The environment in the news friday, 09 July, 2010

A United Arab Emirates official said Chief Executive Tony Hayward had met officials from Abu Dhabi Investment Authority (ADIA) during a routine visit.

He spoke as speculation mounted of a stake purchase by a Middle East or Asian sovereign wealth fund such as ADIA to help BP ward off takeovers and pay the rising costs of the worst oil spill in U.S. history. One report said Saudi investors were looking to buy 10 to 15 percent.

The UAE official, speaking on condition of anonymity, said Hayward's visit was a scheduled one mainly to discuss BP's concessions with Abu Dhabi National Oil Company (ADNOC).

"With the CEO in Abu Dhabi speaking to the sovereign wealth fund to get some investment it's not surprising that there is some enthusiasm in the market for BP shares," said Mic Mills, head of electronic trading at London-based ETX Capital.

BP has said it has no plans to issue new equity, but bankers say it is on a marketing drive for its stock, which has fallen by half since the Gulf of Mexico well blew out in April.

"This is not part of him traveling the world with a begging bowl asking for equity contributions," a BP spokesman told the UAE's National newspaper. "We are not preparing an equity offering but we're keen that people appreciate the value in BP."

The well being drilled to halt the spill is a week ahead of schedule, the U.S. official overseeing the response to the disaster said on Tuesday. However, mid-August remains the target date for completion of drilling of two relief wells, he added.

BP shares, already on the rise in recent days, rose a further 9 percent in New York trade and reached their highest since June 21 in London on Wednesday, standing 4.5 percent higher at 361.25 pence at 1207 GMT, pushed ahead by the good news on the relief well front as well as by investment speculation.

"Anything that would speed up the process, or any kind of success at all as far as capping it, would be a welcome relief," said Alan Lancz, president at Alan B. Lancz & Associates Inc in Toledo, Ohio.

A third vessel at the leak site that will more than double BP's oil-capture capacity to 53,000 barrels a day from around 25,000 is now partially hooked up, although rough seas are hampering efforts to finish the job. Estimates of the leak's severity vary widely and run as high as a 100,000 barrels per day.

BP is already committed to a $20 billion fund for clean-up and other costs stemming from the offshore oil spill. Its costs to date have topped $3 billion.

The final costs would depend on how much crude has leaked from the well, which blew when a rig exploded on April 20, killing 11 workers.

Analysts said that barring other negative news, the stock may have found a floor.

"We're optimistic that the news can get better from there. The talk about sovereign buyers may not lead to anything, but it certainly means that value-orientated investors are seeing opportunity." said Kurt Wulff, president at McDep LLC, an oil and gas research firm in Needham, Massachusetts.

The spill is wreaking havoc on coastal ecosystems, fishing communities and a tourist industry seen as especially important during a time of high unemployment. It has also thrust itself to the top of President Barack Obama's crowded domestic agenda and presented a tough test for his leadership.

TALKS WITH SOVEREIGN FUNDS

BP executives held talks with sovereign wealth funds in Abu Dhabi, Kuwait, Qatar, and Singapore, seeking a partner who might help it avoid being taken over, a UAE source said on Tuesday.

Abu Dhabi's International Petroleum Investment Company (IPIC), was not interested in buying a stake in BP, a source at the company said. IPIC invests in global oil and gas assets.

A spokesman for ADIA declined to comment.

Sovereign funds holding BP stakes include Norway and Kuwait, controlling about 1.8 percent each, China owns 1.1 percent and Singapore 0.7 percent, according to Thomson Reuters data.

Hayward's meeting in Abu Dhabi concerns an oil concession that dates back to 1939 and is due to expire in 2014.

BP is a minority stakeholder in Abu Dhabi Company for Onshore Oil Operations (ADCO). Talks on renewal have been ongoing between Abu Dhabi authorities and companies involved for years. ADCO is responsible for onshore oil production in the emirate, which holds most of the UAE's oil reserves.

State run ADNOC holds 60 percent of the concession. BP holds 9.5 percent, as do Royal Dutch Shell, Total and Exxon Mobil.

BP confirmed on Wednesday that it had received a letter from the U.S. government, but would not comment further on a report that the Department of Justice had asked on June 23 to be consulted in advance about any asset sales or transactions.

TAR BALLS REACH TEXAS

Tests this week showed tar balls washed up on the Texas coast were from the spill, meaning every U.S. Gulf state -- Louisiana, Mississippi, Alabama, Florida and now Texas -- has been soiled by the largest offshore oil spill in the country's history.

There was a chance disturbed weather over the southern Gulf of Mexico could strengthen into a tropical storm this week, the U.S. National Hurricane Center said.

Although it was not expected to travel over the site of the blown-out BP well, it could come closer than Hurricane Alex, which interrupted the cleanup operations last week.

(Additional reporting by Matthew Bigg in Bay Jimmy, La., Sarah Young in London, Stanley Carvalho in Abu Dhabi and Shaheen Pasha in Dubai, Tom Brown in Miami, Anna Driver in Houston and Ryan Vlastelica in New York; writing by Tamara Walid and Andrew Callus; Editing by MIke Nesbit)

The New York Times, 7 July 2010, by the Associated Press

The Financial Times reported Wednesday that Tony West, the assistant attorney general in charge of the Justice Department’s civil division, wrote to BP’s general counsel, Rupert Bondy, on June 23. Normally the Justice Department does not require advance notice of such deals.

“We have received the letter, and have not yet responded,” a BP press officer, Sheila Williams, said. “We will be responding in due course.”

She declined to say whether the Justice Department had set a deadline.

The letter underlines Washington’s scrutiny of BP as it struggles to cap the oil leak in the Gulf of Mexico, which began on April 20, and to clean up the damage.

On April 30, Attorney General Eric H. Holder announced that he had dispatched a team, which included Mr. West, to New Orleans to monitor the spill.

Under pressure from the Obama administration, BP agreed last month to suspend dividend payments for the rest year and to set up a $20 billion escrow fund to insure that the company pays for the damage.

On June 1, Mr. Holder announced that the Justice Department had started criminal and civil investigations of the disaster, which began with an explosion and fire aboard the Deepwater Horizon drilling platform. Eleven workers died.

The New York Times, 7 July 2010, by the Associated Press

The oldest of these wells were abandoned in the late 1940s, raising the prospect that many deteriorating sealing jobs are already failing.

The AP investigation uncovered particular concern with 3,500 of the neglected wells -- those characterized in federal government records as ''temporarily abandoned.''

Regulations for temporarily abandoned wells require oil companies to present plans to reuse or permanently plug such wells within a year, but the AP found that the rule is routinely circumvented, and that more than 1,000 wells have lingered in that unfinished condition for more than a decade. About three-quarters of temporarily abandoned wells have been left in that status for more than a year, and many since the 1950s and 1960s -- even though sealing procedures for temporary abandonment are not as stringent as those for permanent closures.

As a forceful reminder of the potential harm, the well beneath BP's Deepwater Horizon rig was being sealed with cement for temporary abandonment when it blew April 20, leading to one of the worst environmental disasters in the nation's history. BP alone has abandoned about 600 wells in the Gulf, according to government data.

There's ample reason for worry about all permanently and temporarily abandoned wells -- history shows that at least on land, they often leak. Wells are sealed underwater much as they are on land. And wells on land and in water face similar risk of failure. Plus, records reviewed by the AP show that some offshore wells have failed.

Asked in multiple requests over several weeks how often abandoned wells have failed, the U.S. Environmental Protection Agency acknowledged Tuesday -- as this story was being released -- that it has had to deal with leaks at abandoned wells in shallow state waters of Louisiana and Texas. The U.S. Bureau of Ocean Energy Management, Regulation and Enforcement -- which oversees wells in federal waters -- also acknowledged Tuesday that it has dealt with ''a few'' failed abandoned wells farther out in the Gulf. But the information was released only through the public affairs offices and neither agency provided experts for follow-up.

Experts say abandoned wells can repressurize, much like a dormant volcano can awaken. And years of exposure to sea water and underground pressure can cause cementing and piping to corrode and weaken.

''You can have changing geological conditions where a well could be repressurized,'' said Andy Radford, a petroleum engineer for the American Petroleum Institute trade group.

Whether a well is permanently or temporarily abandoned, improperly applied or aging cement can crack or shrink, independent petroleum engineers say. ''It ages, just like it does on buildings and highways,'' said Roger Anderson, a Columbia University petroleum geophysicist who has conducted research on commercial wells.

Despite the likelihood of leaks large and small, though, abandoned wells are typically not inspected by industry or government.

Oil company representatives insist that the seal on a correctly plugged offshore well will last virtually forever.

''It's in everybody's interest to do it right,'' said Bill Mintz, a spokesman for Apache Corp., which has at least 2,100 abandoned wells in the Gulf, according to government data.

Added spokeswoman Margaret Cooper of Chevron U.S.A., which has at least 2,700 abandoned wells in the Gulf: ''It is our experience that the well abandonment process, when performed in accordance with regulation, has been accomplished safely and successfully.''

Greg Rosenstein, a vice president at Superior Energy Services, a New Orleans company that specializes in this work for offshore wells, maintained that properly plugged wells ''do not normally degrade.'' When pressed, he acknowledged: ''There have been a few occasions where wells that have been plugged have to be entered and re-plugged.''

Officials at the U.S. Interior Department, which oversees the agency that regulates federal leases in the Gulf and elsewhere, did not answer repeated questions regarding why there are no inspections of abandoned wells.

State officials estimate that tens of thousands are badly sealed, either because they predate strict regulation or because the operating companies violated rules. Texas alone has plugged more than 21,000 abandoned wells to control pollution, according to the state comptroller's office.

Offshore, but in state waters, California has resealed scores of its abandoned wells since the 1980s.

In deeper federal waters, though -- despite the similarities in how such wells are constructed and how sealing procedures can fail -- the official policy is out-of-sight, out-of-mind.
Oil spill reaches Lake Pontchartrain

Los Angeles Times, 6 July 2010, by Richard Fausset

More than 1,000 pounds of tar balls and waste are removed from the lake that borders New Orleans. The city gets its drinking water elsewhere, but the oil is still a psychological blow.

Anne Rheams saw them this week floating in the water, small and scattered and about the size of silver dollars. Some had washed up near boat docks, others near lakeside subdivisions — tar balls, most likely from the Deepwater Horizon oil spill.

They made their way to Lake Pontchartrain, the vast estuarine oval that hems New Orleans to the north — and defines the city's character and destiny as much as the winding Mississippi River a few miles south.

By Tuesday, cleanup crews had collected more than 1,020 pounds of tar balls and waste from the lake and the Rigolets, the strait connecting Pontchartrain to Lake Borgne and the Gulf of Mexico.

It was a relatively small smudge for a 630-square-mile lake, and it will not pose a direct public health problem: New Orleans gets its drinking water from the Mississippi River.

But Rheams, executive director of the Lake Pontchartrain Basin Foundation, described the occasion as a psychological blow for New Orleans. The city is more than 100 miles from the gulf, and while the worry and gloom of the catastrophe have penetrated the metropolitan area for months, there was no oil — until now.

"People love the lake, and they live around the lake," Rheams said. "It's really bringing this closer to home for our folks in the basin."

Crews have put 600 feet of boom at a choke point in the Rigolets (pronounced RIG-oh-leez) to prevent more oil from making it to the lake, according to the oil spill response headquarters in New Orleans.

On Monday, more than 20 skimming and decontamination boats were working to clean it up. But on Tuesday, bad weather kept the boats docked, and workers had to try to skim the water from shore, said Coast Guard Petty Officer Kelly Parker.

In the gulf, rough seas again stymied the work of skimming boats and complicated an attempt to hook up a system of pipes that could more than double the roughly 25,000 barrels of oil being captured near the well site.

Rheams, whose group heads the effort to protect Lake Pontchartrain's fragile ecosystem, was trying to be optimistic. She said she hoped that the oil in the lake would be more weathered, and thus less toxic, than the heavy goop in the gulf.

But it was difficult not to be disappointed, given the progress Rheams' nonprofit and others have made on Lake Pontchartrain over the years. In 1962, "no swimming" signs were posted on the shoreline, and many New Orleanians didn't need a sign to be convinced. The lake was enough of a mess to be a local joke, collecting raw sewage, urban runoff and other waste from a basin of more than 2 million people.

In the late 1970s, according to the foundation, the water quality became so bad that the state stopped taking samples.

With concern mounting, the Legislature formed the nonprofit foundation, which eventually applied enough public pressure to limit sewage pumping, stop oil and gas drilling, and halt harmful dredging for shells used as cheap paving material. Among other things, the dredge boats effectively strip-mined the lake bottom, killing bottom-dwelling creatures key to the food chain.

In a region where environmentalism often takes a back seat to economic pressures, Lake Pontchartrain was eventually restored — a place where humans, and animals, could swim again.

Rheams noted with pride that triathletes swim in the lake these days. Pelicans returned in the 1990s. According to the foundation, a herd of manatees was spotted in the lake in 2005, just before Hurricane Katrina — whose storm surge pushed Pontchartrain's waters into the streets and over the rooftops of much of the city.

Now, like many others along the Gulf Coast, Rheams is wondering when, and whether, oil company BP is going to plug its well. During hurricane season, she said, the easterly and southeasterly winds from the gulf tend to blow what's out in the open water through the Rigolets, and close to home.

"The concern we have long-term," she said Tuesday, "is if this oil keeps coming."

AP IMPACT: Gulf awash in 27,000 abandoned wells

The Seattle Times, 6 July 2010, by Jeff Donn and Mitch Weiss, Associated Press Writers

Related

The oldest of these wells were abandoned in the late 1940s, raising the prospect that many deteriorating sealing jobs are already failing.

The AP investigation uncovered particular concern with 3,500 of the neglected wells - those characterized in federal government records as "temporarily abandoned."

Regulations for temporarily abandoned wells require oil companies to present plans to reuse or permanently plug such wells within a year, but the AP found that the rule is routinely circumvented, and that more than 1,000 wells have lingered in that unfinished condition for more than a decade. About three-quarters of temporarily abandoned wells have been left in that status for more than a year, and many since the 1950s and 1960s - eveb though sealing procedures for temporary abandonment are not as stringent as those for permanent closures.

As a forceful reminder of the potential harm, the well beneath BP's Deepwater Horizon rig was being sealed with cement for temporary abandonment when it blew April 20, leading to one of the worst environmental disasters in the nation's history. BP alone has abandoned about 600 wells in the Gulf, according to government data.

There's ample reason for worry about all permanently and temporarily abandoned wells - history shows that at least on land, they often leak. Wells are sealed underwater much as they are on land. And wells on land and in water face similar risk of failure. Plus, records reviewed by the AP show that some offshore wells have failed.

Experts say such wells can repressurize, much like a dormant volcano can awaken. And years of exposure to sea water and underground pressure can cause cementing and piping to corrode and weaken.

"You can have changing geological conditions where a well could be repressurized," said Andy Radford, a petroleum engineer for the American Petroleum Institute trade group.

Whether a well is permanently or temporarily abandoned, improperly applied or aging cement can crack or shrink, independent petroleum engineers say. "It ages, just like it does on buildings and highways," said Roger Anderson, a Columbia University petroleum geophysicist who has conducted research on commercial wells.

Despite the likelihood of leaks large and small, though, abandoned wells are typically not inspected by industry or government.

Oil company representatives insist that the seal on a correctly plugged offshore well will last virtually forever.

"It's in everybody's interest to do it right," said Bill Mintz, a spokesman for Apache Corp., which has at least 2,100 abandoned wells in the Gulf, according to government data.

Officials at the U.S. Interior Department, which oversees the agency that regulates federal leases in the Gulf and elsewhere, did not answer repeated questions regarding why there are no inspections of abandoned wells.

State officials estimate that tens of thousands are badly sealed, either because they predate strict regulation or because the operating companies violated rules. Texas alone has plugged more than 21,000 abandoned wells to control pollution, according to the state comptroller's office.

Offshore, but in state waters, California has resealed scores of its abandoned wells since the 1980s.

In deeper federal waters, though - despite the similarities in how such wells are constructed and how sealing procedures can fail - the official policy is out-of-sight, out-of-mind.

The U.S. Minerals Management Service - the regulatory agency recently renamed the Bureau of Ocean Energy Management, Regulation and Enforcement - relies on rules that have few real teeth. Once an oil company says it will permanently abandon a well, it has one year to complete the job. MMS mandates that work plans be submitted and a report filed afterward.

Unlike California regulators, MMS doesn't typically inspect the job, instead relying on the paperwork.

The fact there are so many wells that have been classified for decades as temporarily abandoned suggests that paperwork can be shuffled at MMS without any real change beneath the water.

With its weak system of enforcement, MMS imposed fines in a relative handful of cases: just $440,000 on seven companies from 2003-2007 for improper plug-and-abandonment work.

Companies permanently abandon wells when they are no longer useful. Afterward, no one looks methodically for leaks, which can't easily be detected from the surface anyway. And no one in government or industry goes underwater to inspect, either.

Government regulators and industry officials say abandoned offshore wells are presumed to be properly plugged and are expected to last indefinitely without leaking. Only when pressed do these officials acknowledge the possibility of leaks.

Despite warnings of leaks, government and industry officials have never bothered to assess the extent of the problem, according to an extensive AP review of records and regulations.

That means no one really knows how many abandoned wells are leaking - and how badly.

The AP documented an extensive history of warnings about environmental dangers related to abandoned wells:

- The General Accountability Office, which investigates for Congress, warned as early as 1994 that leaks from offshore abandoned wells could cause an "environmental disaster," killing fish, shellfish, mammals and plants. In a lengthy report, GAO pressed for inspections of abandonment jobs, but nothing came of the recommendation.

- A 2006 Environmental Protection Agency report took notice of the overall issue regarding wells on land: "Historically, well abandonment and plugging have generally not been properly planned, designed and executed." State officials say many leaks come from wells abandoned in recent decades, when rules supposedly dictated plugging procedures. And repairs are so routine that terms have been coined to describe the work: "replugging" or the "re-abandonment."

- A GAO report in 1989 provided a foreboding prognosis about the health of the country's inland oil and gas wells. The watchdog agency quoted EPA data estimating that up to 17 percent of the nation's wells on land had been improperly plugged. If that percentage applies to offshore wells, there could be 4,600 badly plugged wells in the Gulf of Mexico alone.

- According to a 2001 study commissioned by MMS, agency officials were "concerned that some abandoned oil wells in the Gulf may be leaking crude oil." But nothing came of that warning either.

The study targeted a well 20 miles off Louisiana that had been reported leaking five years after it was plugged and abandoned. The researchers tried unsuccessfully to use satellite radar images to locate the leak.

But John Amos, the geologist who wrote the study, told AP that MMS withheld critical information that could have helped verify if he had pinpointed the problem. "I kind of suspected that this was a project almost designed to fail," Amos said. He said the agency refused to tell him "how big and widespread a problem" they were dealing with in the Gulf.

Amos is now director of SkyTruth, a nonprofit group that uses satellite imagery to detect environmental problems. He still believes that technology could work on abandoned wells.

MMS, though, hasn't followed up on the work. And Interior Department spokeswoman Kendra Barkoff said agency inspectors would be present for permanent plugging jobs "only when something unusual is expected." She also said inspectors would check later "only if there's a noted leak." But she did not respond to requests for examples.

Companies may be tempted to skimp on sealing jobs, which are expensive and slow offshore. It would cost the industry at least $3 billion to permanently plug the 10,500 now-active wells and the 3,500 temporarily abandoned ones in the Gulf, according to an AP analysis of MMS data.

The AP analysis indicates that more than half of the 50,000 wells ever drilled on federal leases beneath the Gulf have now been abandoned. Some 23,500 are permanently sealed. Another 12,500 wells are plugged on one branch while being allowed to remain active in a different branch.

Government records do not indicate how many temporarily abandoned wells have been returned to service over the years. Federal rules require only an annual review of plans to reuse or permanently seal the 3,500 temporarily abandoned wells, but companies are using this provision to keep the wells in limbo indefinitely.

Petroleum engineers say abandoned offshore wells can fail from faulty work, age and drilling-induced or natural changes below the seabed. Maurice Dusseault, a geologist at the University of Waterloo in Ontario, Canada, says U.S. regulators "assume that once a well is sealed, they're safe - but that's not always the case."

Even fully depleted wells can flow again because of fluid or gas injections to stimulate nearby wells or from pressure exerted by underlying aquifers.

Permanently abandoned wells are corked with cement plugs typically 100-200 feet long. They are placed in targeted zones to block the flow of oil or gas. Heavy drilling fluid is added. Offshore, the piping is cut off 15 feet below the sea floor.

Wells are abandoned temporarily for a variety of reasons. The company may be re-evaluating a well's potential or developing a plan to overcome a drilling problem or damage from a storm. Some owners temporarily abandon wells to await a rise in oil prices.

Since companies may put a temporarily abandoned well back into service, such holes typically will be sealed with fewer plugs, less testing and a metal cap to stop corrosion from sea water.

In the Deepwater Horizon blowout, investigators believe the cement may have failed, perhaps never correctly setting deep within the well. Sometimes gas bubbles form as cement hardens, providing an unwanted path for oil or gas to burst through the well and reach the surface.

The other key part of an abandoned wells - the steel pipe liner known as casing - can also rust through over time.

MMS personnel do sometimes spot smaller oily patches on the Gulf during flyovers. Operators are also supposed to report any oil sheens they encounter. Typically, though, MMS learns of a leak only when someone spots it by chance.

In the end, the Coast Guard's Marine Safety Laboratory handles little more than 200 cases of oil pollution each year.

And manager Wayne Gronlund says it's often impossible to tell leaking wells from natural seeps, where untold thousands of barrels of oil and untold millions of cubic feet of gas escape annually through cracks that permeate the sea floor.

Los Angeles Times, July 2010, by Richard Fausset

Anne Rheams saw them this week floating in the water, small and scattered and about the size of silver dollars. Some had washed up near boat docks, others near lakeside subdivisions — tar balls, most likely from the Deepwater Horizon oil spill.

They made their way to Lake Pontchartrain, the vast estuarine oval that hems New Orleans to the north — and defines the city's character and destiny as much as the winding Mississippi River a few miles south.

By Tuesday, cleanup crews had collected more than 1,020 pounds of tar balls and waste from the lake and the Rigolets, the strait connecting Pontchartrain to Lake Borgne and the Gulf of Mexico.

But Rheams, executive director of the Lake Pontchartrain Basin Foundation, described the occasion as a psychological blow for New Orleans. The city is more than 100 miles from the gulf, and while the worry and gloom of the catastrophe have penetrated the metropolitan area for months, there was no oil — until now.

"People love the lake, and they live around the lake," Rheams said. "It's really bringing this closer to home for our folks in the basin."

Crews have put 600 feet of boom at a choke point in the Rigolets (pronounced RIG-oh-leez) to prevent more oil from making it to the lake, according to the oil spill response headquarters in New Orleans.

On Monday, more than 20 skimming and decontamination boats were working to clean it up. But on Tuesday, bad weather kept the boats docked, and workers had to try to skim the water from shore, said Coast Guard Petty Officer Kelly Parker.

In the gulf, rough seas again stymied the work of skimming boats and complicated an attempt to hook up a system of pipes that could more than double the roughly 25,000 barrels of oil being captured near the well site.

Rheams, whose group heads the effort to protect Lake Pontchartrain's fragile ecosystem, was trying to be optimistic. She said she hoped that the oil in the lake would be more weathered, and thus less toxic, than the heavy goop in the gulf.

But it was difficult not to be disappointed, given the progress Rheams' nonprofit and others have made on Lake Pontchartrain over the years. In 1962, "no swimming" signs were posted on the shoreline, and many New Orleanians didn't need a sign to be convinced. The lake was enough of a mess to be a local joke, collecting raw sewage, urban runoff and other waste from a basin of more than 2 million people.

In the late 1970s, according to the foundation, the water quality became so bad that the state stopped taking samples.

With concern mounting, the Legislature formed the nonprofit foundation, which eventually applied enough public pressure to limit sewage pumping, stop oil and gas drilling, and halt harmful dredging for shells used as cheap paving material. Among other things, the dredge boats effectively strip-mined the lake bottom, killing bottom-dwelling creatures key to the food chain.

In a region where environmentalism often takes a back seat to economic pressures, Lake Pontchartrain was eventually restored — a place where humans, and animals, could swim again.

Rheams noted with pride that triathletes swim in the lake these days. Pelicans returned in the 1990s. According to the foundation, a herd of manatees was spotted in the lake in 2005, just before Hurricane Katrina — whose storm surge pushed Pontchartrain's waters into the streets and over the rooftops of much of the city.

Now, like many others along the Gulf Coast, Rheams is wondering when, and whether, oil company BP is going to plug its well. During hurricane season, she said, the easterly and southeasterly winds from the gulf tend to blow what's out in the open water through the Rigolets, and close to home.

"The concern we have long-term," she said Tuesday, "is if this oil keeps coming."