I know I keep saying it, but I told you so. The Observer is reporting that, according to its sources, the EPA is likely to agree to cut its current estimate of oil spilled into the Gulf of Mexico by BP's Macondo well that blew out on April 20. BP has officially disputed the government's estimate, saying that it could be half of the official estimate, citing multiple estimates and lack of actual measurement of the flow. The Observer is reporting that the EPA agrees that estimates are not 100% accurate, signalling the weakness of the government's position.
You'll recall that I repeatedly rang the alarm bell in the middle of July that BP was foot dragging the containment of the flow and the fabrication of facilities that could have captured (and measured) 100% of the flow rate. When the US government agreed that the well would be shut in for the "well integrity test" on July 13, the opportunity to actually measure the total flow was lost forever. BP knew that no government official would have the intestinal fortitude to ever risk releasing more oil into the environment, and won the Battle of the Flow Estimate when Coast Guard Admiral Thad Allen agreed to the high risk operation of shutting in the well without proper contingency plans and inadequate containment facilities in place. Remember that EPA fines are determined by the amount of oil released into the environment, so it remains in BP's interest to minimize that amount. As feared, it appears that they are going to win this battle.
If BP gets away with reducing the flow estimate to half of the current estimate, it will be a masterful manipulation of government regulators and inexperienced administration officials. It appears that with the media now completely ignoring this tragedy, BP will successfully lowball the flow to minimize its liability. To give you an idea of the size of this issue, let's look at a few numbers:
First, the official government estimate for flow into the Gulf is 4.9 million barrels, or about 60,000 barrels per day (this estimate is likely way low due to flow characteristics of these big deepwater wells, but that fact just complicates an already complicated subject, so I'll ignore it for now). Second, at the peak of it's "top hat" containment, BP was capturing about 25,000 barrels of oil per day, even as oil roared into the water around the cap. Here's a little video to remind you of what it looked like at the time:
So. If BP is now claiming that the flow rate was half the estimated 60,000 barrels per day, that means that when they were capturing 25,000 barrels per day, they were capturing close to all of the flow. I don't know about you, but all that oil roaring into the water around the cap looks like a lot more than nothing. Additionally, recall that on July 6, Doug Suttles actually used 53,000 barrels per day as his estimate of flow for the calculation of the amount of dispersant BP wanted to apply at the sea floor. To now assert that the flow rate was half of the government estimate, and far below their own estimate is disingenuous on the face. It appears that when inexperienced administration officials faced BP's steely-eyed negotiators on this issue, they were buffaloed into shutting in the well without measuring the flow. Once again, said steely-eyed negotiators out-negotiated the government negotiators.
So the die is cast. Without media focus on this tragedy, there's nothing any of us can do about this miscarriage of justice. BP wins again.
Oh. BTW. BP turned a profit of $1.79 billion in the third quarter of 2010, at the height of the oil spill crisis. Bob Dudley, BP CEO, is expected to soon communicate to his shareholders that the $39 billion reserve established by the company in 2010 will be more than enough to cover the costs of the blowout and resulting spill clean up.
And the beat goes on.
Bob Cavnar, a 30-year veteran of the oil and gas industry, is the author of Disaster on the Horizon: High Stakes, High Risks, and the Story Behind the Deepwater Well Blowout. He is CEO of Luca Technologies.