More oil flows into Gulf of Mexico after accident

HOUSTON/WASHINGTON – Oil gushed largely unchecked from BP’s ruptured Gulf of Mexico well on Wednesday after a collision involving an undersea robot halted efforts to contain the worst oil spill in U.S. history.

While the energy giant struggled to restart its oil collection operation, the U.S. government said it would impose a more flexible ban on new deepwater drilling, a day after a federal judge overturned an initial moratorium as too broad.

Interior Secretary Ken Salazar also said initial investigations showed "reckless conduct" in the days leading up to the April 20 explosion on an offshore oil rig that ruptured BP’s Gulf of Mexico well.

In another problem for the British company, New York State’s pension fund, a BP investor, on Wednesday threatened to sue over the halving of its stock price since the start of the 65-day-old crisis.

After siphoning off a record amount of oil from its blown-out well on Tuesday, BP suffered a setback when an undersea robot crashed into the containment cap system that channels leaking oil from the mile-deep well to a ship on the surface.

Coast Guard Admiral Thad Allen, the Obama administration’s point man for the oil spill, told reporters the containment cap system could restart later on Wednesday after safety checks.

He said the flow of oil from the well was not completely unchecked. Some was still being burned off on the surface.

The containment cap system installed on June 3 captured 16,600 barrels on Tuesday, BP said. A separate oil-flaring system that collected 10,5000 barrels is still operating. A team of U.S. scientists estimate the leak is spewing between 35,000 and 60,000 barrels a day.

The oil slick, which consists of hundreds of thousands of patches of crude, has shut down rich fishing grounds, killed hundreds of turtles and seabirds and dozens of dolphins. It has also soiled the coastline in four U.S. states.

The disaster prompted the Obama administration to slap a six-month ban on all new deepsea drilling while it sought to improve safety procedures on other rigs in the Gulf of Mexico.

Salazar told a congressional hearing in Washington he would reissue the drilling ban, blocked by the federal judge as too far-reaching, to include criteria detailing when it would end.

Salazar, who did not indicate when he would issue the revised order, suggested it could allow oil companies to drill in certain low-risk areas.

"We will in the weeks and months ahead take a look at how it is that the moratorium in place might be refined," he said.

He did not elaborate on his observation that he believed reckless behavior was involved in the April 20 rig blast in which 11 workers were killed, and he did not point the finger at any particular company.

U.S. lawmakers, however have accused BP of cutting corners and putting savings over safety. The company leased the rig from Transocean and was a part owner in the ruptured well with Anadarko.

The criticism has fueled investor fears about BP’s future and its stock has tumbled since the April 20 spill, losing half its value and trading at levels not seen since 1996.

LAWSUIT COMING

New York Comptroller Thomas DiNapoli said on Wednesday the state pension fund planned to sue to recover losses from the drop in BP’s stock. Other big U.S. state funds are watching New York’s lawsuit but are yet to launch their own legal actions.

"BP misled investors about its safety procedures and its ability to respond to events like the ongoing oil spill and we’re going to hold it accountable," said the Democratic comptroller, who will stand for election in November.

The share price decline has led some major investors, including Aviva Investors and UBS Asset Management to start buying again, seeing a bargain even as others remain worried about the oil giant’s total liabilities from the spill.

BP shares edged up slightly in afternoon trading in New York on Wednesday.

According to U.S. government estimates, up to 4 million barrels of oil have spewed into the ocean since April 20, about 15 times as much as was spilled by the Exxon Valdez in 1989. BP says it has collected about 325,700 barrels so far.

Under the Clean Water Act, which levies a $4,300 per barrel fine, BP could face penalties of more than $15 billion. That does not include the many billions of dollars in criminal fines that many analysts have said are likely.

On June 17, the company halted dividend payments, pledged $20 billion to a special compensation fund for oil spill victims, and said it would step up asset sales over the next 12 months to help raise cash to cover the rising costs of the disaster.