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CSM: International sensitivities: What if BP oil spill heads for Cuba?

The BP oil spill has begun to have international repercussions. Cuba is the country most likely to be the first non-US victim if the oil slick advances beyond Florida into the Caribbean.

By Howard LaFranchi, Staff writer / June 11, 2010
Washington

When Secretary of State Hillary Rodham Clinton met with officials from numerous Caribbean countries on a stop in Barbados earlier this week, she was confronted with plenty of hand-wringing over the Gulf oil leak.

The questions and concerns – based on conjectures that the slick from the gushing Deepwater Horizon well could eventually foul Caribbean waters and coastlines – signaled another front in the gradual internationalization of the unfolding disaster.

Until now the oil leak has been largely viewed as an American problem with environmental and economic impacts on US coastlines and being addressed by US officials. But that is now changing.

Already this week the normally smooth waters of US-British relations were roiled by growing signs of strain over objections to US treatment of the officers and stockholders of BP, a big-oil company listed on the London stock exchange.

Some British officials and the London press bellowed the view that US officials – President Obama topping the list – were increasingly mixing anti-British vitriol into their growing frustration with the formerly “British Petroleum” named, formerly British-owned BP.

On Friday, the European Union announced it was responding to a request by US authorities for various types of booms to help contain the spilled oil.

Other countries pitching in

Sweden, Germany, Norway, the UK, and the European Maritime Safety Agency all responded with offers and are working “flat out” to deliver the equipment as soon as possible, the EU Delegation to the US reported Friday. The Netherlands responded to an earlier request by providing three sweeping arms which are already operating in the Gulf.

But the oil leak is also having unanticipated international repercussions, with the US already quietly discussing the Gulf disaster and its potential extended impact with Cuba, the country most likely to be the first non-US victim if the oil slick advances beyond Florida into the Caribbean.

The US, which has modestly expanded contacts with the Cuban government under the Obama administration, has had some low-level discussions with the Cubans about the Gulf oil leak and is keeping channels of communication open in light of the oil’s potential trajectory, State Department officials say.

But some oil experts say the US needs to look beyond the current catastrophe to consider a potential future oil disaster. With Cuba set to commence oil exploration in its northern territorial waters sometime in the next six to nine months, they see a stark scenario under which the US embargo on Cuba would prevent American oilfield and petroleum-technology companies from taking part in any disaster response.

“The oil spill has really moved up-front the whole US-Cuba energy issue,” says Jorge Piñón, a visiting fellow at Florida International University’s Cuban Research Center.

The Gulf leak has reanimated discussion of the economic and political impact oil production will eventually have on Cuba, he says. But he adds that even more important are the worries the situation has raised about a similar disaster in Cuban waters – given longstanding US-Cuban hostilities.

“If an accident like Deepwater Horizon occurred in Mexican or Bahamian or any other territorial waters, all they’d have to do is pick up the phone and contact petroleum-equipment suppliers in Houston, and in a matter of hours they’d be on site,” he says. “That’s not the case with Cuba given the embargo, so days would go by as the bureaucratic paperwork was shifted from agency to department – and in the meantime the oil would be moving towards Key West and South Beach.”

Exempt Cuba embargo on oil equipment?

Mr. Piñón, a former Conoco and BP oil executive, says the Obama administration should do for petroleum equipment and services trade with Cuba what the Clinton administration did for agricultural trade – exempt it from the embargo.

An executive order paving the way for US companies to intervene in a Cuban oil disaster was one of the recommendations of a Cuba Task Force organized by the Brookings Institution in Washington. Piñón serves on the task force and co-authored a recent paper analyzing Cuban oil issues in light of the Gulf disaster.

Before the Gulf spill, much of the focus of analysis of Cuba’s move into oil exploration and production was on the impact it will have on the current regime, Cuba’s relations with current oil-supplier Venezuela, and an eventual transition government in Havana.

“Some of the folks in Washington remain focused on making sure we do nothing to strengthen the current regime,” Piñón says. “I’m telling them that if Repsol [the Spanish firm with the contract for the first round of exploration] does find oil it will take 3-7 years before Cuba is a major producer. But a disaster could happen in the meantime, and we should want to be ready.”

IN PICTURES: The Gulf oil spill's impact on nature


http://www.csmonitor.com/USA/Foreign-Policy/2010/0611/International-sensitivities-What-if-BP-oil-spill-heads-for-Cuba

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BL: BP May Lose U.S. Oil Leases, Contracts as Gulf Spill Punishment

By Jim Efstathiou Jr. and Jeff Plungis

June 14 (Bloomberg) -- BP Plc may lose control of its U.S. oil and natural gas wells and be barred from doing business with the federal government as punishment for the worst oil spill in U.S. history, industry and regulatory analysts said.

President Barack Obama and lawmakers are debating penalties that would cripple the company’s ability to do business in the U.S. as public outrage intensifies. In addition to BP’s culpability in the Gulf of Mexico spill, a 2005 explosion at BP’s Texas City refinery that killed 15 workers and a 2006 pipeline leak that dumped 200,000 gallons of crude at Prudhoe Bay, Alaska, will figure in the debate, said Michael Wara, associate professor of environmental law at Stanford University in Palo Alto, California.

“The government weighs whether there is a pattern and practice,” Wara said. “They’ll consider whether BP runs these incredibly complicated systems, where accidents can and sometimes do happen, or whether the company has a culture that disfavors safety and environmental compliance.”

The U.S. may revoke BP’s status as operator of producing wells in the Gulf of Mexico, such as Thunder Horse, or of leases at Prudhoe Bay, said David Pursell, a managing director at Tudor Pickering Holt & Co. LLC, a Houston investment bank. Separately, Congress is considering measures to bar BP from contracts with the Department of Defense and Environmental Protection Agency.

Escrow Demand

Lawmakers including House Speaker Nancy Pelosi are demanding that BP defer the payment of any dividends until fishermen and others are compensated for losses from the spill. BP should set up an escrow account to cover claims, Obama aide David Axelrod said on NBC’s “Meet the Press” yesterday. The spill’s cost may reach $40 billion, Standard Chartered Bank estimated last week.

BP’s board is meeting today. It’s unlikely to make any announcements until Chairman Carl-Henric Svanberg meets with Obama on June 16 in response to a request from the administration, according to two people familiar with the matter. Chief Executive Officer Tony Hayward is scheduled to appear before the House Energy and Commerce oversight panel the following day.

The administration has the power to force BP out as operator of existing leases on federal lands and offshore tracts. The operator, typically the partner with a majority interest, is designated before drilling begins. The Interior Department tracks each operator’s performance and may “disapprove or revoke your designation as operator” based on accidents, pollution events or other cases of noncompliance, according to federal regulations.

‘Good Chance’

“We think there’s a good chance the government not only doesn’t allow BP to operate going forward, but could rescind operating control,” Pursell, an oil specialist, said in an interview. “It’s a way to keep BP alive and a way for the government to say we’ve really done something to penalize BP.”

Such a move would force BP to sell part or all of its interest in some of its most profitable oil and gas fields, said Michael McKenna, president of MWR Strategies, a consulting firm in Washington. Other partners in a lease are unlikely to take on the risk of being the operator without also taking the lion’s share of profits, McKenna said. Even if BP breaks even on the sale of its stake, it would lose the profits from future oil production.

“It’s exceedingly possible and exceedingly unwise,” McKenna said. “You engage in the economic deterioration of a company that’s already under stress.”

Oil Pollution Act

“The BP Deepwater Horizon oil spill raises several fundamental questions about safety and about industry’s ability to respond to spills,” Kendra Barkoff, a spokeswoman for the Interior Department, said in an e-mail. She declined to say if the administration may revoke BP’s operator status.

BP also faces a fine of as much as $4,300 for each barrel of oil leaked under the 1990 Oil Pollution Act, said David Pettit, a senior attorney for the Natural Resources Defense Council in Los Angeles. That may mean a bill of as much as $8.6 billion based on more than 50 days of oil spilling at a rate of up to 40,000 barrels per day.

David Nicholas, a BP spokesman, declined to comment on possible U.S. sanctions. “It’s not the sort of thing that we would react to,” Nicholas said in an interview. “Clearly throughout the response to this event we have been working extremely closely with the administration and we continue to do so.”

Shares Plunge

BP shares have fallen 44 percent since the explosion, wiping out about $73 billion in market value. Investors buying the so-called put options are wagering that the shares will extend their drop from $33.97 and slash $140 billion from BP’s market value, according to U.S. stock-options trading.

In addition to the Deepwater Horizon rig that exploded and sank in April, BP operates the Gulf platforms Thunder Horse, the second-largest producing well in the U.S. at about 300,000 barrels per day, and Atlantis, which produces 200,000 barrels of oil a day. BP also operates the Prudhoe Bay oil field on Alaska’s North Slope.

Representative Luis Gutierrez, an Illinois Democrat, will write Interior Secretary Ken Salazar urging him to ban BP from future lease sales because of the company’s “abhorrent environmental and safety record,” said Gutierrez spokesman Douglas Rivlin.

“Oil leases are a license to print money, said Rivlin. “Why should we be giving them to these guys?”

EPA Sanctions

The EPA can disqualify companies convicted of Clean Water Act or Clean Air Act violations from receiving federal contracts or financial assistance, according to an agency e-mail responding to questions. Those penalties apply to individual facilities, not an entire company, it said.

BP’s facility in Prudhoe Bay and its Texas City refinery are already under EPA sanctions. Negotiations to lift them were suspended after the Deepwater Horizon explosion and leak, the agency said.

The EPA declined to discuss details of the current investigation into the Deepwater Horizon spill.

“We are taking all the steps necessary to enforce our laws and to ensure that the responsible parties pay for the cost of cleaning up the spill,” the agency said.

Last month, Gutierrez successfully pushed through an amendment to a broader Defense Department bill requiring the secretary of defense to review whether BP is a “responsible” contractor.

Debarment Option

If BP doesn’t meet that standard, which includes having a “satisfactory record of integrity and business ethics,” the legislation would require Secretary Robert Gates to bar the oil giant from defense contracts, according to Gutierrez’s office.

BP has six contracts with the Pentagon worth a combined $2.1 billion, mostly for fuel.

In a letter last week, the consumer group Public Citizen called on Obama and Gates to “debar” BP from all government contracts and terminate the six Pentagon agreements.

“It’s a pretty disturbing pattern in the company,” Tyson Slocum, director of Public Citizen’s energy program, said in an interview. “There has to be a point when a financial slap on the wrist is no longer adequate.”

Debarment is “definitely not an extreme option,” said Robert Meunier, former EPA debarment officer who is now head of Debarment Solutions in Arlington, Virginia. “It’s been used against 70,000 individuals and businesses. It’s fairly routine,” even if the public never hears about it, he said.

“While debarment makes for good politics, it makes terrible public policy,” Meunier said. “But you’d have to be a fool not to consider it when the president is saying he’s looking for somebody’s ass to kick.”

To contact the reporters on this story: Jim Efstathiou Jr. in Washington at [e-mail]; Jeff Plungis in Washington at [e-mail].

Last Updated: June 13, 2010 19:00 EDT

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GOM: Layoffs to begin? Obama pleads for $50 billion in state, local aid

By Lori Montgomery
Washington Post Staff Writer
Sunday, June 13, 2010

President Obama urged reluctant lawmakers Saturday to quickly approve nearly $50 billion in emergency aid to state and local governments, saying the money is needed to avoid "massive layoffs of teachers, police and firefighters" and to support the still-fragile economic recovery.

In a letter to congressional leaders, Obama defended last year's huge economic stimulus package, saying it helped break the economy's free fall, but argued that more spending is urgent and unavoidable. "We must take these emergency measures," he wrote in an appeal aimed primarily at members of his own party.

The letter comes as rising concern about the national debt is undermining congressional support for additional spending to bolster the economy. Many economists say more spending could help bring down persistently high unemployment, but with Republicans making an issue of the record deficits run up during the recession, many Democratic lawmakers are eager to turn off the stimulus tap.

"I think there is spending fatigue," House Majority Leader Steny H. Hoyer (D-Md.) said recently. "It's tough in both houses to get votes."

Democrats, particularly in the House, have voted for politically costly initiatives at Obama's insistence, most notably health-care and climate change legislation. But faced with an electorate widely viewed as angry and hostile to incumbents, many are increasingly reluctant to take politically unpopular positions.

The House last month stripped Obama's request for $24 billion in state aid from a bill that would extend emergency benefits for jobless workers. Senate Majority Leader Harry M. Reid (D-Nev.) hopes to restore that funding but with debate in that chamber set to resume this week, he acknowledges that he has yet to assemble the votes for final passage. Obama's request for $23 billion to avert the layoffs of as many as 300,000 public school teachers has not won support in either chamber.

Mixed signals

Senior Democratic congressional aides said those initiatives have not gained traction in part because the White House has not made additional spending on the economy a clear priority.

(Photos: A look at key policy proposals during Obama's first year in office.)

In recent weeks, for instance, the White House has appeared more intent on cutting spending -- threatening to veto a defense bill over a jet engine project that the Pentagon views as unnecessary and urging every agency to come up with a list of low-priority programs for elimination. Obama has also proposed a three-year freeze in discretionary spending unrelated to national security, an idea endorsed by leaders of both parties at a meeting at the White House last week, according to Obama's letter.

With the letter, however, Obama makes a direct and unequivocal case for additional "targeted investments," including state aid and several less-expensive initiatives aimed at assisting small businesses. He specifically calls for passage of the measure that is before the Senate, which would extend unemployment benefits and offer states additional aid, increasing deficits by nearly $80 billion over the next decade.

Obama asks lawmakers to be patient on the deficit, noting that a special commission is at work on a comprehensive deficit-reduction plan.

"It is essential that we continue to explore additional measures to spur job creation and build momentum toward recovery, even as we establish a path to long-term fiscal discipline," Obama wrote. "At this critical moment, we cannot afford to slide backwards just as our recovery is taking hold."

In an interview, White House Chief of Staff Rahm Emanuel said the letter is intended to settle the growing debate over the opposing priorities of job creation and deficit reduction and "where you put your thumb on the scale."

"While some people say you have to spend and some people say you have to cut, the president wants to talk about both cuts and investing," Emanuel said.

GOP alternative

Don Stewart, a spokesman for Senate Minority Leader Mitch McConnell (R-Ky.), called the letter full of "contradictions."

"He's calling on Congress to pass a [jobless] bill that will add about $80 billion to the deficit, but then calls for fiscal discipline; he says these measures need to be targeted and temporary, but then calls for extending programs passed in the stimulus more than a year ago," Stewart said in an e-mail.

Republicans have offered an alternative package that proposes to cover the cost of additional jobless benefits -- but not aid to state governments -- by cutting federal spending elsewhere. In contrast to the Democratic bill, the GOP measure would reduce deficits by nearly $55 billion over the next decade, according to the nonpartisan Congressional Budget Office.

The politics of the Democratic bill before the Senate are further complicated because it has become a grab bag of must-pass provisions. In addition to state aid and more money for jobless benefits, it includes a plan to extend $32 billion in expired tax breaks for individuals and businesses and a separate provision, known as the "doc fix," that would postpone until 2012 a scheduled pay cut for doctors who see Medicare patients.

When it was first unveiled last month, the total cost of the package approached $200 billion, with only about $50 billion paid for through higher taxes on multinational corporations, hedge fund managers and certain small businesses. Conservative Democrats in the House balked, forcing House leaders to scale back the doc fix and strip out the state aid, as well as $6 billion in health insurance subsidies for jobless workers. In the letter, Obama asks Congress to reconsider that decision. The House narrowly approved the trimmed-down bill.

Now the Senate is struggling to assemble a 60-vote coalition for the measure. Reid moved last week to restore the state aid, but the CBO said the resulting measure would add nearly $80 billion to budget deficits over the next decade. Moderates objected, saying they could not support such a big increase in borrowing at a time when the total national debt has topped $13 trillion, nearly 90 percent of the gross domestic product.

On Saturday, as Obama called for urgent action, senior Senate aides said the scramble for votes would delay final action on the bill for at least another week.


http://www.washingtonpost.com/wp-dyn/content/article/2010/06/12/AR2010061204152.html