Oil Spill Prompts Inspections; Louisiana Prepares


April 29 (Bloomberg) -- The U.S. Interior Department announced immediate inspections of all deep-water drilling rigs in the Gulf of Mexico and Louisiana’s governor declared a state of emergency as oil from a sunken rig drifted within three miles of the state.

The U.S. will “use every single available resource at our disposal,” in response to the spill, President Barack Obama said today. BP Plc, which owns the leaking well, is “ultimately responsible” for paying for the costs of the cleanup, the president said. Oil may land in Louisiana today, in Mississippi two days later, Alabama in three days and Florida in four, according to a government forecast.

Oil is escaping at a rate of about 5,000 barrels a day, five times faster than previously estimated, according to the U.S. Coast Guard. At that rate, the spill will exceed Alaska’s 1989 Exxon Valdez accident by the third week of June, making it the worst U.S. oil spill.

“This has a danger of becoming an utter ecological disaster,” said Ken Medlock, a fellow in energy and resource economics at Rice University’s Baker Institute for Public Policy in Houston, Texas. “This is going to result in remediation costs, and is going to be burdensome, to say the least.”

Louisiana Governor Bobby Jindal declared a state of emergency as state agencies prepared for oil to hit coastal areas within hours. The state requested additional booms from BP and the U.S. Coast Guard to try to keep the spilled oil out of wildlife preserves.

Oil Removal

State agencies have begun an effort to train personnel in techniques to remove oil from wetlands areas, and are working with prisoners from the Department of Corrections to get enough manpower for spill remediation efforts.

BP, unable to staunch the leak that began when a drilling rig burned and sank a week ago, proposed injecting detergent 5,000 feet below the surface in an effort to disperse oil before it can form a slick. U.S. Coast Guard Rear Admiral Mary Landry said she was considering the request after consulting with oil spill experts.

BP has a rig on site to drill another well to the base of the damaged one and plug it. Drilling may start within 48 hours, Doug Suttles, chief operating officer of exploration and production, said today at a press conference in Robert, Louisiana. That work may take three months, Suttles said.

Companies Consulted

The company summoned offshore experts from Exxon Mobil Corp., Chevron Corp. and Royal Dutch Shell Plc to devise other ways to halt the leak, Suttles said today. BP also called in Anadarko Petroleum Corp., its partner in the Macondo field where the rig was drilling.

BP’s shares plunged the most in more than a year on concern that the costs of containing the worsening oil spill will escalate. BP declined 40.8 pence, or 6.5 percent, to 584.2 pence in London, the sharpest drop since December 2008.

Transocean Ltd., which owned the rig, saw its shares fall $6.51, or 7.7 percent, to $78.31 at 3:16 p.m. in composite trading on the New York Stock Exchange.

BP’s costs of operation, previously estimated at $6 million a day “are ramping up” as they bring more people and equipment, Neil Chapman, company spokesman, said in an interview in Robert, Louisiana. He said the company would welcome additional assistance, including help from the U.S. Defense Department.

Visiting the Site

The secretaries of the Interior and Homeland Security Departments will join the head of the Environmental Protection Agency to visit the site tomorrow, Obama said. The president said he has contacted governors of states that may be affected by the spill.

Sixteen federal agencies are responding to the spill, which is edging toward fisheries and shrimping areas. Shrimpers and commercial fishers filed suit yesterday against BP and Transocean in federal court. The lawsuits say Louisiana supplies 25 percent of the seafood for the continental U.S.

Minerals Management Service inspectors will immediately check testing records of blowout preventers at all deep-water rigs, moving to safety inspections of all deep-water oil and gas producing platforms, Mike Saucier, an agency spokesman, said at the press conference in Robert.

Blowout Preventers

Blowout preventers are stacks of valves intended to cut off any unexpected surge of pressure from a well. BP doesn’t know why the blowout preventer failed to avert last week’s explosion and fire that destroyed the rig, Suttles said. Crew aboard Transocean’s Deepwater Horizon activated controls that should have triggered it, he said today.

The families of some of the 11 workers killed as a result of the explosion and sinking of the rig last week have also filed suit.

The spill may cost the insurance industry as much as $1.5 billion in claims, according to Transatlantic Holdings Inc.

Louisiana Governor Jindal, a Republican, said oil may reach wetlands preserves on his state’s coast in two days. The slick was 16 miles (26 kilometers) off the coast of Louisiana yesterday, the Coast Guard said in a statement today.

“A declaration of emergency is necessary to allow state agencies to thoroughly prepare for and respond to any eventuality and to allow federal agencies and federal resources to be deployed if necessary,” Jindal said in an e-mailed release today.

Sensitive Areas

The eastern end of the slick was about 84 miles south of Pensacola, Florida, according to a map posted yesterday by the spill-response command.

“There are berms that have been staged, and are being deployed in some sensitive areas as a preventative measure,” said Scott Hughes, spokesman for Alabama’s Department of Environmental Management. “Hopefully they will prevent or minimize any onshore impacts that might occur.”

Representative Edward Markey, a Massachusetts Democrat who chairs the Select Committee on Energy Independence and Global Warming, cited the spill in announcing a hearing featuring the chief executive officers of major oil companies.

The CEOs of BP, Exxon Mobil, ConocoPhillips, Royal Dutch Shell and Chevron were asked to testify, Markey said in an e- mailed statement.

Representative Henry Waxman, chairman of the House Energy and Commerce Committee, sent letters to the heads of BP and Transocean seeking inspection reports for the Deepwater Horizon rig.

There are 90 rigs searching for oil and natural gas in the U.S. Gulf of Mexico, according to the Minerals Management Service, which oversees drilling in federal waters as part of the Interior Department.

Government Inspectors

Inspectors from the Minerals Management Service visited several rigs owned by Diamond Offshore Drilling Inc. in the last day or two, said Gary Krenek, the Houston-based company’s chief financial officer. It’s normal for the officials to inspect the documentation every so often, he said.

“It’s unusual for them to hit all of the rigs all at one time,” Krenek said.

Statoil ASA welcomes any U.S. review, said Kjersti Torgersen, a Houston-based spokeswoman for the Norwegian company. Statoil complies with requirements that differ from U.S. rules when drilling off the shore of Norway, including the use of acoustic blowout preventative control systems, she said.

It’s too early to know whether the inspections will slow or interrupt drilling that is ongoing in the gulf, said Torgersen.

The Coast Guard has partly restricted traffic in and out of the Mississippi River. Ships were asked to slow down in three of the four lanes to prevent disturbance of an area around the spill, according to a bulletin issued by the Coast Guard yesterday. The main entrance to the river is still open.

To contact the reporters on this story: Jessica Resnick-Ault in New York at jresnickault@bloomberg.net; Jim Polson in New York at jpolson@bloomberg.net.


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