Oil invades more wetlands as surf pounds Gulf coast

Thursday, July 1, 2010
By Paul Martin

* Bad weather still a problem after Alex hits land

* Storm pushes more oil farther inland along Gulf Coast

* Cleanup operations not expected to resume until Saturday

* BP shares up 2 percent, top fund acquires oil bonds (Adds BP executive saying cleanup likely to resume Saturday; Mississippi closes remainder of waters to fishing)

By Kristen Hays
Reuters.com

HOUSTON, July 1 (Reuters) – Tropical storm Alex slowed oil spill clean-up and containment work in the Gulf of Mexico and drove more petroleum into fragile Gulf wetlands and beaches on Thursday, with any permanent fix to BP Plc’s ruptured deep-sea well still several weeks away.

More than 10 weeks into the crisis, oil continued spewing into the Gulf, clean-up success remained limited and a proposal by the Obama administration to halt all deep-water drilling for the next six months remained in limbo.

Washington’s attention has also been distracted by the recent firing of U.S. Army General Stanley McChrystal as commander of NATO forces in Afghanistan and the fate of a huge financial reform bill.

This week nature added to the problems as Alex crossed the Gulf. The storm made landfall as a hurricane over northeastern Mexico well to the west of the spill site, but its high winds and rough seas thwarted plans by BP (BP.L)(BP.N) to expand the volume of oil it is siphoning from the well. [ID:nN01117871]

The bad weather also pushed more oil-polluted water onto the shoreline of the U.S. Gulf Coast and forced the halt of skimming, spraying of dispersant chemicals and controlled burns of oil on the Gulf surface for a third straight day.

“It has brought in oil, unfortunately, from the panhandle of Florida to Louisiana, right now, at a higher rate than it has been over the last few days,” Robert Dudley, chief of BP’s Gulf Coast restoration efforts, said of the storm’s effect in a live PBS online interview.

He said the storm had spawned waves of 8 to 12 feet (2.4 to 3.7 meters) in some parts of the Gulf, and that oil cleanup and containment efforts were unlikely to resume until Saturday.

Coast Guard officials also said they doubted conditions would be calm enough to restart full-scale operations Friday.

“Operations will likely be curtailed,” Coast Guard Commander Charles Diorio said in a conference call. “We expect the seas to start to calm down as we get into Friday and further into the weekend,” Diorio said.

The worst oil spill in U.S. history, entering its 73rd day on Thursday, has unleashed an unprecedented environmental and economic disaster along the Gulf Coast, idling much of the region’s fishing and tourism industries, soiling its beaches and marshlands and killing wildlife.

Millions of barrels of crude oil have gushed nonstop from the floor of the Gulf, about 50 miles off Louisiana, since an April 20 explosion that demolished the Deepwater Horizon drilling rig and killed 11 crewmen.

BP says the target date for two relief wells to intercept and plug the blown-out well remains early to mid-August.

The British energy giant drew harsh criticism earlier in the crisis, but some of the political heat has cooled since President Barack Obama pressured the company to set up a $20 billion fund for damages and lawmakers hammered BP executives at congressional hearings.

REVERBERATIONS IN THE CAPITAL

In Washington on Thursday, the U.S. House of Representatives passed a bill to give families of those killed in the oil rig explosion greater latitude to sue for damages. And the House Transportation Committee met to negotiate proposed legislation to hold vessels and facilities more accountable for oil spills.

The White House, meanwhile, said it expected to release details of a revised offshore oil drilling moratorium in the next few days.

A federal court order last week blocked the government’s initial ban on drilling exploratory and development wells in waters more than 500 feet (152 meters) deep, and a revised plan could still face legal challenges.

In an interview with Reuters, International Energy Agency head Nobuo Tanaka said a moratorium “makes sense” while a presidential commission investigates the spill’s cause. But he said the world still relied on oil and gas, and that rigs idled in the Gulf should leave to search for resources elsewhere.

BP’s market capitalization has shrunk by about $100 billion and its shares have lost more than half their value since the spill began. But shares have shown signs of stabilizing. They closed nearly 2 percent higher in New York on Thursday, after ending the day up almost 3 percent in London.

Pacific Investment Management Co. (PIMCO), which manages the world’s biggest bond fund, said on Thursday it is buying more debt of some of the companies involved in the oil spill disaster, though it did not cite specific corporations.

Separately, Mark Kiesel, head of the PIMCO corporate bond portfolio management group, wrote in an article that BP had hefty amounts of cash on hand, strong operating cash flow and could sell assets to raise money if needed.

ROUGH SEAS

In bays and estuaries, work crews were replacing containment boom dislodged or damaged by the storm, but the Coast Guard had no estimate on the extent of damage.

The storm surge from Alex also pushed oil more toward the northwest, in the direction of Mississippi and Louisiana, after a week in which the slick had crept mainly toward the northeast, washing up on Florida Panhandle beaches.

Mississippi officials on Thursday closed down the last open portion of that state’s territorial marine waters to all commercial and recreational fishing, citing an increase in the amount of oil driven ashore by the storm.

The weather delayed BP plans to boost containment capacity at the undersea well, but relief well drilling continued.

A government spokeswoman said on Thursday a massive ship converted into a “super skimmer” had arrived in the Gulf to assist with the cleanup. The 1,100-foot (335 meter) vessel, dubbed the “A Whale,” was provided by its owner, TMT Shipping of Taiwan, officials said. [ID:nN01150876]

Government officials estimate 35,000 barrels (1.47 million gallons/5.56 million liters) to 60,000 barrels (2.5 million gallons/9.5 million liters) of oil pour from the ruptured wellhead each day.

BP’s containment systems can handle up to 28,000 barrels daily and its planned addition could raise that to 53,000.

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