More trouble on the horizon for BP as oil moves towards Florida

Company fears tidal wave of lawsuits as slick nears tourist areas
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The US Coast Guard revealed yesterday that oil from the BP spill had touched barrier islands in both Mississippi and Alabama for the first time, as the London-based company encountered a snag in its latest efforts to tame the sub-ocean geyser.

"Now the threat is shifting to Mississippi and Alabama," Admiral Thad Allen of the US Coast Guard confirmed. Meanwhile, officials said a thin sheen of oil had been spotted just nine miles off the beaches of Pensacola, one of the most popular resort towns in the Florida Panhandle.

The movement of the slick towards tourist areas will further fuel anger in the region at BP. It has now embarked on the placement of a "top-hat" dome over the broken well opening. Engineers hope that if it can be placed neatly, about 80 per cent of the leaking oil can be funnelled to tankers above.

By early yesterday, a robotic submersible had completed one cut in the ruptured pipe that used to rise from the well to the surface but now lies tangled on the sea bed. However, the diamond-tipped saw became stuck when work began on making a second cut, Admiral Allen said.

After a 13 per cent fall in London trading on Tuesday, BP shares fell another 2.5 per cent yesterday. Bad news has buffeted the company ever since it was forced last Saturday to abandon its "top kill" operation that was supposed to drive the oil back down into the well to allow it to be sealed shut. The company's woes were compounded on Tuesday by the announcement that the US government has opened criminal and civil probes into the circumstances of the accident. Details of what the investigations are likely to look like are still not clear, but it is assumed that BP itself might be targeted, as well as some individuals. So far, no subpoenas have been issued, but that is expected to change soon.

President Barack Obama last night highlighted suspicions that the oil spill was an accident that could have been avoided.

"The catastrophe unfolding in the Gulf right now may prove to be a result of human error – or corporations taking dangerous short-cuts that compromised safety," he said in a speech in Pittsburgh.

"Stopping this oil spill and containing its damage is necessarily the top priority not just of my administration but of the entire country."

Under the microscope with BP are the other main companies that were involved in the drilling of the well. They are Swiss-based Transocean, which owned the doomed Deepwater Horizon rig, Halliburton which had been contracted to do the cementing of the well, and Cameron, the company that designed and built the blow-out preventer, a five-storey stack of valves and sheer rams that was meant to shut off the flow of oil after the blow-out but did not.

It is thought that investigators will search for possible violations in the days and weeks before the 20 April disaster of a number of US laws, including the Clean Water Act, the Oil Pollution Act and the Endangered Species Act. In a statement, BP has said it will cooperate with any government investigations.

Even until a few days ago, top BP executives were publicly predicting that the oil spill would not cause coastal damage beyond Louisiana. The fact that the oil has already reached two more states and may reach Florida before the end of this week significantly deepens the company's problems. BP says it has spent nearly $1bn (£680m) so far on fighting and cleaning the spill and a new tide of demands for compensation may well follow.

BP has already paid $36m to settle claims for economic loss and damage from the leak. Experts say that based on federal law, BP and its partners also face a minimum fine of $1,000 per barrel of oil spilled. If the spill were contained today, the fines would add up to between $480m and $1bn. Already, the Gulf disaster has eclipsed the 1989 Exxon Valdez spill, which, after two decades of lawsuits, cost Exxon Mobil $4.5bn.

Mr Obama's policy programme in his second year in office risks being overwhelmed by the ongoing catastrophe in the Gulf of Mexico. While some have called it "Mr Obama's Hurricane Katrina", at least that event itself was over quickly. The spill continues, however, causing others to recall how the Iran hostage crisis that lasted for 444 days, from 1979 to 1981, crippled a large part of the presidency of Jimmy Carter.

So far, nothing has been successful in curtailing the leak. Even if the latest attempt works, 20 per cent of the current leak will continue unabated at least until August, when BP expects to complete the drilling of two relief wells that will allow them at last to shut off the original well that is leaking. That means many more weeks of an expanding slick on the surface of the sea and growing plumes of oil under the water.

The cost to BP

$40m The amount BP has paid out so far in compensation. The company estimates that in total spill has cost it more than $1bn

$1,000 The minimum fine expected to be levied on the company for every barrel of oil spilt into the Gulf of Mexico

480,000 Conservative estimates of the number of barrels to have leaked from the Deepwater Horizon. Some experts claim it could be as high as 1 million – and up to 19,000 barrels are leaking from the rig every day

$10bn The estimated cost of the spill to the tourism industry of the gulf coast, although the figure may eventually be significantly higher

12,000 The number of Louisiana fishing jobs that could be lost