Page last updated at 23:15 GMT, Wednesday, 26 May 2010 00:15 UK

BP suffers Washington blame game after oil spill

By Simon Cox
BBC Radio 4's The Report

To be present during the early sessions of the Congressional inquiries into the cause of the Deepwater Horizon explosion last month, was to get a sense that this is not a great time to be trading on the word "British" in Washington.

Gulf coast clean up
The BP oil spill has cast US energy policy in a new light

Congressmen were lining up to heap scorn on both BP's response to the spill and its prior safety record in the United States.

Although BP has not been called British Petroleum for the best part of a decade, it has become fashionable for administration officials and congressmen to refer to it pointedly by its former name.

But despite the ill-feeling directed towards Britain's biggest company, the more resounding lesson to come from the catastrophe could be for the United States and its relationship with its offshore oil industry.

"The United States uses 25% of the world's oil, yet we only have 3% of those reserves in the United States," House Energy and Commerce Committee chairman Henry Waxman told the BBC.

It's so illogical that we're continuing to rely on oil and we still haven't had the courage to move away to a better energy policy," he added.

"And part of the reason we have not moved away has been the influence of the oil companies themselves."

Regulation issues

That influence has led US politicians to look not only at the performance of companies like BP in the rich oilfields beyond America's continental shelf, but to the performance of the federal agency which should have been keeping a close eye on the risky business of deep water oil exploration.

Raul Grijalva
You don't hear the mantra of 'drill, baby, drill' right now as much as you did a month ago in congress
Representative Raul Grijalva

To gain permission to drill anywhere in the Gulf of Mexico, BP has to submit a document called an oil spill response plan. In its plan for Deepwater Horizon, BP claimed that in the unlikely event of a spill, it could cope with a worst-case scenario around 30 times bigger than the spill it is currently grappling with.

The federal regulator, the Minerals Management Service (MMS), also decided to exempt BP from supplying an environmental assessment of Deepwater Horizon's impact on the Gulf of Mexico, because it decided a spill would be small and unlikely to reach shore.

Kieran Suckling, director of the American environmental NGO, the Center for Biological Diversity, believes closer oversight by the MMS could have prevented the spill.

"The environmental documents would no longer be written by BP and the oil industry, they would have been written by government scientists, giving us an independent assessment of what was happening out there," he said.

"They could have required more safety equipment, required a better clean-up plan, a very large bond or they could have rejected the permit altogether and said 'no, we're not going to issue this permit, this project is just too dangerous'."

Obama's pledge

US President Barack Obama has already promised an end to what he calls the 'cosy relationship' between the MMS and the oil industry.

But where does that leave BP, a company which was not so long ago reckoned to hold one in every six pounds invested by UK pension funds?

"It will dent their reputation, it will give them a black eye," said Fadel Gheit, an oil analyst from the US investment bank Oppenheimer and Co.

Steve Scalise
It's unfortunate that right now there are people who have always been against domestic US exploration that are trying to take advantage of this situation
Representative Steve Scalise

"Will they recover from it? Absolutely. Depending on how severe this hit is going to be financially and on their reputation, they will recover.

"It's a strong company with lots of resources and a lot of history and a good management team," he added. "It will take time, will cost a lot of money and life will go on."

However, that assessment is based on the well being shut off soon. And whatever the result of that operation, Gheit is sure that what will follow is a wave of regulation which the US oil lobby has fought long and hard to avoid.

For those on Capitol Hill who would like to see an America less dependent on oil, Deepwater Horizon could be a turning point.

"You don't hear the mantra of 'drill, baby, drill' right now as much as you did a month ago in Congress," said Democratic Representative Raul Grijalva.

Oil industry 'friends'

"This could put more emphasis on alternatives and counter the economic argument by saying there is a cost if we don't do this right, and the cost is... borne by the US taxpayer," he argued.

But the oil industry still has friends on Capitol Hill who think responsibility for Deepwater Horizon lies not with the industry as a whole, but with BP and the federal government.

"We've got experience from 30 years of drilling in the Gulf of Mexico that those safety mechanisms work when they're used properly. What happened in this explosion is something that should not have happened," said Republican Representative Steve Scalise, whose Louisiana district is on the Gulf of Mexico.

"It's unfortunate that right now there are people who have always been against domestic US exploration that are trying to take advantage of this situation, and to use it as an opportunity to say, 'I told you so, we shouldn't drill in the United States.'

"That would be like raising the white flag because ultimately that would make the US even more dependent on the Middle East for oil.

"We have got to do is say 'we're not going to tolerate this kind of failure of safety standards'. We've got to hold every company, including BP to that standard."

The Report is on BBC Radio 4 on Thursday, 27 May at 2000 BST. You can also listen via the BBC iPlayer after broadcast or download the podcast.

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