BP Update

BP Update

WASHINGTON - The federal government on Wednesday issued a second set of citations against BP that accused the oil company of violating safety and environmental regulations while drilling the Macondo well that blew out last year in the Gulf of Mexico.

The five "incident of noncompliance" notifications sent to the firm build on earlier allegations that BP ran afoul of seven offshore regulations at the site and could ratchet up the company's potential civil penalties for all of the violations to $36.6 million.

BP said it will appeal the new notices, which zeroed in on alleged problems with the company's management of the well, including an accusation that BP continued drilling even when risks exceeded government-approved limits.

When oil and gas escaped from the Macondo well in April 2010, it ignited aboard the Deepwater Horizon drilling rig, killing 11 workers and unleashing the nation's worst oil spill.

In October, the federal Bureau of Safety and Environmental Enforcement issued 15 citations to BP and two of its contractors on the well - cement contractor Halliburton and rig owner Transocean - based on a federal probe of the Deepwater Horizon disaster.

Bureau Director James Watson said the notices sent Wednesday resulted from a closer look at how the Macondo well was drilled.

"Further review of the evidence demonstrated additional regulatory violations by BP in its drilling and abandonment operations at the Macondo well," Watson said in a statement.

"Our federal regulations exist to ensure safe and environmentally responsible activities," Watson added. "We will continue to be vigilant in enforcing those regulations."

According to the safety bureau, BP violated a rule requiring the company to conduct an accurate pressure integrity test in the well.

The bureau also accused BP of failing to suspend drilling operations at the well when work slipped outside the safe drilling margin that had been identified in the company's government-approved permit to drill.

Drilling margin

That drilling margin represents the difference between the pressure exerted by oil and gas in the underground formation and the counter- vailing weight and pressure of drilling fluids at the site. If the downhole drilling mud pressure exceeds the forces exerted by the formation itself, it can cause cracks to develop.

BP said it would challenge all 12 of its alleged violations before the administrative Interior Board of Land Appeals.

"Drilling margins and related integrity testing played no causal role in the accident," BP spokesman Scott Dean said in a statement.

The notices Wednesday and in October kick off a long process of assessing civil fines.

Each violation carries a penalty of up to $35,000 per day per incident. In the case of the oil spill, violations may have covered just one day or up to 87 days - the time crude was gushing into the Gulf - creating a maximum potential tab per incident of $3.05 million.

Millions more?

The new violations could add from $175,000 to $15.23 million to BP's tab, on top of the maximum $21.32 million in penalties the company was facing from the citations issued earlier.

Rep. Ed Markey, D-Mass., a frequent oil industry critic, said the new alleged violations reinforce BP's culpability for the disaster, but "are unfortunately nothing more than a slap on the wrist for an oil giant like BP - the equivalent of a parking ticket on a Bentley."

Other penalties

The safety bureau's sanctions are separate from penalties expected under the Clean Water Act, which could reach $21 billion for BP, based on estimates that 4.9 million barrels of oil gushed into the Gulf.

Under existing law, the Clean Water Act penalties would be funneled into the federal Oil Spill Liability Trust Fund to help pay for future spills. A coalition of Gulf Coast lawmakers have advanced legislation in the House and Senate that would instead dedicate 80 percent of the assessed penalties to rebuild wetlands, repair coral reefs and other restoration pro-jects in the region.

Divided Republicans

But the prospect divides Republican lawmakers, and some key GOP House members on Wednesday said the money belongs to all American taxpayers - not just those who live along the Gulf of Mexico.

At a House Transportation and Infrastructure Committee hearing on the issue, Rep. Bob Gibbs, R-Ohio, said Gulf Coast states are already cashing in, by getting checks from BP to cover spill response and damages. And, he noted, most of those states also receive a share of royalties from offshore drilling near their shores.

But Rep. Pete Olson, R-Sugar Land, testified that the restoration proposal is a "consensus approach to best address the challenges facing our states."

"A one-size-fits-all approach won't work," Olson insisted. "Gulf Coast communities know what they need for recovery," and this plan allows states to make sure "any economic response reflects local priorities."



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