BP Producing $1.4 Million a Day from Oil Spill

NEW ORLEANS (Hollywood Backstage) - British Petroleum says they are producing between 7,000 and 11,000 barrels a day from the BP oil spill through the LMRP containment cap. Questions remain unanswered. How much oil is leaking from the seal surrounding the well? Will the federal government receive royalties from the captured oil?

Coast Guard Admiral Thad Allen said today that the NOAA team headed by Jane Lubchenco which is completely independent from BP is analyzing the spill leaks around the containment cap and they will provide a flow rate once the production is ramped up to 20,000 barrels a day. Current government estimates of the spill are based on two models. One model predicts the flow right now at 12,000 to 19,000 barrels per day. The other model estimates the flow at 12,000 barrels to 25,000 barrels per day. Admiral Allen stressed that these are estimates. The early initial estimates of 1,000 barrels per day and later 5,000 barrels per day are now obviously not correct.

So much oil is being produced right now that they have ordered larger rigs which are now on route to the spill site to bring in up to 20,000 barrels per day. 20,000 barrels equals 840,000 gallons of oil per day. The current price for a gallon of crude is around $70 per barrel. The U.S. uses about 378 million gallons of gasoline per day.

Admiral Allen noted in his White House Press Briefing that concerns of the structural damage within the well bore are the reason that pressure on the oil well must be relieved and the oil must be withdrawn from the well. To seal the well completely from the top could cause pressure to build up inside the well and force the oil to pour through the damaged well structure. That could make the situation much worse. The oil could flow outside the well and up through the bottom of the sea floor -- a much more catastrophic situation where the well could not be contained and the flow would continue until the reservoir was depleted -- unimaginable destruction.

According to Adm. Allen, oil will continue to flow in the Gulf of Mexico for the foreseeable future. The oil will not be stopped until the relief well intersects with the well bore just above the oil reservoir and engineers are successful in cementing a seal at the base of the well. Adm. Allen refers to that final step as the "bottom kill" which should take place in August.

In the event of a hurricane, the containment cap may have to be disengaged and the oil would again flow unimpeded until the danger passes. Scientists are predicting one of the worst hurricane seasons on record.

The cleanup effort will take many months, at least through the fall and perhaps through April of next year and beyond. The restoration of the natural habitat and wildlife of the Gulf of Mexico will go on for years. This oil spill scenario has now far exceeded Alaska's Exxon Valdez spill.

BP America CEO, Lamar McKay, has repeatedly stated in his testimony to congress that BP is a responsible party and that the $75 million dollar cap on liability will not limit BP's liability. They will "pay all legitimate claims" related to the spill.

UPDATE: June 8, 2010

HOUSTON -- As part of its commitment to restore the environment and habitats in the Gulf Coast region, BP today announced that it will donate the net revenue from oil recovered from the MC252 spill to create a new wildlife fund to create, restore, improve and protect wildlife habitat along the coastline of Louisiana, Mississippi, Alabama, and Florida.  The creation of this fund is over and above BP’s obligations under the Oil Pollution Act of 1990.  

BP’s net revenue from the sale of oil recovered from skimming operations and the well containment systems will be deposited into this newly-created fund.  At this point, BP cannot predict the total of amount of net revenue that will be deposited into the wildlife fund. The amount of funding will be contingent upon the amount of oil collected during operations and the price at which the oil is sold. BP will provide regular updates on the amount of proceeds being deposited into the fund.  

“We’ve already launched the largest environmental response in history, and BP is committed to protecting the ecosystems and wildlife on the Gulf Coast. Proceeds from the sale of oil recovered from the MC252 well will be used to further this commitment,” said Tony Hayward, BP’s chief executive officer. “We believe these funds will have a significant positive impact on the environment in this region.” 

The creation of wildlife fund is the latest example of BP’s commitment to help the Gulf Coast states and their residents.  On May 24, 2010, BP announced a commitment of up to $500 million for an open research program studying the impact of the Deepwater Horizon incident, and its associated response, on the marine and shoreline environment of the Gulf of Mexico.