Oil spill panel calls for tighter federal rules, new fees for drilling

The presidential oil spill commission said Tuesday that the federal government should require tougher regulation, stiffer fines and a new industry-run safety organization, recommendations that face an uncertain future in the new Congress.

Former senator Bob Graham (D-Fla.), one of the commission's co-chairmen, said that the Deepwater Horizon accident was "both foreseeable and preventable," and that Congress and the administration needed to enact reforms in order to prevent a repeat of the massive BP oil spill in the Gulf of Mexico last year.

"I am sad to say that part of the answer is the fact that our government helped let it happen," Graham said. "Our regulators were consistently outmatched."

The panel proposed several safeguards aimed at strengthening regulators' control over the oil and gas industry, including establishing an independent safety agency within the Interior Department that would be headed by someone for a fixed term in order to insulate the appointee from political interference. Graham said such a person should have "a background of both science and management."

It also called for funding the regulatory agency that oversees offshore drilling, the Bureau of Ocean Energy Management, Regulation and Enforcement (BOEMRE), with fees from the companies who are tapping into the nation's petroleum resource.

William K. Reilly, the commission's other co-chairman, emphasized that it would be a mistake to focus just on the three companies involved in last year's accident. "The solution to the problem has to be industry-wide."

Graham, who along with Reilly will testify before both the Senate Committee on Energy and Natural Resources and the House Natural Resources Committee on Jan. 26, said he hoped the "searing impact" of the Deepwater Horizon explosion and its aftermath would "override an ideological preference for less government, less government intrusion and less government cost" that could impede legislative action.

Both Louisiana Sens. Mary Landrieu (D) and David Vitter (R) endorsed the panel's recommendation that 80 percent of the Clean Water Act fines and penalties linked to the Gulf of Mexico oil spill go to environmental restoration. Landrieu said it would give "added ammunition" to a proposal that already has White House support.

But in a sign of how the two parties remain divided on how to regulate drilling, Landrieu said the report found a path forward for deepwater drilling while Vitter criticized it for failing to do so.

"The report could have easily said 'end of deepwater drilling,' but it doesn't," Landrieu told reporters in a conference call. "I think that's the really big takeaway - that this commission, having examined a horrible incident that occurred, has basically concluded that deepwater can be done safely."

In an interview, Vitter said he was concerned the report "didn't make any statement, any observation about the gulf still almost being shut down, nine months after the fact."

He added that although he was open to creating a new safety office within Interior, and didn't object outright to the idea of imposing fees to help regulate offshore energy exploration, he lacked confidence in the administration's ability to oversee drilling operations.

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Shell diverting LNG to Japan to help offset energy supply drop; lifts oil output targets

AMSTERDAM - Royal Dutch Shell PLC said Tuesday it plans to divert liquefied natural gas and fuel oil to Japan to help replace energy sources damaged in last week's earthquake and tsunami.

Shell, Europe's largest publicly listed oil company, also said it planned to boost its oil production to 3.7 million barrels per day by 2014, with CEO Peter Voser vowing that a "wave of new production" will continue.

Voser said Shell's refining assets in Japan were not damaged in Friday's disaster but it was too early to say how much assistance the government wants and Shell can give. Major LNG companies need to cooperate on rerouting planned shipments and it is not clear how much capacity in Japan can be used to generate electricity from LNG.

The country may in the meantime use fuel oil or crude oil power plants that are only slightly damaged. Voser said LNG diversions could lead to price increases in Europe in the short term.

Shell is not planning for scenarios in which global demand or prices for oil and gas decline on a long-term basis. Growing populations, improving living standards and a lag in investment mean that energy prices are still headed up, Voser said.

Shell's new output target compared with production in 2010 of just 3.34 million barrels of oil and equivalents, which was up from 3.14 million in 2009 thanks to heavy investments in places such as Russia's Sakhalin Island and offshore Qatar, both LNG projects.

Voser said Shell had made mistakes around the turn of the century, when it was pumping more than 4 million barrels of oil per day, not so much because of the major accounting scandal it suffered - in which managers were caught overestimating proven reserves - but instead because executives at the time hadn't spent enough on new capacity.

He warned an oil company can cut costs too far and enter a shrinking phase with limited investment and financing options. That won't happen on his watch, he told reporters during an exposition on the company's strategic plans for the coming year and beyond.

"We're 'back' now, and I can tell you we are not going back to where we were 10 years ago," he said.

Shell's annual report released Tuesday said the company added more to proved reserves than it pumped in 2010, and now has more than 14 billion barrels of proved reserves - enough for an estimated 11 years of operations.

Voser said the company plans $100 billion in capital spending in 2011-2014 to continue growing.

The company cited a list of 20 projects under construction and another 30 under consideration that will take it through 2020.

Chief Financial Officer Simon Henry gave a quick breakdown of some planned investments, including $5 billion into heavy oil projects in places like Canada and Oman, $12 billion in "tight" gas and oil exploration in the U.S. and Brazil, and $20 billion each into deep water development projects and integrated gas facilities.

The company is planning for oil prices of $60-$80 - well below current rates - and said the company would be able to support investment plans of $25-$27 billion per year and still maintain $10 billion in annual dividend payouts with oil at $50 per barrel.

In February Shell reported full year 2010 net profit of $20.1 billion, up from $12.5 billion in 2009, as production rose, inventory values increased, and refining operations improved.

Voser said the company plans to cut $1 billion in costs from its "downstream," or refining and chemicals operations this year, though employment will remain about flat companywide at around 93,000, after 7,000 jobs were cut last year.

Copyright 2011 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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International Energy Agency says Libyan oil exports halted, production down to a 'trickle'

CAIRO - Libya's oil exports have "ground to a halt" because of the fighting between rebels and pro-government forces, and it could be months before the country's crude resurfaces on world markets, the International Energy Agency said Tuesday.

The Paris-based group, whose members are mainly oil-consuming industrial nations such as the United States, also said that production from the North African nation appeared to have "slowed to a trickle" as the fighting and mounting unrest prompted an exodus of foreign oil workers and led international companies to halt their operations in the country.

The IEA said that while the rebellion against Libyan leader Moammar Gadhafi continues, "what is becoming clearer is the country's oil production and exports could be off the market for many months due to both war-inflicted damage on oil infrastructure and international sanctions."

The fighting in Libya, which has served as the stage for the most violent of the anti-regime protests sweeping the Middle East, drove oil prices as high as almost $107 per barrel last week on the New York Mercantile Exchange before they quickly cooled after the massive earthquake that ravaged Japan. The U.S. benchmark crude futures contract was around $99 per barrel in electronic trading on the Merc on Tuesday.

The assessment, presented in the IEA's latest month oil market report, reaffirms the belief of many in the market that Libya's vital oil industry was all-but-shuttered amid the fighting. The country sits atop Africa's largest proven reserves of conventional crude, and had produced about 1.6 million barrels per day. Most of its exports went to Europe.

At least three of the major ports in the east are no longer exporting, and an official with the Arabian Gulf Oil Co. in the east said Monday that they were not expecting another tanker until mid-April from the terminal in Tobruk, near the Egyptian border.

Other ports have been shut down, with the Ras Lanouf facility suffering a fire at a kerosene storage facility. Even if they are open, tankers have steered clear because of the shelling by pro-Gadhafi forces.

Similarly, analysts believe that what little production remains is likely to have been shut in, or will be shut down, given that the net outcome of shipping oil through pipelines during a military campaign could easily be a major explosion.

Gadhafi's forces have been pushing to recapture the eastern ports, which represent at least 65 percent of the country's export capacity. The country's oil minister has said output is down by about two-thirds of its normal level, but the fighting, communication cuts and other challenges have made it impossible to independently verify the figures put forward both by the government or the rebels.

Many analysts believe that they may try to restart the fields with what limited oil labor force available to the state-run National Oil Co., but that such a step would be essentially irrelevant given that there appear to be few willing buyers of Libyan oil because of the mounting international sanctions on the country.

"While approximately half the country's output was halted in the first few weeks of the rebellion, by 11 March it appeared that production had slowed to a trickle, not least because of the fighting," the IEA said. "Indeed, it is understood that most oil field operations have been shut-in or sharply curtailed, with transport routes choked off."

Other members of the 12-nation Organization of the Petroleum Exporting Countries - most notably Saudi Arabia - have ramped up production to offset the loss of Libyan oil. Several minister have said there are informal discussions about whether there was a need to meet ahead of their June gathering to determine whether their output quotas needed to be revised to cool surging prices.

The IEA said OPEC crude oil output was down slightly less than 100,000 barrels per day in February, with increases from other members of the producer bloc largely offsetting the drop in Libya's production.

Copyright 2011 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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Increase in oil revenue amid unrest in Arab world gives Russia some breathing room

MOSCOW - With the price of oil climbing to more than $100 a barrel, Russia has a little more weight to throw around on the world stage, and it is doing just that.

The stepped-up flow of petrodollars into the government's coffers relieves what had been a worrisome budget deficit and lessens the urgency of reform. Good relations with the West - and especially the "reset" with Washington - are not quite so pressing when the economy here is in good shape.

Russia is benefiting tangibly from the turmoil in the Middle East and North Africa. Urals crude sold for $113 this week, up from $75 a year ago. Of that, $76.50 goes into the Russian treasury. And the spike in oil income has compensated for growing weakness elsewhere. It arrived just as Gazprom - the natural-gas giant that until recently was a potent weapon in Russia's foreign policy - has seen its clout in Europe washing away amid a flood of competition.

An emboldened Prime Minister Vladimir Putin was in Brussels in late February angrily lecturing the Europeans on energy policy and the uprisings in the Arab world. After months in which Moscow and Washington have tried to put their differences over Georgia on a back burner, President Dmitry Medvedev two weeks ago accused the country of threatening the security of the 2014 Winter Olympics, to be held in Sochi, near the border of a breakaway region of Georgia.

Earlier this year, Russia's warming relations with Poland went sour over the handling of the investigation into the plane crash that killed Poland's president and other top leaders this past spring.

But with increased oil revenue also comes the danger of complacency. Bureaucrats, defense contractors, pensioners and workers in construction and finance all stand to gain from the money coming in, along with the oil companies. But the cash also feeds corruption, encourages increased financial opacity and discourages attempts to shake up the system - all of which could spell trouble for Russia down the road.

"All of the dominant groups in Russia get a share of the increased oil revenue," said Alexander Auzan, an economist and adviser to Medvedev. "Yet it contradicts their long-term interests."

Largest oil producer

It's a powerful prop for the status quo - which Auzan and others say is unsustainable.

But as Sergei Guriev, head of the New Economic School in Moscow, pointed out, any change is going to involve a cost for someone, so why take the risk if the money is flowing in?

Russia is currently the world's largest oil producer. When the price last spiked, in 2007, Moscow was flooded with money and people close to Putin were suggesting that Russia was genuinely self-sufficient and had no need to engage more deeply with the West. The economic crisis the following year brought that talk to an abrupt end, and Medvedev began pushing for a Western-oriented program of modernization and diversification away from dependence on energy exports.

The Kremlin moved to stimulate the economy in 2008 by increasing government salaries and hiking pensions by 35 percent. Now it is stuck with those increases. With oil revenue providing 40 percent of the Russian budget, the Gaidar Institute for Economic Policy here has calculated that at any price less than $105 a barrel the government will be in the red.

That tempers any inclination toward hubris, said Daniel Treisman, a political scientist at UCLA who follows Russian developments. The Kremlin was looking at a difficult financial crunch, with parliamentary elections coming late this year and a presidential election next March, so the timing of this rise in revenue is more a relief than a goad to aggressive behavior.

"We don't need high prices," said Leonid Grigoriev, an economist and former World Bank adviser. "We need good relations, a long-term market and reasonable prices," which he put in the $70-to-$90 range.

Russia will not turn its back on the West, by any means, he said. But, especially in an election year, its leaders may be more vocal in pointing up differences with the West. In 2010, Russia had enough problems at home that it was actively trying to avoid them abroad; now, with money to address domestic issues, that caution may not be so evident.

Treisman, like many others, did not think much would ever come of Medvedev's modernization plans - it's not the sort of change, he said, that can be ordered from the top down. But the oil bulge makes the Westernization of the Russian economy less likely. It helps big companies - which, Grigoriev said, already dominate the economy to a much greater extent than in other developed countries - and it hurts small ones, where jobs and creativity tend to be nurtured.

Information technology firms, with high labor costs, will suffer, Guriev said, and they are central to Medvedev's vision for the future of Russia.

Gazprom loses clout

Part of what got Putin so riled up in Brussels was Europe's treatment of Gazprom, a gigantic state-owned operation that at one time had unchallenged sway in the European energy market. Gazprom was a powerful tool in the Kremlin's hands, useful when threatening Ukraine and a reminder to the rest of Europe that Russia had to be given its due.

But that was before American companies began extracting cheap natural gas from shale deposits, and before developments in liquefied natural gas (LNG) technology made inexpensive transportation by ship possible.

Qatar set up a new LNG port to ship gas to the United States, but when it couldn't compete there it turned to Europe instead. Today, Europe can buy gas cheaper from Qatar than it can get by pipeline from Russia. European companies have been renegotiating their contracts with Gazprom - downward - and the European Union has insisted that Gazprom divest itself of its pipelines.

Russia will still sell gas to Europe, said Pierre Noel, an energy expert at England's University of Cambridge, "but the pricing regime is changing." Gazprom, he said, will eventually have to change with it.

But the turmoil in North Africa has temporarily masked even Gazprom's difficulties. When the Libyan gas pipeline across the Mediterranean was shut down, Italy, which is Gazprom's second-biggest customer, relented for now in trying to renegotiate its contract.

If production in Algeria, a much bigger supplier than Libya, were to be disrupted, that would make Gazprom a power to be reckoned with again.

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BP to sell $7.06 billion in Argentina assets to help cover gulf oil spill costs

BP has agreed to sell its share of an Argentina-based oil and gas company for $7.06 billion in cash, bringing to about $21 billion its total sales of assets to help cover costs stemming from the Gulf of Mexico oil spill.

After the sale, BP will be most of the way toward its goal of selling as much as $30 billion in assets by the end of 2011 to help cover spill costs and bolster cash holdings to assure investors and lenders of the oil giant's financial stability. The sales are expected to reduce BP's assets by 10 to 15 percent.

The price of the Argentina operations fell $2 billion to $3 billion short of what many analysts expected. Nonetheless, the latest sale of what is considered a non-core asset for BP demonstrates the huge scale of the London-based oil firm's operations. In addition to asset sales, BP is raising more than $2.5 billion a quarter for spill costs from the suspension of its dividend.

BP announced Sunday that it would sell its 60 percent interest in Pan American Energy's oil and gas operations in Argentina to Bridas Corp., which already owns the other 40 percent.

BP acquired the interest when it bought Amoco in 1999. Since then, BP has revived output from the aging Argentine fields, which now produce about 100,000 barrels of oil a day and 450 million cubic feet of natural gas per day. The vast bulk of that production comes from one field, Cerro Dragon, about 900 miles south of Buenos Aires.

But Argentina's tax policies have diminished the attractiveness of operating there, analysts said.

Bridas was founded by the Bulgheroni family of Argentina. In May, the China National Offshore Oil Corp., which has been expanding its worldwide operations, bought 50 percent of Bridas for $3.1 billion. CNOOC's deep pockets helped make the BP sale possible; it will provide much of the cash for the transaction.

The price CNOOC paid earlier this year for its share of Bridas led many analysts to believe that BP would get more for its interests. The CNOOC purchase of Bridas implied a value of $15.5 billion for the entire Pan American Energy operation. That would have translated into a price of $9.3 billion for BP's share.

The sale does not include Pan American's operations in Bolivia.

"Today's agreement further demonstrates both the high quality and attractiveness of the assets throughout BP's global portfolio and also the company's ability to meet our significant financial commitments arising from the Gulf of Mexico tragedy," BP chief executive Bob Dudley said in a statement.

At the end of the third quarter, BP had incurred costs of $11.6 billion as a result of the oil spill, not counting the $3 billion first installment it had paid into a $20 billion escrow fund. Even after those payments, the company had nearly $13 billion in cash and $17 billion of bank facilities it could draw down. The company expects the total cost of the oil spill to ultimately reach $40 billion.

Dudley said BP would seek to sell other assets that might be "strategically more valuable to others than to BP."

Under the terms of the agreement, Bridas will pay BP a cash deposit of $3.53 billion, with the balance of the proceeds due on completion of the sale, which is expected to be completed by Dec. 28.

In China, CNOOC announced that it would join with Bridas's Argentine shareholders to provide $4.94 billion, or 70 percent, of the purchase price. The remaining 30 percent will be covered by loans, or additional cash contributions if necessary.

As of Dec. 31, 2009, BP's 60 percent interest in Pan American accounted for 917 million barrels of oil equivalent reserves, about 5 percent of the company's overall reserves. Production from Pan American accounted for 3.6 percent of BP's global output.

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When oil prices rise, Russia has freedom over a barrel

The judge had already postponed the verdict without explanation ("The court does not explain itself," said a spokesman). Before reading it, he barred journalists and the defendant's family from the courtroom. No one should have been surprised, therefore, when Mikhail Khodorkovsky - the Russian oil baron who once defied the Kremlin - received a further six years in prison last week, on top of the eight he's served. This time, he was sentenced for "stealing" an impossible quantity of oil, the same oil he has already been accused of selling without paying taxes.

In fact, nobody pretended that the Khodorkovsky verdict was anything but a political statement, one of a series of gestures the Russian government has made to its own public and to the rest of the world in recent weeks. The blocking of corruption investigations; the expressions of support for the brutal and violent "elections" in neighboring Belarus; the deaths of journalists; all of these seem designed to contradict the distinctly friendlier, reformist language that the Russian president, Dmitry Medvedev, was using until recently. A mere two years ago, Medvedev had even denounced Russia's culture of "legal nihilism" - a phrase some construed as a reference to the Khodorkovsky case.

Why the change of tone? Why now? Many complex theories have been hatched to explain it. This being Russia, none can be proved. But perhaps the explanation is very simple: Oil is once again above $90 a barrel - and the price is rising. And if that's the reason, it's nothing new. In fact, if one were to plot the rise and fall of Soviet and Russian foreign and domestic reforms over the past 40 years on a graph, it would match the fall and rise of the international oil price (for which domestic crude oil prices are a reasonable proxy) with astonishing precision.

To see what I mean, begin at the beginning: In the 1970s, oil prices began to rise significantly, along with the then-Soviet Union's resistance to change. The previous decade (with oil prices at $2 or $3 a barrel, not adjusted for inflation) had been one of flux and experimentation. But after OPEC pushed prices up in the 1970s, oil revenue poured in - and the Soviet Union entered a period of internal "stagnation" and external aggression. Soviet leader Leonid Brezhnev invested heavily in the military, halted internal reforms and in 1979 (when oil was at $25 a barrel) - invaded Afghanistan.

Brezhnev was eventually followed by Yuri Andropov, who had the good fortune to run the Soviet Union when oil prices were still high (at his death, in 1984, they averaged $28 a barrel). Andropov could thus afford both an internal crackdown on dissidents and a continued tense relationship with the West. But Andropov was followed by Mikhail Gorbachev, who took over just as prices plunged. In 1986 (with oil down to $14 a barrel), he launched his reform programs, perestroika and glasnost. By 1989 (when oil was still only at $18) he allowed the Berlin Wall to fall, freed Central Europe and ended the Cold War.

Prices fluctuated, but they did not really rise again in the 1990s (plunging as low as $11 in 1998), the years when Boris Yeltsin was still trying to be best friends with Bill Clinton, the Russian media were relatively free and there was still talk, at least, of major economic reforms. But in 1999 (when oil prices rose to $16 a barrel), Yeltsin's prime minister, Vladimir Putin, launched the second Chechen war, the West bombed Belgrade, and the mood in Russia turned distinctly anti-Western once again.

The fortunate Putin took over as president in 2000, at the start of a long and seemingly inexorable rise in oil prices. Indeed, Gorbachev's calls for internal reform were long forgotten by 2003 (when oil prices were creeping up to $27 a barrel). The days when Yeltsin pushed for Russia to join Western institutions were a distant memory by 2008, when Russia invaded Georgia (and oil was at $91 a barrel).

The new Russian president, Dmitry Medvedev, did try to sound nicer in 2009 (when oil prices averaged about $53 a barrel), leaving Putin, now the prime minister again, grumbling in the background. Medvedev locked a draconian treason law, invited democracy activists to the Kremlin, denounced the Belarusan dictator and even seemed to some to have liberalized Russian television just a bit.

But now it is 2011, Putin is very much in the foreground, and Khodorkovsky has just been sentenced by a kangaroo court. As I write these words, oil is at $92.25 a barrel.

Is this analysis too simplistic? Sure it is. But I haven't yet heard a better explanation.

applebaumletters@washpost.com

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Gasoline prices hit eight-month low

With the end of the summer driving season just around the corner, traders and investors on Monday drove gasoline prices to an eight-month low on U.S. commodities markets, providing the latest sign of pessimism about the economic recovery.

The sagging commodity market price for gasoline is good news for American motorists, promising a mild easing in pump prices. It also marks the end of a summer of relative stability for retail gasoline prices, which have fluctuated by about 20 cents per gallon since the beginning of the year and have stayed in an 8-cent range for the past 69 days.

Prices have been stuck in neutral because of the continuing weak global economy and fundamental shifts in the U.S. gasoline market, the world's biggest.

The surge in U.S. consumption that many refiners expected earlier this year has not materialized. Last week, the American Petroleum Institute reported that in July, U.S. gasoline deliveries (a measure of demand) were 9.3 million barrels a day, down slightly compared with July 2009. Except for 2008, it was the lowest July gasoline demand number since 2003.

A lack of consumer confidence and continuing high unemployment have kept people cautious about spending and traveling. "With unemployment high and July regular gasoline prices more than 20 cents a gallon above those a year ago, consumers likely have been shopping and vacationing less and trimmed their gasoline purchases accordingly," said John Felmy, the institute's chief economist.

But long-term trends -- such as improvements in the fuel efficiency of American autos -- played a part too, other analysts said. A steady increase in the biofuels component of U.S. motor fuel is another reason; the four week average for ethanol production ending Aug. 13 was 854,000 barrels a day, up nearly 18 percent from a year ago and now more than 9 percent of the volume of motor fuel, according to the Renewable Fuels Association.

With consumption lackluster, U.S. oil companies have been left holding much bigger than usual inventories of gasoline. That, combined with renewed pessimism about U.S. economic prospects, has prompted traders to increase their short selling of gasoline -- betting on a further decline in prices. Short positions jumped 20 percent in the week ended Aug. 17, according to figures compiled by Barclays Capital.

Crude oil prices have also tumbled after a brief surge. The price of a barrel of the benchmark West Texas Intermediate type of crude for delivery next month stood at $72.70 at the end of Monday, down from $82.55 on Aug. 3.

"What is amazing is the degree to which the trading community failed to understand that the gasoline season ended at Memorial Day weekend," said Edward Morse, a veteran oil analyst at Credit Suisse who has been predicting stable prices for months. "All the evidence was in sight that the market was going to be oversupplied."

Morse said that refinery output was "too high, Europe was exporting too much [fuel], biofuel blending components were rising, and the fuel efficiency of the fleet has grown remarkably in the past four years."

The American Automobile Association said Monday that the average retail price of a gallon of regular gasoline eased to just under $2.71 a gallon, down more than 4 cents from a week ago and up only 8 cents from a year earlier, when the economy was more deeply mired in recession.

There have been some signs of economic recovery, however, in petroleum statistics recently. The Petroleum Institute said that there was an 11.6 percent increase in deliveries of low sulfur distillates, which are primarily diesel fuels used in trucking, and a 6.9 percent increase in kerosene jet fuel deliveries. The price of diesel fuel also fell 4 cents a gallon in the past week, but it has climbed 28 cents from a year ago.

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Conventional gas-powered cars starting to match hybrids in fuel efficiency

The new Chevrolet Cruze Eco can reach eye-popping fuel economy levels of more than 50 miles per gallon on the highway, which even in this era of hybrid-electric cars stands among the best.

But here's the real trick: The Cruze Eco is neither a hybrid nor electric. It runs on that "old" technology, the conventional gasoline engine.

Although hydrogen, electric and other alternative cars have garnered more hype and significant federal subsidies, the best immediate hope for restraining the nation's fuel consumption might be some new vehicles that, although powered by conventional engines, run efficiently because they have been stripped of unnecessary weight, streamlined to move smoothly and equipped with gas-sipping engines.

This year, General Motors, Ford and Hyundai began selling cars with conventional engines that achieve 40 mpg or more on the highway, exceeding the fuel efficiency of some hybrids, because their mechanics and shapes have been optimized.

To achieve the efficiency of the Cruze Eco, for example, engineers dropped its weight by 200 pounds, installed shutters to close off part of the grill at higher speeds to reduce wind drag, added a rear spoiler, cut the car's height by one centimeter and adopted an efficient turbocharged engine.

The result is a car that, with a manual transmission, is rated at 42 mpg on the highway by the government but can achieve more than 50 mpg under the right conditions, reviewers say. Likewise, the new Ford Focus, with its "super fuel economy" package, is rated at 40 mpg and the Hyundai Elantra gets the same fuel economy, standard in all models.

With the recent spike in gas prices reawakening consumer interest in fuel economy, the new cars are expected to be particularly appealing, in part because they are typically less expensive than their hybrid counterparts.

"The buzz has been all about electric vehicles and hybrids, but to me, the real buzz should be about the old internal-combustion engine," said Jeremy Anwyl, chief executive of Edmunds.com, an automotive Web site. "It ain't dead yet."

At least since the oil shocks of the 1970s, American politicians have been infatuated with developing alternative sources to power the nation's auto fleet. The George W. Bush administration pushed a hydrogen car; now Congress and the Obama administration are laying out billions of dollars for the development of electric cars.

But the new fuel-efficient gasoline cars, critics say, raise doubts about government efforts that favor any one technology over another. If subsidies are to be made, they argue, they should go to efficient cars, no matter what their power source. Moreover, when the fuel economy of a best-selling gas car is improved even incrementally, it can have much larger effects on the nation's oil consumption than an alternative-technology model that doesn't sell well.

Experts expect alternative fuel technologies to take hold eventually, but hybrid cars still represent only about 3 percent of U.S. car and truck sales. And the latest generation of electric plug-in vehicles hit the market only recently.

"When you take some of the most popular vehicles in the U.S. - say, the Ford F-150 pickup - and improve them by just a few mpg, the effects can add up very quickly," said John DeCicco, a faculty fellow at the Michigan Memorial Phoenix Energy Institute at the University of Michigan. "Much more so than with a niche car."

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'Risk/reward equation' used in building gulf well, BP worker testifies

A BP drilling engineer involved in the planning of the Macondo well declined to testify before a federal investigative panel Friday, invoking through his lawyer his Fifth Amendment right against self-incrimination.

Mark Hafle, who was involved in some of the most heavily scrutinized decisions about the well, became the third BP employee to invoke his constitutional right not to answer questions from the panel. Hafle had testified in an earlier round of hearings.

As Friday's hearing proceeded, another BP employee who wrote one of the most widely derided e-mails to surface in investigations of the Deepwater Horizon disaster testified under oath and gave a more benign explanation of the document.

In an e-mail four days before the April 20 blowout in the Gulf of Mexico, drilling engineer Brett Cocales addressed one of the most controversial decisions in the construction of the Macondo well, saying in part, "who cares, it's done, end of story, will probably be fine."

In the e-mail, he went on to defend the decision based on "the risk/reward equation."

Congressional investigators have cited the decision as evidence that BP might have cut corners to save time and money. Testifying before a separate federal investigative panel in Houston on Friday, Cocales said, "Those are my words."

But he said they had nothing to do with financial considerations.

Cocales said he was weighing engineering risks associated with alternative approaches, and he thought less risk was associated with the course BP took.

At the time, he said, he thought the "worst-case scenario" was that BP would have to do remediation work on the well, not that safety would be jeopardized, he testified Friday.

But he acknowledged that there "was still a risk of channeling" - a term that refers to gaps in the cement lining between the steel well pipe and the rock formation that could give gas a path to escape.

At issue was the number of devices called centralizers installed to center the pipe in the well. Halliburton, a contractor to BP, recommended 21 but BP used six. In a report to BP two days before the explosion, Halliburton warned that with as many as seven centralizers the well could have a "SEVERE" gas flow problem.

Cocales on Friday became the fourth BP employee to testify that, before the blowout, he did not read that warning.

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Nuclear energy has environmental pluses; safety remains an issue

I thought nuclear reactors were an absolute no-go for environmentalists. But I keep hearing them touted as a clean energy source. What are nuclear energy's green credentials?

Some environmentalists are indeed coming around to nuclear energy. That's because the nuclear fission process produces virtually no greenhouse gas emissions, unlike the burning of fossil fuels such as coal and natural gas. (Those two fossil fuels accounted for about 70 percent of U.S. electricity in 2008. Nukes made 20 percent.) Also, fission produces neither sulfur dioxide nor nitrogen oxides, the fossil-fuel pollutants that cause acid rain.

Advocates are fond of noting that nuclear power provides 70 percent of the country's "carbon-free" energy. But nuclear energy isn't really a zero-carbon system, since you still have to build power plants, mine and enrich uranium, and transport processed fuel, all of which typically rely on CO2-emitting fuel sources. Even when the entire life cycle is taken into account, however, nuclear energy warms the planet much less than coal or natural gas. The comparison with renewables such as wind and solar (which also generate emissions in the manufacturing phase) is less cut and dried.

While it's commonly accepted that nuclear energy has a relatively dainty footprint, the question of whether new reactors would be the most cost-effective way to lower electricity-related emissions is still hotly debated. The fuel itself is relatively inexpensive, at least for the time being. But as noted in Time, recent price estimates for a large plant in Florida came in at $12 billion to $18 billion, and that's before you consider the nuclear industry's history of major cost overruns.

Some analysts say alternative methods would yield much more climate-saving bang for our buck than nuclear power. For example, Amory Lovins of the Rocky Mountain Institute argues that we should be investing in general efficiency measures and "micropower," a catchall term that includes cogeneration of heat and electricity, plus renewables other than big hydropower operations.

What about safety concerns? Admittedly, there's a fright factor with nuclear power. But in the 31 years since the partial meltdown at Three Mile Island, there haven't been any emergencies in the United States that remotely approached the severity of that incident, though there have been some close calls.

The government's Nuclear Regulatory Commission has a set safety goal for every reactor in the country: The chance of an accident that results in radioactivity being released to the environment must be no more than one in a million, as determined by probabilistic risk assessment. But even the longest of odds will never satisfy everyone, especially after the cataclysmic drilling accident in the Gulf of Mexico. In recent years, a number of leaks of radioactive water have stoked environmentalist ire, although nearby residents were not exposed to dangerous doses of radiation.

Meanwhile, nuclear proliferation risks remain a prohibitive concern for many experts. And many environmentalists continue to give nukes the stink eye because, as the Lantern noted in an earlier column, after 50 years we still don't have a long-term plan for storing high-level commercial nuclear waste.

But long-term disposal is a problem we're saddled with no matter what: Whether we ramp up nuclear energy production or shut down all our plants tomorrow, we'll have at least 62,500 metric tons of used nuclear fuel to deal with.

Atomic energy also generates other environmental concerns. Like conventional power plants, a nuclear site cranks out electricity using steam-driven turbines. Cooling those operations often requires a whole lot of water, the drawing and releasing of which can affect aquatic wildlife.

Uranium mining can also damage the environment. Mining and milling operators must deal with mill tailings, the radioactive material left over after the uranium has been extracted from the ore, as well as waste rock and radiologically contaminated equipment.

For all this, it's worth noting that uranium is a very efficient energy source: One ton of natural uranium can produce the same number of kilowatt-hours as 16,000 tons of coal or 80,000 barrels of oil.

The Lantern doesn't find herself particularly freaked out by atomic energy. The long-term waste conundrum seems more pressing: After all, isn't the notion that you don't bequeath problems to your descendants a major tenet of environmentalism? At the same time, global warming is itself a dire legacy, and every energy technology has its pitfalls. So if nuclear power can play a role in cooling our planet, the Lantern thinks it deserves to stay on the table.

Is there an environmental quandary that's been keeping you up at night? Send it to ask.the.lantern@gmail.com. Read previous Green Lantern columns here.

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Great Plains oil pipeline plan sparks grass-roots activism, high-stakes lobbying

A massive feat of engineering by any measure, the Keystone pipeline expansion project would transport crude oil close to 1,700 miles from "oil sands" in the icy reaches of Hardisty, Alberta, down through the Great Plains to the refineries of Port Arthur, Tex. In doing so, the giant pipe also promises to allay some fears about U.S. energy security: The oil will come from a trusted ally, and its cross-continental path avoids visions of another deep-sea drilling disaster.

But the decision on whether to issue a permit to the project, opposed by environmental groups, rests with the State Department, which has little expertise in engineering or environmental matters. And reflecting the chaos of U.S. energy and environmental policy, the proposed pipeline is pitting Montana landowners against pipe fitters in Nebraska and creating unlikely allies of Nebraska ranchers and chieftains from Alberta's indigenous communities.

On one hand the move to extend TransCanada's existing pipeline - which runs from Hardisty to the Illinois towns of Wood River and Patoka and has a daily capacity of 435,000 barrels - offers obvious benefits. The extension will generate 13,000 construction and 7,000 manufacturing jobs in the United States over roughly two years, according to the company, and could transport as much as 500,000 additional barrels of oil a day. It also could help stabilize electricity prices for several rural co-ops along the route.

"Everyone's saying we've got to get less dependent on Middle East oil, and this is a perfect opportunity to bring this oil in," said William Hite, general president of the United Association, the union for plumbers and pipe fitters.

But the crude comes from an area known as "tar sands" or "oil sands," where operators extract a viscous oil called "bitumen" from formations of sand, clay and water. The process consumes more energy and water than most conventional drilling methods, can require clear-cuts of forests and creates tailings that can pollute nearby waterways. Canada has the world's third-largest reserve of heavy crude after Saudi Arabia and Venezuela and accounts for 20 percent of U.S. crude imports.

At least 65 lawmakers - nearly all Democrats - have written the State Department raising questions about the pipeline, while 40 Republicans have written letters backing it.

"When I think of the State Department I think of many things they do well," said Sen. Mike Johanns (R-Neb.). "But I would tell you, siting pipelines is not anything I would think of when I think of State Department expertise."

Environmental issues

The National Wildlife Federation's senior vice president, Jeremy Symons, said the Obama administration cannot claim to be fighting global warming while signing off on oil imports from such an energy-intensive operation. "What does it mean when the U.S. bellies up to the trough and says, 'Give me your dirty energy?' " Symons said.

Symons also noted that TransCanada submitted a 2009 market assessment in its Canadian permit application suggesting the extension will raise heavy crude prices in the United States by removing the "oversupply" in the Midwest, where the price has been discounted. The analysis said that by extending the pipeline to the Gulf Coast, with many more refineries and buyers, the Canadian heavy crude price could be expected to increase by around $3 a barrel, giving the Canadian oil industry at least $2 billion in additional revenue each year.

But the pipeline will traverse environmentally sensitive areas such as Nebraska's Sand Hills and the Ogalalla Aquifer, which provides drinking water for 2 million people. Local ranchers and farmers have questioned why the pipeline needs to pass through an area where the aquifer runs just a few feet below the ground and the sandy soil makes it harder for vegetation to regrow once it's been disturbed.

"We know what it takes to try to maintain the land in a productive state," said Teri Taylor, who runs a cow-calf operation with her husband and son that would have miles of pipeline laid across it. "We are unable to even fathom what it would take to reclaim the land."

Oil pipelines are not uncommon in the United States. There are nearly 147,000 miles of them already, according to the Transportation Department's 2008 statistics, with 50,000 miles devoted to transporting crude.

An Energy Department-commissioned analysis, which has not been released but has been obtained by The Washington Post, provides some fodder to both sides' arguments. The report says the United States can obtain the Canadian crude it needs for the next decade without the Keystone extension, but it suggests that increasing oil-sands imports and reducing overall U.S. oil demand would "have the potential to very substantially reduce U.S. dependency on non-Canadian foreign oil, including from the Middle East." It also concludes that a decision to block the pipeline would not affect Canadian oil sands production, since the heavy crude would go to Asia instead.

TransCanada chief executive Russ Girling said his company "has done a rigorous review of the rerouting to make sure that it has the least environmental impact," adding that "we will leave the environment in exactly the same condition where we found it."

The Nebraska Farmers Union has passed a resolution demanding the pipeline project be relocated or blocked. Relocation would entail the running the pipeline through more populated areas as well as wetlands, and it could delay the process by another six months.

TransCanada said it will employ extra precautions that are usually reserved for a high-pressure operation. But Nebraska state Sen. Tony Fulton (R), a former engineer who chairs the legislative sportsmen's forum, said he would be more comfortable with the pipeline if another Canadian company, Enbridge, could explain why its pipeline in Michigan ruptured and released more than 800,000 gallons of oil last summer into the and a nearby creek.

"Why are we so hellbent on moving this so quickly?" Fulton said.

At the State Department

The State Department is under pressure to reach a conclusion this year on the permit application, which was filed in September 2008. The draft Environmental Impact Statement it issued in April sparked an unusually high number of comments. The Environmental Protection Agency sharply criticized it, saying it did not fully explore the potential environmental impact or the prospect of a more rapid transition to alternative energy that would make the imports unnecessary.

Daniel Clune, the principal deputy assistant secretary in the Bureau of Oceans and International Environmental and Scientific Affairs, said State Department officials have "been engaged in very serious discussions with" the EPA and other relevant agencies.

Lobbying on both sides has been intense. TransCanada has run television and radio ads in Nebraska and Washington, D.C., and Laborers' Local 1140 in Nebraska has made more than 600,000 robo-calls to Nebraskans. More than 100 activists demonstrated outside Nebraska's capitol early this month, and the Texas-based Stop Tarsands Oil Pipelines has gotten local politicians to demand a more-detailed environmental analysis.

Opponents such as Bold Nebraska director Jane Kleeb are using e-mail, Facebook and monthly conference calls to strategize with others along the pipeline's route - in states including Montana, South Dakota, Kansas and Texas. They have also forged connections with Canadian First Nations activists through the Indigenous Environmental Network, which has sent speakers to Nebraska to help mobilize opposition there.

While Secretary of State Hillary Rodham Clinton prompted an uproar in mid-October when she declared that the department was "inclined" to grant the permit, officials now say they will not release a final environmental analysis before next month. Once that process is complete, the state has another 90 days to make a "national interest determination" that focuses on economic and security considerations.

"All other things being equal, there would be an advantage in getting our oil from a close ally like Canada," Clune said. "What we're trying to do is make the best decision for the country."

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Early cleanup efforts of gulf oil spill marred by communication woes, scammers

PASCAGOULA, MISS. -- Johnny Ray Harris hunted for oil in the gulf near his home for 45 days straight, radioing in coordinates to cleanup crews when he spotted large, inky patches floating in the choppy waters.

"I would call it in, but no one ever came. Not once," Harris said, sitting on his 73-foot-long shrimp boat beside a box filled with unused rubber boots, gloves and coveralls. "What a waste."

Harris is a part of BP's Vessels of Opportunity program that promised to turn out-of-work fishermen into a powerful task force, skimming and scooping up oil before it reached the shores of Alabama, Mississippi, Louisiana and Florida. At its peak, the program dispatched 3,200 boats at an average cost of $2,000 a day. In recent weeks, with a successful capping operation containing the spewing well, the oil company has scaled back to about 1,400 vessels.

Fishermen involved in the program and the company that runs it both say the effort -- costing $450 million so far -- has been fraught with problems. Much of the money doled out by BP probably went to opportunists rather than to commercial fishermen and charter boat operators whose livelihoods were disrupted by the spill. Harris and dozens of other fishermen said in interviews with The Washington Post that the amateur effort, which included laying and maintaining boom, failed to prevent oil from reaching the beaches, marshes and islands near their homes.

BP officials acknowledged that payments as high as $100,000 might have gone to recreational boat owners and others who enrolled multiple boats in the program and quickly seized an opportunity to cash in. But the officials said that it took time to identify problems and make needed reforms. "When a response of this size gets pulled together that quickly, things fall through the cracks," BP spokesman George Gigicos said.

Boat sales spiked in states around the gulf. And even though fishing was banned in as much as 40 percent of the water, officials saw a double-digit rise in demand for fishing licenses in three gulf states in April through July over last year's totals, according to data analysis done for The Post by wildlife officials in the four affected states. In Alabama, license sales shot up 66 percent; in Mississippi, they rose 30 percent; and in Louisiana, they went up 13 percent.

In late June, more than two months into the program, BP began asking participants for proof that their licenses had been issued before the oil spill, company officials said. The company also started a rotation system in mid-July that officials said they hope will pull in fishermen who have been passed by.

"I've been waiting by the phone for three months. I've heard nothing. I'm still not in," said Jerry Walker, who fishes for kingfish and red snapper in Louisiana. "I've been a fisherman for 40 years. I make 100 percent of my living from fishing. These guys out on the water, I've never seen any of them before in my life."

Gigicos said: "It did take some time to weed out the recreational vessels and the out-of town-vessels. It wasn't perfect at first." He added, "But for a while, our motto was 'All hands on deck.' We needed everyone we could get out there."

Fishermen and harbor chiefs describe the program's early days as chaotic and unproductive. Coast Guard planes flew overhead and spotted oil, but their crews were unable to communicate with the rag-tag bands floating beneath them. Repeatedly, boat owners in the program said in interviews that they thought they were part of a "show."

"The entire task force was on different radio frequencies," said Michael White, harbor chief in Long Beach, Miss. "I had to surf through 15 channels to find someone. From a distance, it looked good to have all those boats out there, but it was a mess."

At the height of the program, participants thought their boats would be equipped to skim oil from the surface of the gulf waters. Retired Coast Guard Adm. Thad Allen, who is coordinating the oil spill response, said in a June 11 news briefing that BP and the Coast Guard wanted to get "the skimming equipment in the hands of the vessels of opportunity out there."

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Three books on the gulf oil spill

Just six months after BP stopped the oil that had been flowing into the Gulf of Mexico, a gusher of books about the spill has begun to wash ashore. The first wave includes three very different approaches to the disaster that riveted the nation most of last summer.

How we interpret the spill is important. A 1969 spill off Santa Barbara soiled the shores, killed birds and helped give rise to the modern environmental movement. Exxon's tanker accident in Valdez, Alaska, 20 years later became another symbol of reckless disregard for the environment. What makes the BP oil spill not just shocking but also dispiriting is that it might have relatively little impact on ocean-drilling policy beyond a retooling of the regulatory bureaucracy and the imposition of a few more technological safeguards. The spill has had no effect on the world's appetite for oil, and drilling will continue because the best prospects are offshore in the Gulf of Mexico, off Africa and Brazil, in the Caspian Sea, and in the Arctic.

The recent spill received massive coverage. At the Associated Press alone, more than 40 reporters and editors were thrown into the fray; teams of reporters were mobilized at papers such as The Washington Post, the Times Picayune in New Orleans, the New York Times and the Wall Street Journal. But even though the books under review present little if anything new, readers seeking overviews between two neat covers might find them useful.

"In Too Deep," by Bloomberg News journalists Stanley Reed and Alison Fitzgerald, opens with a brief account of the blowout, then moves on to BP's history, starting in Iran during the 1950s, when the U.S. and British governments overthrew the democratically elected regime for fear that it would hurt foreign oil interests. The authors shift quickly into more recent BP history, describing the enormous and lasting impact of former chief executive John Browne. Browne not only engineered giant mergers with Arco and Amoco, he also helped lead BP into post-Soviet Russia, Alaska and the Gulf of Mexico.

An intellectual, an engineer and a politically savvy executive with passions for art and opera, Browne guided the company into deep-water exploration in the gulf. He is credited with recognizing that the size of the discoveries in deeper water was increasing, not leveling off.

The book also profiles lower-level BP geologists who figured out where to find the likeliest prospects. A striking chart shows that BP's average cost to add a barrel of oil to its proven reserves was lower than any other major oil company's, and a tiny fraction of current prices.

Yet Browne was also a relentless cost-cutter who squeezed money out of operations that should have invested more in maintenance and equipment. The authors blame BP culture for a focus on personal rather than process safety, for leaks in the company's Alaska pipeline, for an explosion at its Texas City refinery and for the gulf blowout.

In this account, Browne's successor, Tony Hayward, who resigned in the wake of the spill last year, was the unfortunate inheritor of the company Browne built. Chosen in part because he wasn't flashy - the board of directors was weary of Browne's celebrity - Hayward lacked the skills to manage this environmental and public relations disaster.

In "Blowout in the Gulf," William R. Freudenburg, a professor of environmental studies at the University of California at Santa Barbara who died late last year, and Robert Gramling, a sociology professor at the University of Louisiana at Lafayette, concentrate on the regulatory framework that failed to prevent the accident. They compare offshore-drilling regulation to airline regulation and discuss whether regulation might be better handled by the Occupational Safety and Health Administration. They examine cleanup techniques and the prolonged and futile efforts made in Valdez. A sign of how their perspective differs from that of Reed and Fitzgerald: The two reporters write that Hayward's parting pay package was not "huge" so that "there would be no reward for failure." Freudenburg and Gramling call Hayward's $17 million package a "golden parachute."

The authors make solid points about the way the U.S. government has allowed big oil companies to march into public waters, about how the much-admired interstate highway system contributed to a fateful boom in U.S. oil consumption and about the way Americans ravenously consume oil and gas today. "Despite our habit of referring to oil 'production,' the reality is that the twentieth century was an unprecedented exercise in oil 'destruction,' " they write. "The oil was actually produced during the time of the dinosaurs."

Bob Cavnar brings an insider's view to "Disaster on the Horizon," but not one the industry will like. Cavnar has spent three decades, first on a rig and later as a chief executive, working for drilling companies in Texas, Louisiana and offshore areas. But he has a dim view of many industry practices and blogs about them for the Huffington Post.

Here, he focuses on the oil rig disaster itself and what caused it, constructing a narrative based on extensive testimony at hearings, newspaper accounts and his own experience. He makes a strong case that the spill was caused by human error. "An older engineer taught me, years ago, that wells actually talk to you," he writes. "In the hours leading up to the disaster, the Well from Hell was screaming at the crew that it was going to blow out, but nobody could understand the language it was speaking." And he notes that in deep water, "bad situations can escalate very quickly into catastrophes."

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Administration reverses offshore drilling policy in eastern gulf, Atlantic

The Obama administration announced Wednesday that it will not allow offshore oil drilling in the eastern Gulf of Mexico or off the Atlantic coast through 2017, reversing two key policy changes the president embraced in late March.

The revised Interior Department drilling plan, which took industry officials and many environmentalists by surprise, will also delay the next two lease sales in the central and western Gulf of Mexico. It marks a sharp political shift by the White House - yanking concessions to conservatives and oil companies - in the wake of the massive BP oil spill and the collapse of comprehensive climate legislation.

Interior Secretary Ken Salazar told reporters that the decision to remove large swaths from the 2012-17 offshore lease plan was "based on our nation's experience with the Deepwater Horizon oil spill." Instead of opening up new areas to oil and gas exploration, Salazar said, the United States should "focus and expand our critical resources on areas that are currently active."

Salazar said the department would also gather new environmental information about drilling off the coast of Alaska, potentially postponing activity there.

The move eliminates the prospect of any drilling taking place off the coast of Virginia for several years, although as recently as eight months ago state and federal officials had envisioned holding a lease sale there in 2011. On March 31, President Obama declared his administration would study the prospect of energy exploration off the Atlantic coast from Delaware to Florida, along with areas in the eastern gulf and in Alaska's Chukchi and Beaufort seas.

Virginia Gov. Robert F. McDonnell (R), who spoke to Salazar by phone Wednesday, called the new policy "an irresponsible and shortsighted decision."

"It demonstrates a complete lack of confidence in the entrepreneurial spirit of American industry and its ability to fix the problems experienced in the gulf spill, and no confidence in the ability of the U.S. government to better plan for and react to offshore emergencies," said McDonnell, who had made drilling off Virginia's coast one of his top priorities.

"The cost of today's decision will be seen in major lost job opportunities, surrendered economic growth and increased dependence on foreign sources of energy, from nations often hostile to American interests," he said.

Criticism was bipartisan. A spokesman for Sen. Mark Warner (D-Va.) said that "while it is appropriate to take the time to incorporate lessons learned from the gulf disaster, Senator Warner sees no reason to delay this process for what realistically could be another seven years or more."

Offshore oil production from state and federal waters accounts for 9 percent of U.S. liquid fuel consumption and 32 percent of U.S. crude oil production. The Interior Department draws up five-year plans for lease sales to companies seeking to explore federal waters, which begin three miles from shore. If oil or gas is discovered, commercial production can begin some years later. The next five-year plan starts in 2012.

Interior said the lease sales scheduled for March and August 2011 in the central and western gulf would be postponed until the end of next year, if not later.

In addition, Interior will conduct a "supplemental" environmental analysis of Shell's plan to drill an exploratory well in the Beaufort Sea next summer. Officials said that Interior was "processing" Shell's permit request but that the new analysis will require another public comment period, ending Dec. 22. Shell has warned that delays could jeopardize its ability to prepare in time to drill next year.

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Oil spill report lays much blame on BP, who knew of Halliburton weaknesses

The chief counsel of the presidential oil spill commission has issued a final report laying considerable blame on BP for last year's disaster in the Gulf of Mexico. But he also points to flaws in Halliburton's work and errors by rig owner Transocean.

Fred H. Bartlit Jr., a prominent trial lawyer, said that for three years BP had been aware of problems with lab tests of Halliburton cement; that a reorganization of BP's engineering department resulted in delays; and that BP decided not to set a lockdown sleeve, an installation deep in the well, during its preparations for temporary abandonment in order to save 51/2 days and $2 million in costs.

He also said BP's well-site leader was not present, as he should have been, during a critical test known as a negative pressure test that indicated something was wrong.

Bartlit's report is the latest of a series from the National Commission on the BP Deepwater Horizon Oil Spill and Offshore Drilling, which has already faulted a variety of factors, including decisions made by the well operator BP, rig owner Transocean, oil service provider Halliburton and federal regulators.

In a statement Thursday, BP did not dispute the report's specifics. The London-based oil giant said that it "has made every effort to understand the causes of the Deepwater Horizon accident to help prevent similar events from occurring in the future." BP said the presidential commission's findings - "particularly that the accident was the result of multiple causes, involving multiple parties - are largely consistent with those contained in the BP internal investigation report." It added that it is reorganizing its safety operations and reviewing its supervision of contractors.

Halliburton and Transocean did not issue comments.

Bartlit noted that in 2007, a consulting firm issued a quality-control report warning BP that Halliburton's lab technicians "do not have a lot of experience evaluating data" and that BP needed to improve communication with Halliburton "to avoid unnecessary delays or errors in the slurry design testing."

A cementing expert at BP described the "typical Halliburton profile" as "operationally competent and just good enough technically to get by." And BP's engineers said that the Halliburton engineer assigned to the doomed Macondo well was "not cutting it" and that he often waited too long to conduct critical tests. But, Bartlit added, the BP engineers neither reviewed his work at Macondo carefully nor checked to see that he conducted testing in a timely manner - even though they knew that their last-minute changes to the cement design test could cause problems and that using nitrogen-foamed cement could pose "significant stability challenges."

Bartlit also said the blowout preventer was not to blame for the explosion on the drilling rig, the Deepwater Horizon, that killed 11 workers April 20. The report says that by the time the rig crew tried to close the blowout preventer on the sea floor, deadly gas had already slipped into the riser pipe leading to the rig.

Although the route that gas took through the well when it blew out has been a matter of uncertainty, Bartlit's report says physical evidence taken from the well shows that oil and natural gas "almost certainly" came to the surface through a piece of equipment called the "shoe track" and up the production pipe. The report says cement in the shoe track should have blocked that flow, which it says further calls into question the quality of the cement job done by Halliburton.

Bartlit also faults Transocean, whose rig workers missed several signs of trouble in the well. Earlier alarm might have prompted them to close the blowout preventer earlier, avoiding catastrophe.

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Federal investigators again try to question BP spill witnesses

A federal investigative panel will begin its next round of hearings Monday into the Deepwater Horizon disaster and call witnesses who can address alleged shortcuts in the drilling of the BP oil well, problems with the failed blowout preventer and the confused scene after an explosion on the rig.

Whether all of those witnesses testify remains to be seen.

After challenges to the investigative board's authority and competence, the hearings are shaping up as a test of the panel as well as the parties under investigation.

At the previous round of hearings last month, some witnesses canceled at the last minute. One invoked his Fifth Amendment right to remain silent. Lawyers for other witnesses accused the board -- a joint panel of the U.S. Coast Guard and the Bureau of Ocean Energy Management, Regulation and Enforcement -- of ignoring their clients' legal rights and the rules governing the proceedings.

Toward the end of the last day of testimony, July 23, the Coast Guard officer presiding over the hearings, Capt. Hung Nguyen, implied that the board could put aside federal rules of evidence. The comment appeared to provide ammunition to the board's critics.

Referring to the federal rules of evidence, Nguyen said: "It's possible we can use it. It's possible we don't have to use it."

"It doesn't say you don't have to. It says they should be followed . . . . ," said Transocean lawyer Edward F. Kohnke IV.

"Should, not shall," Nguyen replied, according to recordings and a privately commissioned transcription.

But in the official transcript released by the panel, Nguyen's response is: "Sure. Sure."

A Coast Guard spokeswoman said that nothing in the transcript had been changed and that it is possible the person transcribing the hearing misheard the statement.

On Thursday, the Coast Guard and the Bureau of Ocean Energy Management added two legal professionals to what had been a six-member board, a move that followed complaints that the panel lacked legal expertise.

The new members are Wayne R. Andersen, a retired federal judge, and Capt. Mark R. Higgins, a Coast Guard staff judge advocate.

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Chinese oil company, Chesapeake Energy enter deal for shale project in Texas

The China National Offshore Oil Corp. will pay Chesapeake Energy $2.2 billion for a one-third interest in a South Texas oil and natural gas shale project and will pay billions of dollars more for its share of development costs over the next several years.

Chesapeake Energy, an Oklahoma City-based domestic exploration company, announced the deal Sunday night, saying it will help speed development of resources on 600,000 acres in the Eagle Ford shale play that could help keep natural gas prices low and boost production of unconventional U.S. oil resources.

"They're providing the capital and we're providing the expertise and assets, and the output will be the development of American assets, less U.S. dependence on foreign oil and the creation of 20,000 jobs and tax revenues for all levels of government," Aubrey K. McClendon, Chesapeake's chief executive, said in an interview.

The investment by CNOOC is one of the company's biggest. Other CNOOC investments around the world have been aimed in part at securing sources of oil for China's growing economy, but this investment will not result in any oil shipments to China. Chesapeake will sell the resources, almost certainly in the United States, and send CNOOC its share of the proceeds.

Chesapeake has been seeking to raise money to help develop its extensive inventory of oil and gas acreage. The company has also been trying to pare its debt, which peaked at about 60 percent of the company's book value and which on Sept. 30 stood at about 42 percent. McClendon said the company's target was in the 30s.

CNOOC will pay $1.1 billion now and another $1.1 billion over the next two years by covering 75 percent of Chesapeake's share of development costs. After that, CNOOC will pay a third of the cost of all wells, which run about $6 million each and could number 5,000 or more over the next few years as the region is developed, McClendon said.

Chesapeake said CNOOC's investment will enable Chesapeake to quadruple the number of rigs it has drilling in the region to about 40 by the end of 2012.

Given the cost of development, many independent companies such as Chesapeake have been looking overseas for investors. U.S.-based oil giants such as Exxon Mobil and Conoco Phillips already have stakes in the region. Last week, Statoil and Talisman bought about 100,000 acres from Denver-based Enduring Resources. They paid about the same price as CNOOC did for its interest.

China has some shale gas, but the deal with Chesapeake does not involve any technology transfer or future project in China, McClendon said. He said Chesapeake has its hands full trying to develop resources in the United States.

Unlike shale developments elsewhere in the United States, the Eagle Ford has greater potential to produce crude oil as well as natural gas, McClendon said. He estimated that the United States could ultimately produce half a million barrels a day from shale. The country consumes 19.5 million barrels of oil a day, most of it imported.

The development of oil and gas from shale has aroused controversy over questions of how it would affect water supplies. And so far, most shale developments in the United States recently have produced natural gas, much of it from Pennsylvania and other parts of the northeast.

"Chesapeake's embedded safety culture and integrated environmental protection strategies will be adopted to safeguard personnel and the surface and subsurface environment," Chesapeake said in its news release.

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As gulf cleanup continues, BP will also struggle to clean up its brand

HOUSTON -- The protesters have stopped coming here to wave angry signs in front of BP's large office campus. The boycotts of BP gas stations are tapering off, too -- both signs that the energy company's plug of the spewing Gulf of Mexico oil well is quieting its loudest critics.

The shouting may be over, but rebuilding the company's badly tarnished brand will prove a much harder task -- one that advertising and oil industry experts say could be nearly as daunting as stopping the oil that gushed into the gulf for more than three months.

"It's probably the most notorious branding crisis in memory," said Tom Zara, director of corporate branding at Interbrand.

After the Deepwater Horizon rig exploded in April, BP went on the air with television ads and bought a series of full-page ads in The Washington Post, Wall Street Journal and other papers to position itself as an imperfect but responsible corporation committed to the cleanup of the gulf. The company has spent $55.8 million on television and print advertising so far this year, according to the Nielsen Co., which tracks ad spending. (The total for all of last year was $80 million.)

But as one of Washington's top corporate lobbying forces, BP took flak for paying lobbyists, so the company cut back that spending to only $3.3 million so far this year, compared with $8.2 million in the first six months of 2009.

BP has been bouncing back already in the place where its brand meets consumers -- at its gas stations. After the spill, sales dropped off 40 to 50 percent at some stations on the Gulf Coast, but in most cases business declines have leveled off to about 10 percent on the gulf and less than 5 percent in other parts of the country, said John Kleine, executive director of the BP Amoco Marketers Association, which represents the station owners.

Kleine, who calls the station owners "investors" in BP's brand (their only link with the company is contracts to buy gasoline), said they began facing angry protests after the spill and turned to BP for help. The company gave them signs and took out print and radio advertisements emphasizing that the stations were locally owned and operated. At some stations BP helped the owners do customer appreciation campaigns with free car washes and cups of coffee. Corporate staffers flew in to stand in driveways and listen to customers' concerns, Kleine said.

"Where the owner is known in the community, there is a less significant impact," Kleine said. "I think BP has to recognize that the local face is really a value to their brand even more so than anybody thought."

Company's evolution

BP, which began selling gasoline in Britain in the 1920s, has long been a company that cared a lot about its name -- and changed it several times. After it bought Amoco in 1998, the company British Petroleum to become BP Amoco, then two years later shortened it to BP, to signify that it was more than a petroleum company and emphasize its investments in alternative energy.

The company dropped the shield and torch that had represented British Petroleum and Amoco and adopted a logo called the Helios, which looks like a sunflower bursting with petals. BP says the design is named after the Greek sun god and represents "dynamic energy in all its forms."

The company's Web site declares that its brand can be summed up in two words: "beyond petroleum." Its executives have preached the importance of "social responsibility on a global scale" at major business conferences.

As British Petroleum, it won the support of some environmental groups in 1997 when it announced that it agreed with scientists that global warming stems from an excess of carbon dioxide and other greenhouse gases released through the burning of fossil fuels. It pledged to greatly increase its investment in solar power. Still, other environmentalists, including Greenpeace, called such investments a relatively insignificant part of the company's portfolio. In 2000, more than 10,000 students from seven Ivy League schools signed a pledge refusing to accept jobs at BP Amoco because the company had pursued permission to drill in the Arctic National Wildlife Refuge.

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Increase in oil revenue amid unrest in Arab world gives Russia some breathing room

MOSCOW - With the price of oil climbing to more than $100 a barrel, Russia has a little more weight to throw around on the world stage, and it is doing just that.

The stepped-up flow of petrodollars into the government's coffers relieves what had been a worrisome budget deficit and lessens the urgency of reform. Good relations with the West - and especially the "reset" with Washington - are not quite so pressing when the economy here is in good shape.

Russia is benefiting tangibly from the turmoil in the Middle East and North Africa. Urals crude sold for $113 this week, up from $75 a year ago. Of that, $76.50 goes into the Russian treasury. And the spike in oil income has compensated for growing weakness elsewhere. It arrived just as Gazprom - the natural-gas giant that until recently was a potent weapon in Russia's foreign policy - has seen its clout in Europe washing away amid a flood of competition.

An emboldened Prime Minister Vladimir Putin was in Brussels in late February angrily lecturing the Europeans on energy policy and the uprisings in the Arab world. After months in which Moscow and Washington have tried to put their differences over Georgia on a back burner, President Dmitry Medvedev two weeks ago accused the country of threatening the security of the 2014 Winter Olympics, to be held in Sochi, near the border of a breakaway region of Georgia.

Earlier this year, Russia's warming relations with Poland went sour over the handling of the investigation into the plane crash that killed Poland's president and other top leaders this past spring.

But with increased oil revenue also comes the danger of complacency. Bureaucrats, defense contractors, pensioners and workers in construction and finance all stand to gain from the money coming in, along with the oil companies. But the cash also feeds corruption, encourages increased financial opacity and discourages attempts to shake up the system - all of which could spell trouble for Russia down the road.

"All of the dominant groups in Russia get a share of the increased oil revenue," said Alexander Auzan, an economist and adviser to Medvedev. "Yet it contradicts their long-term interests."

Largest oil producer

It's a powerful prop for the status quo - which Auzan and others say is unsustainable.

But as Sergei Guriev, head of the New Economic School in Moscow, pointed out, any change is going to involve a cost for someone, so why take the risk if the money is flowing in?

Russia is currently the world's largest oil producer. When the price last spiked, in 2007, Moscow was flooded with money and people close to Putin were suggesting that Russia was genuinely self-sufficient and had no need to engage more deeply with the West. The economic crisis the following year brought that talk to an abrupt end, and Medvedev began pushing for a Western-oriented program of modernization and diversification away from dependence on energy exports.

The Kremlin moved to stimulate the economy in 2008 by increasing government salaries and hiking pensions by 35 percent. Now it is stuck with those increases. With oil revenue providing 40 percent of the Russian budget, the Gaidar Institute for Economic Policy here has calculated that at any price less than $105 a barrel the government will be in the red.

That tempers any inclination toward hubris, said Daniel Treisman, a political scientist at UCLA who follows Russian developments. The Kremlin was looking at a difficult financial crunch, with parliamentary elections coming late this year and a presidential election next March, so the timing of this rise in revenue is more a relief than a goad to aggressive behavior.

"We don't need high prices," said Leonid Grigoriev, an economist and former World Bank adviser. "We need good relations, a long-term market and reasonable prices," which he put in the $70-to-$90 range.

Russia will not turn its back on the West, by any means, he said. But, especially in an election year, its leaders may be more vocal in pointing up differences with the West. In 2010, Russia had enough problems at home that it was actively trying to avoid them abroad; now, with money to address domestic issues, that caution may not be so evident.

Treisman, like many others, did not think much would ever come of Medvedev's modernization plans - it's not the sort of change, he said, that can be ordered from the top down. But the oil bulge makes the Westernization of the Russian economy less likely. It helps big companies - which, Grigoriev said, already dominate the economy to a much greater extent than in other developed countries - and it hurts small ones, where jobs and creativity tend to be nurtured.

Information technology firms, with high labor costs, will suffer, Guriev said, and they are central to Medvedev's vision for the future of Russia.

Gazprom loses clout

Part of what got Putin so riled up in Brussels was Europe's treatment of Gazprom, a gigantic state-owned operation that at one time had unchallenged sway in the European energy market. Gazprom was a powerful tool in the Kremlin's hands, useful when threatening Ukraine and a reminder to the rest of Europe that Russia had to be given its due.

But that was before American companies began extracting cheap natural gas from shale deposits, and before developments in liquefied natural gas (LNG) technology made inexpensive transportation by ship possible.

Qatar set up a new LNG port to ship gas to the United States, but when it couldn't compete there it turned to Europe instead. Today, Europe can buy gas cheaper from Qatar than it can get by pipeline from Russia. European companies have been renegotiating their contracts with Gazprom - downward - and the European Union has insisted that Gazprom divest itself of its pipelines.

Russia will still sell gas to Europe, said Pierre Noel, an energy expert at England's University of Cambridge, "but the pricing regime is changing." Gazprom, he said, will eventually have to change with it.

But the turmoil in North Africa has temporarily masked even Gazprom's difficulties. When the Libyan gas pipeline across the Mediterranean was shut down, Italy, which is Gazprom's second-biggest customer, relented for now in trying to renegotiate its contract.

If production in Algeria, a much bigger supplier than Libya, were to be disrupted, that would make Gazprom a power to be reckoned with again.

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Rising fuel prices putting everyone in a bind

NEW YORK - High fuel prices are putting the squeeze on drivers just as they are starting to feel better about the economy. They also are forcing tough choices on small-business owners, who are loath to charge more for fear of losing cost-conscious customers.

Gasoline prices rose 4 percent last week to a national average of $3.29 per gallon. That's the highest level to date for this time of year, when prices are typically low. And with unrest in the Middle East and North Africa pushing the cost of crude oil into the $100-a-barrel range, analysts say pump prices probably are headed higher.

Bryon Gongaware, an owner of the Floral Trunk and Gifts in White Bear Lake, Minn., didn't raise his $7 flower delivery charge when gas prices spiked in 2008, and he doesn't plan to do so this time, either.

"I don't think the economy is solid enough that you can be careless about raising prices," he said.

That means the extra costs that come from driving the store's delivery van 70,000 miles a year come from only one place: "Right out of the bottom line," he said.

For drivers such as Robert Wagner, 51, a high school teacher from Thornton, Colo., the higher fuel prices mean cutting back on movies and dinners out for him, his wife and their two children. "We're very, very frugal right now," he said as he trickled enough $3.09-per-gallon gasoline into his Chevrolet Suburban to get him to his next pay day.

Analysts and economists worry that by lowering profits for businesses and reducing disposable income for drivers, high gasoline prices could slow the recovering economy.

For a year, analysts estimate, oil at $100 a barrel would reduce U.S. economic growth by 0.2 or 0.3 of a percentage point. Rather than grow an estimated 3.7 percent this year, the economy would expand 3.4 percent or 3.5 percent. That probably would mean less hiring and higher unemployment.

Americans are less prepared to absorb the increase in gasoline prices than the last time they rose to this level, in 2008, because the unemployment rate is higher and real estate values are lower, said David Portalatin, an analyst for market research firm NPD Group.

It has been four months since gasoline was more than $3 per gallon. During that time, drivers have spent $14 billion more on gasoline than they did a year ago, Portalatin said.

Diane Swonk, chief economist at Mesirow Financial in Chicago, said this year's cut in payroll taxes offers consumers a buffer against higher fuel prices. Still, she expects all but the wealthiest Americans to cut back on discretionary spending. And the longer prices stay high, the more damage they do.

Gasoline prices rose throughout last fall as the developing nations of Asia and the recovering economies of the West began using more oil.

In recent weeks, upheaval in the Middle East and North Africa stoked fears that oil supplies would be disrupted, and oil prices exceeded $100 per barrel for only the second time in history.

Much of the most dramatic unrest took place in countries that are not big producers of oil. But when Libya plunged into chaos, there were disruptions in shipments of its high-quality crude, which is well-suited to making gasoline. That sent refiners scrambling to find other sources of high-quality oil. Gasoline prices rose further.

Gasoline prices typically fall in the winter and rise in the spring as refiners switch to more expensive summer blends of gasoline. Since 2000, prices in May have been 52 cents per gallon on average higher than in February, according to the Energy Information Administration.

Tom Kloza, chief oil analyst at the Oil Price Information Service, believes that the normal seasonal rise in prices has been pulled ahead by events in the Middle East, but he still expects prices to rise further. He predicts prices will reach $3.50 to $3.75 per gallon, barring more chaos in the Middle East.

"When we get over $3.75 we are looking at very serious consequences for the economy," he says.

For every 25-cent increase in the price of gasoline, the nation spends an extra $3 billion filling up its cars and trucks, Kloza says.

For Jay Ricker, who owns 51 convenience stores in Indiana that sell gasoline under BP and Marathon brands, that's less money for the "affordable luxuries" he offers - cappuccinos and candy bars that people enjoy, but can do without. "I hate these high prices," he says. "People don't want to come in and buy something I make money off." Drivers often get angry when gasoline prices spike for reasons that aren't apparent, such as refinery problems or overseas demand for oil.

This time, though, the dramatic news reports from the Middle East are making customers more understanding, says Scott Hartman, CEO of Rutter's Farm Stores, which owns 56 convenience stores and gas stations near Harrisburg, York and Lancaster, Pa.

"Whenever you see chaos in the Middle East, people expect higher prices, and this has been more widespread than most of us have seen in our lifetimes," he says. "It's quite clear our customers know what's going on." That doesn't mean they like it.

When asked about fuel prices at a RaceTrac service station in Dallas, Shaun DuFresne tapped the screen on the pump, showing he had just spent $90.14 for diesel - at $3.50 a gallon - to fill his 2006 Ford F-250 pickup truck. Then he said something unprintable.

- Associated Press

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Extensive corrosion threatens BP pipelines in Alaska, risking explosions, spills

The extensive pipeline system that moves oil, gas and waste throughout BP's operations in Alaska is plagued by severe corrosion, according to an internal maintenance report generated four weeks ago.

The document, obtained by the journalism group ProPublica, shows that as of Oct. 1, at least 148 BP pipelines on Alaska's North Slope received an "F-rank'' from the company. According to BP oil workers, that means inspections have determined that more than 80 percent of the pipe wall is corroded and could rupture. Most of those lines carry toxic or flammable substances. Many of the metal walls of the F-ranked pipes are worn to within a few thousandths of an inch of bursting, according to the document, risking an explosion or spills.

BP oil workers also say that the company's fire and gas warning systems are unreliable, that the giant turbines that pump oil and gas through the system are aging and that some oil and waste holding tanks are verging on collapse.

In an e-mail, BP Alaska spokesman Steve Rinehart said the company has "an aggressive and comprehensive pipeline inspection and maintenance program," which includes pouring millions of dollars into the system and regularly testing for safety, reliability and corrosion. He said that although an F-rank is serious, it does not necessarily mean there is a current safety risk.

Rinehart added that the company will immediately reduce the operating pressure in worrisome lines until it completes repairs. "We will not operate equipment or facilities that we believe are unsafe," he said.

Rinehart did not respond to questions about what portion of its extensive pipeline system was affected or whether 148 F-ranks were more or less than normal, except to say that the company has more than 1,600 miles of pipelines and does more than 100,000 inspections a year.

In 2006, two spills from corroded pipes in Alaska placed the company's maintenance problems in the national spotlight. At the time, BP temporarily shut down all transmission of oil from the North Slope to the continental United States, cutting off about 8 percent of the nation's oil supply, while it examined its pipeline system.

Photos taken by employees in the Prudhoe Bay drilling field this summer, and viewed by ProPublica, show sagging and rusted pipelines, some dipping in gentle U-shapes into pools of water and others sinking deeply into thawing permafrost. Marc Kovac, a BP mechanic and welder, said that some of the pipes have hundreds of patches on them and that BP's efforts to rehabilitate the lines were not funded well enough to keep up with their rate of decline.

"They're going to run this out as far as they can without leaving one dollar on the table when they leave," Kovac said.

BP Alaska's operating budget is private, so the picture of its maintenance program is incomplete. But documents obtained by ProPublica show that BP has pumped hundreds of millions of dollars into maintenance and equipment upgrades on the North Slope since the 2006 spills. In 2007, BP's maintenance budget in Alaska was nearly $195 million, four times what it was in 2004, according to a company presentation. In 2009, $49 million was budgeted to replace and upgrade systems that detect fires and gas leaks alone.

Despite the investment, workers say that the capabilities of equipment of all types continue to be stretched and that maintenance plans set years ago remain incomplete.

BP employees told ProPublica that several of the 120 turbines used to compress gas and push it through the pipelines have been modified to run at higher stress levels and higher temperatures than they were originally designed to handle. They also said giant tanks that hold hundreds of thousands of gallons of toxic fluids and waste are sagging under the load of corrosive sediment and could collapse.

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Academic scientists say oil from gulf spill is not going away quickly

Academic scientists are challenging the Obama administration's assertion that most of BP's oil in the Gulf of Mexico is either gone or rapidly disappearing -- with one group Thursday announcing the discovery of a 22-mile "plume" of oil that shows little sign of vanishing.

That plume was measured in late June and was described Thursday by scientists from Woods Hole Oceanographic Institution in Massachusetts. The biggest news was not the plume itself: For weeks, government and university scientists have said that oil from BP's damaged well is still underwater.

(Photos: The oil spill cleanup)

The news was what is happening -- or not happening -- to it.

The scientists said that when they studied it, they saw little evidence that the oil was being rapidly consumed by the gulf's petroleum-eating microbes. The plume was in a deep, cold region where microbes tend to work slowly.

"Our data would predict that the plume would still be there now," said Benjamin Van Mooy, a Woods Hole researcher.

(Gulf driller to light up cigar after job is done)

Their research came after a week in which other scientists had taken issue with the government's portrait of where all the oil went. On Thursday afternoon, Jane Lubchenco, the Oceanic and Atmospheric Administration's administrator, defended the government's work, saying it was done by the "best scientific minds" and reviewed by outsiders.

(Transocean accuses BP of withholding data)

"We remain confident in our assessment," she said.

The Woods Hole research, published in the peer-reviewed journal Science, provided one of the most detailed pictures yet of what this oil is doing under the surface.

The scientists said that, using a robot submarine that zigzagged across the deep gulf, they found a plume of oil droplets that was as tall as a 65-story building and more than a mile wide. The plume, whose droplets were so small that the water appeared clear, extended off to the southwest of the well, 3,600 feet deep.

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Documents indicate heavy use of dispersants in gulf oil spill

While the BP well was still gushing, the Obama administration issued an order that limited the spreading of controversial dispersant chemicals on the Gulf of Mexico's surface. Their use, officials said, should be restricted to "rare cases."

But in reality, federal documents show, the use of dispersants wasn't rare at all.

Despite the order -- and concerns about the environmental effects of the dispersants -- the Coast Guard granted requests to use them 74 times over 54 days, and to use them on the surface and deep underwater at the well site. The Coast Guard approved every request submitted by BP or local Coast Guard commanders in Houma, La., although in some cases it reduced the amount of the chemicals they could use, according to an analysis of the documents prepared by the office of Rep. Edward J. Markey (D-Mass.).

The documents indicate that "these exemptions are in no way a 'rare' occurrence, and have allowed surface application of the dispersant to occur virtually every day since the directive was issued," Markey wrote in a letter dated Aug. 1 to retired Coast Guard Adm. Thad W. Allen, the government's point man on the spill. Markey chairs the House Select Committee on Energy Independence and Global Warming.

Some of them dealt with separate dispersant applications on the same day. Markey said it appeared that the order "has become more of a meaningless paperwork exercise" than a real attempt to curb use of the dispersants.

In an interview Saturday, Allen defended the decisions to grant the waivers, saying that overall use of dispersants declined sharply after that May 26 order to limit their use. The total use of dispersants underwater and on the surface declined about 72 percent from its peak, according to the Environmental Protection Agency.

Allen said that on some days the amount of oil on the surface justified a "tactical" decision, by on-scene Coast Guard commanders, to spray some dispersants.

"There's a dynamic tension that goes on when you're managing an incident that has no precedent," Allen said. "You establish general rules and guidelines, but knowing that the people on scene have the information" means trusting them to make decisions, he said.

In the end, Allen said: "You can quibble on the semantics related to 'rare.' I like to focus on the effects we achieved" by dispersing the oil. Officials have said that, in the days since the gusher was stopped, thick sheets of oil have nearly disappeared from the gulf's surface.

EPA Administrator Lisa P. Jackson conceded that there had been "frustration in the field" from EPA officials about the waivers. But Jackson said it was partly alleviated June 22, nearly a month after the order was issued, when Coast Guard officials began giving the EPA a greater role in the discussions over whether to approve dispersant use.

"EPA may not have concurred with every single waiver," Jackson said. But, she said, the Coast Guard had the ultimate say: "The final decision-making rests with the federal on-scene coordinator. That's where the judgment, the ultimate decision-making ability, had to lie."

The dispersants -- variants of a Nalco product called Corexit -- break up the oil, acting like a detergent on kitchen grease. They are intended to keep the oil from reaching shore in large sheets and to make it easier for microbes to consume the oil underwater.

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