Daily Digest

Daily Digest - June 16

Wednesday, June 16, 2010, 9:49 AM
  • Soros: European recession next year "almost inevitable"
  • Yields on BP-Backed Municipal Bonds Surge to 10% on Gulf Spill
  • Calpers Panel Votes to Ask State for $600.7 Million
  • Greece's tourism industry under threat as strikes, riots scare visitors away
  • Business leaders predict 'global oil supply crunch and price spike'
  • Chicago Board of Education to Discuss $400 Million Deficit
  • France urged to spell out budget deficit cuts
  • Pension Tensions in Santa Cruz
  • Interactive map and trajectory for BP oil spill
  • Gulf Oil Spill Killing Thousands of Animals
  • U.S. boosts estimate of oil flow from BP disaster


Soros: European recession next year "almost inevitable"

Europe faces almost inevitable recession next year and years of stagnation as policymakers' response to the euro zone crisis causes a downward spiral, billionaire investor George Soros said on Tuesday. Flaws built into the euro from the start had become acute, Soros told a seminar, warning that the euro crisis could have the potential to destroy the 27-nation European Union.

Yields on BP-Backed Municipal Bonds Surge to 10% on Gulf Spill

Interest rates on some floating-rate municipal bonds guaranteed by BP Plc have surged to as much as 10 percent on concern that the costs of cleaning up the Gulf of Mexico oil spill and litigation are spiraling higher. Yields on short-term bonds backed by London-based BP to build sewage and solid-waste disposal facilities at a chemical plant in Will County, Illinois, and a refinery in Texas City, Texas, that are now at 10 percent were as low as 0.5 percent at the beginning of the month. BP backs more than $3.5 billion of U.S. municipal obligations, according to Bloomberg data.

Calpers Panel Votes to Ask State for $600.7 Million

The Benefits and Program Administration Committee, in a unanimous vote, sent the recommendation to the pension fund’s 13-member governing board for final approval tomorrow. It would increase the amount the state must pay as its share of retirement costs to $3.9 billion in the fiscal year that starts July 1, from $3.3 billion this year. State Treasurer Bill Lockyer, a member of the Calpers board, sought a one-month delay in the decision in May, saying the increase would come as the state grapples with a $19.1 billion budget deficit.

Greece's tourism industry under threat as strikes, riots scare visitors away

Tourism industry experts say they are currently seeing a drop of 10 to 12 per cent in bookings compared to 2009, which was itself a poor year. With tourism accounting for about 15.5 per cent of gross domestic product, Greece can ill afford to see a prolonged downturn in an industry that provides about one in every five jobs.

Business leaders predict 'global oil supply crunch and price spike' (posted by Damnthematrix)

The Chief Executive Officer of insurance giants Lloyds is warning that the world is facing a “period of deep uncertainty” over the decline of fossil fuels – and may soon be coping with $200-a-barrel oil. It may be hard to believe now, writes Dr Richard Ward in his introduction to a “stark” report just published by Lloyds and an influential UK think tank, but that’s because “the bad times have not yet hit.”

He warns business managers to be ready for “dramatic changes” as oil, gas and coal supplies will soon be “less reliable and more expensive.” The world “has entered a period of deep uncertainty in how we will source energy for power, heat and mobility, and how much we will pay for it,” he states.

Chicago Board of Education to Discuss $400 Million Deficit

The Chicago Board of Education meets today to figure out how to fill a $400 million budget hole. For months, Chicago Public Schools CEO Ron Huberman has blamed the massive budget deficit on a lack of funding from the state. So the Board of Education is scheduled to discuss several methods to fill that hole. Those include borrowing up to $800 million, laying off teachers and increasing individual class sizes.

France urged to spell out budget deficit cuts

The French government was on Tuesday urged by the European Commission to spell out in more detail how it intends to reduce its budget deficit and warned that bigger spending cuts or tax rises than envisaged might be needed. At a forecast 8 per cent of gross domestic product this year, France has the largest public deficit of the three large eurozone economies. But it has so far given little detail of how it intends to reduce its deficit to 3 per cent of GDP by 2013, as promised under a fiscal consolidation programme agreed with the European Union.

Pension Tensions in Santa Cruz (California)

Santa Cruz Police Chief Howard Skerry has worn SCPD blue for 29 years. So when he turns in his gun and badge in September to retire, he’ll take home a pension of about $170,000 per year for the rest of his life. It’s the same deal every cop and firefighter in Santa Cruz gets: stay on the job until at least age 50, then retire with 3 percent of your salary for every year spent on the force..... City Manager Dick Wilson (also soon to retire, but at the “miscellaneous employee” rate of 2 percent of his salary for each of his 28 years) says the model is “completely unsustainable.”


Interactive map and trajectory for BP oil spill

Click the map below to use the tool yourself and see the latest information about the oil spill’s trajectory, shipping information, fishery closures and where responders are taking action.

Gulf Oil Spill Killing Thousands of Animals (Video)

Rescue workers have saved thousand of birds, turtles and dolphins from the oil spill area in the Gulf of Mexico. But many others have died, and those that initially survive may experience long term ill effects. Producer Zulima Palacio has more in this report narrated by Elizabeth Lee.

U.S. boosts estimate of oil flow from BP disaster

BP PLC's damaged well in the Gulf of Mexico is leaking as much as 60,000 barrels of oil a day, U.S. and independent scientists said in a new estimate Tuesday, raising the figure significantly just hours before President Barack Obama will speak to the country about one of the worst environmental disasters in American history. Scientists said the well is spewing between 35,000 and 60,000 barrels into the Gulf, revising a prior estimate of between 20,000 to 40,000 barrels a day. BP is now collecting about 15,000 barrels a day using a containment cap.

Please send article submissions to: [email protected]


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Re: Daily Digest - June 16

"June 16 (Bloomberg) -- The sovereign-debt crisis engulfing Greece risks spreading to Britain and the U.S. unless decisive steps are taken to rein in their budget deficits, said former Bank of England policy maker DeAnne Julius.

“We’re living in a world economy where there are massive pools of liquidity and the tides shift and they usually shift to target the weakest link,” Julius said in a Bloomberg Television interview in London today. “At the moment that’s been Greece. They’re now looking around to see where else in Europe and the euro area it might be, and indeed I think the risk that this economy and the U.S. faces is that unless we get control of our debt burden we could be in line at some point as well.”"

"June 16 (Bloomberg) -- Sweden sold 325 million kronor ($41.66 million) less than planned at a government debt auction today, the country’s debt office said.

The government sold 675 million kronor of 3.5 percent 2039 bonds, compared with the 1 billion kronor originally planned, the debt office said in a statement today. The average yield was 3.190 percent.

“This is far lower than usual and odd considering Sweden’s strong debt position,” IDEAGlobal said in a note to clients today. “As such, it is probably an anomaly.”"

"The yield spread on 10-year Spanish bonds over benchmark German bunds rose 0.13 percentage point to an all-time high of 2.235 percentage points after the Spanish press reported that the European Union, the International Monetary Fund and the U.S. Treasury are drawing up a liquidity plan for Spain involving a credit line of up to €250 billion.

Doubts about the ability of Spanish banks to borrow in capital markets is also causing some concern. "

.............................3A) Spanish banks break ECB loan record

"FT) -- Spanish banks are borrowing record amounts from the European Central Bank as the country's financial institutions struggle to gain funding from the international capital markets.

Spanish banks borrowed €85.6 billion ($105.7 billion) from the ECB last month. This was double the amount lent to them before the collapse of Lehman Brothers in September 2008 and 16.5 percent of net eurozone loans offered by the central bank.

This is the highest amount since the launch of the eurozone in 1999 and a disproportionately large share of the emergency funds provided by the euro's monetary guardian, according to analysis by Royal Bank of Scotland and Evolution. Spanish banks account for 11 percent of the eurozone banking system.

The rise in borrowing from €74.6 billion ($91.9 billion) in April, or 14.4 percent of the net liquidity pumped by the ECB into the eurozone financial system, provides further evidence of the acute tensions in the Spanish banking system."

.................3B) EU Denies Report of EU, IMF Credit Line for Spain

"June 16 (Bloomberg) -- Czech yields may rise at an auction of 2024 koruna bonds as the government will probably sell more debt than planned to meet record borrowing needs, Societe Generale SA said in a report to clients today.

The Finance Ministry is offering 5 billion koruna ($240 million) of the security today to fund the budget deficit and repay older debt. It plans to raise 280 billion koruna this year, the largest amount on record."

"June 16 (Bloomberg) -- Mongolia’s government scaled back its plans for global bond sales this year, after Europe’s debt crisis drove up borrowing costs."

"Multi-year projections do show a shortfall of $700,000 by the 2012-13 fiscal year, and as a result staff is looking into a parcel tax or closing a school.

“If union concessions are not reached for the budget year, it will create a budget hold not only for the budget year, but for the subsequent years as well. Without a plan of action to enhance revenues, such as a parcel tax and local donation, and expenditures, reductions, such as program elimination and closing schools or both, the district is setting the stage for filing bankruptcy,” reads a staff report by Chief Business Official Cynthia Shieh. "

"HARRISBURG, Pa. -- Harrisburg's city controller said Tuesday the capital city's general fund is burdened with $7 million in debt on top of being in line to repay $300 million worth of incinerator debt.

City Controller Dan Miller said the situation is so dire that employees and city vendors may not be paid. He's recommending Harrisburg officials choose municipal bankruptcy, in which the state takes control of the city's finances.

Mayor Linda Thompson, however, said bankruptcy is not an option."

"June 16 (Bloomberg) -- Poland’s borrowing costs will rise in a sale of 10-year bonds today, capping what may be the government’s biggest month for domestic debt issues this year, Societe Generale SA, Bank Pekao SA and PKO Bank Polski SA say."

"Investors could be forced to sell billions of euros of Greek government bonds after Barclays Capital and Citigroup strip GGBs from indices following Moody's downgrade of the sovereign credit to junk status.

Moody's Investors Service cut Greece by four notches to junk status on Monday.

"Greece government debt will thus exit all Series-L investment-grade benchmarks (for example Global Aggregate, Global Treasury, Euro Aggregate, and Euro Treasury) on July 1, 2010," investment bank BarCap said in its statement on Monday.

It follows moves by Citigroup to drop GGBs from its World Government Bond Index (WGBI), another key sovereign credit benchmark series, after the Moody's downgrade.

But estimates vary wildly as to how much debt will be dumped by investors at the end of the month, and there is uncertainty as to the impact on Greek government debt prices.

"The four-notch ratings cut on Greece by Moody's takes GGBs out of most index-tracking funds. We estimate that total forced selling in GGBs could amount to some 30 billion euros," said Harvinder Sian, a bond analyst at RBS in London."

...................................9A) Greek bonds face extra 5 charge at ECB

"Greek government bonds will attract an extra 5% penalty when banks use them as security for European Central Bank funds, an ECB spokesman said on Tuesday, after Moody's cut the country's debt to junk status.

An Executive Board member also said the ECB did not aim to bail out governments and it was buying government bonds to ensure the transmission of monetary policy.

The extra 'haircut' means commercial banks will receive less money in exchange for Greek bonds than they would if they used government bonds from any other euro zone nation."

"Illinois’ premier public university may be owed as much as $700 million from the state by year’s end, threatening its “entire financial underpinning,” its president told a group of regional business leaders Monday.

The prediction by University of Illinois Interim President Stanley Ikenberry comes just days after legislators granted state colleges the ability to borrow up to 75 percent of what the state owes them, with a maximum interest rate of 9 percent.

“This is a stopgap measure … as a symptom of the underlying fiscal crisis, not a solution,” Ikenberry told the Commercial Club of Chicago during a noon luncheon downtown.

Ikenberry said the university expects to finish the fiscal year at the end of June with $335 million in missing payments from the state – roughly 55 percent of its total appropriation."

"June 16 (Bloomberg) -- Builders broke ground on fewer U.S. homes in May than anticipated after the expiration of a tax credit, indicating the real-estate market will struggle without government incentives.

Housing starts fell 10 percent, the biggest decline since March 2009, to a 593,000 annual rate, Commerce Department figures showed today in Washington. Building permits, a sign of future construction, unexpectedly fell to a one-year low. Single-family starts suffered the largest drop since 1991.

Builders focused less on taking on new projects and more on completing houses for those seeking to qualify for the tax credit, which required contracts be signed by April 30 and closed by the end of this month. Growth in sales and construction will now depend more on job gains and a drop in foreclosures, which have pushed down prices and created competition for builders."

"Under current law, the state government's cost for SERS pensions -- for state employees, legislative staff and elected officials except judges -- are due to increase from $489 million now to $1.68 billion, a spike of 245 percent.

This means that pension costs, as a percentage of payrolls, would have to increase sharply over the next few years. For school system members, the percentage would rise from about 4 percent this year to 8.22 percent in the fiscal year starting July 1 and more than 20 percent of payroll by 2013. That would force school boards to raise property taxes and force the Legislature to come up with considerable additional tax funds.

The new pension bill, by Rep. Dwight Evans, D-Philadelphia, would reduce the impact of the changes by limiting the yearly rise in pension costs. It would do so by reamortizing current borrowings and stretching the payments out much farther into the future."

"State workers, already financially drained by furloughs and threatened with possible pay cuts, can brace for another potential hit to their pocketbooks next year: A surge in health insurance premiums, some by more than 16 percent.

A CalPERS committee on Tuesday recommended an array of premium increases and other measures to rein in its rising costs in providing health care services to 1.3 million public employees, retirees and their families.

Exactly how much of the hikes – which will bring total premium costs to $6.7 billion – will be passed on to state workers will depend on what's negotiated between the state and its unions as they wrangle for new contracts.

This much is for sure: The cost of health care will further strain already tight government budgets and add to a chorus seeking relief from the high cost of medicine."

  • Other news and headlines:

Chinese Bank Regulator Warns of Loan Risks

Greek debt should be written off says Nobel economist (Mryon Scholes)

Spanish, Portuguese Bonds Decline on Debt, Austerity Concern

Wave of Debt May Wash Away Some High-Yield US Firms, S&P Says

Banks lose half of Dubai World loan value

Junk Debt Sales Slow With Yields Near '10 Highs: New Bond Alert

Bank deposits in Greece down by EUR 18,5 billion in 4 months

French Pension Reform To Cut Deficit By 1.9 Point Of GDP by 2020 and French reforms substantial but insufficient

Hungary's Planned Bank Tax May Force Insurers Out, Mabisz Says

Kan Plans May Require $76 Billion Japan Tax Increase

San Diego May Use Bankruptcy to Roll Back Benefits: Joe Mysak

Commercial Property to Stay 40% From Peak, Pimco Says

Another 500 to 700 bank failures predicted

Fetherolf: Salinas police at 'mission critical' (California...cutting sworn officers back to 1999 levels)

Fannie Mae, Freddie Mac to delist shares from NYSE

Italy and Portugal's economies 'unsustainable', study finds - Summary

Pension crisis scares off businesses: group (Illinois...Pensions underfunded by $130 billion)

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Re: Daily Digest - June 16

Dr.Riki Ott alleges BP engaged in massive cover-up to hide Gulf Disaster damage


Maddening, frightening, disturbing.

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Re: Daily Digest - June 16

I still don't understand why the gov't hasn't kicked BP out of the area and brought in every other oil company along with the gov't teams to take the issue over.  I guess I shouldn't say "I don't understand" because I know very well WHY they haven't (don't want this post to get thrown into the CT basement), but it's sickening to watch.  


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Re: Daily Digest - June 16
cmartenson wrote:

Dr.Riki Ott alleges BP engaged in massive cover-up to hide Gulf Disaster damage


Maddening, frightening, disturbing.

If emails are disappearing from server that would strongly suggest complicit actions of the authorities.  I certainly hope that was exageration on the part of the interviewee.

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Re: Daily Digest - June 16

I can't comment on Dr Ott's claims but I will tell you that I can smell oil in the air in my yard.  I live inland about 15 miles from the gulf.



Pensacola, FL  

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Re: Daily Digest - June 16


Good catch on the Lloyds "White Paper."  It is refreshing to see an organization as respected as Lloyds is to the business community come out with a paper that discusses the implications of peak oil and climate change.  They have seemed to exist is separate worlds where people interested in one cannot mention the other.  It's about time both are being discussed.  Definitely a great and worrisome read, although they are projecting oil price rises a little further out than I would expect.  I'd be interested in getting ideas from other CMers on when they expect oil prices to head up significantly.


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Re: Daily Digest - June 16
imagesbytjm wrote:

I can't comment on Dr Ott's claims but I will tell you that I can smell oil in the air in my yard.  I live inland about 15 miles from the gulf.



Pensacola, FL  

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Brutish Petroleum

One hundred years ago the government of England bought a controlling interest in the first Middle Eastern oil well, near Basra in what is now Iran.  They did this to have a reliable source of petroleum for their navy as it converted from coal to oil power, which gained them a few precious knots in combat against the fast-developing German navy.  Churchill led this effort.

The company based on Iranian oil sought for military use later became known as British Petroleum.  In 1953, when the CIA overthrew Mohammed Mossadegh after he nationalized Iran's oil, BP was the primary beneficiary.  BP is the largest supplier of oil to the US military now.

Oil won the two great was of the last century.  Oil in the Middle East was a primary objective in both.  Eisenhower's overthrow of a democracy in Iran was only the first of countless atrocities to be committed in the name of military oil.

The spill in the gulf is inconvenient, but little more, from a BP viewpoint, but also from Obama's.  It is a PR hole to be filled, like the recent Israeli murders. From their point of view animals and plants die every day to put supper on the table.  The only tragedy here is that we don't get food to eat from the mass deaths (from their point of view).

BP is obligated to pay a fine for each barrel of oil leaked.  That is the law.  So of course they obscure the actual amount.  It will be argued in court for the next 20 years just as it is being argued in the press now.  Obama is fully complicit in this obfuscation, for a reason:

The US and Israel will soon be invading Iran, to gain access to oil, natural gas, and water (including hydroelectric power) in the provinces of Khuzestan and Baluchistan.  BP is already integral to the power supply for troops in the region.

The US, with British help, built a vise around Iran by taking the adjacent countries.  Iran is the prize, and it is a prize that will be won for multinational pirates by the spilling of American blood.  That blood will drain across the hands of the military industrial complex and stain equally the souls of everyone at BP, Obama's government, and in Israel.

Dr. Paul Craig Roberts, former Treasury Undersecretary, recently called the US a "failed state", because it no longer represents the American people.  In fact the US has for a long time simply been an engine of domination in resource wars that ultimately favor only multinational stateless pirates, like BP.  The problem of the Gulf is systemic.  I would call the system resource imperialism.  The Obama government is as complicit in that as the Bush/Cheney government before it.

As long as resource imperialism rules the day we will see an endless procession of environmental tragedies that eventually kill the planet.  We cannot and will not regain our role of environmental stewardship under this form of government.  The US, as it is now, is depraved, as Dr. Roberts said, "a plague upon the world".  The Gulf is what we have been doing to everyone else for a long time.  We only end this sickness by claiming a sane future with a new form of government.

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Re: Daily Digest - June 16/BP well/sea bed erosion

See article below from OIl Drum:

Editors' note for first-time visitors: What follows is a comment from a The Oil Drum reader. To read what The Oil Drum staff members are saying about the Deepwater Horizon Spill, please visit the front page. (Were the US government and BP more forthcoming with information and details, the situation would not be giving rise to so much speculation about what is actually going on in the Gulf. This should be run more like Mission Control at NASA than an exclusive country club function--it is a public matter--transparency, now!)

OK let's get real about the GOM oil flow. There doesn't really seem to be much info on TOD that furthers more complete understanding of what's really happening in the GOM.
As you have probably seen and maybe feel yourselves, there are several things that do not appear to make sense regarding the actions of attack against the well. Don't feel bad, there is much that doesn't make sense even to professionals unless you take into account some important variables that we are not being told about. There seems to me to be a reluctance to face what cannot be termed anything less than grim circumstances in my opinion. There certainly is a reluctance to inform us regular people and all we have really gotten is a few dots here and there...

First of all...set aside all your thoughts of plugging the well and stopping it from blowing out oil using any method from the top down. Plugs, big valves to just shut it off, pinching the pipe closed, installing a new bop or lmrp, shooting any epoxy in it, top kills with mud etc etc etc....forget that, it won't be happening..it's done and over. In fact actually opening up the well at the subsea source and allowing it to gush more is not only exactly what has happened, it was probably necessary, or so they think anyway.

So you have to ask WHY? Why make it worse?...there really can only be one answer and that answer does not bode well for all of us. It's really an inescapable conclusion at this point, unless you want to believe that every Oil and Gas professional involved suddenly just forgot everything they know or woke up one morning and drank a few big cups of stupid and got assigned to directing the response to this catastrophe. Nothing makes sense unless you take this into account, but after you do...you will see the "sense" behind what has happened and what is happening. That conclusion is this:

The well bore structure is compromised "Down hole".

That is something which is a "Worst nightmare" conclusion to reach. While many have been saying this for some time as with any complex disaster of this proportion many have "said" a lot of things with no real sound reasons or evidence for jumping to such conclusions, well this time it appears that they may have jumped into the right place...

This was probably our best and only chance to kill this well from the top down. This "kill mud" is a tried and true method of killing wells and usually has a very good chance of success. The depth of this well presented some logistical challenges, but it really should not of presented any functional obstructions. The pumping capacity was there and it would have worked, should have worked, but it didn't.

It didn't work, but it did create evidence of what is really happening. First of all the method used in this particular top kill made no sense, did not follow the standard operating procedure used to kill many other wells and in fact for the most part was completely contrary to the procedure which would have given it any real chance of working.

When a well is "Killed" using this method heavy drill fluid "Mud" is pumped at high volume and pressure into a leaking well. The leaks are "behind" the point of access where the mud is fired in, in this case the "choke and Kill lines" which are at the very bottom of the BOP (Blow Out Preventer) The heavy fluid gathers in the "behind" portion of the leaking well assembly, while some will leak out, it very quickly overtakes the flow of oil and only the heavier mud will leak out. Once that "solid" flow of mud is established at the leak "behind" the well, the mud pumps increase pressure and begin to overtake the pressure of the oil deposit. The mud is established in a solid column that is driven downward by the now stronger pumps. The heavy mud will create a solid column that is so heavy that the oil deposit can no longer push it up, shut off the pumps...the well is killed...it can no longer flow.

Usually this will happen fairly quickly, in fact for it to work at all...it must happen quickly. There is no "trickle some mud in" because that is not how a top kill works. The flowing oil will just flush out the trickle and a solid column will never be established. Yet what we were told was "It will take days to know whether it
worked"...."Top kill might take 48 hours to complete"...the only way it could take days is if BP intended to do some "test fires" to test integrity of the entire system. The actual "kill" can only take hours by nature because it must happen fairly rapidly. It also increases strain on the "behind" portion and in this instance we all know that what remained was fragile at best.

Early that afternoon we saw a massive flow burst out of the riser "plume" area. This was the first test fire of high pressure mud injection. Later on same day we saw a greatly increased flow out of the kink leaks, this was mostly mud at that time as the kill mud is tanish color due to the high amount of Barite which is added to it to weight it and Barite is a white powder.

We later learned the pumping was shut down at midnight, we weren't told about that until almost 16 hours later, but by then...I'm sure BP had learned the worst. The mud they were pumping in was not only leaking out the "behind" leaks...it was leaking out of someplace forward...and since they were not even near being able to pump mud into the deposit itself, because the well would be dead long before...and the oil was still coming up, there could only be one conclusion...the wells casings were ruptured and it was leaking "down hole"

They tried the "Junk shot"...the "bridging materials" which also failed and likely made things worse in regards to the ruptured well casings.

"Despite successfully pumping a total of over 30,000 barrels of heavy mud, in three attempts at rates of up to
80 barrels a minute, and deploying a wide range of different bridging materials, the operation did not overcome the flow from the well."

80 Barrels per minute is over 200,000 gallons per hour, over 115,000 barrels per day...did we seen an increase over and above what was already leaking out of 115k bpd?....we did not...it would have been a massive increase in order of multiples and this did not happen.

"The whole purpose is to get the kill mud down,” said Wells. “We'll have 50,000 barrels of mud on hand to kill this well. It's far more than necessary, but we always like to have backup."

Try finding THAT quote around...it's been scrubbed...here's a cached copy of a quote...

"The "top kill" effort, launched Wednesday afternoon by industry and government engineers, had pumped enough drilling fluid to block oil and gas spewing from the well, Allen said. The pressure from the well was very low, he said, but persisting."

"Allen said one ship that was pumping fluid into the well had run out of the fluid, or "mud," and that a second ship was on the way. He said he was encouraged by the progress."

Later we found out that Allen had no idea what was really going on and had been "Unavailable all day"

So what we had was BP running out of 50,000 barrels of mud in a very short period of time. An amount far and above what they deemed necessary to kill the well. Shutting down pumping 16 hours before telling anyone, including the president. We were never really given a clear reason why "Top Kill" failed, just that it couldn't overcome the well.

There is only one article anywhere that says anything else about it at this time of writing...and it's a relatively obscure article from the wall street journal "online" citing an unnamed source.

"WASHINGTON—BP PLC has concluded that its "top-kill" attempt last week to seal its broken well in the Gulf of
Mexico may have failed due to a malfunctioning disk inside the well about 1,000 feet below the ocean floor.

The disk, part of the subsea safety infrastructure, may have ruptured during the surge of oil and gas up the well on April 20 that led to the explosion aboard the Deepwater Horizon rig, BP officials said. The rig sank two days later, triggering a leak that has since become the worst in U.S. history.

The broken disk may have prevented the heavy drilling mud injected into the well last week from getting far enough down the well to overcome the pressure from the escaping oil and gas, people familiar with BP's findings said. They said much of the drilling mud may also have escaped from the well into the rock formation outside the wellbore.

As a result, BP wasn't able to get sufficient pressure to keep the oil and gas at bay. If they had been able to build up sufficient pressure, the company had hoped to pump in cement and seal off the well. The effort was deemed a failure on Saturday.

BP started the top-kill effort Wednesday afternoon, shooting heavy drilling fluids into the broken valve known as a blowout preventer. The mud was driven by a 30,000 horsepower pump installed on a ship at the surface. But it was clear from the start that a lot of the "kill mud" was leaking out instead of going down into the well."

There are some inconsistencies with this article.
There are no "Disks" or "Subsea safety structure" 1,000 feet below the sea floor, all that is there is well bore. There is nothing that can allow the mud or oil to "escape" into the rock formation outside the well bore except the well, because it is the only thing there.

All the actions and few tid bits of information all lead to one inescapable conclusion. The well pipes below the sea floor are broken and leaking. Now you have some real data of how BP's actions are evidence of that, as well as some murky statement from "BP officials" confirming the same.

I took some time to go into a bit of detail concerning the failure of Top Kill because this was a significant event. To those of us outside the real inside loop, yet still fairly knowledgeable, it was a major confirmation of what many feared. That the system below the sea floor has serious failures of varying magnitude in the complicated chain, and it is breaking down and it will continue to.

What does this mean?

It means they will never cap the gusher after the wellhead. They cannot...the more they try and restrict the oil gushing out the bop?...the more it will transfer to the leaks below. Just like a leaky garden hose with a nozzle on it. When you open up the nozzle?...it doesn't leak so bad, you close the nozzle?...it leaks real bad,
same dynamics. It is why they sawed the riser off...or tried to anyway...but they clipped it off, to relieve pressure on the leaks "down hole". I'm sure there was a bit of panic time after they crimp/pinched off the large riser pipe and the Diamond wire saw got stuck and failed...because that crimp diverted pressure and flow to the rupture down below.

Contrary to what most of us would think as logical to stop the oil mess, actually opening up the gushing well and making it gush more became direction BP took after confirming that there was a leak. In fact if you note their actions, that should become clear. They have shifted from stopping or restricting the gusher to opening it up and catching it. This only makes sense if they want to relieve pressure at the leak hidden down below the seabed.....and that sort of leak is one of the most dangerous and potentially damaging kind of leak there could be. It is also inaccessible which compounds our problems. There is no way to stop that leak from above, all they can do is relieve the pressure on it and the only way to do that right now is to open up the nozzle above and gush more oil into the gulf and hopefully catch it, which they have done, they just neglected to tell us why, gee thanks.

A down hole leak is dangerous and damaging for several reasons.
There will be erosion throughout the entire beat up, beat on and beat down remainder of the "system" including that inaccessible leak. The same erosion I spoke about in the first post is still present and has never stopped, cannot be stopped, is impossible to stop and will always be present in and acting on anything that is left which has crude oil "Product" rushing through it. There are abrasives still present, swirling flow will create hot spots of wear and this erosion is relentless and will always be present until eventually it wears away enough material to break it's way out. It will slowly eat the bop away especially at the now pinched off riser head and it will flow more and more. Perhaps BP can outrun or keep up with that out flow with various suckage methods for a period of time, but eventually the well will win that race, just how long that race will be?...no one really knows....However now?...there are other problems that a down hole leak will and must produce that will compound this already bad situation.

This down hole leak will undermine the foundation of the seabed in and around the well area. It also weakens the only thing holding up the massive Blow Out Preventer's immense bulk of 450 tons. In fact?...we are beginning to the results of the well's total integrity beginning to fail due to the undermining being caused by the leaking well bore.

The first layer of the sea floor in the gulf is mostly lose material of sand and silt. It doesn't hold up anything and isn't meant to, what holds the entire subsea system of the Bop in place is the well itself. The very large steel connectors of the initial well head "spud" stabbed in to the sea floor. The Bop literally sits on top of the pipe and never touches the sea bed, it wouldn't do anything in way of support if it did. After several tens of feet the seabed does begin to support the well connection laterally (side to side) you couldn't put a 450 ton piece of machinery on top of a 100' tall pipe "in the air" and subject it to the side loads caused by the ocean currents and expect it not to bend over...unless that pipe was very much larger than the machine itself, which you all can see it is not. The well's piping in comparison is actually very much smaller than the Blow Out Preventer and strong as it may be, it relies on some support from the seabed to function and not literally fall over...and it is now showing signs of doing just that....falling over.

If you have been watching the live feed cams you may have noticed that some of the ROVs are using an inclinometer...and inclinometer is an instrument that measures "Incline" or tilt. The BOP is not supposed to be tilting...and after the riser clip off operation it has begun to...

This is not the only problem that occurs due to erosion of the outer area of the well casings. The way a well casing assembly functions it that it is an assembly of different sized "tubes" that decrease in size as they go down. These tubes have a connection to each other that is not unlike a click or snap together locking action. After a certain length is assembled they are cemented around the ouside to the earth that the more rough drill hole is bored through in the well making process. A very well put together and simply explained process of "How to drill a deep water oil well" is available here:

The well bore casings rely on the support that is created by the cementing phase of well construction. Just like if you have many hands holding a pipe up you could put some weight on the top and the many hands could hold the pipe and the weight on top easily...but if there were no hands gripping and holding the pipe?...all the weight must be held up by the pipe alone. The series of connections between the sections of casings are not designed to hold up the immense weight of the BOP without all the "hands" that the cementing provides and they will eventually buckle and fail when stressed beyond their design limits.

These are clear and present dangers to the battered subsea safety structure (bop and lmrp) which is the only loose cork on this well we have left. The immediate (first 1,000 feet) of well structure that remains is now also undoubtedly compromised. However.....as bad as that is?...it is far from the only possible problems with this very problematic well. There were ongoing troubles with the entire process during the drilling of this well. There were also many comprises made by BP IMO which may have resulted in an overall weakened structure of the entire well system all the way to the bottom plug which is over 12,000 feet deep. Problems with the cementing procedure which was done by Haliburton and was deemed as “was against our best practices.” by a Haliburton employee on April 1st weeks before the well blew out. There is much more and I won't go into detail right now concerning the lower end of the well and the troubles encountered during the whole creation of this well and earlier "Well control" situations that were revieled in various internal BP e-mails. I will add several links to those documents and quotes from them below and for now, address the issues concerning the upper portion of the well and the region of the sea floor.

What is likely to happen now?

Well...none of what is likely to happen is good, in fact...it's about as bad as it gets. I am convinced the erosion and compromising of the entire system is accelerating and attacking more key structural areas of the well, the blow out preventer and surrounding strata holding it all up and together. This is evidenced by the tilt of the blow out preventer and the erosion which has exposed the well head connection. What eventually will happen is that the blow out preventer will literally tip over if they do not run supports to it as the currents push on it. I suspect they will run those supports as cables tied to anchors very soon, if they don't, they are inviting disaster that much sooner.

Eventually even that will be futile as the well casings cannot support the weight of the massive system above with out the cement bond to the earth and that bond is being eroded away. When enough is eroded away the casings will buckle and the BOP will collapse the well. If and when you begin to see oil and gas coming up around the well area from under the BOP? or the area around the well head connection and casing sinking more and more rapidly? ...it won't be too long after that the entire system fails. BP must be aware of this, they are mapping the sea floor sonically and that is not a mere exercise. Our Gov't must be well aware too, they just are not telling us.

All of these things lead to only one place, a fully wide open well bore directly to the oil deposit...after that, it goes into the realm of "the worst things you can think of" The well may come completely apart as the inner liners fail. There is still a very long drill string in the well, that could literally come flying out...as I said...all the worst things you can think of are a possibility, but the very least damaging outcome as bad as it is, is that we are stuck with a wide open gusher blowing out 150,000 barrels a day of raw oil or more. There isn't any "cap dome" or any other suck fixer device on earth that exists or could be built that will stop it from gushing out and doing more and more damage to the gulf. While at the same time also doing more damage to the well, making the chance of halting it with a kill from the bottom up less and less likely to work, which as it stands now?....is the only real chance we have left to stop it all.

It's a race now...a race to drill the relief wells and take our last chance at killing this monster before the whole weakened, wore out, blown out, leaking and failing system gives up it's last gasp in a horrific crescendo.

We are not even 2 months into it, barely half way by even optimistic estimates. The damage done by the leaked oil now is virtually immeasurable already and it will not get better, it can only get worse. No matter how much they can collect, there will still be thousands and thousands of gallons leaking out every minute, every hour of every day. We have 2 months left before the relief wells are even near in position and set up to take a kill shot and that is being optimistic as I said.

Over the next 2 months the mechanical situation also cannot improve, it can only get worse, getting better is an impossibility. While they may make some gains on collecting the leaked oil, the structural situation cannot heal itself. It will continue to erode and flow out more oil and eventually the inevitable collapse which cannot be stopped will happen. It is only a simple matter of who can "get there first"...us or the well.

We can only hope the race against that eventuality is one we can win, but my assessment I am sad to say is that we will not.

The system will collapse or fail substantially before we reach the finish line ahead of the well and the worst is yet to come.

Sorry to bring you that news, I know it is grim, but that is the way I see it....I sincerely hope I am wrong.

We need to prepare for the possibility of this blow out sending more oil into the gulf per week then what we already have now, because that is what a collapse of the system will cause. All the collection efforts that have captured oil will be erased in short order. The magnitude of this disaster will increase exponentially by the time we can do anything to halt it and our odds of actually even being able to halt it will go down.

The magnitude and impact of this disaster will eclipse anything we have known in our life times if the worst or even near worst happens...

We are seeing the puny forces of man vs the awesome forces of nature.
We are going to need some luck and a lot of effort to win...
and if nature decides we ought to lose, we will....

Reference materials:

On April 1, a job log written by a Halliburton employee, Marvin Volek, warns that BP’s use of cement “was
against our best practices.”

An April 18 internal Halliburton memorandum indicates that Halliburton again warned BP about its practices,
this time saying that a “severe” gas flow problem would occur if the casings were not centered more carefully.

Around that same time, a BP document shows, company officials chose a type of casing with a greater risk of

Mark Hafle, the BP drilling engineer who wrote plans for well casings and cement seals on the Deepwater
Horizon's well, testified that the well had lost thousands of barrels of mud at the bottom. But he said models
run onshore showed alterations to the cement program would resolve the issues, and when asked if a cement
failure allowed the well to "flow" gas and oil, he wouldn't capitulate.

Hafle said he made several changes to casing designs in the last few days before the well blew, including the
addition of the two casing liners that weren't part of the original well design because of problems where the
earthen sides of the well were "ballooning." He also worked with Halliburton engineers to design a plan for
sealing the well casings with cement.

graphic of fail
Casing joint

Kill may take until Christmas

BP Used Riskier Method to Seal Well Before Blast

BP memo test results

Investigation results

The information from BP identifies several new warning signs of problems. According to BP there were three flow
indicators from the well before the explosion.

BP, what we know

What could have happened

1. Before or during the cement job, an influx of hydrocarbon enters the wellbore.
2. Influx is circulated during cement job to wellhead and BOP.
3. 9-7/8” casing hanger packoff set and positively tested to 6500 psi.
4. After 16.5 hours waiting on cement, a negative test performed on wellbore below BOP.
(~ 1400 psi differential pressure on 9-7/8” casing hanger packoff and ~ 2350 psi on
double valve float collar)
5. Packoff leaks allowing hydrocarbon to enter wellbore below BOP. 1400 psi shut in
pressure observed on drill pipe (no flow or pressure observed on kill line)
6. Hydrocarbon below BOP is unknowingly circulated to surface while finishing displacing
the riser.
7. As hydrocarbon rises to surface, gas break out of solution further reduces hydrostatic
pressure in well. Well begin to flow, BOPs and Emergency Disconnect System (EDS)
activated but failed.
8. Packoff continues to leak allowing further influx from bottom.

T/A daily log 4-20

Cement plug 12,150 ft SCMT logging tool
SCMT (Slim Cement Mapping Tool)
Schlumberger Partial CBL done.

Schlum CBL tools

Major concerns, well control, bop test.

Energy & commerce links to docs.

well head on sea floor

Well head on deck of ship

BP's youtube propoganda page, a lot of rarely seen vids here....FWIW

I used to cover the energy business (oil, gas and alternative) here in Texas, and the few experts in the oil field -- including geologists, chemists, etc. -- able or willing to even speak of this BP event told me early on that it is likely the entire reserve will bleed out. Unfortunately none of them could say with any certainty just how much oil is in the reserve in question because, for one thing, the oil industry and secrecy have always been synonymous. According to BP data from about five years ago, there are four separate reservoirs containing a total of 2.5 billion barrels (barrels not gallons). One of the reservoirs has 1.5 billion barrels. I saw an earlier post here quoting an Anadarko Petroleum report which set the total amount at 2.3 billion barrels. One New York Times article put it at 2 billion barrels.

If the BP data correctly or honestly identified four separate reservoirs then a bleed-out might gush less than 2 to 2.5 billion barrels unless the walls -- as it were -- fracture or partially collapse. I am hearing the same dark rumors which suggest fracturing and a complete bleed-out are already underway. Rumors also suggest a massive collapse of the Gulf floor itself is in the making. They are just rumors but it is time for geologists or related experts to end their deafening silence and speak to these possibilities.

All oilmen lie about everything. The stories one hears about the extent to which they will protect themselves are all understatements. BP employees are already taking The Fifth before grand juries, and attorneys are laying a path for company executives to make a run for it.

dps's picture
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Posts: 442
Re: Daily Digest - June 16

Here's a real data point for you concerning the oil in the gulf.

My ex lives in Slidell.  That's at the North edge of Lake Pontchartrain which is North of a couple other lakes before you get to the Gulf.  She and neighbors are already having chronic headaches and respiratory difficulties.  I asked “can you smell the oil?” and her response was, without hesitation, “yes.”  This was yesterday.  Not sure of the mileage from the Gulf, but I’m pretty sure Slidell is at least 100 miles inland … maybe further.

We have not yet begun to feel the effects of this tragedy.  It will take generations, not years.

pinecarr's picture
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Re: Daily Digest - June 16

That's downright scary, dps!

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Re: Daily Digest - June 16

Welcome back!  I missed you!


Davos wrote:
imagesbytjm wrote:

I can't comment on Dr Ott's claims but I will tell you that I can smell oil in the air in my yard.  I live inland about 15 miles from the gulf.



Pensacola, FL  

Davos's picture
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Re: Daily Digest - June 16

Thx, great to be back

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Re: Daily Digest - June 16

+1!  Glad you're back Davos!!

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Osborne to give Bank of England top regulatory role

(Uk Chancellor) Osborne to give Bank of England top regulatory role


Mr Osborne said: "On the structure of regulation, our plan is to hand over to the Bank of England responsibility for macro-prudential supervision, that should never have been taken away from it."

Mr Osborne told the Commons that "this government is also committed to handing over micro-supervision to the Bank".


Gordon Brown, made Chancellor when the Labour Party won the 1997 general election, created the FSA following criticism that the Bank had failed to sufficiently regulate the UK's financial system.

But there was criticism of Mr Brown's move from people who thought the change gave far too much power to a single body.





green_achers's picture
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Posts: 205
Re: Daily Digest - June 16
imagesbytjm wrote:

I can't comment on Dr Ott's claims but I will tell you that I can smell oil in the air in my yard.  I live inland about 15 miles from the gulf.



Pensacola, FL  

Don't worry, our brilliant Lt. Gov here in MS assured everyone on the Coast that they were just smelling their neighbor's lawn mower exhaust.

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