(BP oil spill story updated for BP stock gains, static kill effort)

NEW YORK(TheStreet) --The U.S. government and BP have both issued good news about the oil spill.

The White House announced on August 4 that 74% of the oil that leaked from the Macondo well has either been captured, burned off, evaporated or broken down in the Gulf of Mexico.

At the same time, BP announced that its static kill effort has met with initial success, with the heavy drilling mud pumped into the well controlling the well pressure. BP referred to the success as a "significant milestone."

Pumping of the heavy drilling mud into the Macondo well began on Tuesday afternoon and was stopped after 8 hours. BP is in a holding pattern now, and it may or may not pump more drilling mud into the well before attempting to cement the well shut.

Mid-August remains the estimate of the most likely date by which the first BP relief well will intercept the Macondo well, the permanent solution to the oil spill.

Roughly 26% percent of the crude oil leaked by the BP well remains in waters or along the coast of the Gulf of Mexico, but the government report said that the crude was breaking down rapidly.

"There's absolutely no evidence that there's any significant concentration of oil that's out there that we haven't accounted for," Jane Lubchenco, head of the National Oceanic and Atmospheric Administration, told the New York Times.

The government report estimates that 25% of the chemicals in the oil evaporated at the surface or dissolved into seawater; 5% or more was eliminated in controlled burns; 3% was eliminated through skimming operations, another 8% broken down by chemical dispersants; and 16% of the crude oil from the leak dispersed naturally.

BP recently estimated that 827,000 barrels of oil had been skimmed, and 265,500 barrels of oil eliminated through controlled burns.

BP (BP) shares reached the $40 mark for the first time since the end of May, closing at exactly $40 on Tuesday afternoon and staying above that level on Wednesday morning.

The energy sector rally on Monday, which propelled all stocks higher, helped to push shares of BP into the winners column. On Tuesday, even as the markets faltered, oil climbed higher and the energy sector eked out gains.

BP's gain on Tuesday of 1.47%, or 58 cents, was good enough for best among integrated oil majors.

Transocean ( RIG) and Anadarko Petroleum ( APC), the rig operator and minority owner in the BP Macondo well, led energy sector returns on Monday, and was rising ahead of its after-hours earnings expected on Wednesday.

Late on Tuesday afternoon, the entire energy sector got welcome news from Washington D.C., when the Senate decided to put off any action on an oil spill bill -- or energy legislation more broadly -- until at least September. Senate Majority Leader Harry Reid (D. Nev.) had hoped to pass at least an oil spill-focused narrow energy bill before the August recess, but politically contentious issues like the unlimited liability measure for oil spills made the quick passage untenable.

BP ( BP) sent the other minority owner in the Macondo well, MOEX Offshore, a unit of Japanese company Mitsui, a bill for $480 million to cover oil spill costs.

Anadarko Petroleum said in its after-market earnings on Tuesday, August 3, that it was sticking to its claims of gross negligence on the part of BP and not paying any liabilities associated with the oil spill. Anadarko upped its production guidance for the full year, even given the hit in the Gulf of Mexico, and its shares were rally like Transocean and BP.

It wasn't all good news for BP. The government sponsored team of scientists conducting research on the oil spill flow rate announced on August 2 that the BP oil spill may have been leaking as much as 62,000 barrels of oil a day at the outset of the crisis, higher than the previous high-end estimate of 60,000 barrels.

The scientific team narrowed the previous estimate of 35,000 to 60,000 barrels of oil per day to 53,000 barrels per day and approximated that 4.9 million barrels of oil have been released from the well during the oil spill. Based on the new oil flow information, and using the lower figure assuming no "gross negligence" on the part of BP, the government estimates BP's potential Clean Water Act fines at as much as $4.5 billion dollars. If BP is found to be grossly negligent, the fines could reach as high as $21 billion.

BP announced on Tuesday morning a deal to sell assets in Colombia for $1.9 billion, part of its $30 billion in asset sales to cover oil spill costs. The BP deal is with the Colombian national oil company and Canadian company Talisman.

Nevertheless, with BP CEO Tony Hayward out, BP taking a $32.2 billion earnings charge, the BP cap working and reports that it's getting harder to find any oil on the loose in the Gulf, the BP oil spill crisis has entered a new phase.

The popularity of the term "BP Squad," referring to the coordinated effort of federal agencies including the Justice Department, Federal Bureau of Investigations, and Environmental Protection Agency, has ushered in the final phase of the BP oil spill crisis: the long road to the final liability price tag. It's a road that could take years to walk, and it could include criminal convictions and the revoking of BP's license to operate in the U.S., in the worst-case scenario for the oil company.


Still, things have been going well for BP, other than the $17 billion loss it posted in the second quarter as a result of the $32.2 billion oil spill charge.

The image the world had been waiting to see for more than 12 weeks from the BP live spillcam finally came up from the deep at the beginning of July: no oil gusher visible 5,000 feet below the ocean's surface.

The BP static kill, to be followed by the relief well attempt, can be dubbed the "kill and drill" final plug operations on the leaking Macondo well.

The BP static kill is the latest version of the previously failed dynamic kill -- in effect, pumping heavy drilling mud into the capped well. BP thinks its chances of success are good, given that the cap is in place over the well, as opposed to previous efforts to pump heavy drilling mud into the well without a cap to handle the pressure-cooker conditions.

BP fell a little behind on its plans to have its first relief well -- the ultimate leaky well plug -- ready to intercept the Macondo well by mid-August, as the successful cap operation and some tropical storm weather in the Gulf suspended drilling. But drilling is back on track now.

Even the White House has become more optimistic. White House spokesman Robert Gibbs provided a premonition of where the BP oil spill crisis is today, when he said during the cap operation, before it was even successful, that it "represents the best news that we've had....We are approaching what we hope is the next phase in the Gulf -- understanding that that next phase is likely to take many years."

BP may have had its first success, but the oil company's history of failures over the 12 weeks of the oil spill, and the attacks on its safety record don't change because of Thursday's events.

In his testimony on Capitol Hill in June, BP CEO Tony Hayward made it clear that he was going to tow the legal line of not giving anything more than the most cautious answers about the events leading up the oil spill. Whether it was on the subject of cement bond logs, centralizers, well casing, mud circulation, or any of the issues outlined in a letter sent by the House to Hayward earlier this week, a letter that accused BP of reckless well operations designed to save time and money, Hayward's responses did not vary. Either Hayward "doesn't recall much," or "can't answer the question. I wasn't there," or, "That was a decision I was not party to."

In an e-mail message released by the House, BP engineers refer to the Deepwater Horizon well as a "nightmare."

Among the risky decisions made by BP were a decision to use a cheaper casing for the well, and to use fewer "centralizers" to save time -- equipment that helps to make sure cement flows evenly around the outside of the casing. Heavy drilling mud, commonly used in cementing operations, was also a common practice in cementing wells bypassed by BP. There were also several tests related to the cementing job not conducted by BP to save time.

All the major oil companies have chided BP for its well drilling process, and two of its partners on the Macondo Well, Anadarko Petroleum ( APC) and Mitsui Offshore, are resisting efforts by BP to exact a portion of oil spill liability payments from them.

President Obama has even referred specifically to BP being made to pay all claims resulting from its "recklessness" in causing the oil spill.

BP has made some fairly large financial concessions too, and its oil spill liabilities are still unquantifiable.

BP Chairman Carl-Henric Svanberg announced shortly after his meeting with President Obama in June that BP would pay no more dividends this year, a move that BP was loathe to make and BP shareholders loathe to swallow.

BP also agreed to pay $20 billion into an escrow account to cover oil spill claims, bowing to pressure from the government after a meeting in the White House, $5 billion of the money this year. BP also set up a $100 million fund for workers who lost their jobs as a result of the federal ban on offshore drilling.

BP CFO Byron Grote made the case for why the financial concessions made by BP were the right move by the company and for its shareholders on a conference call Wednesday afternoon with investors. "As the frustration has grown with the inability to cap the flow, there has been increasing concern about how BP was going to fulfill its obligations to all of those affected by incident, and the rhetoric has had some fairly dramatic effects on BP, both debt and equity markets, observable for one and all. Much of the reaction was caused by deep uncertainty of how issues would be resolved.... To have the chance for the chairman and CEO to sit down with the President and carve out agreement that provides greater comfort and clarity and a framework consistent with the intention BP has had all along, allows our business to progress more effectively," Grote said.

So now BP has capped the flow, but not before it bowed on the White House lawn.

Some market watchers were not happy with the financial concessions, either. John Rigby, analyst at UBS, said to Grote, "It seems to me that BP agreed to pay $20 billion escrow and suspended the dividend for three quarters, yet the BP chairman described the meeting as being constructive. So what did you get out of the meeting, from what appears to not be a legal requirement and something people thought was an aggressive stance taken by the U.S. government?"

Estimates still vary widely about the potential liabilities BP will face before all is said and done, and even as the progress is made on the final well seal.

While the $20 billion escrow account was a first step by BP to cover liabilities, the company conceded that there is no way to know what the total liability will be.

Raymond James estimates that BP liability may reach $62 billion.

Credit Suisse put out an estimate that BP's oil spill-related costs could reach $37 billion, with $15 billion to $23 billion for clean-up, and $14 billion in claims.

A JPMorgan analyst said on Thursday, June 10, that BP could pay as much as $29 billion when all is said and done, and that the BP market cap loss of $80 billion far exceeds justified investor selling.

Yet other securities firms estimate the BP liability at anywhere from $20 billion to $100 billion.

Resources for the Future, a Washington D.C.-based non-profit with a focus on environmental economics, thinks BP's liability could easily exceed $60 billion to $90 billion, based on work it did on oil spill liability at the time of the Exxon Valdez disaster.

BP said the cleanup and containment costs related to the oil spill would largely be limited to 2010, but that the longer-term liability was impossible to quantify. BP's estimate for total oil spill liabilities ranges from the $3 billion to $6 billion.

A BP dividend cut was a major issue for BP shareholders, but a minor issue compared with the unquantifiable total costs BP will face, maybe for years to come, from the oil spill.

The political repercussions of the devastated Gulf coast economy were felt individual by individual and business by business. One maker of artificial reefs used by fishing boats told the press that after state regulators stopped issuing permits for his reefs due to the oil spill, he has lost $350,000 in expected business. He recently received a $5,000 offer from BP as a damage payment.

Residents and businesses in the Gulf have told the press that calls into the BP claims line are met by an answering machine, and frustration edged into anger across the Gulf coast before BP conceded to have an independent claims payment process managed by 9/11 pay chief Ken Feinberg.

To date, BP has paid claims totaling $200 million.

BP has spent $3.5 billion in the oil spill cleanup effort, excluding the $360 million put into an escrow account to build artificial barrier islands in the Gulf of Mexico. Bloomberg estimated BP's escalating daily price tag in the Gulf of Mexico at $33 million a day.

In more quantifiable oil spill risks, independent scientists in the Gulf of Mexico who have been saying for some time that huge underwater oil plumes are spreading unseen in the Gulf, received government confirmation in June of underwater oil plumes that can wreak havoc with all forms of sea life.

National Oceanic and Atmospheric Association Administrator Jane Lubchenco confirmed that tests conducted at three sites by a University of South Florida research vessel confirmed oil as far as 3,300 feet below the surface, 42 miles northeast of the BP well site. NOAA had previously downplayed the reports of underwater oil plumes.

One plume is 15 miles long, 3 miles wide and 1,500 feet thick at a depth of 3,600 feet below the sea surface, and there are still larger plumes measured by university scientific vessels.

Last week, BP CEO Tony Hayward was still saying, "The oil is on the surface. There aren't any plumes."

BP chief operating officer Doug Suttles tried to turn the issue into a semantic argument on Wednesday morning. Suttles insisted in his latest round of network television morning show appearances on Wednesday that there are no underwater oil plumes in "large concentrations", saying, "It may be down to how you define what a plume is here."

U.S. Coast Guard Rear Admiral Thad Allen said he thought "cloud' might be a better term.

Scientists say the underwater concentrations of oil are creating marine life dead zones, with bacterial life sucking all of the oxygen out of the plume areas.

Whether it is a plume, a cloud, or just concentrations of underwater oil, hydrocarbons from the leaking deep-sea BP well -- and possibly dispersed oil droplets that sank from the chemical dispersants being used by BP at the surface -- are concentrating in deeper waters.

The government confirmation of the oil plumes noted that while it found oil plumes, concentrations were low.

The key issue with the plumes is that they represent the most toxic portions of the oil, but at the same time, are being heavily diluted by the seawater, a point made by the NOAA official. However, NOAA's Lubchenco also said upon confirming the underwater oil plumes, "That does not mean it's unimportant -- far from it. The total amount of oil out there is likely very large, and we have yet to understand the full impact of all that hydrocarbon on the gulf ecosystem."

One item that even BP says exists in the deep waters of the Gulf of Mexico is the failed blowout preventer.

BP officials have begun discussing ways to retrieve the device and other components from the drilling operation as potential oil spill "black boxes." The investigations being run by the Interior Department, Congress and the Justice Department might seek custody of any recovered BP oil drilling components.

The press was joining criticism of BP first lobbied by scientists, claiming that journalists were being restricted by BP in attempts to cover the oil spill.

BP is using a device called the EverGreen Burner, made by Schlumberger ( SLB), to dispose of some oil and gas siphoned from the leaking well. The device transforms oil and gas into a vapor can be burned without creating visible smoke.

The environmental questions about the EverGreen Burner have already begun, with some environmental experts saying that burning off the oil should not be pursued by BP, and existing documentation indicating that burning the oil posed "a moderate risk to the environment" that would release sulfur dioxide, nitrous oxides, methane and other chemicals.

In a bid to salvage at least a little of the public relations momentum, BP announced that net revenue from oil recovered will be donated to create a wildlife fund for the Gulf Coast, an effort that BP noted was "above and beyond" its requirements under the law.

Yet BP has failed to move the needle in its efforts to recast its image during the oil spill.

As the Obama team began demanding the escrow account, the government was also looking at severe punishments for the oil company, potentially barring BP from serving as an operator of oil drilling projects in the U.S., particularly in the Gulf of Mexico and Alaska. The federal government could also ban BP from existing contracts it holds with federal agencies, including the Department of Defense, with which BP has more than $2 billion in contacts.

The "debarment" of BP would be the most severe penalty, effectively crippling the oil giant's ability to operate in the U.S.

The government and BP still don't have an exact flow rate, but one thing the government has conceded is that the impact of the BP oil spill will be measured in years.

U.S. Coast Guard Admiral Thad Allen delivered his most sober assessment of the environmental devastation resulting from the BP oil spill in week seven of the oil spill crisis, saying that it will take years to remedy the situation in the Gulf Coast, and Allen began referring to the widening oil spill in military terms and as an "enemy combatant."

"This is a long campaign and we're going to be dealing with this for the foreseeable future...We're no longer dealing with a monolithic spill. We're dealing with aggregations of hundreds of thousands of patches of oil and we have to adapt to meet that threat," Allen said, stopping just short of referring to the oil spill as a rogue state or sleeper cell. "This spill is holding everybody hostage, not only economically but physically. And it has to be attacked on all fronts," Allen said.

"The economic impact of this disaster is going to be substantial and it is going to be ongoing," President Obama said. President Obama began using the "battle" rhetoric about the oil spill in his June 15 Oval Office speech.

The newest, worst-case scenario for the BP oil spill was presented by Dan Pickering, the head of research at energy investor Tudor Pickering Holt , who said that if BP's relief wells don't work as quickly as expected, once they are completed in August, the oil spill could continue until Christmas.

BP CEO Tony Hayward may have made the understatement of the oil spill crisis when he told the Financial Times : "What is undoubtedly true is that we did not have the tools you would want in your tool kit."

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President Obama has made some notable comments throughout the oil spill crisis, too, going from saying on Larry King that "yelling and venting at people" was not his role, to his statement on NBC's Today Show: "I don't sit around just talking to experts because this is a college seminar. We talk to these folks because they potentially have the best answer so I know whose ass to kick."

It's an open question as to whether the mild-mannered, cool-as-a-cucumber president's sudden locker-room tone was a sign of strength or a sign of the desperation felt by the federal government in managing the spill.

In the battle of public opinion, the federal government has had an increasingly hard time distancing itself from BP and the public frustration over the extent of the spill. A recent CBS News poll released found that only 28% of American felts that that federal government was doing all it could to control the oil spill, while 63% of Americans felt the Obama administration should be doing more in response to the spill. Much to the consternation of Obama administration poll watchers, BP only did slightly worse, with 70% of the American public saying that BP should be doing more and 24% thinking that BP had done all it could possibly do.

A Washington Post/ABC poll found that 69% of Americans believe the government had done a "not so good" or "poor" job handling the spill, echoing the increasingly negative poll numbers for the Obama administration.

A Gallup poll from Thursday, May 27, found that 53% of American though Obama's performance on the BP oil spill was "poor" or "very poor." The president was still comfortably ahead of BP -- which was rated "poor" or "very poor" by 73% of surveyed -- but the margin had even begun diminishing by late May.

The government full press on BP has been in place for months, though with its success, albeit, mixed at best.

As the political pressure on BP continued unabated from the Senate, House and President Obama, on Thursday British business leaders urged the British government to come to BP's defense. Prime Minister David Cameron responded cautiously, discussing the BP situation with Obama in a regularly scheduled call, but indicating that Americans had every right to be frustrated by the BP oil spill, and BP needed to do all it could to take control of the crisis. A second British government official said it should be BP's decision on how to handle its shareholder dividend policy.

Interior Secretary Ken Salazar recently indicated that BP would be asked to compensate energy companies for losses if they had to lay off workers because of the six-month moratorium on deepwater drilling that the government has imposed. As for the moratorium's duration, Salazar was pressed by in Capitol Hill testimony on June 9 to say the drilling ban would be limited to six months, but refused to do so. On June 9, BP shares dropped to a 14-year low, a massive day of selling that led to BP issuing a public statement saying there was no justification for the negative turn on its stock.

BP hit its ultimate oil spill low on June 25, when fears of a hurricane hitting the Gulf sent BP shares to $27.

The political situation is complicated by the economic havoc in the Gulf coast region, with Louisiana Sen. Mary Landrieu saying again on national TV on Thursday morning that the moratorium needed to end. "Every one of these 33 deepwater wells employs, directly, hundreds of people and indirectly thousands," the Senator told ABC. Yet the Louisiana Senator also recently ordered BP to invest $1 billion in wetlands protection.

The Justice Department launched a criminal investigation of the BP oil spill last week. In Wednesday testimony, Thomas Perrelli, the associate attorney general, told a House committee that "we are looking very closely at this, and we are planning to take action."

Perrelli's testimony indicated a focus on making sure that BP and other companies involved in the oil spill have the funds to cover all of the damages claimed by Gulf Coast residents and businesses. There have been suggestions that the federal government put BP into receivership to protect BP assets for use to pay oil spill liabilities. Perelli later would say that his comments were interpreted by the press too broadly.

Justice was also fighting with oil rig operator Transcoean ( RIG) in a federal court, over Transocean's attempt to limit its liability to $27 million, based on a 159 year-old law. The Justice Department argued in federal court in Houston on Tuesday that neither the federal government nor state governments should be subject to this ancient maritime law.

President Barack Obama used a recent speech In Pittsburgh to call for an end to oil company tax breaks, and again promised to use the BP oil spill as a rallying point for comprehensive U.S. energy legislation, and there did seem to be signs of momentum in Washington building for, at least, a spirited energy bill debate as the first week of June ended.

In mid-May, when Kevin Costner arrived to the Gulf Coast with his oil centrifuges to help BP in its efforts to contain the oil spill, it was the most absurd turn yet in the worsening environmental disaster. Nevertheless, the absurd turns in the BP oil spill continue.

The fact that the U.S. government has had to publicly state it won't consider a nuclear bomb detonation below the surface of the Gulf of Mexico to stop the BP oil spill may be the most drastic sign yet of the helplessness of both the government and BP to take control of the environmental disaster.

Film director and Academy Award winner James Cameron joined a recent brain storming session with scientists, academics and politicians on how to contain the BP oil spill. Cameron designed specially designed remotely operated underwater vehicles as part of his documentary film work related to the excavation of the Titanic.

Cameron said that BP "graciously" rebuffed his offer of direct help. "Over the last few weeks I've watched, as we all have, with growing horror and heartache, watching what's happening in the Gulf and thinking those morons don't know what they're doing," Cameron said at the All Things Digital technology conference.

A British bookmaker is now also taking bets on whether BP CEO Tony Hayward will keep his job? The odds are 8 to 11 that Hayward won't have his job at year-end. It's "odds-on" that Hayward is out of a job.

The British bookmaker, Paddy Power, is also branching off into the ethically suspect territory of taking gambling on the extinction risk to bluefin tuna, brown pelicans and smalltooth sawfish, among other species. The odds for the survival of the Kemp Ridley Turtle are the bleakest among all species, according to the odds.

BP CEO Tony Hayward may have made the understatement of the oil spill crisis when he told the Financial Times on Thursday: "What is undoubtedly true is that we did not have the tools you would want in your tool kit."

However, BP's Hayward continued to make the kind of optimistic comments that BP has been known for throughout the crisis, in trying to spin its effort to capture most of the leaking oil as a success, telling the FT, "Considering how big this has been, very little has got away from us."

BP is far from alone in energy sector companies dealing with the market impact of the oil spill.

The International Energy Agency said the BP oil spill could be a "game changer" for the energy sector, restricting future deep-water oil business, and limiting global oil supply.

Moody's Investors Service said in a report released on June 14 that it could be up to two years before oil production reaches pre-BP oil spill levels. "We believe it could take up to two years before producers, rig operators, and service firms in the deep-water Gulf can resume activity to pre-spill levels," said Steven Wood, a managing director at Moody's.

Deutsche Bank estimates that Gulf of Mexico wells account for 14% of BP's estimated 2010 production. Deutsche Bank estimates that a six-month drilling moratorium and a 20% increase in offshore drilling costs, as well as higher royalties in the Gulf of Mexico operations, could cost nearly $2 billion of BP earnings in 2010.

BP has hired Blackstone Group, Goldman Sachs and Credit Suisse as advisors on the financial and political battles it faces in the oil spill.

On June 15, Fitch cut BP bonds to near junk status -- lowering its long-term debt by six levels, two notches above junk -- after the recent news that the government was leaning toward requiring BP to set up an escrow account to pay oil spill damages.

BP now faces more than 200 lawsuits.

A BP spokesman denied reports that BP would look to bankruptcy court as a method of shielding itself from financial claims on its assets, but rumors persist that bankruptcy is among the options under consideration as a last resort.

On Friday, June 4, Standard & Poor's downgraded BP long-term debt, and S&P placed both BP short-term and long-term debt on credit watch for potential further downgrades.

Bank of America has instructed its traders to not enter into any oil trades involved BP ( BP) beyond June 2011, according to a report on June 15 from Reuters, citing an anonymous source. The Reuters story said the Bank of America directive did not specify a reason for the BP trading halt order, but the Reuters source said that the move reflected a "cautionary stance" toward trading with BP.

Louisiana fishermen probably couldn't care less about BP's problems, as long as it pays their claims.

Meanwhile, the estimates for the amount of oil leaking in the Gulf of Mexico from the BP well indicate it far surpassed the Exxon Valdez disaster.

President Obama has noted the federal government had advanced equipment in the Gulf on day one after the Deepwater Horizon oil rig exploded, hundreds of vessels stationed in the Gulf within days of the oil spill crisis worsening, 20,000 people working around the clock, 17,000 National Guard troops ready to be put into action, and more than five million cubic feet of boom in place.

President Obama spoke on Friday, May 28, about the "assault on our shores, our people, our regional economies and communities. People's livelihoods are washing up on the beach," the president said, as the call of seabirds hovered above his words.

The president noted that the cleanup effort is the largest ever in the nation's history. Yet in referring to the oil spill cleanup effort as the largest-ever, President Obama's words also served as a reminder that it is the largest cleanup effort ever because it is the largest oil spill ever in the country's history.

Lousiana's government -- the biggest critic of the federal government response under the lead attack of Republican governor Bobby Jindal -- has been taking more of the oil spill containment effort into its own hands, and is now building a two-mile sand berm off Scofield Island in Plaquemines Parish -- one of six projects that the U.S. Army Corps of Engineers has approved. Governor Jindal has proposed a total of 24 oil spill containment efforts.

On Thursday, June 3, BP was ordered by the U.S. Coast Guard to pay $360 million to build five additional sand barrier projects in Louisiana. The Coast Guard decision was a victory for Governor Bobby Jindal of Louisiana, who has been lobbying for the construction of artificial barrier islands off the coast of Louisiana against environmental critics.

Jindal's plan calls for six artificial barrier islands with sand dredged from the floor of the Gulf to protect sensitive wetlands. The 4 million cubic feet of boom already placed in the Gulf of Mexico are not getting the job done, in Governor Jindal's opinion.

White House environmental advisor Carol Browner has upped her own negative outlook for the BP oil spill, from calling it the worst oil spill in the country's history, to describing the BP oil spill as simply the "worst environmental disaster" ever suffered by the U.S.

Contentious BP oil spill hearings in New Orleans continue. A Transocean manager on the oil rig before it exploded, Jimmy Harrell, recently said he had voiced concern that BP didn't conduct enough pressure tests before cementing the well shut. The cementing process -- carried out by Halliburton ( HAL) -- has come under fire during Senate and House hearings, as there has been ample evidence to suggest that pressure readings were either incorrectly analyzed, or that BP moved to quickly to cement the well without taking the proper steps.

A congressional investigation report released the week of May 24 showed multiple red flags in the events leading up to the oil rig explosion. Equipment readings showed gas bubbling within the underwater well, signaling a potential blowout. The congressional investigation also echoed previous criticism that the decision to replace heavy drilling mud in the well with seawater in the 24 hours before the explosion may have proven to be a major gaffe. BP conceded in its testimony that workers may have made a mistake in analyzing the pressure tests, but so far, BP and Transocean have not been completely forthcoming about these events.

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BP testimony, which made up a good portion of the latest congressional investigation, continued to push blame to other companies, including Transocean ( RIG) and Halliburton ( HAL), saying in the Congressional report that the cement used by Haliburton to plug the well may have been contaminated, and the blowout preventer may have had multiple problems.

The oil spill is costing BP $33 million per day -- versus a previous estimate of $6 million to $7 million. BP was earning $45 million in profit per day from the well, according to a calculation made by Bloomberg.

Thursday, May 27, was supposed to be judgment day for BP and it's top kill in the oil giant's biggest bid to take control of the oil spill, but the only concrete action turned out to be President Obama's formal ban on offshore drilling in the Arctic and the Gulf of Mexico.

Throughout the BP oil spill crisis and all of the previous failed attempts by BP to stop the gushing oil, BP officials have floated confidence across the airwaves while buying time for more unproven methods to stop the gusher 5,000 feet below the surface of the Gulf of Mexico.

President Obama used his early afternoon press conference on Thursday, May 27, to hit home key administration points: the federal government has made the BP oil spill a priority from day one, recognized "the potential enormity" of the oil spill from day one, and will make sure the BP pays for every cent of the oil spill containment and cleanup, and in the end, the government does not have better technology than BP which would allow it to push BP aside in the oil spill cleanup effort.

President Obama did concede on some mistakes made, saying the government did not have an advanced response team ready for a worst-case scenario oil spill, but also said that there has been a historic complacency about worst-case scenarios.

Obama used the attack from the press on his plans to allow new offshore drilling as a chance to express his overarching energy policy - that deep sea oil drilling with higher risk and higher costs to oil companies shows that the oil industry is in its "last days" and the U.S. needs to transition to a clean energy model, but that transition will require domestic oil production, and less reliance on foreign oil. Obama also had a catch phrase for an infamous drilling catch phrase, telling the press, "I never said "Drill, Baby, Drill!'"

"The framework is right. Where I was wrong was belief that oil companies have their act together when it comes to worst case scenarios," President Obama said. The President continued that his mistake was not based on "my blind acceptance" of oil company statements, but the fact that there has been deep sea drilling in the Gulf of Mexico for a long time without a record of accidents like this one.

Before lifting the ban on drilling, President Obama said the government need to be absolutely convinced that it has done a "thorough scrub of safety procedures" and has the confidence that even if an oil spill like the BP oil spill is a one in a million shot, the government has the technology and know-how to stop the oil leak within a matter of days.

The immediate implication to the oil industry of the decision is to Royal Dutch Shell ( RDS.A.), which has been planning to begin a drilling project in the Arctic this summer, and had been working overtime to assure the federal government that it wouldn't be the next BP, once the oil spill crisis unfolded.

One constant lightening rod throughout the BP oil spill has been the Interior Department's Minerals Management Service, and the government is still trying to set the right tone in its relationship with the oil industry.

The Interior Department is at work on a new set of rules to govern offshore drilling and is also planning to break up its much-criticized Minerals Management Service into two separate units, one overseeing drilling permits and the other in charge of drilling regulation.

The head of the Minerals Management Service, Elizabeth Birnbaum, handed in her resignation , the second MMS official to resign since the BP oil spill began. Birnbaum noted in her resignation letter that she hoped the MMS would reform the flaws that she "inherited".

President Obama said when questioned about the MMS that reforms had not been coming fast enough, but after Birnbaum's resignation, Obama said that the buck still stopped with him. "I take responsibility for MMS shortcomings, in case you are wondering in your reporting who is responsible. I take responsibility. My job is to make sure this is shut down."

Late on Tuesday, June 8, the Obama administration issued its new shallow-water drilling standards, with rules that address blowout preventers and cementing of underwater wells, two prime suspects in the failure of the BP well.

In announcing the new rules for shallow-water drilling, Interior Secretary Salazar continued to tow the Obama line of oil production from offshore being an important component of energy security as the U.S. "transitions to the clean-energy economy."

Comments made by BP's chief executive, Tony Hayward, throughout the oil spill crisis have given the public plenty of reason to make the BP chief the N0. 1 lightening rod for abuse.

BP CEO Hayward had said last Monday, May 17, "I do feel that we have, for the first time, turned the corner in this challenge." Yet on Wednesday, May 19, Louisiana Governor Bobby Jindal said that heavy crude oil from the offshore spill had arrived at sensitive wetland areas around the mouth of the Mississippi River, and the situation had worsened by Monday, May 24.

When BP gave up on the top kill over the Memorial Day Weekend, it was the signal that the oil company could not stop the oil spill for months, but only hope to contain it.

BP CEO Tony Hayward had said throughout the top kill effort that it had a 60% to 70% chance of success, and as late as Friday, May 30 -- two days before conceding failure -- that the top kill was "proceeding according to plan."

In the end, the heavy drilling mud and scrap materials -- known as the junk shot -- that BP was pumping into the leaking well, were no match for the pressure of oil and gas gushing out of the compromised underwater well, located 5,000 feet beneath the surface of the Gulf of Mexico.

Even a successful cap -- and success depends on the still-undertermined oil leak flow rate -- has to contend with hurricane season in the Gulf of Mexico that started this month. The current incarnation of the dome will have to be modified to withstand storms. BP plans to enable its new dome to resist storms and also be built with an "eject" button -- BP can pull up the dome in the event of a hurricane -- but that would mean once again allowing the oil to gush unimpeded into the Gulf of Mexico.

BP managing director Bob Dudley downplayed the risk of storms, saying, "By the end of the month, we are engineering a completely separate system that will make it more storm proof with a free standing riser that would allow for quick disconnects if needed."

Doug Suttles, BP chief operating officer and No. 2 Oil Spill Optimist behind BP CEO Tony Hayward, said about the LMRP containment effort that there was no guarantee it would work, but added, "I'm very hopeful."

All along, Hayward has tried to counter the worst-case scenarios, saying that leakage rate of 60,000 barrels a day might never prove true and that, "a guesstimate is a guesstimate. And the guesstimate remains 5,000 barrels a day."

At the other end of the spectrum from Hayward's comments are recent predictions about the ultimate oil spill "fail safe", that has been accepted without reservation, the BP's relief wells. The BP relief wells are to be drilled by August and many expect they will stop the oil spill.

Yet David Rensick, president-elect of the American Association of Petroleum Geologists, told Bloomberg on Tuesday, June 1, that the chances of the BP relief well working on the first shot are equivalent to the odds of winning the lottery. Resnick called initial failure "almost a certainty", saying that drilling the well is the easy part, but intersecting with the existing well is a significant challenge.

BP has already paid $4 billion in its failed effort to contain the oil spill, but that price tag would be nothing compared to a federal ban on BP operating in the U.S.

A report from ProPublica on Monday, May 24, indicated that the Environmental Protection Agency was considering whether to bar BP from receiving government contracts. The subject is not a new one between the government and BP. The EPA decided last week to suspend negotiations on barring BP from federal contracts, negotiations that related to environmental violations committed previous to the Gulf of Mexico spill.

The fact that these negotiations existed shows that the EPA already has BP on a short leash. Furthermore, the fact that the talks were put on hold could mean the EPA is looking for evidence from the oil spill to show a pattern of negligence on the part of BP, which would make a strong case for the EPA to ban BP from winning federal contracts, a process known as debarment.

If the most severe "discretionary debarment" were applied to BP, it would cancel BP's contracts to sell fuel to the military, and prohibit the oil giant from drilling on federal lands, and possibly even lead to cancellation of existing BP contracts on federal land.

The Obama administration stepped up the level of rhetoric aimed at BP on Sunday, May 23, when Secretary of the Interior Ken Salazar told the press that he was "not completely" confident BP was in control of the oil spill. Salazar had some strong words of warning for BP, saying "If we find they're not doing what they're supposed to be doing, we'll push them out of the way appropriately."

Some Republicans continue to refer to the oil spill as "Obama's Katrina."

When Interior Secretary Salazar, Homeland Security chief Janet Napolitano, and a Congressional delegation toured the Gulf on Monday, May 24, there was no BP official tagging along. But while U.S. Interior Secretary Ken Salazar has said the government could push BP aside and federalize the cleanup, Coast Guard Admiral Thad Allen, said at a White House press conference, "To push BP out of the way would raise the question of 'replace them with what?'"

All the polling has certainly defied BP's best efforts to massage the public message. And BP CEO Hayward has had company in the BP public relations game throughout the oil spill crisis.

A few weeks ago, BP COO Doug Suttles again said all the customary words, pleading with the public, and responding to an angrier tone from Interior Secretary Ken Salazar. "What I do know is, everyone is frustrated. I think the people of the region are frustrated. I know we are, I know the government is.... The fact that it's taken this long is painful to everybody," Suttles said.

BP CEO Hayward also said, just a week before the White House called the oil spill the worst environmental disaster in U.S. history, that the environmental damage from the oil spill would ultimately prove "very, very modest." Not all agreed, even at the time of Hayward's comment. Government officials indicated on Tuesday, May 18, that they have now documented 156 dead sea turtles, 12 dead bottlenose dolphins, and 35 oiled birds. By Monday, May 24, pelicans that had recently been removed from the endangered species list were showing up in the Gulf region covered in oil.

Environmental groups began filing lawsuits against the Interior Department on May 18, with the Center for Biological Diversity, the Sierra Club and the Gulf Restoration Network, making various allegations regarding Interior's Minerals Management Service ignoring law in its "cozy" relationship with the oil industry.

The damage to BP's market value has neared $100 billion, and the market value of the other companies involved in the oil spill has been severe, too. Transocean ( RIG) has shed roughly $15 billion in market cap, or 50% of its market value. Anadarko Petroleum ( APC) has also shed more than $15 billion from its market cap during the oil spill crisis.

On Monday, May 24, BP said it had pledged $500 million to create an independent scientific research fund to work on the oil spill, but that seemed like little in the face of the worsening oil spill crisis by the time June arrived without a fix in sight.

By mid-May, neither BP nor the government has provided an accurate estimate yet for the amount of oil leaking from the underwater well.

The scientific community was early in to attack the conservative estimates for the leaking oil during the week of May 17. Scientists contended that the government's National Oceanic and Atmospheric Administration (NOAA) has been slow to investigate the spill and, in particular, the large plumes of underwater oil first noticed by independent scientific research vessels.

A scientific advisory group noted that the government has failed to make public a single test result on water from the deep ocean. NOAA's main research vessel was in Africa at the time of the BP oil spill and did not begin its journey back toward the Gulf of Mexico until three weeks after the explosion. NOAA has provided funding to the research vessel that discovered the underwater plumes, but also downplayed the findings, and said they were premature, the New York Times reported on Thursday.

On Saturday, May 15, scientists working on an independent research vessel discovered huge plumes of oil deep underwater in the Gulf of Mexico. Scientists told the New York Times that one plume was more than 10 miles long.

These underwater plumes of oil were still a bone of contention on Tuesday, June 1, when BP CEO Tony Hayward denied that the plumes existed, while scientists contended that entire swaths of underwater life were being wiped out as a result of the plumes.

The BP oil spill also took an odd turn in the direction of independent scientific help on Wednesday, May 19, when BP approved the use of six $24 million oil centrifuge devices that were created by a team funded by Hollywood icon Kevin Costner, after the Exxon Valdez oil spill.

"If you build it, they will come," the line from the Costner classic Field of Dreams, took on a whole new meaning with Costner's centrifuge, which works by separating clean sea water from oil.

President Obama and his administration have been closely monitoring the spill and acting to limit the political problems presented to the White House by the disaster.

On May 17, President Obama said he was creating an independent commission to investigate the spill as well as the much-maligned Minerals Management Service (MMS), the unit of the Department of the Interior that regulates offshore drilling.

The first head may have rolled as a result of the spill, when the chief of the MMS's offshore oil-and-gas drilling department, Chris Oynes, announced on Monday, May 16 that he would retire by the end of the Month. The Interior Department wouldn't say if the retirement was voluntary.

Interior Secretary Ken Salazar himself was critical of the Minerals Management Service in a Senate hearing on Tuesday, May 18. "We need to clean up that house," he said.

A report in the New York Times on Tuesday, May 25, indicated that Minerals Management Service allowed oil companies to fill out their own safety reports and the government then passed them off as the work of regulators. It was just one of many new examples of a relationship between the MMS and oil companies that makes a mockery of codes of professional and ethical conduct.

The MMS has in the past reportedly issued permits for offshore drilling, including in the case of the BP well, that have bypasses required environmental sign-offs, or simply ignored the recommendations of staff scientists, the New York Times reported on Friday morning.

Even though BP had said it will not limit its liability to $75 million, President Obama was livid that a measure introduced to expand liability to $10 billion had stalled in the U.S. Senate. "This maneuver threatens to leave taxpayers, rather than the oil companies, on the hook for future disasters like the BP oil spill," the president said in a statement on May 18.

Republicans countered that the liability-cap bill would do nothing more than have the unintended consequence of giving Big Oil another advantage over independent oil and gas producers.

More than a month into the oil spill, and there's still no clear explanation for what caused the spill.

The U.S. government has demanded that BP release all information it has collected about the oil spill during the past month.

Rep. Henry Waxman, D-Calif., said that BP had informed his House committee that at some point when the well was being closed with cement an influx of methane entered the wellhead, indicating that cementing the well had not produced needed pipe integrity.

Waxman, opening a hearing into the April 20 well explosion that unleashed a massive oil spill, said while "we have far more questions than answers" it appeared clear -- from BP and other documents -- that there were problems with the blowout preventers before the accident and confusion almost right up to the time of the explosion over the success of the cementing process.

Rep. Bart Stupak, D-Mich., said that a 2001 report by Cameron International, which made the device, indicated there can be as many as 260 failure possibilities in the equipment. The device is supposed to be the final safeguard against a well blowout by clamping down and sealing a gushing oil well.

The Obama administration has faced some tough questioning, too. Homeland Security Secretary Janet Napolitano faced off against the Senate Committee on Homeland Security and Governmental Affairs on Monday, May 17, and defended the Obama administration from criticism that it had been too slow to respond to the oil spill, describing its "all-hands-on-deck response to this event," and saying that "the federal government has limited capability and expertise in responding to wellhead incidents on the sea floor."

BP Chief Operating Officer Doug Suttles told CNN as far back as May 10, "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 throughout the month-long crisis demonstrate 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."

By May 21, Scuttles was taking a page from his CEO Tony Hayward's playbook, effusing optimism in the face of mounting criticism. Scuttles said on CBS's "Early Show" that even though the oil may keep gushing until August, "I'm optimistic -- I'm very optimistic that the Gulf will fully recover."

It's been a battle against time for BP. The oil spill first reached several sensitive barrier islands off the Louisiana coast in mid-May, touching Whiskey Island in Louisiana's Terrebonne Bay, west of the Mississippi Delta, Louisiana's Chandeleur Islands and Port Eads, and Dauphin Island in Alabama.

A U.S. State Department official told the AP on Wednesday, May 19, that the government had even begun what the official described as "low level" talks with Cuba about the oil spill.

From the western side of the Gulf, the Mexican Environmental Minister joined those looking into legal recourses against BP. Mexico has its own checkered oil spill history, though, and the 1979 Bay of Campeche spill for which state-owned PEMEX was responsible, leaked oil for nearly 10 months, and reached Texas beaches at an estimated cost of $4 million in lost Texas tourism.

BP CEO Hayward told the the BBC, "We will ultimately win it because ultimately one of the interventions to stop the leak will stop the leak."

The rate of the oil leak has become a focal point of criticism against BP, as the company denied requests from independent scientific experts to measure it. BP claims the exact rate is insignificant to its containment effort.

BP CEO Hayward conceded mistakes made by the oil giant in setting a public relations tone with the U.S. public. Hayward said it was a mistake for BP to initially refuse to compensate fishermen who were unable to produce written proof of their normal earnings, and it was a mistake to ask fishermen signing up to help with the relief effort to sign agreements limiting their receipt of any future damages from BP. "It was a bit bumpy to get it going. We made a few little mistakes early on," Hayward told the British daily.

In a recent interview 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, too, saying "Apollo 13 a failed NASA project did not stop the space race ... It's the same for the oil industry."

BP had no shortage of potential oil spill containment techniques; it was just short of one that has been proven at a depth of 5,000 feet, or is comprehensive in attacking the root problem of the leaking underwater well.

BP has been spraying a toxic chemical dispersant directly onto the oil. The fact that BP needed EPA approval to use a potentially hazardous chemical to control an existing environmental disaster shows the extent of BP's exasperated efforts to control the oil spill.

BP CEO Hayward insisted to the British newspaper The Guardian that the estimated hundreds of thousands of gallons of dispersant which BP has pumped into the sea to try to disperse the slick were relatively "tiny" amounts.

The chemical dispersant being used by BP, called Corexit, ranked only 13th out of 18 chemicals approved by the EPA in level of effectiveness against southern Louisiana crude oil, and of the 12 chemicals above it, all were equal to or less toxic than BP's chemical of choice, according to the EPA.

BP's chemical dispersant was not only under attack for potential environmental harm, but for the fact that the company that manufactures the Corexit brand, Nalco, was once owned by Exxon Mobil. Additionally, among current Nalco executives are veterans of the BP boardroom and former Exxon Mobil top managers, the New York Times reported on Thursday afternoon.

By Tuesday, May 25 BP had used more than 785,000 gallons of Corexit and there had been a total of 1.2 million gallons of the chemical ordered.

By Thursday, May 20, the Environmental Protection Agency had changed its tune on chemical dispersants, and and ordered BP to find a less toxic chemical in the oil spill cleanup effort.

Even after BP was ordered by the EPA to use a less toxic dispersant last week, some oil industry analysts expected that BP would wait a few days and then come back to the government and say it couldn't find another option. That's exactly what happened, too.

On Sunday, May 23, BP said there was no alternative available because companies could not produce dispersants in sufficient volume, or because BP could not use dispersants that include chemicals not specified by the producers.

BP Chief Operating Officer Doug Suttles said in a press conference on Monday: "We did considerable work ... and found there weren't any alternatives that were less toxic and available."

By Tuesday morning, May 25, the White House was in agreement with BP, with Obama Administration environmental advisor Carol Browner saying on national television that not enough alternatives were being manufactured.

EPA administrator Lisa Jackson said that she did not think BP had tried very hard to find alternatives.

The list of BP's failed techniques to stop the oil spill is not long, but it is distressing.

The 100-ton concrete-and-steel contraption known as the dome -- BP's biggest failure -- was supposed to be able to contain as much as 85% of the oil spill.

A smaller version of the dome, called a "top hat" pictured above was in place a few weeks ago, yet its stature as a potential BP bailout shrank as the tube dominated BP's efforts, and as the top kill became the Great Hope for the oil spill containment effort.

Just as quickly as the "top hat" seemed ready to don itself and rescue the day, BP officials said they planned to temporarily put the "top hat" back on the rack, and it was not heard about again until the top kill failed.

The tube effort which preceded the top kill in the line of BP failures was originally designed to work in concert with the top hat -- serving as its "cane", so to speak -- but BP was worried that the same ice crystal formation that doomed the large dome could doom the top hat too.

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 downplaying this risk, saying it is only a worst-case scenario, but Bloomberg quoted some scary reference points for a blowout of that magnitude: it would be equal to 240,000 barrels of oil a day, or two-thirds the supply pumped daily from Prudhoe Bay, Alaska.

Neil McMahon, an oil analyst at Bernstein, estimates that BP cleanup costs alone could run as high as $12.7 billion, and that was before reports surfaced that the EPA was considering a ban on BP winning any federal drilling contracts.

"BP appears to be turning to more adventurous, and potentially more expensive, solutions," analysts at BOA Merrill Lynch said in a research note on Monday. Bank of America Merrill Lynch estimates the ultimate cost of cleanup and compensation could be $13.5 billion, two-thirds of which would come from BP's pocket.

As lawsuits against BP and other companies involved in the oil spill mount -- one estimate claims there are already more than 100 such 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.

Bad weather, which has proved to be an on-and-off unintentional help to the oil spill, became a more prominent factor with hurricane season officially beginning on June 1.

Persistent, light winds over the past two weeks have brought increasingly more oil to the Louisiana coast, and any time a storm breaks out, the containment booms are much less effective.

The oil spill threatens the Gulf of Mexico economy from oil and gas production and refining operations to shipping and seafood operations. Louisiana, Alabama and Mississippi account for 19% of U.S. refining capacity, according to government data.

There were fears that the oil spill would cripple the ability of ships to enter and leaving the Mississippi River, yet shipping has proceeded, and it was the fisheries hit hardest. The Coast Guard has set up two clean-up stations near the entrance of the Mississippi River, which is the gateway port for U.S. commodity shipments.

By June, more than one-third of the fishing waters in the Gulf of Mexico, or 37%, were closed by the government to fishing, due to the threat from the oil spill. It was the biggest hit yet to the local Gulf of Mexico-based economies.

The impact to Louisiana's fishing industry continues to worsen as more oil washes ashore.

With hurricane season about to begin in the Gulf of Mexico, there are fears that tropical storms will not only hamper BP in its ongoing efforts to contain the oil spill, but help the oil to spread more quickly.

The U.S. Coast Guard is preparing for Gulf hurricane season as if it could be a game-changing event in the BP oil spill. There has been at least one major storm in June or July in recent years and storm surges "may carry oil into the coastline and inland as far as the surge reaches," according to an information sheet from the National Oceanic and Atmospheric Administration (NOAA).

NOAA predicts a 70% chance that 14 to 23 named storms, including as many as seven major hurricanes, will form in the Atlantic in the next six months. The seasonal average is 11 named storms and two major hurricanes.

It's been a few weeks since the oil spill first hit the most sensitive barrier islands off the coast of Louisiana.

Well before the oil even reached landfall, President Obama had declared the Gulf of Mexico oil spill an event of "national significance." Louisiana Governor Bobby Jindal had also declared a state of emergency related to the oil spill. The Department of the Interior and Department of Homeland Security, as well as the head of the Environmental Protection Agency, have been managing the oil spill disaster clean up, and investigate its causes.

The latest estimate is that at its current rate of leakage, the Gulf of Mexico oil spill has far surpassed the Valdez disaster.

What's more, the Valdez oil tanker had a limited amount of oil to spill, unlike the potential amount of oil in the undersea well, against which all containment efforts have so far failed.

The oil spill disaster was already a disaster for the stock price of both BP and Transocean, as their losses led all the stocks in the energy sector down over the past few weeks, on fears that the entire sector could be impacted by a change in U.S. policy on offshore drilling.

Anadarko Petroleum ( APC), which owns 25% of the BP well, may be exposed to as much as 25% of total expenses related to the oil spill, according to an estimate from ING Bank.

Louisiana barrier islands remain shuttered by the government, where the first oil reached shore.

Comparisons of the oil spill's size change as quickly as the spill seems to float closer to the U.S. shore. Regardless, the size comparison sound bites -- is it the size of Puerto Rico or Rhode Island -- are less important than the site of a tiny tar ball in a national wildlife refuge; tar balls first washed up on Alabama's Dauphin Island over a week ago.

Whatever comparison one chooses to make, the Coast Guard, BP and all involved parties continue to lose a desperate battle to keep the coastal Louisiana oil spill from wreaking environmental disaster on sensitive ecological coastal areas, and various sectors of local economy, from fishing to tourism, that will suffer, not even to mention the threat to hundreds of species of birds and fish.

The government response now includes more than 2,600 vessels in action, in addition to dozens of airplanes and remotely operated vehicles.

Fourteen staging areas have been set up and approximately 4 million cubic feet of boom -- plastic barriers strung along the coast -- have been deployed to contain the spill.

Government authorities in Louisiana are using helicopters to drop massive sandbags along barrier islands and marshes where the oil had already reached shore. Louisiana's system of locks and levees was also being contemplated as a way to push back against the approach of the oil by releasing more water to sea.

The two Louisiana parishes directly west of the Mississippi delta declared states of emergency. The U.S. Fish and Wildlife Service has shuttered Louisiana's Chandeleur and Freemason islands from the public. Large areas of the Louisiana's fisheries, particularly shrimp and crab harvesting, have also been closed during peak season.

There were oil tar balls spotted all the way from Galveston, Texas to Alabama -- where the tar balls first appeared -- and Mississippi, and now Florida.

Help in the form of boats, workers and government agencies, has been flooding the Gulf of Mexico for weeks.

In all, 16 federal agencies have been called to action and the declaration by President Obama that the Gulf of Mexico oil spill is of "national significance" opened the spigot for federal funding, Homeland Security Secretary Janet Napolitano said at a White House briefing last Thursday.

President Obama made it clear in all of his remarks that while the federal government will pursue all means to contain the oil spill, it remains BP's responsibility to pay for the clean up effort.

There have been some minor wins, but not enough. The Coast Guard took advantage of favorable wind conditions off the coast of Louisiana in prior weeks to fight back against the oil spill with flames, but controlled burns can only provide minor victories.

BP was also having a hard time fighting the battle of public relations, as the one-time "Beyond Petroleum" company struggled to find the right note in its public comments on the oil spill.

Democratic senators have introduced legislation to raise the current cap on liability in drilling accidents from $75 million to $10 billion. The Senate legislation would make the $10 billion cap applicable to this oil spill, though those costs are separate from the ongoing containment effort.

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.

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."

Even after last week's BP success in shutting down one of the three leaking valves, the oil spill had not been slowed before the dome's failure.

It now seems a long time since BP's CEO Tony Hayward was in Louisiana watching work on the 100-ton steel dome, which now seems like a quaint image of man and his impressive-enough looking technology proving to be no match for nature and a substance as simple as ice.

The dome was supposed to work by channeling oil, natural gas and Gulf of Mexico seawater into a pipe leading to a floating processing and storage facility. While the technique has proven effective at depths of 350 feet, the leaking BP underwater well is located 5,000 feet beneath the ocean's surface.

The Coast Guard described the oil slick as ranging in thickness from a couple of molecules to the equivalent of a layer of paint. BP said that only 3% percent of the oil spill is viscous crude oil.

The Transocean rig originally caught fire on April 20 after what is now believed to be a methane bubble exploded. Eleven workers are still missing and presumed dead. When the Transocean rig finally sank, the force of the rig's sinking bent a pipe that connected the rig to the seafloor, causing oil to gush up from the deep.

The Congressional ire during May 11 and May 12 hearings moved from decades-old safety lapses to the blowout preventer, pressure tests carried out right before the rig explosion, and a "too coy" relationship between 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.

In fact, just last November, a Minerals Management Service official told a Senate committee that an undersea blowout and massive spill in the Gulf of Mexico was highly unlikely because of tighter United States regulations and safety devices like the blowout preventer.

At the same hearing, a BP vice president referred to the "blowout preventer technology, which includes redundant systems and controls" as a sign of the high-tech nature of the oil industry. BP CEO Hayward conceded on Monday that, "The investigation of this whole incident will undoubtedly show up things that we should be doing differently."

One Coast Guard strategy has been to use 500-foot long fire-resistant booms to contain areas of the thickest oil on the ocean's surface, tow them to remote areas, and light them on fire.

It wasn't considered a perfect solution, but the worsening oil spill left the Coast Guard without too many options.

The Coast Guard controlled burns have to be timed to the right set of conditions to send smoke out into deeper waters.

Thunderstorms and high winds have already provided an unintentional helping hand to the oil spill, and work against containment efforts.

The U.S. Coast Guard said the bad weather makes the controlled burns impossible to carry out, and that the stormy conditions also allow the oil to escape from booms put in place near shorelines to stop its advance.

Some experts believe that the controlled burns can only do so much, anyway. Lighter elements in oil can be eliminated by the burns, but heavier oil elements, known as "tar balls", stay below the surface of the water, and may still pose a threat to the U.S. coastline.

There was a disagreement between BP and academic experts over the effectiveness of the controlled burns, also. BP officials maintain that controlled burns can eliminate 50% to 99% of oil within a limited area. However, experts who worked on the Santa Barbara oil spill indicated that in cases of open sea oil spills, oil company efforts have a track record of containing less than 10% of the oil spill.

Predictions for the level of environmental damage from the oil spill continued to worsen.

Whales at play alongside an oil spill is not the picture postcard President Obama wanted when he recently offered the first federal support for offshore drilling in three decades. Above: A plane from the U.S. Fish and Wildlife Service spied five whales near the oil spill last week.

The Gulf of Mexico is not a focus of the Obama administration's earliest offshore drilling permit sales, focused on Virginia, but the western Gulf of Mexico is in the administration's long-term plan for the expansion of offshore drilling.

In an ironic political twist, it is now a few weeks after the 40th anniversary of Earth Day, and the Gulf of Mexico oil spill could soon surpass the size of the 1969 Santa Barbara spill that was instrumental in Earth Day's creation. Senator Gaylord Nelson flew over the Santa Barbara oil spill in 1969 before deciding to lead a Senate campaign to create the environmental holiday.

"Obviously, what's occurring now will also be taken into consideration as the administration looks to how to advance that plan and what makes sense and what might need to be adjusted," said Carol Browner, Obama's adviser for energy and climate change.

Browner tried to redirect politically motivated attacks on the offshore drilling plan by saying that the focus right now should be on containing the oil spill, and that the offshore drilling policy is a work in progress and evolving as it moves forward. Above: birds fly over oil on the water near Breton Sound Island in the Gulf of Mexico south of Louisiana.

The Obama administration has been in damage-control mode all along about the link between the oil spill and its now-unfortunately timed plan to lift the decades-old federal ban on offshore drilling.

President Obama righthand man David Axelrod appeared on Good Morning America weeks ago to toe a fine line, saying that all the President has agreed to is an end to the moratorium on offshore drilling, but Americans can rest assured that no new drilling will be authorized until the cause of this oil spill is determined.

Axelrod also tried to spin the oil spill story back in the favor of the administration against attacks that Obama was slow to respond as the oil spill worsened -- which is a potential political powder keg in Louisiana, given the recent historical reminder of the federal response to Hurricane Katrina.

"This is always the case in Washington, that whenever something happens, the political speculation sets in. But the truth of the matter is that we had the Coast Guard on the scene almost immediately after this accident, the deputy secretary of the Interior was on the ground the next day, and we've been coordinating closely with the local authorities and with the responsible party, BP, down there to deal with this from the very beginning," Axelrod said.

Weeks later, it is clear the Obama administration has failed to massage the message almost as often as BP has failed to stop the oil from leaking into the Gulf of Mexico.

Gov. Charlie Crist of Florida, expected to leave the Republican party and run for U.S. Senate as an independent, flew over the spill and said it made him reconsider his support for drilling off Florida's coast.

The most recent governor to join the anger over the BP oil spill is Governor Haley Barbour of Mississippi, who has been increasingly vocal about the impact on tourism as more oil has arrived to his state's coastal areas. In particular, Barbour has expressed anger at the media for exaggerating the environmental devastation and costing his state critical summer beach tourism income.

California Governor Arnold Schwarzenegger pulled his support for expanded drilling off the coast of California, specifically because of the Gulf of Mexico oil spill. The about-face by Schwarzenegger came after he had called for more drilling as a way to help the state recover from its $20 billion budget shortfall.

The congressional powers-that-be in Washington D.C. had been increasing their focus on oil rig safety, too, even before the latest estimate from BP made the spill seem worse than the previous worst case scenario.

House Energy and Commerce Committee Chairman Henry Waxman (D., Calif.) and Rep. Bart Stupak (D., Mich.) sent letters to BP and Transocean requiring the companies to provide details on the risks of drilling at such sites, before this week's hearings.

BP has tried passing the buck to Transocean and Cameron International, saying federal inquiries should focus on the "blowout preventer," which BP described as the "failsafe mechanism of the industry." BP noted that the equipment had been inspected 10 days before the oil rig disaster.

By the end of two days of hearings in Washington. the blowout preventer was still at the center of the oil spill story, and even though Transocean executives tried to downplay the device's role in the spill, Congressional investigators had zeroed in on its failure, among a host of safety lapses.

Yet BP was also under fire for supporting the industry effort, for a decade, to oppose the type of regulation that might have given the government more control over blowout preventers and other offshore mechanisms.

A 1990 oil pollution law that requires owners of oil leases to cover the costs of regaining control of the well and the cleanup is responsible for BP's current price tag of $6 million per day in its effort to limit the damage from the Transocean rig oil spill.

Eventually, some of oil spill that is not cleaned up will evaporate, break down or sink, but the environmental damage and political repercussions from the spill will be significant.

All along the congressmen were concerned that BP's and Transocean's efforts to control the oil spill were using unproven methods, and with the failure of the dome, those concerns were well placed.

The oil rig explosion comes on the heels of a new proposal from the U.S. Minerals Management Service (MMS) for mandatory safety rules, replacing the voluntary system in place currently.

The MMS reviewed 1,400 offshore incidents, and 41 fatalities, before concluding that human error or faulty procedures were primary causes.

The American Petroleum Institute worked with the government on the proposal, which would require companies to identify potential hazards at all facilities and adopt written operating procedures. After the Senate released its climate bill on Thursday, the API said it was withholding judgment on potential support for the time being.

While the big oil companies, including BP, have agreed to the trade group-authored guidelines, they have balked at an MMS proposal for an audit of their safety protocols to be carried out every three years, and at company cost.

Interior Secretary Ken Salazar ordered inspections of all Gulf of Mexico deepwater rigs. BP and BP America executives have been called to successive meetings with top Obama administration officials in the Gulf of Mexico area to discuss the containment and cleanup efforts.

The political rhetoric was taken up another notch, not only with the decision to put a soft ban in place on new drilling, but when Reps. Lois Capps (D-Santa Barbara) and Edward J. Markey (D-Mass.) proposed an independent commission with subpoena power to investigate the oil spill and make recommendations on future oversight of offshore drilling.

Lamar McKay, president of BP America; Steven Newman, president of Transocean; and Tim Probert, a senior executive at Halliburton ( HAL), were the big oil executives to face the Senate and House firing lines.

Transocean blamed BP's failure to cement the well properly, while BP blamed Transocean for the failure of the blowout preventer, which is nothing new in the rhetoric that has dominated commentary from these companies since the oil rig explosion and spill first occurred.

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."

-- Reported by Eric Rosenbaum in New York.

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Copyright 2009 TheStreet.com Inc. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed. AP contributed to this report.

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