Posted on Tue, Jun. 08, 2010
last updated: March 15, 2013 11:58:36 AM
WASHINGTON — Money from any oil collected and sold from BP's runaway oil well will go toward a fund that helps restore and improve wildlife habitat in the four states most damaged by what is now the nation's largest ever oil spill.
Although thousands of barrels of oil continue to spew into the Gulf of Mexico each day from BP's broken well, the energy giant is salvaging much of it using a containment device installed last week.
That captured oil, McClatchy first reported last week, could generate more than $1.4 million in revenue each day, based on flow rate estimates calculated by a federal team determining how much oil is leaking from the well.
The company said it doesn't know exactly how much money it'll donate to the fund, but all net revenue from the well will go to the fund. So will the net revenue from any oil skimmed from the ocean's surface and sold to a refinery for processing.
The wildlife fund will create, restore, improve and protect wildlife habitat along the coastline of Louisiana, Mississippi, Alabama and Florida, Tony Hayward, the company's chief executive, said in a statement.
The company also took pains to note that its contribution is voluntary; the fund it's creating is "over and above BP's obligations under the Oil Pollution Act of 1990." The money will be made available to state agencies and non-profits that are focused on wildlife protection and restoration, the company said.
BP is "committed to protecting the ecosystems and wildlife on the Gulf Coast," Hayward said. "We believe these funds will have a significant positive impact on the environment in this region."
Although the oil from the well could be valued at as much as $1.4 million a day, it's unlikely it will fetch quite that much.
McClatchy's calculation used a government tally of 25,000 barrels flowing from the well each day, and the 18.75 percent royalty rate applicable to oil from the BP well. It assumed that oil is selling at an average of $70 a barrel.
In the first 12 hours of the day on Tuesday, BP captured 7,850 barrels of oil. If it captured twice that over the course of a day, assuming oil is $70 a barrel, Tuesday's proceeds could be valued at more than $1 million.
BP estimates that 53 percent of the proceeds of each barrel of oil will go to the wildlife fund after it subtracts the 18.75 percent in federal royalties as well as a 35 percent share it owes to its co-owners in the lease. So the wildlife fund on Tuesday alone could have received as much $582,470.
However, the company cautioned that oil it's collecting from the well includes a high concentration of methanol, which is injected at the source to prevent the formation of hydrates that could cripple the containment system. As a result, it expects each barrel of collected oil to sell at a lower price than regular crude would.
Yet the oil will still be a moneymaker — and not just for BP. U.S. taxpayers are also expected to see a modest windfall from royalties, too. The Treasury could be due as much as $192,325 in royalties daily, based on Tuesday's estimated 15,700-barrel collection rate.
BP said it would continue to donate all net revenue from the well until it "is killed and oil is no longer coming from this source." A relief well is expected to be completed in August.
The money at stake underscores the need for accurate measurements of how much oil has been flowing from the BP well since the April 20 disaster, a measurement that President Barack Obama acknowledged last week the government was too slow in developing independently.
It's been difficult to establish an accurate tally of the amount of oil coming out of the well. BP initially said the rate was 1,000 barrels a day, and then increased it to 5,000. The government-appointed Flow Rate Technical Group estimated the rate at 12,000 to 25,000 barrels a day. Attaching the containment apparatus last week was expected to increase the flow by 20 percent.
One member of the flow rate group told McClatchy on Monday that based on satellite data he's examined, it could be as much as 100,000 barrels a day. The rate of flow from the well has been increasing over time, especially since BP's "top kill" effort failed last month to stanch the flow, said Ira Leifer, an associate researcher at the Marine Science Institute of the University of California, Santa Barbara, and a member of the government's Flow Rate Technical Group.
Accurate measurements are important because they're used as evidence when federal investigators consider fines and if juries impose damages on BP for the spill. BP also is responsible for paying royalties for each barrel of oil lost, and the measurements are needed to calculate the money that's due the government.
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