Stakes rise for Obama and the gulf
Kicking off a week of high-stakes maneuvering around an oil slick threatening to bog down his first term, President Obama returned to the troubled Gulf Coast on Monday, warning of hard times to come -- but also taking time to tout the region’s continued viability for tourists.
“There’s still a lot of opportunity for visitors to come down here; a lot of beaches that are not yet affected or will not be affected,” Obama told reporters after a meeting with Republican Govs. Haley Barbour of Mississippi and Bobby Jindal of Louisiana in Gulfport, Miss. “And we just want to make sure that people who have travel plans down to the gulf area remain mindful of that, because if people want to know what they can do to help folks down here, one of the best ways to help is to come down here.”
Obama’s effort to boost tourism while acknowledging the tragedy is not the only delicate calibration he faces this week. He plans to address the nation from the Oval Office for the first time in his presidency Tuesday, with a speech that is expected to cover the spill and broader energy policy. He will also meet with the leaders of oil company BP on Wednesday.
Many Americans may want Obama to be harder on BP, but many others are alert to any hint of anti-business sentiment amid lingering high unemployment. Some Americans will simply want to hear his plans for plugging the runaway well, and others expect Obama to seize the opportunity to boldly reimagine the nation’s energy future.
And then there is the question of BP, which the administration is expected to pressure to repair lives, businesses and wetlands -- but not so hard as to put the company out of business, leaving behind a whopping cleanup and compensation bill.
“You don’t want this horse to collapse in the middle of the race,” said Fadel Gheit, an energy analyst at Oppenheimer & Co. “You want a healthy BP, not a crippled one.”
The president’s visit, the fourth since the April 20 rig explosion, comes amid mounting calls, even among allies, that Obama appear more in command. It also comes amid growing pressure on BP, from the administration and Congress, to do more to fix the well and compensate the victims of the catastrophe.
The administration has taken a more aggressive stance toward the company of late, announcing Sunday that it hopes to force BP to create an independently administered escrow account for compensation claims.
In remarks on the coast Monday, however, Obama refrained from chastising BP. Instead, he said he had already had “constructive” talks with the company and hoped the two sides could arrive at some kind of structured plan at their White House meeting.
A significantly more fiery reception may await BP Chief Executive Tony Hayward on Thursday, when he is set to appear before a panel of the House Energy and Commerce Committee, which has been investigating the company’s actions before the well blowout that killed 11 crew members and began the worst oil spill in U.S. history.
In a letter to Hayward on Monday, House Energy Committee Chairman Henry A. Waxman (D-Beverly Hills) and Rep. Bart Stupak (D-Mich.) alleged that BP appeared to have made a number of short-sighted, penny-pinching decisions because the well was significantly behind schedule -- decisions that could have increased the chances of catastrophe. A
The blown deadline for the drilling project “appears to have created pressure to take shortcuts to speed finishing the well,” they wrote.
“Time after time, it appears that BP made decisions that increased the risk of a blowout to save the company time or expense,” the letter said.
In several instances, the letter said, BP’s decisions appeared to violate industry guidelines and were made despite warnings from the company’s personnel and its contractors.
Wall Street has taken note of the pressure and uncertainty facing the London-based company this week. On Monday, BP shares fell $3.30, or 9.7%, to $30.67.
Gheit noted that BP had already lost about half its market value, or $90 billion in market capitalization, since the blowout.
BP directors met Monday in London to explore their options, including deferring the company’s $10.5-billion dividend to shareholders. As of late Monday, no decision had been reached and BP was unwilling to discuss the matter.
Many on Wall Street were beginning to come around to the idea of canceling or postponing the dividend.
“If they were to set aside $20 billion in an escrow account, it wouldn’t break BP. Suspending the dividend would generate about $1 billion a month for the company. BP is among the three largest oil companies in the world. They generate $8 billion to $9 billion every quarter, and they only spend $5 billion to $6 billion a quarter,” Gheit said. “The difference is what they would have left over to spend.”
So far, at least one administration attempt to ratchet up the pressure on BP appears to have paid off: In a letter released Monday, BP acceded to a Coast Guard demand to move faster in its oil containment strategy.
In a letter to Coast Guard Rear Adm. James A. Watson, BP Chief Operating Officer Doug Suttles said the company had revised its oil capture plans to collect more than 50,000 barrels a day by the end of June -- two weeks earlier than planned.
The company has been collecting about 16,000 barrels a day from the broken well using a containment cap that funnels the oil to a processing ship. But federal experts have estimated that the well has been spewing at least 40,000 barrels a day.
BP said the maximum capacity of its current system was 18,000 barrels a day. An additional plan set to go live Tuesday would siphon as much as 10,000 barrels a day more, using equipment from BP’s failed “top kill” plan, which sought to stem the flow with drilling mud.
For days, the company had planned to scrap those two systems, eventually replacing them with a new one with floating risers. The revised plan, however, calls for all of these systems to work concurrently, said BP spokesman David Nicholas.
If all goes well, that would enable the company to capture 40,000 to 53,000 barrels of oil a day by the end of June, creating “sufficient capacity to cover the upper end” of the federal government’s leak-rate estimate, according to the plan submitted to the Coast Guard.
The company said that in mid-July or later, it will have the capacity to take up 60,000 to 80,000 barrels a day.
Thursday’s congressional hearings promise to shift the focus away from the troubled and still-unfolding attempts to contain the oil, and onto what appear to be the equally tragic days before the blowout.
The letter from Waxman and Stupak alleges that “crucial” choices by BP proved tragic.
The letter alleges that the company decided to use a “risky” well-casing plan in an attempt to save up to $10 million; declined to conduct a time-consuming test of the well’s cement job; failed to use a device called a “lockdown sleeve” that “would have prevented the seal at the wellhead from being blown out”; and rejected the advice of subcontractor Halliburton to use extra devices called “centralizers” to make sure the casing of the well was properly aligned.
Halliburton, the letter states, warned of a “severe gas flow problem” if the extra sensors weren’t used, but, the letter said, one BP official worried that it would take too long to install them.
On April 16, the letter states, another BP official recognized the risks, but commented, “Who cares, it’s done, end of story, will probably be fine.”
The administration’s response to the leak has generated tension at times with the gulf’s Republican governors. In an interview Sunday on CBS’ “Face the Nation,” Barbour of Mississippi urged the White House to lift the six-month moratorium on deep-water drilling it imposed after the spill.
On Monday, Obama lunched with Barbour and others, feasting on crab cakes, fried shrimp, shrimp salad sandwiches and sweet tea. Later, in 95-degree heat, Obama and Barbour walked down the pier in Gulfport to get snow cones. Both men ordered lemon-lime.
Setting aside larger differences for the moment, Barbour was heard telling the president, “See, that’s something else we agree on.”
Times staff writer Ronald D. White in Los Angeles contributed to this report.
Nicholas of the Washington bureau reported from Theodore, Ala.; and Times staff writers Simon and Fausset reported from Washington and Atlanta, respectively.