How Much Has Spilled, and How Far? Seeking Answers as Questions Mount
Since the Deepwater Horizon oil rig exploded in the Gulf of Mexico in April, killing 11 and setting off the biggest maritime oil spill in the nation’s history, questions about the potential dimensions of the disaster have only multiplied from week to week. Readers have been asking whether the oil can be contained, how serious the damage will be and what they can do to help. Following is a primer on the spill.
The Oil’s Reach
Q. How far has the oil advanced along the Gulf Coast? How far could it travel, and what variables are at play? Have any communities been bypassed and spared?
A. So far, oil has made landfall along hundreds of miles of the Gulf Coast, from Freshwater Bayou in the middle of Louisiana’s coastline, all the way to the Florida panhandle to just outside Panama City. The impact has not been uniform; some areas have been greatly affected, while others have been spared. For example, Mississippi’s mainland coast, excepting its barrier islands, has been largely untouched by heavy oil, though that appears likely to change in the next few days.
The oil, either in the form of tar balls, sheen or heavier “mousse,” is brought near the coast by currents, but the wind is usually responsible for the final push, bringing streams of oil onshore. Coast Guard officials frequently describe the oil as a series of spills rather than one big slick, and that is reflected in the impact: oil is heading in all directions at the same time.
Shoreline trajectories, based on currents and wind patterns, are only dependable for roughly 72 hours. But scientists using computer models at the National Center for Atmospheric Research have suggested that the oil reaching the loop current in the Gulf of Mexico could come around Florida’s southern tip within weeks.
After that, the modeling indicates, it would travel up the Atlantic Seaboard to North Carolina’s Outer Banks, before joining the Gulf Stream and heading east across the Atlantic toward Europe. They caution, however, that this is not a forecast but merely a possibility, and that it is unclear how much the oil would dissipate as it traveled in these currents
Q. How much oil has spilled so far?
A. The exact rate at which oil is leaking from the well is not known. Although estimates of the flow rate have changed drastically — to 35,000 to 60,000 barrels a day now, from 1,000 barrels a day originally — it is also not known if the actual rate has changed in the two months since the gusher began.
Calculating the spill to date using the current estimate, and factoring in the approximately 365,000 barrels collected so far from the wellhead, results in a total of about 1.9 million to 3.5 million barrels, or about 80 million to 150 million gallons since the rig exploded on April 20.
By contrast, the Exxon Valdez spill off Alaska in 1989 released an estimated 10.8 million gallons of oil.
Plugging the Well
Q. How might BP plug the leak?
A. BP has tried a lot of methods to seal the well or contain the leak and until recently did not have much success. On June 3, however, technicians succeeded in cutting the riser — the large pipe that connected the well at the seafloor to the drilling rig and that collapsed when the rig sank — and two days later lowered a containment cap on it.
Although the cap did not make a perfect seal, it collected about 15,000 barrels of oil a day.
In normal operation, the oil collected by the cap travels up a pipe to a drill ship, the Discoverer Enterprise, where it is stored and later loaded onto a tanker before heading to a refinery. Natural gas is separated from the oil and burned on a long boom extending from ships.
On June 16, a second system began operating, in which oil is collected through a pipe at the base of the blowout preventer, the stack of safety valves at the top of the well on the seafloor. The oil flows up to a drill rig, the Q4000, where both the oil and the gas it contains are burned using special equipment that produces far less soot than open-air burning of oil.
Q. Is there a sure long-term fix for the spill? When could that happen, best case and worst case?
A. Drilling experts say that two relief wells being drilled near the site of the blowout are the ultimate solution to stopping the gusher. Relief wells have been used to “kill” runaway wells in the past, and the basic procedure is straightforward.
The relief well is drilled at an angle to intersect the damaged well just above the oil reservoir — in this case, about 18,000 feet below sea level. Then heavy drilling mud is pumped down the relief well into the runaway well. As more and more mud is pumped in, it builds up a column of mud that produces enough downward force to counteract the upward pressure of the gas and oil, stopping the leak. Cement is then pumped into the well to entomb it permanently.
Only one relief well should be needed, but BP is drilling a second in case anything goes wrong with the first. Both wells should be completed by late July or August, although they could be delayed. The wells have to find a seven-inch steel pipe that forms part of the runaway well, and although they have plenty of high-tech tools and data-gathering equipment to do that, there is no guarantee they will succeed on the first try.
Mechanical problems or bad weather could also delay the work. A hurricane or other severe storm could also push back completion dates by a week or more, as the drilling rigs would have to shut down and move to a safe location. Bad weather would also affect the containment operation, as all the other vessels at the site of the blowout would have to depart and the well would be left uncapped until the storm had passed.
Q. Doomsday scenarios described online suggest that the pipe that lines the well is deteriorating, or that there may be other problems with the well that may cause it to fail completely, leaving an utterly uncontrolled gusher that could prove difficult or impossible to control. Is this true?
A. There is a lot of speculation about the condition of the well, but it is not really possible to know what kind of shape it is in. BP suggested that one reason that a procedure called the “top kill” failed was because there may have been damage to the well lining about 1,000 feet down. But no one knows for sure.
What does seem clear is that there is enough concern about not making the situation worse that BP is now pursuing only the containment option at the top of the well. They have abandoned efforts to permanently plug the well from the top because that would build up pressure that might cause damage. The well will be permanently sealed starting from the bottom, using one or both relief wells.
The Cleaning Crew
Q. Who is in charge of stopping the oil that is already spilled from spreading and reaching the gulf shoreline?
A. The Coast Guard, led by Adm. Thad W. Allen, has been designated the lead agency. In practice, day-to-day decisions are made jointly by Coast Guard personnel and their BP counterparts. At the spill response center in Venice, La., BP officials or contractors in charge of a certain task — setting cleanup priorities, for instance, or allocating resources like containment boom — are matched with Coast Guard officials with the same responsibility. One Coast Guard petty officer described the division of authority in percentage terms: “It’s 51-49, and we’re the 51.”
A unified command center has opened in New Orleans and incident command posts operate in Houma, La., Mobile, Ala., and Miami. Satellite posts exist elsewhere along the coast in places like Port Fourchon, La. and Venice, La.
Q. How many people are working on the response, and what are they doing?
A. Some 36,000 people are involved, according to the Deepwater Horizon Response Web site overseen by BP. A BP official said that included 1,185 Coast Guard personnel, 1,282 National Guardsmen and 667 BP officials. But the bulk of the personnel — a total of nearly 31,000 — work for contractors hired by BP, ranging from United States Environmental Services, based in New Orleans, to O’Brien’s Response Management in Houston.
Out on the waters around the broken well, some 27 vessels with 230 crew members and support personnel are burning oil. Some 14,500 people are serving as mariners, crew members or captains on 2,680 “vessels of opportunity” recruited for the cleanup. Some are skimming oil — either at sea, from specialized skimming vessels, or closer to shore with so-called “drum” skimmers, cylinders with surfaces that attract oil, which is then squeegeed off as the drum spins.
Others are laying “hard” vinyl boom and soft absorbent boom — more than 475 miles of it — to protect the marshes and beaches.
The State of Louisiana has enlisted National Guardsmen to install 1.6 miles of welded-mesh steel barriers on one coastline; the goal is to cover eight miles. The guardsmen are also deploying cylindrical “tiger dams” on Grand Isle.
The state-sponsored construction of sand berms was started in two places off Louisiana’s fragile barrier islands and wetlands to keep the oil at bay, state officials say. But a dispute between state and federal authorities over where it is safe to dredge halted one project this week after 690,000 cubic yards of dredged material had been made available for berms.
In addition to the engineers and cleanup workers, more than 500 federal and state wildlife specialists are working on rescuing oiled animals and oiled habitat, said a BP spokesman, John Curry. That does not include an undetermined number of staff members and wildlife experts from nonprofit organizations and advocacy groups.
Q. How are vessels assigned to work in various areas of the spill?
A. The captains of these so-called vessels of opportunity register with the joint command and are assigned to work in a lottery, with the number picked on any given day based on regional need, said Michael R. Abendhoff, BP’s director of government and public affairs. “We’re focusing on getting fishermen to work in an area they know,” he said.
Q. Is BP using anything to break up the oil?
A. BP has used large amounts of chemical dispersant in an attempt to reduce the damage caused by oil coming from the broken well. To date, it has sprayed 977,000 gallons of dispersant on the gulf’s surface as well as applied 501,000 gallons to the leak, the company says. It is the largest volume of dispersants ever applied to a spill in United States waters.
Dispersants are detergent-like compounds that cause the oil to break up into tiny droplets, which sink below the surface and can be “dispersed” by sea currents. Until now, dispersants were always applied to oil on the surface; the deepwater application is a first.
Q. Could the chemicals themselves pose any environmental risks?
A. Although concentrated dispersant is mildly to moderately toxic, the notion is that the diluted dispersant is less toxic than the concentrated oil it treats. And it is far less toxic when diluted in the vast volume of the seas.
But the use of such large volumes of dispersant, and its application in a novel setting like the wellhead, constitute an experiment of epic proportions. So far, officials from the Environmental Protection Agency say they have seen no ill effect from the chemicals.
BP has used dispersants from the Corexit line of products, a source of some controversy; their use has been banned in Britain because of risks they pose to marine life along rocky coasts. Weeks ago, the E.P.A. instructed BP to identify and start using a newer, less toxic dispersant. BP did not do so, arguing that Corexit products were the best available and that there was no gold standard for evaluating the toxicity of dispersants.
Dispersant use peaked in late May. On May 26, the E.P.A. and Coast Guard instructed BP to significantly reduce the amount of dispersant it was applying to the Gulf, and it has since done so.
Q. Has wildlife taken a hard hit? How many animals have been killed?
A. Oil is toxic to many forms of wildlife, and the spill is surely killing or harming untold numbers of creatures at sea and on land. That said, calculating the number of fatalities specifically attributed to the oil may be nigh impossible. Every day, federal officials release a count of dead and impaired animals that they have found along the gulf beaches since the spill began. Nearly 2,000 birds, 550 sea turtles and dozens of marine mammals have been counted.
But that tally is far from a reliable measure. For starters, it is not clear that most of those animals were killed by oil. In fact, many of the dead animals were not even visibly oiled. And many were so decomposed by the time they were spotted that postmortems will never be done.
But if the count is way off, it is probably an undercount. Most animals, particularly sea creatures, live far from where humans spot them. For every bird found covered by petroleum muck on a beach, there are untold others who simply die on an secluded beach. For every dolphin that washes ashore, there is another that sinks at sea, and so on.
It is also virtually certain that fish larvae, which are exquisitely sensitive to oil, are dying by the millions as well.
Q. Have any endangered species been put at risk?
A. Yes, the gulf is home to many animals officially listed as endangered, the highest level of vulnerability, under the federal Endangered Species Act. The largest among the permanent marine residents are sperm whales, which like to feed right at the mouth of the Mississippi and have been spotted in the slick. Numerous endangered species of sea turtles, including Kemp ridleys, live almost entirely within the Gulf of Mexico, as does the bulbous West Indian manatee. On land, the federal Department of Fish and Wildlife lists 17 endangered species on the beaches of Florida alone, including four different species of beach mice. Some of these species you have probably never heard of, like the Florida perforate cladonia, a type of lichen, but others are quite well known, like the majestic whooping crane, only hundreds of which are thought to survive in the wild.
Q. Are coral reefs in the gulf and in the Florida Keys in danger?
A. Scientists are definitely worried about the reefs, but the ones at greatest risk appear to be deep reefs relatively near the gushing well. Because the well is so deep, some toxins that would rise to the surface and evaporate in a shallow oil spill are instead dissolving into the water. The worry is that they may kill or weaken deepwater marine organisms. But even relatively near the well, the concentrations of these toxins in deep water are relatively low, so there is reason to hope for the best.
As for risk to the coral reefs in the Florida Keys, scientific opinion is not unanimous, but most researchers have said that if any oil gets pulled into currents that take it past the Keys, it would probably be so diluted by then that it would pose little risk to organisms.
Q. Has the damage to Louisiana’s marshes and estuaries been severe?
A. Obviously, if you talk to locals, they will give you an earful about the oil that has seeped into their local marshes and how the government is not doing nearly enough to protect this delicate resource.
However, as ugly as any oil spill is, it is unclear at this point just how deep into the marshes the worst of the oil has penetrated. As this changes on an almost daily basis, firsthand observation is the best source of information. For an overview, check out the interactive map at www.geoplatform.gov/gulfresponse.
Of course, the wild card here is a hurricane. A large surge of water could carry the water deep into the inner marshes, which for wildlife could mean an even nastier game change.
Q. Is gulf seafood safe to eat?
A. Yes, experts say. Health scientists and politicians have been hammering home this message since the spill, all the way up to President Obama, who ate local crab cakes and shrimp salad sandwiches on television during a trip to Gulfport, Miss. The federal government says the seafood is being tested for dangerous chemicals by federal scientists from the Environmental Protection Agency, the National Oceanic and Atmospheric Administration and the Food and Drug Administration.
Mainly they are looking for a chemical called a polycyclic aromatic hydrocarbon, which is a leading indicator of oil contamination. So far, all levels are safe. This is largely because the federal government closed large swaths of the gulf to fishers, shrimpers and oystermen.
Not that much seafood, speaking relatively, comes from there anyway: The gulf supplies only 2 percent of the nation’s seafood, while 83 percent is imported. Still, wary seafood eaters aren’t taking any chances, causing prices across the country to rise for fish and shrimp. So, the real thing to avoid, experts say, is an overpriced meal.
Q. What will the economic impact of the spill be?
A. The final costs of the spill are difficult to predict. For now, as images of oil-coated wildlife on Louisiana’s islands fill the news, most parts of coastal Mississippi and Alabama have seen only intermittent tar balls, but the states are suffering the same blows to their fishing and tourism industries.
In May, Nathaniel Karp, chief economist for the Alabama bank BBVA Compass, projected eventual losses for the four gulf states at $4.3 billion, including $191 million in losses to Alabama. This month he raised that projection to $11.5 billion.
In Louisiana, seafood and tourism generate $2.4 billion a year and $8.3 billion, respectively, according to officials associated with the two industries.
The moratorium that President Obama imposed on offshore oil drilling could also have a big economic impact and has been fought fiercely by political figures at every level in Louisiana. They argue that it would essentially be another economic hit to the state, already reeling from the fishing closures and other economic dislocation related to the spill. (A federal judge in New Orleans this week struck down the administration’s moratorium; the administration said it would appeal.)
The ban would take 33 floating rigs out of commission for six months; like many rigs in the gulf, all of these employ workers from Louisiana and are supplied by companies from Louisiana. The Louisiana State University Center for Energy Studies calculated that the moratorium would result directly in the loss of 3,339 jobs, and another 7,656 indirectly.
State officials are concerned about the ripple effects throughout the economy, including lost tax revenue. They are also worried about how long it would take for drilling to resume after the end of the moratorium.
Louisianans of all political stripes are generally advocates of offshore drilling, even after this disastrous spill. But many feel that the state should reap more of the benefits, whether by taking a percentage of the royalties that the oil companies pay to the federal government or receiving money from the companies outright to rebuild and restore the state’s coastal wetlands.
In Alabama and Mississippi, many beaches remain open, and the oil for the moment seems to be moving east, away from them. On good days it is difficult to see any evidence of the spill — except for the empty beaches, the idle fishermen and seafood processors, and the worry and anger on the brows here.
But tourist bookings in Alabama and Mississippi are down 40 to 75 percent, with cancellations accelerating as the summer begins, say hotels, condominium owners and real estate agents. Researchers at the University of Southern Mississippi estimated the state’s tourism losses at $119 million for May through August.
With federal and some state fishing waters closed, a seafood business that had hoped to recover this season from a series of cold years and the lingering effects of Hurricane Katrina has been brought to its knees. In Bayou la Batre, the center of Alabama’s seafood industry, a food bank has been giving out 10,000 pounds of food a week — a grim anomaly in a town where residents had always counted on the sea to feed them.
Florida looks especially vulnerable — partly because it is such a large state with an economy as tied its coastline as Detroit’s is to automobiles. Tourism is Florida’s biggest industry, generating about $60 billion a year, and the Gulf Coast counties alone stand to lose $11 billion and 200,000 jobs if visitor numbers decline 50 percent, according to a recent study from the University of South Florida.
But that might be a conservative estimate. Even without oil on beaches in South Florida, hotels in Miami are reporting that bookings are down as families cancel trips because of uncertainty about where the spill will show up. Charter fishermen from Panama City to the Keys are already reporting that advance bookings are nonexistent, and as long as the spill churns in the gulf, this will be the case. Who wants to book a vacation when the loop current in the gulf could shift direction and send oil around Florida and up the East Coast?
And that’s just tourism. Since the 1950s, Florida’s population has become increasingly concentrated by the coast. Millions of homes and condos already devalued by the recession and foreclosure crisis could face further downward pressure on prices because of the spill. State and local budgets that depend on the sales tax — Florida has no state income tax — may have to be cut even further, adding to an unemployment rate that already hovers around 12 percent.
But here’s the comparison that really scares Floridians: Moody’s recently found the spill could do more damage to the state’s economy than the 2004 hurricane season — when four large storms slammed the state — and more damage than the global recession, which has already brought Florida to its knees.
Q. Will the spill help generate support for energy and climate legislation now before the Senate? (Will promoters of renewable energy like wind and solar benefit from this new evidence of the dangers of fossil fuels?)
A. President Obama and some Democratic leaders hope that the gulf disaster will build public and political support for a bill to tighten oil drilling regulations, reduce dependence on imported oil and limit emissions of gases contributing to global warming. There is likely to be a debate in the Senate in July on some new oil drilling rules and incentives for energy conservation. There may be movement toward new subsidies for clean energy sources like wind, solar and biofuels.
But there is little evidence of growing support for a more ambitious effort to address climate change by putting a price on carbon dioxide emissions or creating a cap-and-trade style market for pollution permits. Deep divisions remain within the Democratic Party over climate change, and they are unlikely to be bridged in the busy weeks that Congress has left before breaking for the fall election season.
Q. What federal agencies have regulatory oversight over offshore drilling? Will any heads roll at a cabinet or agency level because of the spill?
A. In some respects, offshore work has been overseen by a patchwork of federal bodies, including the Coast Guard, which regulates the seaworthiness of oceangoing rigs, and the Environmental Protection Agency, which reviews drilling plans for the potential impact on marine life and the surrounding ecosystem.
But the principal agency charged with oversight of offshore drilling is — or was — the Minerals Management Service, a division of the Interior Department formed in 1982. Among other responsibilities, the agency was charged with leasing oil and gas formations in the Gulf of Mexico, approving driller permits and plans, monitoring the safety of offshore drilling operations and — in what quickly drew allegations of conflict of interest after the Deepwater Horizon explosion — collecting royalties from oil companies doing work in federal waters.
Since the accident, the downside of vesting one regulatory division with all of those disparate responsibilities has been brought into stark relief.
Documents have revealed, for example, that the agency sidestepped rules requiring it to obtain other federal permits before allowing BP — and dozens of other oil companies — to drill in areas that might harm endangered species or other marine mammals. Current and former scientists of the agency have also stated that they were routinely overruled when they raised concerns about the safety and environmental impact of certain drilling proposals.
And investigators have also charged that the minerals service was lax in approving drilling proposals — including those developed by BP for the Deepwater Horizon — despite lacking any realistic plan to respond to a blowout of the magnitude now polluting the gulf.
Of course, the precise combination of factors leading to the unchecked gusher is still being sorted out — including what measure of blame will be assigned to BP, to human error and to a failure of federal oversight.
Nonetheless, in an effort to dissolve a relationship between industry and regulators that many critics say had become far too cozy and permissive, the Obama administration announced plans to break up the Minerals Management Service on May 11. The idea is to divide the agency into three parts — one responsible for leasing, another for fee collections and a separate division for environmental oversight.
The agency also gets a new name: the Bureau of Ocean Energy Management, Regulation and Enforcement. Michael R. Bromwich, a former Justice Department inspector general under the Clinton administration, was named last week to head it up.
He succeeds the most prominent official to depart in connection with the gulf disaster: S. Elizabeth Birnbaum, the former director of the minerals service, who resigned on May 27. Mr. Obama suggested that Ms. Birnbaum had failed to change her troubled agency with “sufficient urgency.”
Mr. Bromwich told a Senate panel on Wednesday that he would create an investigative unit to root out corruption and speed reorganization of the office.
Q. Is anyone investigating what caused the spill? Is there any mechanism for prosecution, should wrongdoing be discovered?
A. This accident will be the most closely studied domestic event since the Sept. 11, 2001, terrorist attacks. A formal Marine Board investigation has been under way since shortly after the April 20 explosion, jointly conducted by the United States Coast Guard and the Interior Department’s Minerals Management Service, the agency responsible for policing offshore drilling.
President Obama has appointed a seven-member commission to study the accident and make recommendations on strengthening regulation, led by William K. Reilly, a former administrator of the Environmental Protection Agency, and Bob Graham, a former governor and senator from Florida.
Many congressional committees are looking into various aspects of the explosion and leak; among the most aggressive are the House Energy and Commerce Committee, the House Natural Resources Committee and the Senate Energy and Natural Resources Committee. The Justice Department has dispatched civil and criminal investigators to the Gulf Coast to determine whether damage suits or criminal charges can be brought.
The National Academy of Engineering is looking into the technical failures that contributed to the disaster. BP is carrying out an internal investigation into the causes of the blast. The American Petroleum Institute and other industry groups are conducting their own inquiries to determine whether BP followed accepted industry practices, or if those practices need to be changed.
Q. Who is legally liable for the effects of the oil spill?
A. Under the Oil Pollution Act of 1990, BP, the owner of the well, has been named the “responsible party” and bears the brunt of liability for the spill. That means the company must foot the bill for the cleanup efforts and pay claims for economic damage, as well as penalties under the law. Other companies involved with the well could find themselves drawn into litigation.
Q. Has BP paid out any claims to people who have suffered from the spill? How much so far?
A. From the beginning of the disaster, BP has said it will pay all “legitimate claims” of economic loss related to the spill and so far has paid out more than $100 million. It has issued more than 31,000 checks since the accident to residents along the Gulf Coast. It has received 64,000 claims and says it has a claims team of 1,000 working on claims at 33 field offices.
Q. Is there any law limiting the damages paid out by an oil company?
A. The Oil Pollution Act sets the liability limit for economic damage claims at $75 million, but BP blew past that number long ago and has said it will pay all legitimate claims. Last week, BP and the White House announced that the company was creating a $20 billion fund to take over payment of economic damage claims. The fund will be run independently by Kenneth R. Feinberg, who also administered the settlement fund for 9/11 victims and others.
Q. Have any lawsuits been filed against BP or other parties?
A. More than 200 lawsuits have been filed against BP and other companies — and some of those suits are class actions involving hundreds and even thousands of plaintiffs. Commercial fishermen, shrimpers, vacation home rental agents, dive shop owners, seafood processors, state and local agencies and anyone whose income could be affected by the spill are weighing in.
Whether they continue to pursue their claims in court or opt for the more predictable settlement from Mr. Feinberg’s fund is one of the issues we will all be watching.
Q. How in the world will the courts deal with all of those lawsuits?
A. The suits are likely to be consolidated by the federal courts through a process called multidistrict litigation. A seven-judge panel appointed by the chief justice of the Supreme Court of the United States meets regularly to determine which cases should be consolidated and how.
The industry has asked that the cases be consolidated in Houston; the companies’ headquarters are there, and, not coincidentally, it might be a relatively friendly environment. The various lawyers for the plaintiffs have requested that the cases be consolidated across the Gulf Coast, with the Louisiana trial bar pushing hard for New Orleans — not coincidentally, a place where anger over the spill runs high.
BP and the Oil Industry
Q. Is BP wealthy enough to pay for the economic and environmental costs of the spill? Or is the company at risk financially?
A. The price of BP stock has plummeted by more than 50 percent since the April 20 accident, from just over $60 a share to below $30. But BP remains a very wealthy company; last year alone it earned $17 billion, and it ended the year with more than $8 billion in cash. It has operations all over the world that generate income, and with oil at over $75 a barrel, the prospects for revenues remain strong.
Most experts believe the company will survive, despite anticipated losses from penalties and claims mounting to tens of billions of dollars.
Still, uncertainties remain, especially if the runaway well is not plugged by the two relief wells now being drilled, which was expected to be completed by late August. That could mean months more of heavy damages, and more and more claims.
Q. Who owns BP stock? Mostly Britons?
A. BP is owned by investors all over the world. BP estimates that about 40 percent of their shares are owned by British investors, and nearly as much by American investors. Another 10 percent are owned by other Europeans, and the remaining 10 percent by investors from other countries outside Europe. Since much of the stock is owned by mutual funds, it is not easy to determine the exact percentages of the nationalities of its owners. Suffice it to say, many Americans and Britons depend on BP dividends.
Q. Are lots of ordinary people whose mutual or pension funds are invested in BP going to be adversely affected? Or are most such funds widely diversified?
A. There are certainly some mutual funds and pension funds that will be affected on both sides of the Atlantic. Nebraska’s retirement fund, for instance, reportedly will lose $1.3 million each quarter that BP suspends its dividend. The erasure of about $100 billion in BP stock value has translated into big losses for several funds. The California Public Employees’ Retirement system has lost more than $284 million in value, Bloomberg News reported.
Q. Will other oil companies benefit from BP’s woes, or will they all be negatively affected?
A. Some companies may benefit in the future. When companies decide to invest in big projects, they often look for partners to share risks and expenses. BP may be seen now as less reliable, giving a new competitive edge to Exxon Mobil and Chevron, for instance, when smaller companies like Anadarko are looking for a partner with deep pockets.
But at the moment BP’s woes are shared widely, especially among companies that would like to drill more in the Gulf of Mexico. The current drilling moratorium will hurt the majors and service companies. Oil companies will almost certainly face more regulatory hurdles and safety expenses in the future.
Q. Will the spill or the offshore drilling moratorium affect oil or gas prices?
A. The moratorium on drilling in the gulf should not have an impact on oil or gasoline prices over the short term. For one thing, a well that is being drilled is not a producing well; each drilling operation takes a year or more before production commences. For another, oil production is still high in the gulf by historical standards as a result of a wave of drilling in recent years.
Oil is a world commodity, and its price is affected by many factors including the strength of the world economy, which drives demand. However, if the moratorium were to go on for years, it would eventually have an impact on oil supplies as older wells became less productive. That could affect prices, unless lost production is replaced by new production somewhere else.
Q. Is any organization coordinating charitable donations?
A. Several Web sites are compiling places to donate money, time and resources. The Greater New Orleans Foundation is focused on charities that help fishermen and their families in Louisiana. The National Wildlife Foundation and the Humane Society of the United States are taking donations to help wildlife on the coast.
Q. Is this the nation’s worst oil disaster ever? Its worst environmental disaster ever?
A. It is probably neither. If your criterion for the worst oil disaster is the greatest volume of oil leaked, then the Lakeview Gusher of 1910 released at least twice as much oil into a semi-desert area of California as this leak has released so far. This leak is without question the worst oil disaster at sea in United States history, but it does not yet match the volume of an Mexican oil-well blowout known as Ixtoc 1, also in the gulf, in 1979-80.
As for worst environmental disaster ever, this one so far does not come close to matching the human impact of the Dust Bowl of the 1930s, which prompted one of the largest mass migrations in American history, with perhaps a half-million people abandoning the Plains. But that said, the damage is accumulating as the spill drags on. It seems likely to wind up as one of the worst American environmental disasters, if not the worst.