BP oil spill 2010: How much will it cost?

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Oil spills are expensive. Nearly two weeks after a massive explosion in an oil rig killed 11 workers and triggered a massive oil spill in the Gulf of Mexico, the cleanup and other associated costs are rapidly mounting and, by one estimate, will total at least $12.5 billion.

BP is already spending between $6 million and $7 million per day on cleanup. That doesn't include state and federal spending – including the deployment of thousands of National Guard units to the Gulf – that BP will likely be held responsible for.

So what’s the bill?

“I don’t think anybody knows at this point,” says Mr. Eisenbeis. “We don’t know when the gusher is going to be capped. Every day it goes on longer than anticipated, more and more [the costs mount].”

For starters, BP is looking at $12.5 billion, minimum, says David Kotok, chairman and chief investment officer of Cumberland Advisors.

“This will be a financial calamity for many firms, not just BP and its partners and service providers,” he said in a statement. “Their liabilities are immense and must not be underestimated. The first estimate of $12.5 billion is only a starter.”

Included in that $12.5 billion in potential costs is a laundry list of expenses, says Eisenbeis.

Depending on how the situation unfolds, the oil behemoth may be footing the bill for costs of drilling and capping spill, costs associated with containing and picking up oil that has been spilled, damages to wildlife, damage to commercial fisheries, damages involving tourism and recreational industries, costs associated with disruption of shipping.

That’s not to mention litigation costs and fines, adds Eisenbeis.

There are questions as to whether BP may have violated US safety regulations, and a number of private citizens affected by the spill are organizing class action lawsuits.

“These are all things that can really bump costs up,” says Eisenbeis. “It’s obviously going to be greater than Exxon Valdez,” he says of the 1989 oil spill that cost Exxon more than $7 billion. “That’s because of the sheer volume pumping into the Gulf right now and the fact that Exxon Valdez was a known volume on a ship, whereas this is an unknown volume.”

The question is whether BP will actually pay, and how much.

“Of course, BP’s a foreign company and we don’t know to what extent there might be some indemnification provided by British government,” says Eisenbeis. “If Britain backs [BP] up because it’s deemed too big to fail, costs may be shouldered by British taxpayers.”

BP’s cleanup costs are still hazy, but costs to BP are clear as day: The 52-week high for the oil behemoth’s stock is $62.38. Monday morning’s trading low? $47.82

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Alpharius
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BP Offers Fishermen a Month's Pay, From Slow Season

Fishermen along the Gulf Coast are unhappy about BP's plan to compensate them for lost wages

The oil giant's formula for calculating those payments is causing controversy and distress among workers who make their living at sea. The compensation proposal is based on wages from their slowest earning season.

According to the fishermen, the oil company [BP 49.41 -0.922 (-1.83%) ] has offered them one month’s wages, using a formula that takes a three-year average of their income between January and March—their least productive season.

Separately, the company has hired idle fishermen to prepare the shoreline, in the event that oil reaches the beaches, to lay boom and to use their own boats to help BP in other oil spill-related efforts.

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Alpharius
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BP Offers Fishermen a Month's Pay, From Slow Season

Fishermen along the Gulf Coast are unhappy about BP's plan to compensate them for lost wages

The oil giant's formula for calculating those payments is causing controversy and distress among workers who make their living at sea. The compensation proposal is based on wages from their slowest earning season.

According to the fishermen, the oil company [BP 49.41 -0.922 (-1.83%) ] has offered them one month’s wages, using a formula that takes a three-year average of their income between January and March—their least productive season.

The oil disaster started on April 20, just as the fishermen’s high season was beginning. “Shrimp season is getting ready to open,” fisherman Lester Ansardi of Hopevale, La, told CNBC Wednesday. “Crab season is just picking up.”

Separately, the company has hired idle fishermen to prepare the shoreline, in the event that oil reaches the beaches, to lay boom and to use their own boats to help BP in other oil spill-related efforts.
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Alpharius
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BP CEO talks oil spill compensation

Hayward reiterated BP officials' earlier statements
that the company intends to take care of anyone who
is adversely affected by the spill. BP has established
a claims hot line, though questions remain about
how the claims process will work.

Q: Whom can I call if I have a claim?

A: BP established a hot line for spill-related damage
claims at 1-800-440-0858. Many have reported
difficulties in getting through to operators.

Q: What can I expect when I call the claims number?

A: When you call the toll-free number, an operator
will ask you a list of questions and your information
will be logged into a system. An adjustor will call
you and determine whether your claim can be
handled over the phone or if it needs to be dealt
with in person.

Q: What sort of claims resources is BP bringing to
the Panhandle?

A: Currently there is one adjustor in Florida and five
more due to arrive soon. There is an additional pool
of adjustors that can be dispatched to heavy-need
areas as required.

Q: If I own a hotel, rental properties or a charter
boat and I am starting to see cancellations, what
should I do?

A: BP says that larger and more complex claims may
require additional investigation and documentation prior to evaluation and resolution.

A company spokeswoman says that business owners
with cancellations and anticipated impact on future
business should contact the claims hot line as soon
as possible.

BP encourages business to file open-ended claims
and continue to track lost revenue prior to meeting
with adjustors.

Some attorneys say to contact them, rather than go
through the BP claims system.

Q: Should I sign any paperwork from BP?

A: Florida Attorney General Bill McCollum cautions
Florida residents not to sign any documents
provided to them in return for money from BP or
anyone else until they know the extent of their loss,
which may be significantly higher than the money
being paid. Pensacola attorney Mike Papantonio also
cautioned against signing any paperwork.

BP came under fire when it asked hundreds of
fishermen it hired to consult on the cleanup to sign
contracts that included a waiver of their right to sue
BP. The company said it has revoked those waivers.

Q: I can tell an adjustor what the immediate effects
the oil event might have on my business, but what
about any unforeseen problems that won't
materialize for years, maybe even a decade?

Continued...

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Alpharius
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Q: How does BP determine what constitutes a
legitimate claim?

A: "The easy ones are easy, the obvious ones are
obvious, and the difficult ones are in the middle, the
gray zone," Hayward said. "And that is what we are
working on. The obvious ones are obvious, right? T
he legitimate obvious ones. The obvious non-
legitimate ones are equally obvious. And the
challenge is in the gray zone, and that is what we
are working on."

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Alpharius
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Apr. 20, 2010 9:28 am

Clean-up costs are running at $6m per day, and could rise as high as $15bn over the course of the effort. Twenty lawsuits have already been filed against BP. Hefty fines are likely. And the damage to BP's reputation is immeasurable, with some experts predicting that the company could even be forced to abandon its carefully built and incredibly valuable BP brand. In short, the Deepwater Horizon disaster is showing us that environmental and social risks are also financial risks.

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Alpharius
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Apr. 20, 2010 9:28 am

I hope you listened to Greg Palast on Randi to get the BP compensation plan. Or you could just look at the Exxon Valdez and Prince William Sound today to see it in operation. That and the history behind the Valdez where BP, the actual corporation involved in the drilling and safety in shipping issues in Alaska, avoided all the safety measures and lied about what it did not do. Bottom line, the "spill" could have been contained had they done a few simple things.

Legal weasel words abound, and "legitimate" is a lawyer's meat. They will dispute which contractor is responsible for how much, and they will drag out the process to exhaust the poor watermen and coastal residents whose lives will be devastated and work rendered worthless. Some may get dimes on the dollar, but others will spend considerable sums to win only to have the win cut up and whittled down to less than a draw.

For BP, this is like Rothelsberger being charged with rape again. It is a big enough deal to impact the business, but the legal liabilities are capped low enough to make shortcuts on safety worth the losses. It is more about reputation than finance.

All those critics of trial lawyers need to watch the real trivia freaks at work as they whore for corporate. Watch them swarm and feed.

And the promises. Watch them dissolve while the oil sticks around.

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DRC
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Jul. 31, 2007 3:01 pm

Sorry, you’re at the wrong thread.

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Alpharius
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Apr. 20, 2010 9:28 am

I did try to locate Greg Palast Piece.

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Alpharius
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Apr. 20, 2010 9:28 am

America has some wind farms throughout the country; however they are small in amounts. It appears as though the harder someone works for a wind farm; the harder a lot more individuals push back away from a wind farm. With the BP oil spill increasing gas prices, it's also raising wind power stock prices. The 2 seem to go hand in hand. I think that we will finally start to make a dent on our environment. The oil spill in Mexico wasn't a downfall for everybody. Actually, wind power promoters are at long last receiving the consideration they deserve due to this tragedy.

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