Friday, June 11, 2010

New Estimates Double Rate of Oil That Flowed Into Gulf/First the Spill, Then the Lawsuits

New Estimates Double Rate of Oil That Flowed Into Gulf
Copyright by The New York Times
Published: June 10, 2010

A government panel on Thursday essentially doubled its estimate of how much oil has been spewing from the out-of-control BP well, with the new calculation suggesting that an amount equivalent to the Exxon Valdez disaster could be flowing into the Gulf of Mexico every 8 to 10 days.

The new estimate is 25,000 to 30,000 barrels of oil a day. That range, still preliminary, is far above the previous estimate of 12,000 to 19,000 barrels a day.

These new calculations came as the public wrangling between BP and the White House was reaching new heights, with President Obama asking for a meeting with BP executives next week and his Congressional allies intensifying their pressure on the oil giant to withhold dividend payments to shareholders until it makes clear it can and will pay all its obligations from the spill.

The higher estimates will affect not only assessments of how much environmental damage the spill has done but also how much BP might eventually pay to clean up the mess — and it will most likely increase suspicion among skeptics about how honest and forthcoming the oil company has been throughout the catastrophe.

The new estimate is based on information that was gathered before BP cut a pipe called a riser on the ocean floor last week to install a new capture device, an operation that some scientists have said may have sharply increased the rate of flow. The government panel, called the Flow Rate Technical Group, is preparing yet another estimate that will cover the period after the riser was cut.

The new estimate appears to be a far better match than earlier ones for the reality that Americans can see every day on their televisions. Even though the new capture device is funneling 15,000 barrels of oil a day to a ship at the surface, a robust flow of oil is still gushing from the well a mile beneath the waves.

The question of how much oil is pouring into the gulf has been a nagging one for weeks, especially since early estimates from BP and the government proved woefully low. And the new estimates come as the company, after weeks of failed efforts, is enjoying its first substantial success at preventing a significant volume of oil from entering the gulf.

The new numbers are certain to ratchet up the already intense political pressure on BP.

For days Mr. Obama and his advisers have fended off questions about why he has not spoken with the chief executive of BP, Tony Hayward. The president’s commander for the spill response, Adm. Thad W. Allen of the Coast Guard, wrote on Thursday to the chairman of the BP board, Carl-Henric Svanberg, requesting that he and “any appropriate officials from BP” meet with administration officials next Wednesday. Mr. Obama will participate in part of the meeting, he wrote.

Administration officials suggested that they had no immediate plans to directly block BP from paying the dividend, even as the White House and its allies made clear that they would pressure the company to ensure that it made paying spill-related claims its top financial priority. Nancy Pelosi, the House speaker, told reporters that BP should withhold dividends to shareholders until it paid small-business owners along the gulf for their loss claims. Representative Edward J. Markey, who is chairman of one committee investigating the spill, suggested that the government would take action to block the payments if necessary.

“This company, I think, will stay solvent,” said Mr. Markey, a Democrat from Massachusetts. “And we’re going to make sure that the shareholders wait until the victims are paid first.”

Andrew Gowers, a BP spokesman, said “there is no change in the position” of retaining the dividend. “We intend to meet all our obligations to all our stakeholders,” he said. “We are a very financially strong company.”

In coming weeks, BP hopes to start capturing the vast bulk of the oil emerging from the well. The new high estimate of 30,000 barrels, however, would exceed BP’s current processing capacity, which is expected to reach 25,000 barrels a day by next week. The company plans to move an additional ship into position by early July to improve its ability to manage the flow.

Mr. Gowers said that the flow-rate group was doing “appropriate” work and that the new estimate would not affect the company’s planned containment efforts.

Mr. Gowers noted that BP had supplied the information that allowed the technical group to make its calculation. “It’s their job to produce the estimate, and we have nothing to add,” he said.

As investors have fled BP stock over uncertainties about the company’s future and its ability to pay what it will end up owing, BP has lost nearly half its market capitalization since April, and its bonds are now trading at junk levels.

Credit Suisse estimates the cleanup costs could end up at $15 billion to $23 billion, plus an additional $14 billion of claims. But analysts make much of BP’s financial flexibility: it had net profit of $17 billion last year alone.

Mr. Gowers said the company did not have an estimate of what its potential liability costs would be. But he said that as of Thursday morning, the company had already spent $1.43 billion, including claims payments, the costs of trying to plug and cap the leak, and payments of block grants to gulf states.

On the new estimates of the flow rate, Marcia McNutt, director of the United States Geological Survey and chairwoman of the technical panel, said the new figures were based on a more detailed analysis of information like video of the gushing well. The new range was also based on the first direct measurement of the flow rate, using sonar equipment lowered to the ocean floor.

Two scientists from the Woods Hole Oceanographic Institution, Richard Camilli and Andy Bowen, made that measurement on May 31, Mr. Bowen said.

As with the government’s previous estimate, Dr. McNutt said subgroups of the panel applied various analytical techniques to come up with estimates. The best overlap among the techniques was the range of 25,000 to 30,000 barrels a day, she said, and that became the new official estimate.

Dr. McNutt added, however, that the range of estimates the technical panel considered plausible was actually wider, more like 20,000 to 40,000 barrels a day.

A barrel is 42 gallons, so 30,000 barrels would equate to nearly 1.3 million gallons a day. The Exxon Valdez disaster in 1989 is estimated to have spilled 10.8 million gallons of oil into Prince William Sound in Alaska.

Ira Leifer, a researcher at the University of California, Santa Barbara, and a member of the flow-rate group, said the new figures confirmed a suspicion he had developed, based on looking at satellite data, that the rate of flow for the well was increasing even before BP cut the riser pipe.

“The situation is growing worse,” Dr. Leifer said.

Jackie Calmes contributed reporting from Washington, and Graham Bowley and Liz Robbins from New York.
A version of this article appeared in print on June 11, 2010

First the Spill, Then the Lawsuits
Copyright by The New York Times
Published: June 10, 2010

“Oil spill damages? You May Be Entitled to Compensation,” reads a billboard in LaFourche Parish, Louisiana.

It is just one of the tactics lawyers are using to sign up clients to sue BP, along with running advertisements on Gulf Coast television stations, buying Internet addresses like, and holding informational seminars — with free food and drinks — for those who feel the oil company owes them something.

Lawyers across the nation have filed nearly 200 lawsuits so far related to the April 20 oil disaster, including death and injury claims for those aboard the rig, claims of damage and economic loss for people whose livelihoods are threatened by the slick, and shareholder suits over BP’s plunging stock. Cases have even been filed on behalf of the oil-coated fish and birds. Lawyers also plan to file a civil racketeering action alleging a corporate conspiracy with the Bush administration.

At a seminar on Tuesday evening at the Emerald Grande hotel in Destin, Fla., 150 residents and business owners heard a presentation by two lawyers, Robert J. McKee of Fort Lauderdale, Fla., and Stuart H. Smith of New Orleans, about dealing with the BP claims process.

Mr. Smith, who had flown his private plane from his home in New Orleans for the event, called the continuing gusher under the gulf “a disaster on the installment plan.”

They introduced a team of experts they have assembled to fight BP in court, including accountants, an oceanographer, chemist and toxicologist, and explained to the audience how to gather records to improve their chances.

Mr. McKee’s advice to the group — and it was just advice, because he had to stay on the proper side of the ethical line that bars solicitation of clients — was blunt. Should they decide to sue, he said, “You find someone competent who can kick their butt and take what is owed to you for full, fair and honest compensation.”

Because thousands of plaintiffs’ lawyers from across the country are trying to join in the kicking, consolidation of the federal suits is almost certain. The decision will be made, oddly enough, some 2,000 miles away from the Gulf Coast, by a panel of judges meeting on July 29 in Boise, Idaho, to manage what is known as multidistrict litigation.

The panels will almost certainly give the oil cases to a single judge or a small number of judges, who will then sort them into groups and combine tasks, like the discovery process to ferret out underlying facts for all the cases.

Finding a judge without a potential conflict of interest in the sprawling case could be a challenge: half of the active judges in the federal judicial district in which New Orleans sits have already recused themselves.

The judges in Idaho may send the cases to New Orleans (where more of the plaintiffs and the damage can be found), to Houston (as the defendants wish, perhaps because of the city’s ties to the oil industry) or to more neutral ground. Wherever it ends up, Louisiana’s feisty lawyers are likely to play a big role in the litigation.

Seasoned Texas litigators like Brent W. Coon, who fought BP over the 2005 plant explosion in Texas City, are likely to be deeply involved, as will experts in mass tort litigation from around the country who have taken part in enormously complex suits involving tobacco, pharmaceuticals, accelerating Toyotas and defective Chinese drywall.

The plaintiffs’ lawyers are eager to fight the oil giant, just as soon as they get past fighting one another.

They are still involved in the scrum at the beginning of most multidistrict litigation, trying to get the largest number of clients and earliest filings in hopes of winning influence in steering the consolidated litigation.

Mass tort litigators and the specialists do not think highly of each other. Mr. Smith, an environmental litigator in New Orleans who has sued oil companies for much of his career, scoffs at the generalist approach to mass tort lawyering. “If you need brain surgery, you don’t go to an orthopedic surgeon,” he said.

The mass tort litigators do not pretend to be experts in every field of law required in every case. Asked whether he had experience in the arcane maritime law involved in the spill, Stephen A. Sheller, a mass tort specialist from Philadelphia, said, “I go on a cruise boat occasionally.”

But the mass tort lawyers argue that their experience in prior multidistrict cases is essential to building the ad hoc law firm that will take on the large defense firms that the corporations retain.

“That’s the David-and-Goliath dynamic,” said Richard J. Arsenault, a lawyer in Alexandria, La., who represents plaintiffs in many BP cases.

The question that is likely to dominate much of the litigation, wherever it lands, is the extent of liability for BP and the companies it worked with.

The most straightforward cases are those involving direct impact — compensation to the families of the dead and wounded on the rig, and the effect of the spill on people like commercial boat operators, fishermen and others whose livelihood could be destroyed, and landowners whose property is fouled.

Beyond those cases, there are shades of gray, including for businesses that have not been touched by oil, but still feel its impact.

The Oil Pollution Act, which governs many of the damage issues, does not spell out how far such liability extends, said Val P. Exnicios, a New Orleans lawyer.

The commercial fishing boat is an easy call, Mr. Exnicios said, but what about the stand next to the dock that sells snowballs, the shaved-ice treat that the fishermen might buy after a hot day on the water? What about the company that sells the ice to the snowball stand?

“This case will ultimately determine where the courts are going to draw the line,” he said.

Stephen J. Herman, who is serving as a liaison between plaintiffs’ lawyers and a New Orleans judge who has many of the cases, said he expected BP to fight continuing claims of indirect damage though they might pay initially.

“In the short term they might, for PR purposes,” he said. “But in the long run they won’t, because it would bankrupt them.”

The lawyers are plotting a range of strategies.

Mr. Smith hopes to circumvent some of the restrictions on the claims process under the Oil Pollution Act for some clients by arguing that the act does not come into play at all. His point: the pollution is not coming from a vessel or rig, as the law requires. The rig, he notes, is long gone, and what is left is a hole in the ground spewing oil.

The pollution should fall under the nuisance claims in Louisiana civil law and other states’ common law, just as a neighbor’s toxic dump or feedlot might. That might provide recovery, he said, for people whose land will never get oil on it, but who will claim the smell interferes with the quiet enjoyment of their property.

Mike Papantonio, a Florida lawyer, has many cases involving fishermen and shrimpers, but he is also filing civil racketeering claims intending to tie the BP blowout to what he sees as close collaboration between the industry and Bush administration officials.

“It’s a case that helps us reflect on where we are after eight years,” Mr. Papantonio said. The relaxation of regulatory oversight “disconnected the hydraulic line from your brakes,” he said.

The lawyers, meanwhile, know that they are often viewed as predators who sue for their own profit. A person commented on the Web site of The Times-Picayune of New Orleans about an article on the lawyers’ conference saying, “The vultures are circling, hopefully some of them will get soaked in the oil.”

Lisa A. Rickard, the president of the U.S. Chamber Institute for Legal Reform, said compensation efforts should reward victims, but litigation drags on for decades and “the end result has too often left at least some victims at the back of the line.”

Such talk riles the plaintiffs’ lawyers.

“Why do I need more money?” asked Daniel E. Becnel Jr., who has worked on mass tort cases leading to billions of dollars in settlements from tobacco companies, breast implant makers and others.

Mr. Becnel raised his shirt to show a long scar on his left side, the mark of difficult surgery to give a kidney to his brother, which left him with lasting health problems. He has also survived grueling treatment for leukemia.

“I’m living on borrowed time,” he said. “I should have been dead 10 years ago.”

With these cases, he insisted, “I want to do right.”

Calvin Fayard Jr., a New Orleans lawyer, said the damage to the gulf and the way of life there was “heartbreaking and gut-wrenching for me, being born and raised in Louisiana.”

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