Jun 1, 2010 8:54 PM by Chris Welty
NEW YORK (AP) - BP is probably sturdy enough to survive the
worst oil spill in U.S. history. But investors are shaving billions
of dollars off its value with every day that crude gushes into the
Gulf of Mexico.
On Tuesday alone, the first trading day since BP's latest
attempt at a fix failed, and the day the government announced it
had opened a criminal probe into the disaster, its stock took a hit
of 15 percent.
The British oil giant is worth $75 billion less on the open
market than it was when the Deepwater Horizon rig exploded six
weeks ago. Other companies involved in the spill - Transocean,
Halliburton and Cameron - have all lost at least 30 percent in
And as oil seeps unchecked into the Gulf, nearby states,
businesses, environmental regulators and injured workers and
cleanup crews are eyeing damages that could total billions more.
"This will be the mother of all liability claims," said Fred
Kuffler, a Philadelphia maritime lawyer who has handled oil-spill
The stakes were raised Tuesday as Attorney General Eric Holder
said federal authorities had opened criminal and civil
investigations into the spill. He did not specify which companies
or individuals might be targets.
BP says it has spent $1 billion so far on fighting and cleaning
the spill. Its liabilities and potential fines are growing by the
day, and it could be August before the company gets control of the
situation by completing two relief wells.
The company has already agreed to pick up the government's
cleanup tab and any "legitimate" damage claims. BP said Tuesday
it has paid out about $40 million to cover about half of the 30,000
claims it has received.
At least 130 lawsuits have been filed seeking damages for
business lost from the spill. Most are from seafood processing
plants, charter boat captains, hotels, restaurants and others who
make their living from the sea or from coastal tourism.
Based on federal law, BP and partners Anadarko Petroleum and
Mitsui & Co. also face a minimum fine of $1,000 per barrel of oil
spilled, said Eric Schaeffer, who led the Environmental Protection
Agency's enforcement office from 1997 to 2002. Schaeffer is now the
director of the Environmental Integrity Project.
The government estimates 20 million to 43 million gallons of
crude have gushed into the Gulf over the past six weeks. If the
spill were contained today, the fines would add up to between $480
million and $1 billion.
Already, the Gulf disaster has eclipsed the 1989 Exxon Valdez
spill, which, after two decades of lawsuits, cost Exxon Mobil $4.5
billion. That's roughly $654 per gallon in today's dollars,
according to Blake Fernandez, an analyst with Howard Weil, an
energy investment firm with headquarters in New Orleans.
Experts are increasingly looking at the Valdez disaster as a
conservative model because the Gulf Coast is home to far more
people and businesses than Alaska, where the Valdez ran aground.
In addition to cleanup costs, the government will probably also
ask BP to pay for restoring an oil-soaked coastline - including
repairs to sensitive marshlands, oyster beds and fisheries, Kuffler
Doug Inkley, a senior scientist for the National Wildlife
Federation who monitored the Gulf spill from a boat, said the
damage is nearly impossible to fix.
Crews could try to burn marshlands to get rid of the oil, or
they could send people in with rags to try to mop it up by hand.
But both solutions could do more damage than help, Inkley said.
What's especially troublesome to many scientists is BP's use of
chemicals to disperse the crude plumes. They argue that the
dispersants could harm fish larvae and other creatures living below
BP also will face claims from commercial fishermen, hotels,
party boat operators, and other businesses that depend on the Gulf
"Think of everything you find at a beach front resort like jet
skis and trip planners. The contractors involved, they will all
have claims," Kuffler said.
Altogether, the impact on tourism, fishing, property values and
other damages could reach $10 billion to $15 billion, said Ahmad
Ijaz, an economist for the center for business and economic
research at the University of Alabama.
In Florida, the $60 billion tourism industry can probably
withstand the impact, but other industries like commercial fishing
probably cannot, said Amy Baker, the state's top economist. Fishing
has already been heavily restricted along the Gulf.
Commercial fisheries in Louisiana bring more than $275 million
of seafood annually to Louisiana docks, and recreational fishing
generates an estimated $1 billion in retail sales. State officials
say up to 12,000 jobs may be lost from the spill.
"From just a sociological standpoint ... pretty much every crab
and oyster processor is shut down," state Rep. Spencer Collier
said. "So even outside the numbers, just looking at the reality of
it, it's significant."
Then there are contract workers helping with the cleanup who say
they have suffered respiratory problems because of exposure to the
BP is self-insured, and analysts say it has enough money to pay
for the growing calamity without putting the company at risk of
Most of its legal costs will be spread out over years, if not
decades, as suits wind their way through the courts. The company
can also borrow up to $15 billion from various credit lines to pay
for cleanup and other costs without overextending debt beyond
BP also will benefit from what has become an extremely lucrative
oil production business. As long as oil prices stay above $60 a
barrel, BP's other oil rigs will make enough money to maintain
company operations and pay shareholders the expected $10 billion in
dividends, Fernandez said.
"They could use the rest to pay down debt or whatever," he
Associated Press Writers Jane Wardell in London, Travis Reed and
Curt Anderson in Miami, Melinda Deslatte in Baton Rouge, Sheila
Hardwell in Jackson, Miss., and John Zenor in Montgomery, Ala.,
contributed to this report.
1 hour ago