WRAPUP 10-Storm hinders Gulf of Mexico oil spill cleanup

Wed Jun 30, 2010 10:29pm EDT

Related Topics

* Salazar: weeks before relief well reaches gushing pipe

* US administration working on new deep-water moratorium

* Senate panel moves to remove oil spill liability cap

* BP shares up about 4 pct in New York; 3rd day of gains

* Hurricane Alex makes landfall in northeastern Mexico (Adds hurricane making landfall, paragraph 8)

By Kristen Hays and Tom Doggett

HOUSTON/WASHINGTON, June 30 (Reuters) - Waves and wind spawned by Hurricane Alex disrupted cleanup of the Gulf of Mexico oil spill on Wednesday while a senior U.S. official said a relief well intended to plug BP Plc's (BP.L) (BP.N) gushing deep-sea well remained weeks from completion.

In Washington, lawmakers took a step toward making oil companies face unlimited liabilities from offshore spills like the one sullying the U.S. Gulf Coast.

The relief well, one of two being drilled, will still take several weeks to reach the spewing oil pipe, Interior Secretary Ken Salazar told U.S. lawmakers. The relief wells are intended to intersect and then plug the ruptured deep-sea well.

The Interior Department, focused on the BP spill, announced it was postponing until later this year planned public hearings on President Barack Obama's proposal -- announced before the BP spill began on April 20 -- to expand offshore oil drilling.

Rough weather associated with Alex, 2010's first Atlantic hurricane, threatened to push more oil-polluted water onto U.S. shores and delayed BP's plans to boost oil containment capacity at its leaking well.

BP has been siphoning some oil from the spewing well but an unknown amount continues to spurt into the sea.

Alex strengthened into a Category 2 hurricane on Wednesday, with maximum sustained winds near 105 miles (169 km) per hour.

The hurricane made landfall late on Wednesday on the coast of Tamaulipas state in northeastern Mexico, about 100 miles (160 km) south of Brownsville, Texas, the U.S. National Hurricane Center said. [ID:nN30192989] <^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^

For full spill coverage link.reuters.com/hed87k

Special Report: Oil spill gushes for lawyers[ID:nN29258627]

Breakingviews [ID:nLDE65R1P7]

Insider TV link.reuters.com/ned73m

Graphics link.reuters.com/run88k

^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>

The weather conditions forced the halting of skimming, spraying of dispersant chemicals and controlled burns of oil on the ocean surface, the Coast Guard said.

Some 50 miles (80 km) off Louisiana's coast, British energy giant BP kept oil-capture and relief well drilling operations going at the leak site. Oil collection volumes were lower on Wednesday as the storm raged, BP said.

Salazar's timetable regarding the relief well was in line with BP's own statements, but there had been speculation earlier this week that the relief well link could be established earlier.

Thad Allen, the U.S. government's point man on the spill response, said one of the relief wells was within 16 feet (4.9 metres) of the side of the blown-out well. Allen retired as a U.S. Coast Guard admiral on Wednesday.

The oil spill disaster, in its 72nd day, is causing economic and environmental havoc along the Gulf Coast, hurting tourism, fishing and other industries, harming wildlife, and leaving the future of BP far from clear.

NEW MORATORIUM PLANNED

Salazar said he is working hard to finalize a new moratorium on deep-water offshore drilling that would affect exploratory wells at 500 feet (152 metres) or deeper after a federal court blocked the Obama administration's previously announced six-month ban. Salazar would not say when the new moratorium would be issued.

The administration wants the moratorium in order to give a presidential commission enough time to investigate the cause of the rig explosion that led to this disaster and see what new safety regulations may be needed to prevent future oil spills.

The U.S. Senate Environment and Public Works Committee voted on Wednesday to eliminate limits on liability that oil companies would face for oil spill damages. The measure now goes before the full Senate. It also would need to win passage in the House of Representatives before becoming law.

Oil companies currently have a $75 million cap for compensating local communities for economic losses and cleaning up environmental damage. The change, if approved and enacted into law, would apply retroactively to BP.

The Gulf of Mexico holds the most promising untapped crude oil reserves in the United States, and a string of major discoveries over the past decade by companies including BP have rejuvenated investment in deeper and more difficult waters.

BP STOCK

BP's market capitalization has shrunk by about $100 billion since the drilling rig exploded.

BP shares have lost more than half their value since the spill but show signs of stabilizing. The shares rose for a third straight day in New York trading on Wednesday, rallying 4 percent following sharp gains in London.

"The stock prices had really discounted a very negative scenario. ... The reality is not as bad as what the market has priced in," said Eric Marshall, director of research at Hodges Capital Management in Dallas.

BP has said it will cover all costs of its Gulf oil spill. It has agreed to establish a $20 billion fund, but claims are expected to easily eclipse that sum. [ID:nWBT014025]

A steady flow of tar balls, sticky brown patches of oil and black sludge have been making landfall on major tourist beaches, inland marsh areas and fishing inlets along the coast in Mississippi.

Small armies of cleanup crews contracted by BP were forced to temporarily pack up their gear due to the weather, taking precious time away from cleaning the oil off tourist beaches in Mississippi. "We are getting out of the storm right now but we will be back," said Bill Sigler, working to clean up the oil.

The Deepwater Horizon drilling rig sank in 5,000 feet (1,525 metres) of water after an April 20 explosion and fire killed 11 workers, touching off the worst oil spill in U.S. history.

The new head of the U.S. agency overseeing offshore drilling told lawmakers a record of "bad performance, deadly performance" by an oil company should be considered relevant when the government decides on drilling lease awards.

"It is simply unacceptable for companies to repeatedly misreport production, particularly when it interferes with the auditing process," said Michael Bromwich, who heads the Interior Department's Bureau of Ocean Energy Management, Regulation and Enforcement. [ID:nN30360458]

Environmental groups sued BP in federal court in New Orleans on Wednesday, seeking to halt controlled burning of spilled oil on the surface of the Gulf that has taken place regularly since late April. Endangered sea turtles are being burned alive, they said, accusing BP of violating the U.S. Endangered Species Act. [ID:nN30248285]

(Additional reporting by Steve Gorman in Los Angeles, Ernest Scheyder in Buras, Louisiana; Richard Cowan in Washington; Chuck Mikolajczak in New York; Writing by Ros Krasny; Editing by Will Dunham)

FILED UNDER:
Photo

After wave of QE, onus shifts to leaders to boost economy

DAVOS, Switzerland - Central banks have done their best to rescue the world economy by printing money and politicians must now act fast to enact structural reforms and pro-investment policies to boost growth, central bankers said on Saturday.