BP starts to reinstall cap on Gulf of Mexico oil leak

HOUSTON/WASHINGTON (Reuters) - BP Plc said on Wednesday it was starting to reinstall an oil-siphoning cap on its blown-out well in the Gulf of Mexico after an earlier disruption unleashed a torrent of crude.

“Operations have now begun to reinstall the cap,” the British energy giant said in a statement.

Oil gushed largely unchecked from the well on Wednesday after an undersea robot collided with a system intended to capture some of the crude from the worst spill in U.S. history.

While BP struggled to restart its oil collection operation, the U.S. government said it would impose a more flexible ban on new deepwater drilling after a federal judge overturned an initial moratorium as too far-reaching.

Oil companies, trying to stop the government from keeping the ban in place, swiftly returned to court to ask the judge to enforce his ruling, accusing the Obama administration of choosing to “ignore and disobey it.”

The government imposed a six-month moratorium on deepwater drilling after an offshore rig exploded on April 20, killing 11 workers and rupturing BP’s well. The White House plans to appeal the ruling.

Washington is taking a tough line on other fronts as well. The House of Representatives agreed on Wednesday to give subpoena power to the commission created by President Barack Obama to investigate the spill.

In another development, Kenneth Feinberg is stepping down from his role as U.S. Treasury’s “pay czar” later this summer to focus on administering BP’s $20 billion oil spill fund, a Treasury spokesman said on Wednesday.

After siphoning off a record amount of oil from the well the day before, BP suffered the setback when an undersea robot crashed into the containment cap system that channels leaking oil to a ship from the well on the seafloor.

The containment cap system installed on June 3 captured 16,600 barrels on Tuesday, BP said. A separate oil-flaring system that collected 10,5000 barrels is still operating. A team of U.S. scientists estimate the leak is spewing between 35,000 and 60,000 barrels a day.

The massive oil slick has shut down rich fishing grounds, killed hundreds of turtles and seabirds and dozens of dolphins and soiled the coastlines of four U.S. states.

OIL COATS PENSACOLA BEACH

Florida saw its worst effect yet from the spill as thick oily sludge washed ashore on Pensacola Beach.

Emergency workers said the pudding-like mixture covered 3 miles of Pensacola Beach, a barrier island that is part of the Gulf Islands National Seashore.

“It’s just a line of black all the way down the beach as far as you can see in both directions. It’s ruined,” said Pensacola fisherman Steve Anderson.

The oil spill prompted the Obama administration to impose the deep-sea drilling ban while it investigated the causes of the accident and set new safety guidelines for offshore rigs.

Interior Secretary Ken Salazar told a congressional hearing he would reissue the drilling ban blocked by the federal judge but suggested some drilling in proven fields might move forward.

“We will in the weeks and months ahead take a look at how it is that the moratorium in place might be refined,” he said.

That would be welcomed by companies like Petrobras and Royal Dutch Shell, which were set to delay major projects on fields that offer the best new source of domestic crude.

Salazar said initial investigations showed evidence of “reckless conduct” leading up to the April 20 rig blast, but he did not point the finger at any individual company.

U.S. lawmakers, however, have accused BP of cutting corners and putting cost savings over safety. BP leased the rig from Transocean and was a part owner in the ruptured well with Anadarko.

INVESTORS TO SUE BP

The criticism has fueled investor fears about BP’s future and its stock has tumbled since the April 20 spill, losing half its value and trading at levels not seen since 1996.

New York Comptroller Thomas DiNapoli said on Wednesday the state pension fund planned to sue to recover losses from the drop in BP’s stock. Other big U.S. state funds are watching New York’s lawsuit but have not yet taken legal action.

“BP misled investors about its safety procedures and its ability to respond to events like the ongoing oil spill and we’re going to hold it accountable,” said DiNapoli, a Democrat, who will stand for election in November.

BP’s share price fall has led some major investors, including Aviva Investors and UBS Asset Management, to start buying again, despite worries about the oil giant’s total liabilities related to the spill.

Under the Clean Water Act, which levies a $4,300 per barrel fine, BP could face penalties of more than $15 billion. That does not include the $20 billion compensation fund it agreed to last week or the many billions of dollars in criminal fines that analysts have said are likely.

According to U.S. government estimates, up to 4 million barrels of oil have spewed into the ocean since April 20, about 15 times as much as was spilled by the Exxon Valdez in Alaska in 1989. BP said it has collected about 325,700 barrels so far.

Workers at a bird cleaning facility in Fort Jackson, Louisiana were collecting blood and feather samples as evidence of environmental damage that could be used in possible lawsuits against BP.

About 50 workers removed caked-on crude from pelicans, gulls and other animals with dark, dirty brown feathers.

“Most spills are over really quick, but this is like a new spill every day. It’s really discouraging,” said Jay Holcomb, director of the International Bird Rescue Center.