June 16 (Bloomberg) -- As devastation from the worst U.S. oil spill mounts, President Barack Obama vowed that BP Plc will pay for all damage caused by its “recklessness” and that the government would commit to restoring the Gulf Coast.
“We will fight this spill with everything we’ve got,” Obama said last night in his first address to the nation from the Oval Office. “We will make BP pay for the damage their company has caused. And we will do whatever’s necessary to help the Gulf Coast and its people recover from this tragedy.”
Almost two months into the environmental disaster, Obama sought to reassure Americans as BP’s blown-out well continues spewing crude into the sea, threatening livelihoods and economies in the coastal states.
Underscoring his message, Obama named U.S. Navy Secretary Ray Mabus, a “son of the Gulf” and former governor of Mississippi, to oversee the region’s recovery. The president also appointed a former Justice Department inspector general, Michael Bromwich, to recast the criticized federal agency that oversees oil drilling as a “watchdog” instead of a “partner” with the oil industry.
Obama drew on the flood of crude as a rallying call for action on “clean energy” legislation to ease the nation’s dependence on oil.
White House Meeting
He said he will tell BP Chairman Carl-Henric Svanberg in a White House meeting today that the London-based company must set aside “whatever resources are required to compensate the workers and business owners who have been harmed as a result of his company’s recklessness.”
Susan MacManus, a political scientist at the University of South Florida in Tampa, said the speech would do little to ease concerns of the region’s residents.
“They were looking for more tangibles and evidence that some of the organizational issues have been worked out,” she said in an interview. “They were hoping to have more tangibles on specific relief and deadlines.”
Ross Baker, a political science professor at Rutgers University in New Brunswick, New Jersey, said Obama accomplished what he needed to and called the speech a “turning point.”
“He showed flashes of anger and he was certainly compassionate and understanding,” Baker said. “He rose to the occasion.”
The oil gushing from the well is threatening the shores of four states, and the government yesterday raised the estimate of the leak rate to 35,000 to 60,000 barrels a day.
It was the fifth increase in the official estimate of the leak, which began at 1,000 barrels a day. The spill began after the drilling rig Deepwater Horizon sank April 22, two days after the well it was drilling for BP exploded, killing 11 workers.
Based on the low end of the estimate, the BP well may have leaked 1.99 million barrels so far. That exceeds the 262,000 barrels spilled by the Exxon Valdez in 1989 and the U.S. record 300,000-barrel spill by a tanker off the Oregon coast in 1968, according to statistics from the American Petroleum Institute.
Obama called the BP leak “the worst environmental disaster America has ever faced.”
The president said in the coming weeks, BP should be capturing as much as 90 percent of the oil spewing into the Gulf and that relief wells to be finished later this summer are “expected to stop the leak completely.”
More Damage to Come
“But we have to recognize that, despite our best efforts, oil has already caused damage to our coastline and its wildlife,” he said. “There will be more oil and more damage before this siege is done.”
BP said in an e-mailed statement that the company shared the president’s goals of shutting off the well, cleaning up the Gulf and mitigating the economic impact.
The British bank Standard Chartered Plc estimated BP’s liabilities in the spill at about $40 billion. By comparison, Exxon Mobil Corp. paid $4.8 billion in cleanup costs, fines, punitive damages and interest for the 1989 incident.
BP fell yesterday to 342 pence in London trading, its lowest price in 13 years and down 48 percent from the day the oil rig blew up. The cost to protect $10 million of BP debt for a year reached $695,000, according to CMA DataVision. It was $29,000 on April 30.
The yield on BP’s $750 million of 1.55 percent notes due in 2011 rose to 8.796 percent yesterday and the price dropped 2.1 cents to 92.25 cents on the dollar, the lowest on record, according to Trace, the bond-price reporting system of the Financial Industry Regulatory Authority. The bonds traded the most ever, according to data compiled by Bloomberg.
Fitch Ratings cut BP’s credit rating six notches yesterday to two levels above junk on concern over the potential cost of cleaning up the spill and meeting future liabilities. Standard and Poor’s downgraded BP by one level last week.
Obama, seeking to dispel criticism his administration responded too slowly to the spill, said 30,000 personnel and thousands of ships and vessels have been deployed.
“From the very beginning of this crisis, the federal government has been in charge of the largest environmental cleanup effort in our nation’s history,” he said.
The administration has been criticized by members of both political parties, including Democratic strategist James Carville and Senate Republican leader Mitch McConnell, who said the administration “hasn’t lived up to” Americans’ expectations in its response.
Minerals Management Service
Senator Lamar Alexander, a Tennessee Republican, said in a statement, “The president should spend more time focusing on cleaning up and containing the oil spill and less time trying to pass a national energy tax that will drive jobs overseas looking for cheap energy.”
Obama yesterday accused the Minerals Management Service, which oversees offshore drilling, of corruption and tasked Bromwich with overhauling it. Failures at the agency may leave the administration open to some of the blame for the disaster at BP’s Macondo well, said Philip Weiss, an analyst with Argus Research Corp. in New York.
“MMS is supposed to be regulating what’s going on in the Gulf,” Weiss said. “It seems to me that the government really does have some culpability here.”
Obama’s address came about six hours after he returned from a two-day visit to the Gulf Coast, talking with state and local officials and business owners in Mississippi, Alabama and Florida. It was his fourth trip to the region.
The spill has closed as much as 37 percent of the Gulf of Mexico to fishing, cut offshore drilling in the nation by half and polluted 140 miles (225 kilometers) of shoreline from Louisiana to Florida. It also may create political turmoil for the administration.
“Everybody knows the president isn’t at fault for the leak, but they have to blame somebody,” said Stuart Rothenberg, publisher of the nonpartisan Rothenberg Political Report in Washington. Americans “are unhappy with a lot of stuff. They are unhappy with the economy; they are unhappy with the debt; they are pre-existing in a bad mood.”
Even though 71 percent of Americans in a USA Today/Gallup poll conducted June 11-13 say Obama hasn’t been tough enough in dealing with BP, his overall approval ratings haven’t suffered, according to Gallup’s daily tracking poll.
Historians said it’s difficult to compare the spill to past crises that have beset presidents, such as Hurricane Katrina under President George W. Bush and the Iran hostage crisis during President Jimmy Carter’s administration.
The spill doesn’t pose the same national security threat as the hostage crisis and there was more immediate and obvious devastation and loss of life from Katrina, said Bruce Buchanan, a political scientist at the University of Texas in Austin.
“This is loss of livelihood and slow torture,” said Buchanan. “It’s quite unique.”
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