BP accused of repeated shortcuts

THEODORE, Ala./HOUSTON Tue Jun 15, 2010 9:58am IST

1 of 29. Leaking oil and gas are seen during dispersant operations at the site of the Deepwater Horizon oil spill in the Gulf of Mexico, in this screen grab taken from a BP live video feed June 14, 2010.

Credit: Reuters/BP/Handout

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THEODORE, Ala./HOUSTON (Reuters) - Lawmakers accused BP Plc on Monday of repeatedly taking risky shortcuts on its blown-out Gulf of Mexico oil well, while President Barack Obama pushed the energy giant to compensate spill victims.

Setting the stage for a showdown with BP executives at congressional hearings starting on Tuesday, two Democratic lawmakers said the British company chose faster and cheaper drilling options in the Gulf of Mexico that "increased the danger of a catastrophic well failure."

The usually clubby oil industry may fragment in front of Congress as top executives from BP, Exxon Mobil, Chevron, ConocoPhillips and Royal Dutch Shell argue that deepwater drilling is safe if proper procedure is followed.

"This incident represents a dramatic departure from the industry norm in deepwater drilling," Exxon Mobil Chairman and Chief Executive Rex Tillerson said in prepared testimony obtained by Reuters.

Millions of gallons (liters) of oil have gushed into the Gulf since an April 20 explosion on an offshore rig killed 11 workers and ruptured BP's well.

The spill, the biggest in U.S. history, has soiled 120 miles of U.S. coastline, imperiled multibillion-dollar fishing and tourism industries, and killed birds, sea turtles and dolphins.

The massive spill has overshadowed Obama's political agenda, eclipsing job creation and Wall Street reform. Both are key issues in November congressional elections in which Obama's fellow Democrats are expected to face a tough fight to hold onto their majorities in both houses.

Obama, on his fourth visit to the Gulf Coast since the crisis began, said he would press BP executives at a White House meeting on Wednesday to deal "justly, fairly and promptly" with spill damage claims.

In New York, BP's U.S.-listed shares tumbled 9.71 percent on investor concern the company may give in to calls by U.S. politicians to suspend its quarterly dividend. In London, BP shares closed down 9.3 percent.

Under intense pressure from the Obama administration, BP unveiled a new plan on Monday to vastly boost the amount of oil it is siphoning off from its ruptured well.

BP said it planned to send more vessels to the spill site to increase its capacity to capture oil from 15,000 barrels a day now to 40,000-53,000 barrels by the end of this month and 60,000-80,000 by mid-July.

"RISKY PROCEDURES"

In a pivotal week in the 56-day-old crisis, Obama began a two-day visit to the Gulf coast. He will address the nation on Tuesday, before he meets BP executives for what a White House spokesman said would be a "very frank" encounter on Wednesday.

Ahead of the congressional hearings on Tuesday and Thursday, lawmakers Henry Waxman and Bart Stupak released a letter to BP Chief Executive Tony Hayward laying out a potentially damning account of the events leading up to the rig explosion.

"It appears that BP repeatedly chose risky procedures in order to reduce costs and save time and made minimal efforts to contain the added risk," their letter said.

A BP spokesman declined to comment before the hearings.

Sweat beading his face in the hot weather, Obama on Monday toured fouled beaches and visited businesses laid low by the collapse of tourism. He promised the Gulf would bounce back, urged Americans not to cancel travel plans to the region and said the seafood was safe.

In the evening, he sampled crawfish tails and crab claws at a waterside restaurant in Orange Beach, Alabama.

The president faces intense criticism that he has not shown enough leadership in the spill and will seek to use his meeting with BP executives and his first nationally televised Oval Office speech to show he is on top of the crisis.

But Anthony Bourgeois, 62, a seventh-generation commercial fisherman, said the situation was past the point where Obama's words could quickly bring a quick solution.

"There ain't much he can say. We're all commercial fishermen and we can't go out and make a living," Bourgeois said in blazing heat in Venice, Louisiana.

Many on the Gulf Coast are torn between support for the oil industry, an economic mainstay, and anger. Louisiana Governor Bobby Jindal said the coast was in a "war to stop this oil" but also asked Obama to put a quick end to a drilling moratorium.

BP HIRES BANKS

BP has faced a barrage of criticism over its handling of the cleanup and last week was confronted with a White House threat to widen its liabilities for the disaster.

The company has lost more than 40 percent of its market value since the crisis began.

"The concern is that BP is going to cut its dividend and that's weighing on the stock," said Andy Fitzpatrick, director of investments at Hinsdale Associates, in Hinsdale, Illinois.

BP has hired investment banks Blackstone Group LP, Goldman Sachs Group and Credit Suisse Group as advisers, a source familiar with the matter said, without disclosing the purpose of the move.

The spill has created an unprecedented financial, legal, regulatory and environmental crisis for companies that operate in the Gulf, Moody's Investors Service warned in a report on Monday, saying it could be up to two years before oil production reaches pre-spill levels and that a six-month moratorium on deepwater drilling posed many uncertainties.

Obama announced the final five people he wants to join a commission to make recommendations for the future of offshore drilling -- all environmentalists and academics with no clear representative of the oil industry.

CLAIMS PAYMENTS

In his meeting with BP Chairman Carl-Henric Svanberg on Wednesday, Obama will press for the company to set up an independently managed fund to pay oil spill damage claims.

Speaking in Theodore, Alabama, Obama said the White House was already talking to BP about the fund and hoped agreement on a framework for claims payments would be reached by Wednesday.

Gulf Coast residents have been complaining for weeks the BP claims process is too slow and that the money the company is paying out is too little to make ends meet.

U.S. politicians have been calling on BP to scrap its quarterly dividend to ensure it has enough money on hand to pay the compensation claims and clean up the spill.

BP's Hayward will make his first appearance at a congressional hearing on Thursday and is expected to face harsh questioning from lawmakers.

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