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Oil Spill Estimate Rises

Source: Washington Post

Posted on 10 Jun 2010

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The amount of oil spewing out of the Deepwater Horizon well is substantially greater than the company or the federal government initially estimated. Coast Guard Adm. Thad W. Allen, head of the government's spill response, said that Wednesday that BP collected 630,000 gallons of oil (15,000 barrels) from the blown well on Tuesday but that significantly more was escaping the containment cap into the ocean.

Allen said the company is moving a "mobile drilling unit" to the site that will increase the receiving capacity to almost 1.2 million gallons (28,000 barrels) a day.

The quantity of oil spilling into the Gulf of Mexico has been the subject of speculation and controversy for weeks. Early in the crisis, the National Oceanic and Atmospheric Administration issued an estimate of 210,000 gallons a day, but more recently a government-appointed team of scientists known as the Flow Rate Technical Group produced estimates of 504,000 to 1.05 million gallons.

Because the damages and penalties that could be levied against BP would be based on the amount of oil released into the gulf, investors interpreted Wednesday's news as substantially increasing the company's potential liability.

BP's stock price plunged more than 15 percent Wednesday, to a 14-year low. It fell again Thursday in early trading in London before recovering some ground mid-morning, as British analysts told investors that the extent of the U.S. sell-off was unwarranted, the Associated Press reported.

Since the Deepwater Horizon explosion, BP's stock price has dropped by more than 50 percent. The most recent declines were attributed to both the amount of oil flowing from the well and comments from Interior Secretary Ken Salazar that the Obama administration will ask BP to repay the salaries of workers laid off because of the six-month moratorium on deepwater exploratory drilling.

Phil Weiss, an oil analyst with Argus Research in New York, said momentum is working against BP as the news gets progressively worse despite the increased capture of oil. He said he thinks the company can survive, "but there's more doubt in my mind than there was a week ago. Momentum is a powerful thing."

Concerns have also grown that BP will have to suspend its dividend payment under pressure from U.S. lawmakers who say the money should go toward paying legal claims and for environmental repair in the gulf. In the past two days, seven analysts have cut their expectations on the likely payout, giving more reason to sell the stock.

Along the Gulf Coast, the damage to wildlife is becoming more apparent. A rescue center in Louisiana said it has gotten more than five times as many oily birds in the past few days than in the previous six weeks.

The U.S. Fish and Wildlife Service's rescue center in coastal Louisiana has reported a little more than 400 birds since the BP well blew out April 20. Of those, 350 were brought in since last Thursday.

Allen said Wednesday that the 1,000-foot shuttle tanker Loch Rannoch was headed to the gulf from the North Sea. The tanker is capable of withstanding rougher seas than the ships currently in place at the crowded blowout site.

Although officials of the administration and BP communicate every day, President Obama told NBC's Matt Lauer on Tuesday that he has not spoken directly with company chief executive Tony Hayward.