reserve was a rustic hamlet of a few hundred people with a gravel road paralleling the towering levees of the Mississippi River. The town sat amid thousands of acres of sugar cane fields and woodlands interspersed with the aging plantations of sugar barons who had built them in the previous century.
Like most men and a lot of women in South Louisiana, Becnel spent his youth hunting and fishing the wild lands around him and often ventured down into the saltwater estuary, the system most under siege by the oil spill, to spend a day trawling for shrimp. He echoes a refrain heard over and over—that it's not just an ecosystem under assault but a way of life. "This is making people physically sick," he says.
A short drive from his office is a 15-acre gated compound that holds his house, a guest house, pool, horse paddock, barns, vegetable gardens, and a hurricane bunker. At a table in the guest house, over a lunch of chicken-and-andouille gumbo prepared by his cook, Becnel talks about his attachment to his hometown and the influences that prompted him to become a tort lawyer. His ancestors were part of a wave of German migration to Louisiana's Mississippi coast starting in the 1720s. His father died in 1965 at the age of 57 from lung cancer after an adult lifetime as a smoker. His estate was a house valued at $14,000 with a $7,000 mortgage remaining on it. Becnel worked his way through Louisiana State University, earning a bachelor of science degree in 1966. During law school at Loyola, he took a job as a night dispatcher for the local sheriff's office. "That's where I learned not to sleep," he says.
When Becnel graduated from Loyola in 1969, he had few resources. He rented one quarter of a tiny cinder-block building from the local gas company within walking distance of the office he now owns and occupies. The space, he recalls, was so small that he had to crawl over the top of his desk to get in and out.
Name-dropping: Carter, Reagan, Clinton
Becnel envisioned himself as a small-town lawyer handling wills and property transactions. One of his first clients was a young woman, on the cusp of her honeymoon, who wanted to get her car transferred to her soon-to-be husband's name. "It was a $3 fee, and at that point I was dying for that $3," he says. "I said, 'no charge.' But I told her: 'Look, one day you might have a good case, don't forget me.' "
She didn't. The woman, Paulette Trosclair, sought out Becnel when she was later injured in a horrific car accident. Her case went to trial in Jefferson Parish and netted Becnel his first million-dollar verdict. His career as a tort lawyer was born.
Becnel doesn't mind talking about how well he's done, how good he is at what he does, and whom he knows. He also likes to drop names. His office and home are decorated with photos of Becnel and Jimmy Carter, Becnel and Ronald Reagan, Becnel and Hillary Clinton, Becnel and John Kerry, among others.
He shows off several of the 17 Mercedes-Benzes that he owns, some of which he assigns to his staff to drive. "I have 12 tractors," he says, each one hooked to a separate implement that he uses to do yard work. The explanation is that he can't change implements because he donated a kidney several years ago to his brother, and rib-cage weakness prevents him from heavy lifting. It doesn't, however, prevent him from mowing his own grass from on top of a tractor or from working in his multi-acre vegetable garden, which he has rigged with night lights so that he can garden through bouts of insomnia. "Ten p.m. or 3 a.m., it doesn't matter. I could be out there," he says.
An inveterate tinkerer, Becnel completed a 3,000 square-foot hurricane bunker — made from structural steel and rod-trussed, concrete-filled cinderblocks — earlier this year, which he says will withstand 250 mile-per-hour winds and can hold several families. He has hooked it all up to a generator that he says "could run two city blocks," and he has 20,000 gallons of diesel in underground tanks to power it.
He has a 40,000-acre ranch near Aspen, Colo.— a fact he mentions more than once — and takes a visitor on a tour of his main house, where he shows off a bathroom and curved walk-through closet used by his wife, Mary Hotard Becnel, a local judge. The addition was completed several years ago and was designed by Bill Gates' architect, whom he knows from Aspen. Becnel says his other holdings include about 4,000 acres of land in and around Reserve where he keeps 500 chickens to supply fresh eggs for his compound and for friends.
Ironically, Marathon Oil has a large refining operation in nearby Garyville that partly occupies property that Becnel says he sold the company. Earlier this month, an explosion ripped through a boiler there, causing injuries. So far around 200 plaintiffs have poured into Becnel's law office to sue.
"I'm probably one of the few people in the country who doesn't accept his Social Security," Becnel says. "I could retire, but I don't because I just love the work."
Becnel and the other spill lawyers may have a big job ahead of them if the Exxon Valdez litigation is a foreshadowing of the BP cases. Exxon fought the $5 billion Alaska state court damage verdict for 19 years, all the way to the U.S. Supreme Court.
Although the oil giant spent $3.4 billion to clean up 1,200 miles of Alaskan shoreline, and tens of millions more on legal fees, it eventually won a $4.5 billion reduction from the Supreme Court on the punitive damages. On the other hand, "this is a radically different fact pattern than Exxon Valdez," says Arsenault. While the Exxon Valdez disaster was blamed on a drunken ship captain, "the BP spill follows a very troubling pattern of systemic failures." Arsenault also doubts that our "judicial, legislative, and executive branches will allow a repeat" of the drawn-out Exxon Valdez case. So far, at least, BP is playing contrite corporate citizen, offering to help commercial fishermen with their bills and providing no hints about its legal defense strategies.
Becnel thinks that no matter how large the judgments finally are, BP will be able to shoulder the costs of a massive cleanup and the damage claims simply based on the value of its oil reserves. A parallel can be found in the case of U.S. tobacco companies, which continue to pay claims, estimated at more than $270 billion, out of future income. Salas, Becnel's partner in the litigation, says that he has another theory of how BP will finance the damages:
"The American people will ultimately pay for it at the gas pump."
Copyright © 2010 Bloomberg L.P. All rights reserved.
http://www.msnbc.msn.com/id/37388699/ns/business-bloomberg_businessweek//
>>Graham Walker - Spain’s Debt Downgraded – Who’s Next?
GrahamWalker : As Standard & Poor’s downgrade Spain’s credit rating, who will come under scrutiny next?
Graham Walker analysts are apparently speculating that the next country to have its AAA sovereign debt credit rating downgraded will be the United Kingdom. Sources close to the firm said that they may already have begun divesting themselves of sterling-denominated assets including gilts and equities at an even faster rate than previously thought.
Although Graham Walker have had a “sell into strength-rating” on UK gilts and equities for more than six months, the S&P Spain downgrade together with the imposition of a “junk grade” rating on Greece’s debt and a less severe cut on Portugal’s may have prompted the firm to begin selling with conviction.
The reasons would appear to obvious given the fact that the UK’s budget deficit is fast-approaching Greek levels in percentage terms and, to date, none of the three major political parties contesting the country’s imminent general election have outlined any remotely credible plans for its reduction.
Graham Walker sources believe that S&P and the other two main ratings agencies, Moody’s and Fitch Ratings, are delaying decisions on the UK because they cannot reasonably expect the parties to release details of what would almost certainly be vote-losing spending cuts and tax hikes.
http://bignews.biz/?id=877532&keys=GrahamWalker-Grahamwalker-Graham-Walker
>>Russia Suggest Nuclear Explosion to Cut Off Gulf Oil Geyser
May 10, 2010 | Vetting explained
Posted by:oldfromdc
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As British Petroleum scrambles to affix a four story dome over the massive oil geyser venting toxic sludge into the Gulf of Mexico, people everywhere are wondering what else can be done to stem the deadly tide.
Komsomoloskaya Pravda, Russia's best-selling daily publication, has and idea: Why not just nuke it?
During the Soviet years, Russia's communists had to deal with numerous oil disasters and on five different occasions they employed controlled, underground nuclear blasts to quickly solve the problem.
[The] underground explosion moves the rock, presses on it, and, in essence, squeezes the well’s channel," Pracda reported.
"It’s so simple, in fact, that the Soviet Union, a major oil exporter, used this method five times to deal with petrocalamities," added Moscow reporter Julia Ioffe, writing for True/Slant "The first happened in Uzbekistan, on September 30, 1966 with a blast 1.5 times the strength of the Hiroshima bomb and at a depth of 1.5 kilometers. KP also notes that subterranean nuclear blasts were used as much as 169 times in the Soviet Union to accomplish fairly mundane tasks like creating underground storage spaces for gas or building canals."
And those 169 underground blasts do not count the Soviet military's tests of various atomic-yield weapons, the paper noted.
Russia's success in capping major oil leaks with nuclear demolitions has an almost perfect record of success: only one detonation failed to accomplish its purpose. The last such explosion took place in 1979, according to Ioffe.
During the same period, the United States also had a "peaceful nuclear explosions" program called Operation Plowshare. U.S. officials abandoned it due to environmental concerns.
Conspiracies rum amok
Meanwhile, a variety of conspiracy theories about the sinking of the Deepwater Horizon drilling rig have emerged, with some suggesting that it may have been an Obama administration inside job, an attack by environmental terrorist, an indirect result of people liking meat, or even an act of God.
One theory in particular that's been circling conspiracy sites claims the disaster was caused by a North Korean torpedo as a way of presenting an "impossible dilemma" to President Obama ahead of the United Nations nuclear summit, with the goal being total chaos in the world's nuclear arms debate. The writer, going by the name "Sorcha Faal", sourced the claim as part of a "grim" report circulating the Kremlin, providing no additional details as to how the information was obtained. That was apparently good enough for "The European Union Times," which ran the claims in full.
...for more go to http://rawstory.com/rs/2010/0504/russian-paper-suggests-nuclear-explosion-cut-gulf-oil-geyser/
>>SDS green: Spain downgraded as Europe debt crisis widens
By JUERGEN BAETZ and PAN PYLAS (AP) – Apr 28, 2010
BERLIN — Europe's debt crisis spread its contagion to another country Wednesday when a major agency downgraded Spain's credit rating, even as Germany grudgingly moved closer to bailing out Greece from imminent collapse.
Greece and Portugal — up to now the focus of alarm — are relative economic minnows. But Spain's economy, at four times the size of Greece, is considered by many too big to rescue.
At stake is the threat of higher borrowing costs that could crimp government spending for years and undermine the once-mighty euro.
Chancellor Angela Merkel said Germany would speed up approval of its share of a nearly $60 billion (euro45 billion) joint bailout with the International Monetary Fund and other euro countries, rushing it through parliament by May 7.
That would beat a May 19 deadline when Greece has debt coming due — and which it can't pay without a bailout.
"It's absolutely clear that the negotiations between the Greek government and the European Commission and the IMF have to be accelerated now," Merkel said ahead of a meeting with IMF head Dominique Strauss-Kahn. "We hope that they will be completed in the next days."
Her remarks and a promise from Finance Minister Wolfgang Schaeuble that the package could be signed, sealed and delivered — provided Greece agrees to tough austerity measures — helped shore up confidence the country would not suffer a disastrous default. That would make borrowing more expensive for governments across Europe.
But the Spain downgrade and a lack of clarity about how much money Greece will really need unsettled investors. Major European markets closed down after the Spain announcement, which came in the final two minutes of trading.
Strauss-Kahn would not confirm reports he had told German parliamentary deputies that Greece would need as much as $158 billion (euro120 billion) over several years.
Some say the very future of the euro hangs in the balance.
At minimum, a Greek default would roil the balance sheets of European banks holding Greek bonds. Higher borrowing costs would force indebted governments to pay more to cover interest costs, thus stifling spending and economic stimulus, and pushing them to increase taxes. That would make it harder for Europe to maintain its shaky economic recovery.
Once again, the main actors in the Greek debt drama failed to provide complete clarity — threatening already shaky markets with further turmoil.
Royal Bank of Scotland analyst Jacques Cailloux said the statements by Merkel, Strauss-Kahn and European Central Bank president Jean-Claude Trichet "failed to provide groundbreaking information" and warned that Europe risked the "biggest coordination failure in modern history."
Until the German parliament backs the release of bailout funds, the markets will remain "very skeptical" that EU and IMF leaders have a handle on the crisis, Cailloux said.
Merkel's government has balked at handing over German taxpayers' money to a country that has acknowledged massaging its debt figures for years — and key regional elections in Germany on May 9 have not helped to bring about a swift resolution.
Merkel stressed that Germany was still insisting Greece commit to tough austerity measures.
"Germany will make its contribution, but Greece has to make its contribution," she said.
Merkel would not comment on how much money Greece would need in the long run. "What is known ... is that it will be a three-year program," she said. "Let us talk about numbers when the program is finalized."
The clock is ticking — Greece has to pay off some $11.3 billion (euro8.5 billion) worth of debt by May 19, but cannot raise the money in the markets given sky-high borrowing costs.
That means it needs its 15 eurozone partners and the IMF to cough up the promised nearly $60 billion (euro45 billion) in bailout funds, including Germany's $11 billion (euro8.4 billion) share.
The downgrade for Spain was an ominous new blow, coming just as markets were recovering their poise after the double shock Tuesday of a Standard & Poor's downgrade for Greece — to junk status — and Portugal.
Though Spain's overall debt burden is fairly modest at around 53 percent of national income — compared to 115 percent for Greece — the country is running a big budget deficit and has done less than others to get a handle on its public finances.
The agency said it was cutting Spain's rating to AA from AA+ amid concerns about the country's growth prospects following the collapse of a construction bubble.
"We now believe that the Spanish economy's shift away from credit-fueled economic growth is likely to result in a more protracted period of sluggish activity than we previously assumed," Standard & Poor's credit analyst Marko Mrsnik said.
Spain still has an investment grade rating, though it could wind up paying more to borrow and find itself under pressure to take tougher steps to cut spending.
"Given its lack of competitiveness and the grim outlook for domestic demand the government will need to announce further fiscal measures if it is to make serious inroads into the deficit," said Ben May, European economist at Capital Economics.
"Today's announcement may increase the pressure on it to do this sooner rather than later."
Speaking during a Cabinet meeting Wednesday, Greek Prime Minister George Papandreou said that every EU member must "prevent the fire that intensified through the international crisis from spreading to the entire European and global economy."
Papandreou insisted Greece was determined to bring its economy into order.
"We will show that we do not run away. In difficult times we can perform — and we are performing — miracles," he said, adding that "our government is determined to correct a course that has been followed for decades in a very short time."
Investors appeared to anticipate Athens would eventually have to default or restructure its debt payments at some point, even if the bailout gets it past its most imminent hurdle — May 19.
Business Writer Pan Pylas reported from London. Associated Press writers Verena Schmitt-Roschmann, Melissa Eddy and David Rising in Berlin, Barry Hatton in Lisbon, Nicholas Paphitis and AP Television Producer Nathalie Rendevski Savaricas in Athens contributed to this report.
Copyright © 2010 The Associated Press. All rights reserved
On BL: North Korea says: "Total War Could Break Out at Any Time"
http://www.saigon-gpdaily.com.vn/International/2010/5/82458/
War on Korean Peninsula: High Tension Prompts Scenarios
Friday ,May 28,2010, Posted at: 10:58(GMT+7)
"A symphony of death." That's the chilling phrase that Kurt Campbell, who is now Assistant Secretary of State for East Asian and Pacific Affairs in the Obama Administration, once used to describe the likely outcome of any military encounter on the Korean peninsula between the U.S., its ally South Korea and their mutual enemy across the 38th parallel in the North.
The possibility of war breaking out once again in Korea is so unthinkable that a lot of people in various military establishments - the Pentagon, South Korea's armed forces and China's People's Liberation Army - actually spend a lot of time thinking about it. The truce between North and South has lasted for 57 years, but a peace treaty has never been signed, and now, in the wake of the North's attack on a South Korean naval vessel - and the South's formal accusation that the Cheonan was sunk by a North Korean torpedo - tensions are at their highest level since 1994, when North Korea threatened to turn Seoul into a "sea of fire."
Seoul has already made it clear that it will not seek military retaliation, and Washington and Beijing have said all the right things about trying to ensure that "cooler heads" prevail, as China's State Councilor, Dai Bingguo, said in talks with U.S. Secretary of State Hillary Clinton in Beijing on Tuesday. But all concerned parties understand that at a moment of high tension, the possibility of hot war breaking out is not negligible. (See TIME's photo-essay "The Iconography of Kim Jong Il.")
How might a shooting war start? Defense analysts and military sources in Seoul and Washington agree that an outright, all-out attack by either side is unlikely. Even a nuclear armed North, a Seoul-based defense analyst says, "would not risk an all-out war because it would be the end of the regime. Period, full stop." But there are ways in which smaller skirmishes could break out, and if they aren't contained, they could conceivably lead to disaster. Here are three that are uppermost in defense planners' minds:
The West Sea Redux
The site of the crisis - what Koreans call the West Sea (the Yellow Sea to everyone else) - remains the most obvious danger zone. Prior to the March 26 sinking of the Cheonan, there had been three separate naval clashes in the past decade along the so-called Northern Limit Line. The NLL is the de facto boundary that was drawn in 1953 by the head of U.N. forces at the end of the Korean War. Some say the North has never recognized it; others claim that it implicitly did in a 1992 non-aggression pact signed with the South. With the sinking of the Cheonan - an obvious violation of the 1953 armistice - the West Sea is obviously the most sensitive flash point. After the sinking, South Korean President Lee Myung Bak said that North Korean commercial ships - including fishing vessels that hunt for blue crab in the summer months in the South's waters - could no longer venture below the NLL. Pyongyang responded by saying that, likewise, no ships from the South would be welcome north of the NLL. That means all sea-borne traffic from both sides needs to steer clear of the de facto border, lest "they get blown out of the water," says a Western diplomat in Seoul. "That by definition, under these circumstances, is a fraught situation, given that both sides are on a hair trigger now." (See pictures of the rise of Kim Jong Il.)
Loudspeakers at the DMZ
To much of the rest of the post–Cold War world, the idea seems slightly farcical: setting up big speakers on the southern side of the demilitarized zone and broadcasting - loudly - news and anti–North Korean propaganda across the border. To some it conjures up images straight out of Monty Python and the Holy Grail ("I fart in your general direction. Your mother was a hamster and your father smelt of elderberries"). But it's no joke. Cheong Seong-chang, senior fellow at the Sejong Institute, a think tank in Seoul, believes that South Korea's plan to restart these broadcasts will likely infuriate North Korea. "Their military is already in a high state of emotion," Cheong says. And indeed, North Korea has already said publicly that it will shoot at any speakers broadcasting from the southern side of the DMZ. The defense analyst in Seoul says that if Pyongyang were to follow through, it would be "a serious act of aggression, and South Korea must counter it."
Tit for Tat Getting Out of Hand
Shots fired across the DMZ at a time of such tension is a potential disaster waiting to happen. A senior U.S. diplomat concedes that these sorts of incidents "are not at all unlikely to occur" over the next weeks and months. "The key is not letting them escalate. Our side understands acutely the dangers of things getting out of hand." Complicating the situation is that, according to a former senior military official in Seoul, the South Korean government will in all likelihood respond in kind to any future military attack from the North. "We will not do anything in response to the Cheonan [militarily], but I do not expect that that would be the case in any future incidents," says the former official. (See pictures of North Koreans at the polls.)
The question is, Does North Korea know that, and if not, how to communciate the message? There is no hot line between Seoul and Pyongyang, and North Korea announced on Wednesday that it was shutting down a phone line run by the Red Cross in Panmunjom, the so-called truce village set up by the 1953 armistice. The danger here is obvious. The only open lines of communication are two that are affiliated with the train links between the Koreas (including a route to the Kaesong Industrial Zone, which the North has threatened to close). The only way now to get a message to the North about what the South will not tolerate going forward may be via the Chinese. Conveniently, China's Prime Minister, Wen Jiabao, will head to Seoul on Friday for talks with Lee. North Korea will dominate that discussion. Let's hope they figure out how to keep Pyongyang in the loop.
source AFP
Friday ,May 28,2010, Posted at: 10:58(GMT+7)
Yes, I read the "Eruptions" blog on the Science Daily site, and it's populated by Icelandic volcanic experts.. Very interesting site, btw.
Two months ago they had been saying (after analyzing the seismic activity, nature of the volcanic flows and other indicators) that the high likelihood was that the first volcano would "wake up" big sister Katla. That was the historical precedent...and it seems like it's coming true.
YIKES
>>RUH ROH: Now KATLA is erupting - Iceland's President Warns Eruption At (bigger) Katla Volcano Is Close
May 27, 2010 06:53 PM EDT
views: 2139 | comments: 1
http://news.gather.com/viewArticle.action?articleId=281474978263187
Katla is the second largest volcano in the country of Iceland, and Iceland's president is issuing a warning saying that the eruption of Katla is close.
Icelandic president Ólafur Grímsson has warned other governments around Europe "that a significant eruption at the volcano is close."
"We [Iceland] have prepared ... it is high time for European governments and airline authorities all over Europe and the world to start planning for the eventual Katla eruption," he said.
Europe is still experiencing clouds of volcanic ash from Eyjafjallajokull that erupted in April.
Airlines all over the world have lost significant flight time and money due to flights being cancelled as a result of the ash clouds. An eruption of Katla, the second largest volcano is Iceland, could spell even more trouble. There has been speculation about Katla since the eruption of Eyjafjallajokull. Katla is the larger of the two volcanos.
The planet appears to be in a perpetual state of unrest. From today's 7.2 magnitude earthquake in Vanuatu to the pending eruption of Katla in Iceland; it seems like Mother Nature is kicking up her well worn heels.
Source: MSNBC
>>What happens if the oil slick closes U.S. Gulf ports, the biggest export points for corn, soybeans, wheat?
AgFax.Com - Your Online Ag News Source
By Bob Bailey, DTN
There has been a lot of talk in the past week or so about the oil slick in the Gulf of Mexico and how it might affect grain shipments. A leak triggered by the explosion of an offshore oil rig is pumping thousands of barrels of oil per day into the Gulf and causing the oil slick.
If this slick expands toward the shore and chokes off the main deepwater shipping lane, known as the Southwest Pass, from the Mississippi River into the Gulf, then grain shipments will likely come to a halt. The U.S. Coast Guard is monitoring the slick's progress, as are grain elevator operators and traders. So far, there are no restrictions on vessels moving through the shipping lanes into and out of Gulf ports.
When talking about the Gulf ports in relation to this oil slick, the problem, for now, is contained in the northeastern part of the Gulf that includes the states of Florida, Alabama, Mississippi and Louisiana. For the grain trade, that includes ports in Mobile, Ala.; Pascagoula, Miss.; and all the grain loaders from the lower Mississippi River to Baton Rouge, La. There are several other grain loading ports in the western Gulf that for now are not expected to be affected by this oil slick.
The U.S. Gulf ports are the country's biggest export points for corn, soybeans and wheat. These ports account for 60 percent to 65 percent of the country's total grain export shipments. With this being the case, it is easy to see why it's important to keep these Gulf ports open. There is concern about delays in loading if the oil slick blocks access to ports and arriving ships have to be decontaminated prior to entering the ports. These delays could take a few days, but it is better than closing the ports.
If it comes down to closing the ports, it could cause exporters to divert supplies to other U.S. ports for loading or force them to source grain from other countries, such as Argentina or Brazil. Most of the grain moving into the Mississippi River Gulf ports, including Mobile and Pascagoula, is sourced from the interior river system and moved in barges.
Barges are the most economical method of moving grain in the U.S. from interior locations to export ports. Losing the use of barges would raise the cost of moving grain, and that would be felt in a weaker basis. In order for exporters to divert grain to other ports, they need some lead time, as it has to be done from the origins. In this case, the fear is the Gulf ports will be open one day and closed the next, leaving barges in the pipeline with nowhere to go. Right now, the ports are all open, and all the talk about the ports closing is nothing but conjecture. But, no doubt, exporters have already made contingency plans should port disruption occur.
Changing the method of transportation is never cheap. Many barge loaders in the country are only set up to load barges and have no options to load rail or trucks. That means that once their elevators are filled, they would be forced to close. For others, there are options to load out by other methods, but in most cases, it is probably not economical. They would be able to load trucks and a few rail cars, but they would become less competitive in the marketplace against large unit train shippers, which would likely result in less grain handled.
If the Gulf ports close, the Gulf basis is going to fall, barge freight is going to rise and values at country points will drop. For the barge shipper, this would be expected, but what isn't said is the effect on the rest of the grain market. The Gulf export market is key to determining the value of grain in the U.S. The trend in the Gulf market usually influences the rest of the market. Users of grain -- processors, ethanol plants and feeders -- keep tabs on the Gulf market, and when it weakens, the domestic markets have a tendency to also weaken.
But the situation in the Gulf may not be as dire as we fear, because there is not as much activity as usual. Exports of wheat from the Mississippi River Gulf ports are slow, as that crop year is nearing an end, and the U.S. has had a difficult time being competitive in the world market. Soybean exports have also slowed with export demand shifting to South America. Corn exports are the most active with demand seemingly on the rise and the Gulf supply pipeline growing. However, it is planting season in the Midwest, and farmers are in the fields and not marketing much corn, at least for now. This is keeping the supply pipeline adequately filled but not burdensome.
If any grain has to be diverted, it most likely will be corn. Most of the corn being sold for export is moving into the Asian markets, and with ocean freight spreads at a $30-per-metric-ton, or 76-cent-per-bushel, advantage for grain shipped from the West Coast, it only makes sense to ship from those ports. The problem is elevator capacity from the Western ports is already booked. That doesn't leave much of an alternative other than Texas Gulf ports. The problem is wheat harvest is set to start in the Southern Plains late in the month, and that crop will start moving into those ports. The Texas Gulf elevators are set up to handle wheat and are not going to want to handle corn during harvest.
That brings up another issue for the Mississippi River Gulf ports: Soft red winter wheat harvest will start in the Southern states in a few weeks. SRW wheat markets are closely tied to the Gulf market, and if shipping is delayed or if SRW wheat can not be shipped out of the Gulf ports, it would weaken basis values in the country and beat the market up further than it already is.
It is going to be interesting to see what actually happens in the Gulf. There is talk that it may take several weeks or even months to get the oil spill under control. Hopefully, ships will be able to skirt the spill and access the ports, or, in the worst case, have to be cleaned before entering the ports. In any event, the hope is that this situation is all behind us by fall harvest.
Bob Bailey can be reached at bob.bailey@telventdtn.com
http://agfax.com/Content/oil-slick-delay-grain-shipping-05052010.aspx
>>Drilling Moratorium Could Have Big Effect on Oil Prices
Published: Thursday, 27 May 2010 | 7:20 PM
By: Sharon Epperson
CNBC Senior Energy Correspondent
The Obama Administration's moratorium on new offshore oil drilling could have a serious impact on Gulf of Mexico production, resulting in a chilling effect on the oil industry and strong fundamental support for crude oil prices.
President Obama's announcement that the 30-day moratorium on new offshore drilling would be extended was expected, but his stand-down on 33 new rigs in the Gulf came as a shock to some industry watchers.
"The most surprising element of the announcement was the extension of the moratorium to the 33 wells under development, for an unspecified length of time," says Eurasia Group's Robert Johnston. "This is a significant escalation that will have a much more pronounced impact on the development plans of the offshore industry, particularly for operators that were expecting to move deepwater production into the production phase over the next year or two."
Though oil prices have been following the financial markets recently, these developments could be supportive as oil production will be immediately impacted.
At its peak, the Gulf of Mexico accounts for about 1.7 million barrels/day of production capacity.
"A 180-day halt in drilling activity would imply 200,000 barrels/day of lost capacity!" or nearly 37 million barrels over the 180-day period, said Clearview Energy's Kevin Book.
"Shallow-water permitting appears likely to continue," he said. But the bulk of production occurs further offshore. Deepwater and ultra-deepwater production account for about 80 percent of oil and 46 percent of natural gas production in the Gulf of Mexico.
An active hurricane season—today NOAA forecast 8-14 hurricanes in the Atlantic this year—combined with a drilling ban could mean $70 oil will soon be a faint memory.
http://www.cnbc.com/id/37388447?__source=yahoo|headline|quote|text|&par=yahoo
Euro, thy name is kryptonite on Wall Street
By PAUL THARP
Last Updated: 12:38 AM, May 27, 2010
Posted: 12:38 AM, May 27, 2010
The euro is becoming Wall Street's nastiest ankle-biter.
After fending off alarms all week that the euro would drag down the US recovery, traders here couldn't prevent the Dow Jones industrial average from skidding below the psychologically important 10,000-point mark yesterday.
The Dow had rallied to a 135-point gain by midday but got slammed in a big sell-off triggered by the euro's late day nosedive to $1.21 on rumors that China would unload euros and eurobonds from its huge reserves.
Investors began dumping the currency, igniting new fears of global economic weakness and a stock sell-off in the US. The Dow ended at 9,974.45, down 69.30 -- its eighth-straight drop in 10 days. The Standard & Poor's 500 index slipped 0.6 percent to 1,067.95, off 6.08. The Nasdaq fell 15.07 to 2,195.88, off 0.7 percent.
European markets escaped the stock rout since they were already closed when euro-dump rumors spread from Chinese sources.
The Financial Times said officials at China's State Administration of Foreign Exchange, which manages China's central bank reserves, had been meeting for days with foreign bankers in Beijing to discuss the issue. Separately, Reuters quoted a key Chinese fund official as saying China Investment Corp. is considering lowering the percentage of assets it allocates to Europe while keeping a close eye on the continent's efforts to revive its weak economies.
Earlier in the session, US investors rode a wave of rising optimism caused by a jump in home-building and busier factories. Sales of new homes in April hit their highest level in nearly two years as homebuyers closed more deals to capture tax breaks of up to $8,000 for first-time home buyers.
Many investors also pulled back from the safety of US Treasury securities, causing prices to dip and yields on the benchmark 10-year note to jump from one-year lows. paul.tharp@nypost.com
Read more: http://www.nypost.com/p/news/business/euro_thy_name_is_kryptonite_on_wall_Zi6gfafypUFMU9lCtsd8eN#ixzz0pBm8d3GR
GM! I ws up until 4 am reading...
Let me see what Ash thinks impact of that regulation might be...
I'm only surprised that doesn't happen more often, lol, what with so many people have access to this kind of information through internal networks
...TMMMMMMMMMMMBRRRRRRRRRRRRRRRRRRRRRRRRR!!!
GO LIBOR! GO VIX! RAH!!! lol
WSJ: BP Cites Crucial 'Mistake'
'Very Large Abnormality' in the Well Wasn't Heeded Hours Before Fatal Explosion
MAY 25, 2010
By STEPHEN POWER
Oil giant BP PLC told congressional investigators that a decision to continue work on an oil well in the Gulf of Mexico after a test warned that something was wrong may have been a "fundamental mistake," according to a memo released by two lawmakers Tuesday.
The document describes a wide array of mistakes in the fateful final hours aboard the Deepwater Horizon—but the main revelation is that BP now says there was a clear warning sign of a "very large abnormality" in the well, but work proceeded anyway.
The rig exploded about two hours later.
The congressional memo outlines what the lawmakers say was a briefing for congressional staff by BP officials early Tuesday. Company representatives provided a preliminary report on their internal investigation of the April 20 disaster, which killed 11 workers and continues to spill thousands of barrels of oil daily into the Gulf of Mexico.
The new developments come as President Barack Obama, working to tame a political storm over the spill, is expected to announce Thursday that the government will impose tougher safety requirements and more rigorous inspections on off-shore drilling operations.
According to the memo, BP identified several other mistakes aboard the rig, including possible contamination of the cement meant to seal off the well from volatile natural gas and the apparent failure to monitor the well closely for signs that gas was leaking in, the congressmen wrote in their post-meeting memo. An immense column of natural gas, erupting from the oil well, fueled the fireball that destroyed the rig.
A BP spokesman declined to comment on the memo's specific statements. He said the company had identified "what we believe to be a series of underlying failures" that caused the accident.
Although the memo identifies some of the problems that led to these mistakes, it doesn't identify who made the key decisions. Most of the work aboard the rig was performed by employees of Transocean Ltd., the rig's owner and operator, and other contractors, but BP had managers aboard the rig to supervise the work at the time of the accident.
A Transocean spokesman said in response to the memo: "A well is constructed and completed the same way a house is built—at the direction of the owner and the architect. And in this case, that's BP."
The memo sheds new light on a key test performed hours before the explosion that has been a focus of congressional investigations. BP previously told investigators that a "negative pressure" test, which checks for leaks in the well, was inconclusive at best and "not satisfactory" at worst.
But in the meeting Tuesday, BP went further, saying the results were an "indicator of a very large abnormality" but that workers—unnamed in the memo—decided by 7:55 p.m. that the test was successful after all. That may have been a "fundamental mistake," BP's investigator said in the meeting, according to the memo. Reps. Henry Waxman (D., Calif.) and Bart Stupak (D., Mich.) wrote the memo, which was made public Tuesday.
After that, workers began to remove the heavy drilling fluid, called "mud" in the industry, that provides pressure to prevent any gas that seeps into the well from rising to the surface.
The memo also describes a breakdown in communication aboard the rig in the hours leading up to the explosion that made it tough for workers to monitor how much mud was coming out of the well—a key measure of whether gas is leaking in, according to the memo.
BP identified "several concerns" related to the cementing process used on the well, the memo indicated. The cement work that was supposed to hold back gas "failed," the memo said, allowing gas into the well.
Halliburton, Co., the cementing contractor on the rig, said it followed BP's instructions. "As a contractor, Halliburton made recommendations regarding the contract services provided," said Halliburton spokeswoman Cathy Mann. "However, ultimately, the responsibility for what operations to conduct lies with the well owner, and Halliburton is obligated to act at the direction of the well owner."
The congressional inquiry by Mr. Waxman, chairman of the House Energy and Commerce Committee, and Mr. Stupak, a senior member of the panel, has focused on the actions of the various companies and their workers on the day of the accident. Inquiries by other congressional panels have tended to focus more on the actions of regulators or the general policies of the companies.
Separately on Tuesday, Democrats and Republicans jousted on Capitol Hill over how much money oil companies should have to pay for oil-spill damages, but agreed that the current $75 million limit was too low.
BP, which is responsible for stopping and cleaning up the giant spill, has said it would pay "all legitimate claims" from the spill. Some Democrats fear that the company might find a way to avoid some liability.
Speaking to a Senate panel, Associate Attorney General Thomas Perrelli said the limit should be removed entirely for deepwater drilling, arguing that the government needs to "ensure that there is no arbitrary cap on corporate responsibility for a similar major oil spill."
The agency that oversees the offshore oil industry, the Minerals Management Service, again came in for criticism. On Tuesday the Interior Department's inspector general published a report saying employees at the Lake Charles, La., office of the MMS accepted sporting-event tickets, lunches and other gifts from oil and natural-gas companies. The report also said employees used government computers to view pornography.
It wasn't immediately clear how many MMS staffers were implicated in the inspector general's report, which said that "all of the conduct chronicled in this report occurred prior to 2007." In a written statement, Interior Secretary Ken Salazar said that some employees cited in the report have resigned, been terminated or been referred for prosecution. He said that any remaining staffers accused of questionable behavior in the inspector general's report would be placed on administrative leave pending the outcome of a personnel review.
On Wednesday, Secretary Salazar is to testify before the House Natural Resources Committee on his plan to overhaul the MMS.
http://online.wsj.com/article/SB10001424052748704026204575265701607603066.html?ru=yahoo&mod=yahoo_hs