The Obama Administration is now making demands that BP cover all costs stemming from the Gulf of Mexico Oil Spill, including millions of dollars in salaries of oil-industry workers, in what could financially cripple the oil giant--BP stocks plummet in New York.
The sudden increase in BP's potential liabilities, and growing evidence that even more oil than expected or stated by BP is gushing from BP's crippled oil well, plummeted BP's stock shares by 16% in New York, to $29.20.
BP stocks has lost close to half its value, more than $82 billion, in just seven weeks since the Gulf Oil Spill crisis began. "There is no objective justification for this BP [stocks] share price movement. BP faces this situation as a strong company," said BP CEO Tony Hayward in an interview at the oil company's Houston crisis center. "We have significant capacity and flexibility in dealing with the cost of responding to the incident [the BP Gulf Oil Spill disaster], the environmental remediation [to the Gulf] and the payment of legitimate claims[related to the oil spill disaster]."
BP didn't comment directly on the latest demand from the Obama Administration in Washington, but BP is expected to argue that under the Oil Pollution Act of 1990, the BP oil company should only be liable for the direct costs of the oil clean-up and therefore couldn't be held responsible for lost wages of oil workers.
"Somewhere a line has to be drawn," a BP company official said.
Apparently that line should have been drawn in the sand by President Obama when the oil spill disaster first started.
Several legal experts said they couldn't think of any law or precedent that would allow the United States to try to recover damages from BP on behalf of rig workers thrown out of work by a government moratorium on deep offshore drilling.
So, apparently the U.S. has allowed a foreign company into the country, to perform dangerous drilling, with no liability clause prior-and additionally not stepped in soon enough to ensure the clean-up could and would be performed before destroying the environment and lives.
"I'm not aware of anything out there that would allow [President Obama] to latch onto a legal remedy on behalf of the out-of-work [Gulf of Mexico] workers," said Escobar Jr., a Houston-based labor and employment attorney for Beirne Maynard & Parsons. "I think he's [President Obama] in for a real court fight on [over] these issues."
The Obama White House has a different viewpoint on the BP Gulf oil crisis and liability with the disaster. "The moratorium is a result of the accident that BP caused [in the Gulf Oil Spill]. It is an economic loss for those [Gulf] workers," Press Secretary Gibbs said. "Those are [financial] claims that BP should pay."
The financial meltdown in BP's company stock suggests investors are bracing for a worst-case scenario. BP claims the oil giant has spent well over $1 billion on the disaster response. The total clean-up and legal costs to BP, over the oil spill, could eventually reach up to $33 billion for BP to cover in financial responsibility, though those might not fully materialize for a decade, says Goldman Sachs.
"The [stock] market is saying BP's future is in doubt," said Fadel Gheit, an analyst at Oppenheimer and Co. "They think BP's CEO and chairman [Tony Hayward] will be forced out [of BP], that it [BP] will suspend the dividend for an unknown period of time, and that it [BP] may even be forced to liquidate, and sell off its most strategic assets."
British Petroleum's company board has said that it stands behind BP leaders and leader response to the oil spill. In the U.K., oil executives warned of political and financial fallout, referencing that British Petroleum dividends comprise a large share of money that feeds U.K. pension funds.
BP hasn't commented on individual complaints about financial claims made to the company, but a British Petroleum rep has referenced an issue with processing business claims and BP claims payment, issuing the statement that the oil company plans to "improve the claims process, because it is a vital part of our [BP's] response to the oil spill."
Wait until they start running out of money.
The Obama Administrations says BP maintains financial responsibility in provididng resources to stop damages and the oil spill, and clean up the Gulf, rather than reward BP shareholders. Where's that contract?
Local U.S. government and city officials and Gulf Coast residents say that BP isn't moving fast enough to pay for damage from the oil spill. The U.S. government's "point man" on the oil spill, Thad Allen, has demanded that British Petroleum provide more detail on how it is meeting financial claims from both residents and individuals-and from businesses.
The mounting pressure on BP is bearing down as the oil company is capturing more oil from the gusher, which has literally been gushing oil since the Deepwater Horizon drilling rig sank seven weeks ago in April. British Petroleum claims it is now collecting more than 15,000 barrels of oil per day, following installation of a new containment cap last week designed to channel oil and gas upward out of the water and to a vessel on the surface.
A permanent solution to stop the gushing oil in the Gulf will only come with completion of a relief well, which won't be finished until August.
The prospect of demanding that BP cover worker salaries came when Energy Secretary Ken Salazar was testifying before a Senate committee. Citing oil-services companies that had written her, Sen. Mary Landrieu, asked Salazar if "the oil-services companies have to either go out of business or take bankruptcy or lay off classes of workers, are you going to ask BP to pick up their salaries and to make them whole?" Salazar responded, "The answer to that is yes, we will."
The Louisiana Mid-Continent Oil and Gas Association has estimated that the number of Gulf jobs affected by the moratorium ranges from 26,000 to 46,000.
Direct individual wages lost could be as high as $330 million per month.
And BP is sure to consider that quite a tab, that the company isn't going to want to pick up. The American government has some threats to use against British Petroleum, including threat of federal criminal indictment.
BP is the biggest supplier of fuel to the American Pentagon, with contracts worth $2.2 billion dollars per year. BP is also the largest oil producer on federal waters in the Gulf of Mexico.
The American government is supposedly sending signals of getting tough with the oil giant. James Watson of the U.S. Coast Guard wrote to BP, demanding details of its oil-recovery plans within 72 hours-to be sure that the oil spill clean-up efforts won't be impeded by problems with one vessel or the potential onslaught of a hurricane in the Gulf area.
The Obama Aministration also is demanding "more detail and openness from BP" to ensure that the oil company meeting its commitment to restore the Gulf Coast, according to a letter from Admiral Allen to BP. It's not quite clear, however, what exactly "more openness" is supposed to mean: after all, BP has been less than open about how much oil has really been gushing per day from the disaster-hugely or directly underestimating oil gallons per day that have been released from the gusher.
Allen's team had asked for access to the BP financial claims database to be able to monitor individual claims to the oil company. BP pledges to honor all "legitimate" financial claims, stating June 7 that it has paid nearly $49 million dollars in claims thus far and additionally issued nearly 18,000 checks to those impacted by the oil spill disaster, such as fishermen.
The only problem: it's not just the Gulf fisherman that have been impacted by the oil spill, it's the entire region-and the spill is still spreading.
BP claims that it hasn't denied any of the 37,000 financial claims submitted, though it has paid few of those claims larger than $5,000. So apparently BP is issuing out thousands of small claims, to provide a larger number of issued payments to the public, ignoring the larger claims for now-or big ones that will really hit the company. If those claims are ever paid.
BP says that by end of month, the company will have paid about $50 million to 7,900 individuals and businesses in Louisiana, smaller sums in other states. It's not helping a lot of businesses, some claiming they're on their last legs following the BP oil disaster.
Gulf businesses operated by people like Bill Brett, who manages vacation rentals in Gulf Shores, Alabama, are taking big hits. Last week a top client canceled 117 four-night stays for June, causing an immediate drop of $107,449.59 in expected related revenue.
That's the loss after the business has already filed a financial claim with BP on May 25 for oil spill-related losses, a claim that still hasn't been paid by British Petroleum.
"All the documents they [BP] are wanting [for claims processing and payment], I'll have to put them on a pickup truck," he says.
Reports have been issued by businesses that BP is requiring extensive paperwork for claims, even hundreds and hundreds of pages in required documents for claims submissions. BP hasn't commented on individual complaints about financial claims made to the company, but a British Petroleum rep has referenced an issue with processing business claims, issuing the statement that the oil company plans to "improve the [financial] claims process, because it is a vital part of our [BP's] response to the oil spill."
A vital part--along with BP's ads, to convince Americans that the company is supposedly doing everything it can.