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Can BP Avert an Exxon Valdez-Like Disaster?

BP's biggest effort yet to contain the oil spill in the Gulf of Mexico failed over the past weekend. Can BP take control of the Gulf of Mexico oil spill before it becomes the worst oil disaster in U.S. history? See what 'TheStreet' thinks.

(BP poll updated for latest oil spill efforts, BP and government comments)

NEW ORLEANS, La. (

TheStreet

) -- Last week,

BP

(BP) - Get BP Plc Report

CEO Tony Hayward was watching over construction of "the dome" in the Gulf of Mexico, and BP officials were optimistically predicting that the dome could contain 85% of the oil spill by the end of the weekend.

But the BP dome failed, its impressive technology and 100 tons of metal proving useless against one of nature's most simple substances: ice crystals.

Throughout this week, BP CEO has pitching the press on a cadre of new approaches to combating the oil spill, including a revised dome strategy, as hearings in Washington D.C. heightened the attacks on BP and other companies involved in the oil spill.

BP, in fine British fop form, was referring to the smaller dome as a "top hat". A few days after BP officials expressed such optimism about the original dome, they were hoping that the "top hat" would do the trick in turning the tide back in their favor -- or in their favor for the first time -- in fighting the worsening oil spill in the Gulf of Mexico.

BP Plans Top Hat, Junk Shot to Stop Oil Leak (Forbes)

Barrier islands off the coast of Louisiana received their first visits from the oil spill over the weekend, and a national wildlife refuge area dating back to the administration of Theodore Roosevelt was among the affected areas. Some barrier islands popular with fishermen and for tourism were closed to the public after the oil reached their shores.

By Thursday of this week, oil had reached Whiskey Island in Louisiana's Terrebonne Bay, west of the Mississippi Delta, Louisiana's Chandeleur Islands and Port Eads, and Dauphin Island in Alabama.

Each day, the National Oceanic and Atmospheric Administration (NOAA) updates the projected course of the oil spill. In Thursday's NOAA update, scientists predict that in the next 24 hours, the periphery of the contiguous oil spill mass will begin reaching the outer reaches of Louisiana's coast for the first time, near Venice. Over the next 72 hours, NOAA's projections show the mass of the oil spill continuing to move closer, with heavier concentrations of oil reaching the shoreline.

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U.S. congressmen have been saying for weeks that the methods that BP is using in the Gulf of Mexico to combat the oil spill are unproven, and last week a high-ranking U.S. Coast Guard official tried to temper expectations about the dome since it had never been attempted at a depth of 5,000 feet, where the BP underwater well continues to leak unabated. The Coast Guard Rear Admiral Mary Landry had basically said the dome could not be expected to work -- and lo and behold, she was right.

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The new BP ideas are to add a second blowout preventer atop the first as a way to stem the gushing oil, or putting a valve in place over what is known as the riser piper, and which BP hopes would have the same effect of cutting off the oil flow. BP would use a larger pipe to funnel the oil up to a drillship; however, the blunt method of cutting the riser pipe could also result in an increased rate of oil leaking from the well. If effective, either method would provide BP with the time it needs to finish drilling the relief well that will serve as a permanent contain on the oil spill, the oil company said.

The "junk shot" that BP has been discussing for several days already -- firing rubber or other junk material directly into the leaking well -- might be attempted before the other measures, as if successful, it could make the other measures easier to carry out. Nevertheless, the level of technical nuance in this approach sounded about as complex as an American dad with a six-pack of Bud and a potato gun in his backyard taking aim at leaking hose on a lazy summer Saturday.

Obama administration Energy Secretary Steven Chu and Interior Secretary Ken Salazar were sent by the President to the BP command center in Houston on Wednesday.

Energy Secretary Chu bred some of BP's enthusiasm for its latest attack plan on the oil spill, telling the

New York Times

, "I'm feeling more comfortable than I was a week ago."

All of BP's potential approaches face the same dilemma as all of BP's failed efforts to control the oil spill, though: they have never been attempted at a depth of 5,000 under the surface of the ocean.

The cost is leaking from BP coffers unabated too. BP estimated on Wednesday that it has already spent $450 million on its failed effort to slow the oil spill, and at least one Street analyst expects the total cost to BP to run as much as $13 billion.

The depth of the water is part of the problem that is beyond BP's control, as most existing methods for containing oil spills have only been used successfully for incidents in shallower waters.

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Still, the critical issue is not the exact depth or the moving target of the total cost to BP, but whether any of BP's efforts will actually work to slow the oil spill anytime ahead of the multi-month timeline for drilling a relief well that would serve as a permanent solution.

In an interview of Thursday with the British newspaper

The Guardian

, BP CEO Hayward was asked whether he felt that his job was on the line. "I don't at the moment. That of course may change. I will be judged by the nature of the response. Investors have so far been very supportive."

BP CEO Hayward waxed historic and metaphoric with the British news daily about the ultimate impact of the oil spill, saying "Apollo 13

a failed NASA project did not stop the space race...It's the same for the oil industry."

There are reasonable predictions from BP and government officials that the relief well going to 18,000 feet may not be finished for another two months, and that timeline runs right alongside the dire prediction that by the middle of June the Gulf of Mexico oil spill will be worse than the infamous Exxon Valdez oil spill.

BP CEO Hayward said the dome on which so much hope had been pinned failed because there was more gas in the leak than previously believed and the gas combined with water to form ice crystals that clogged the structure's opening.

BP will now pump methanol into the "top hat" to keep ice from forming, and the smaller size of the new dome should also keep down the level of water entering and causing the crystals to form.

The new steel dome -- a much smaller five feet in diameter and five feet tall -- should be ready by the end of week, the BP said on Wednesday.

In other words: Another week, another round of hope offered by BP tied to another new technology, yet still no progress to slow the hundreds of thousands of gallons of oil spilling into the Gulf of Mexico.

Submersible robots failed, the dome failed, a minor success to plug one of three leaking valves did nothing to slow the rate of oil leaking from the underwater well.

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Is BP just buying time again -- while it's spending quite bit of money -- or is it just learning by unavoidable trial and error in a situation where it continues to fail, but deserves an "A" for effort?

BP's Hayward said that BP will ultimately beat the oil spill, "it's simply a question of how long it takes."

Of course, how long it takes is the difference between victory for BP in limiting the damage from the oil spell, and eclipsing the Exxon Valdez as No. 1 oil spill villain in U.S. history.

As far as public opinion goes, in the first major polls about the oil spill, President Obama is doing better than BP, but not by as much as the President would probably prefer. A poll released by

NBC

and the

Wall Street Journal

showed that approximately 45% of Americans think the government hasn't done enough in response to the spill, while 43% think the government has done all it can. Approximately 50% of survey takers said BP has not done enough, while only 37% think BP has made good on its claims to aggressively attack the oil spill.

The

Associated Press

also released a poll on Thursday indicating that 42% of people approve of Obama's response to the oil spill; 33% disapprove and 21% were neutral. The underlying poll results were strongly along partisan lines. In the AP poll, 49% disapproves of BP's efforts; 32% approve, and 15% were neutral on the oil company. However, both polls showed that, not surprisingly, BP is suffering more than President Obama, with 32% of survey takers in the

AP

poll voicing strong disapproval of BP's effort.

Federal officials have been giving BP a hard time, and Department of the Interior Secretary Ken Salazar was quoted early on as saying that the government's job was to keep a boot on BP's neck.

The focus of the Congressional ire in the Senate and House hearings on Tuesday and Wednesday shifted around from the blowout preventer that Congressional investigators say was a major culprit in the disaster, to decisions made by BP before a final cementing of the well was completed, and decades-old safety lapses from both the oil industry and the government's main oil industry watchdog.

Major oil companies, as well as the Minerals Management Service of the Interior Department, have long argued that blowout preventers were near-infallible, and the "too cozy" relationship between the government and oil industry was under attack, leading President Obama to propose a separation of the MMS into two distinct units, one regulatory and one business.

BP continues to aggressively defend its response to the oil spill.

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David Nagel, executive vice president for BP America, said earlier this week at a press conference in Washington D.C., ahead of the hearings: "In terms of the spill response: that was mobilized right away." He also cited the failure of Transocean's blowout preventer as what "turned this incident into a really tragic situation."

Yet at some point, the rhetoric on both sides -- which was being taken up a notch on Tuesday when BP executives began to face the congressional hearing firing line in Washington D.C. -- just shows the level of frustration and failure in the combined efforts of BP and the government to take control of the oil spill as it heads toward becoming the worst oil disaster in the country's history.

Comments made by BP Chief Operating Officer Doug Suttles on Monday show that the oil giant is, in some respects, in a situation in which it has to try any and all solutions and hope for the best. The BP COO told

CNN

on Monday, "What we've been doing is pushing parallel paths because we don't know which one's going to work."

BP may not get an "F" for effort, but the tone of Suttles' comments across the airwaves demonstrated the lack of progress. On NBC, the

BP

executive said, "We've brought the world's experts together to try to help us understand how do we make these successful. I can't tell you if any one of them will work but as long as we have options we're going to keep trying. The goal here has to be to get the flow stopped."

Indeed, the situation had reached such a frustrating moment after the failure of the dome on Monday that BP was using a chemical dispersant to slow the rate of the oil spill -- which needed special Environmental Protection Agency clearance because the chemical dispersant, itself, was a potential danger to the Gulf waters.

Yet BP CEO Hayward insisted that the estimated 400,000 gallons of dispersant which BP has pumped into the sea to try to disperse the slick were relatively "tiny" amounts to the British newspaper

The Guardian

on Thursday.

Even the relief wells being drilled by BP, on which hopes of a permanent fix rest, will require BP to first drill into the same oil and gas deposit that caused the original blowout.

BP noted in a recent regulatory filing that the relief well drilling could cause a blowout that releases as much as 240,000 barrels of oil a day into the ocean. BP CEO Hayward has been playing down this risk as an unlikely worst-case scenario, but given the worst-case scenario BP already seems to be trapped within, it's hard to have blind faith in BP's optimism that future worst-case scenarios will be avoided.

Bloomberg

quoted a scary reference point for a blowout of that magnitude: the 240,000 barrels of oil a day would equal two-thirds the supply pumped daily from Prudhoe Bay, Alaska.

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According to a plan submitted by BP to the Department of the Interior, the relief wells should be completed by July 15, well after estimates claim that the Gulf of Mexico spill will have become a worse disaster than the Exxon Valdez.

BP CEO Hayward conceded on Monday that, "The investigation of this whole incident will undoubtedly show up things that we should be doing differently."

As lawsuits against BP and other companies involved in the oil spill mount -- one estimate claims there are already more than 100 suits -- BP has moved to consolidate the suits in a court in Houston, and made what some considered an unusual request to have a specific judge -- first appointed by President Ronald Reagan and familiar with energy sector law -- assigned to the case.

Yet the legal battle between the government, the public, and the oil companies is just getting going. On Thursday, Transocean filed a legal claim based on a law more than one hundred years old to limit its liability in the oil spill to under $27 million.

The more important issue for the U.S. public, though, is not a legal one, but if BP do things quickly enough to control this spill before the many days in court arrive for the oil company?

After the Senate hearing on Tuesday, Senator Jeff Sessions (R-Ala.) told the

Wall Street Journal

that the oil executives' responses were "disappointing" and lacked "candor."

During the Senate hearing, a frustrated Republican Senator, Lisa Murkowski of Alaska, said that if the oil companies can't restore confidence in their operations offshore, "The incident will impact the development of energy policy for our country." The Alaskan Senator added in a rhetorical flourish that if confidence is not restored, "not only will BP not be out there, the Transcoeans won't be out there to drill the rigs and the Halliburtons won't be out there cementing."

Shortly after one of BP's top executives was in Washington playing the blame game, BP CEO Hayward told British newspaper

The Guardian

on Thursday that it was "unwise" to speculate about the direct causes of the accident before investigations had been completed. "There is a lot of speculation, red herrings and hearsay."

Indeed, it all begs the question: Given the high-profile failure of the much-anticipated, massive BP dome,

do you think the oil giant will get the upper hand on the oil spill before it becomes the worst oil spill in U.S. history?

Take our poll below, to see what

TheStreet

has to say -- and don't be afraid to leave a comment, to let the world exactly what you think about BP's efforts ... and its outlook.

-- Reported by Eric Rosenbaum in New York.

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