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BP found Guilty of Gross negligence in 2010 Gulf of Mexico Oil Spill

‘Worst Case’ BP Ruling to Force Billions More in Payouts – Sep 4, 2014

BP Plc (BP/) faces billions more in potential penalties after a judge found it acted with gross negligence in the 2010 Gulf of Mexico oil spill, dealing a blow to the company’s efforts to expand its drilling program as costs rise and production slips.

In a turning point after four years of legal wrangling over responsibility, U.S. District Judge Carl Barbier’s ruling laid the bulk of the blame on BP for the explosion, which killed 11 men and caused the largest offshore oil spill in U.S. history. Acting with gross negligence means BP will be exposed to as much as $18 billion in additional government fines and penalties. The London-based company has spent more than $28 billion on the accident so far.

BP fell 5.9 percent to 455 pence at the close of trading in London, the most in more than four years.

Related: BP Found Grossly Negligent in 2010 Spill; Fines May Rise

“This opens the window for a worst-case scenario to play out, although this will likely drag out for years,” said Brian Youngberg, an analyst with Edward Jones & Co. in St. Louis. “The legal uncertainty and unrest in Russia are overshadowing the company’s operations in a significant way.”

Barbier found BP’s co-defendants Transocean Ltd. (RIG) and Halliburton Co. (HAL) less responsible for the accident. The judge did not rule today on how much oil was spilled, a key factor in determining the scope of additional fines. The millions of barrels of crude dumped into the Gulf of Mexico harmed wildlife and fouled hundreds of miles of beaches and coastal wetlands.

BP said it “strongly disagrees” with the ruling and would appeal immediately.

Evidence Insufficient

“The finding that it was grossly negligent with respect to the accident and that its activities at the Macondo well amounted to willful misconduct is not supported by the evidence at trial,” the company said in a statement.

Both Transocean and Halliburton fell less than 1 percent at 12:19 p.m. in New York trading.

“BP’s conduct was reckless,” Barbier wrote in a decision today in New Orleans federal court. “Transocean’s conduct was negligent. Halliburton’s conduct was negligent.”

The ruling leaves BP further weakened at a time when the search for crude resources grows riskier and more expensive. Asset sales from Ohio to Pakistan already have shrunk the company as it seeks to pay for the oil spill, which halted deep-water drilling for months and forced explorers to foot the bill for additional safety measures to access oil miles beneath the ocean’s surface. More disposals are probable.

Takeover Pressure

Once one of the biggest and most powerful oil companies in the world, BP faces years more of uncertainty that will put continued pressure on shares and may open the company to takeover pressure from larger rivals such as Royal Dutch Shell Plc or Exxon Mobil Corp.

Today’s ruling defines the scope of the ultimate payouts, which will be determined after a trial scheduled to begin in January 2015 in New Orleans. If Barbier agrees with the government’s spill estimate of 4.2 million barrels, the payout could ultimately be as high as $18 billion based on federal guidelines for pollution fines. If he sides with BP’s estimate that only 2.45 million barrels spilled, it would reach $10.5 billion.

Barbier has discretion in how the fines are ultimately decided.

“During the penalty proceedings, BP will seek to show that its conduct merits a penalty that is less than the applicable maximum after application of the statutory factors,” BP said in its statement.

BP also may be subject to unspecified punitive damages from lawsuits. Legal appeals may prolong the outcome for more than a decade — Exxon paid the final punitive damages from the 1989 Valdez spill off Alaska 20 years after the incident.

Blame Share

Barbier laid 67 percent of responsibility for the deadly disaster squarely on BP’s doorstep. The judge found co-defendant Transocean, owner of the drilling rig, was 30 percent responsible. Halliburton, which also worked on the well, was just 3 percent to blame. Earlier this week, Halliburton said it had agreed to settle most of the lawsuits stemming from its role in the spill for $1.1 billion.

BP had lost more than $3 billion in market value this year as the value of its stake in Russian producer OAO Rosneft (ROSN) has plunged on concerns that conflict between Russia and Ukraine could break out into full-scale war.

“The federal government has extracted more than a pound of flesh in many cases, such as in the aftermath of the financial crisis, but the extraordinary amounts of those fines haven’t reversed the damage that was done,” said Robert Mittelstaedt, dean emeritus of Arizona State University’s W.P. Carey School of Business. “It’s only made them weaker institutions.”

Drilling Impact

Equipment failures and questions about lapses in oversight led to an overhaul of federal regulation governing U.S. offshore safety. The agencies controlling deep-water drilling were reorganized, with new rules put in place to strengthen requirements for equipment, inspections and accident response.

New drilling in the deepest waters of the Gulf of Mexico was shut down for almost a year and permitting of new projects slowed under more stringent federal reviews.

Since deep-water drilling in the U.S. resumed in 2011, BP and its peers have returned to the Gulf of Mexico, where the company is seeking to drill deeper and at higher pressures than before. Gulf oil output rose to 1.3 million barrels a day in May, the highest level since 2011, according to the U.S. Energy Information Administration.

Asset Sales

Before today, BP’s stock had fallen 26 percent since the spill, compared with a 44 percent rise over the same period for Exxon and 34 percent climb for Royal Dutch Shell. Former Chief Executive Officer Tony Hayward was ousted and the company’s dividend was halted after the spill.

Incoming CEO Robert Dudley embarked on a wide-ranging asset sale campaign to raise money and streamline the company. Sales included oil fields in Alaska, natural gas developments in Vietnam and refineries in Texas and California.

The company has set aside $43 billion to pay for cleanup costs and fines. It has about $28 billion in cash hoarded to pay potential costs, enough to ward off questions about its viability in the short term, said Fadel Gheit, an analyst with Oppenheimer & Co. in New York.

“Not only does the company want to get this albatross off their shoulder, they also want to make up for this disaster to shareholders by buying back stock and reducing debt,” said Gheit, who rates the shares the equivalent of a buy.

BP Debt

Even before meeting the cost of any pollution fines BP is more indebted than its competitors. The London-based company has a ratio of debt to earnings before interest, tax depreciation, and amortization of 1.67, compared with 0.9 at Royal Dutch Shell, the largest European oil company, and 0.39 at Exxon.

The cost of insuring BP debt against default is the highest among the largest European and U.S. oil producers by market value.

Investors’ continued wariness can be seen in the income they demand for owning shares. BP’s dividend yield of 4.8 percent is higher than Shell’s 4.6 percent, Chevron Corp.’s 3.1 percent and Exxon’s 2.6 percent.

To contact the reporters on this story: Bradley Olson in Houston at bradleyolson@bloomberg.net; Margaret Cronin Fisk in Detroit at mcfisk@bloomberg.net

To contact the editors responsible for this story: Susan Warren at susanwarren@bloomberg.net; Michael Hytha at mhytha@bloomberg.net

Decline in Gas Consumption puts Retailers in a Fight for Survival

July 22 2014

Gasoline consumption peaked in 2007. It’s estimated to bottom out in 2035. By that time, the United States could consume about 2 million fewer barrels per day (BPD), or 84 million fewer gallons per day, according to the Energy Information Administration (EIA).

The government agency predicts that gasoline demand will plummet 24% from 2012 to 2040.

What is causing this plunge in projected forecourt demand? First the structural part: tougher Corporate Average Fuel Economy (CAFÉ) standards that require automakers to essentially double the average fuel economy of the U.S. vehicle fleet in little more than a decade. Then there is the demographic demand vise: aging baby boomers driving less, and millennials who are driving later—if at all.

Now factor the average fill-up—let’s say 10 gallons—into that 84-milliongallon- per-day decline. This means potentially 8.4 million fewer visits per day to a gas pump. Spread that across all U.S. gas stations—or roughly 126,000 fueling sites, according to NACS—and the industry could see an average of 66 fewer fill-ups per day per store by 2035.

This is roughly a 17% drop from the current industry average.

Meanwhile, as demand slips, the c-store industry continues to add more fueling sites. In 2013, that total of 126,000, according to NACS, reflects a more than 21% increase over the past decade.

Something—or rather, someone—has got to give.

“It means more people in a price war over a shrinking pie,” says Walter Zimmermann, senior technical analyst for United-ICAP, Jersey City, N.J., who helped frame this calculation. “This industry is at the crosshairs of so many turbulent issues. To succeed here, you will have to reinvent yourself.”

“With declining fuel demand from demographic changes, [and] more efficient vehicles, there has to be a decline in the number of retail c-stores; it can’t just keep growing,” says David Nelson, founder and president of Finance & Resource Management Consultants Inc., a retail study-group facilitator, and professor of economics at Western Washington University in Bellingham, Wash.

“Some of these sites have got to leave the industry and move to non-petroleum uses,” he continues. “You can’t keep building more and more facilities with declining demand and have the economics work out for people.”

It is not Judgment Day yet. According to NACS’ same-firm sample, fuel gallons inched up 0.9% in 2013. Nelson’s own study-group same-firm sample shows more fuel sold per retail location in the 12 months ending January 2014 than the 12 months ending January 2013. But from his standpoint, this is not evidence of revived demand, but rather a small blip against a backdrop of long-term decline.

And not everywhere and everyone would be hit by that same 17% decline in gallons. In some markets, notably energy-boom states, demand is positively rocketing. For big-box and new-era retailers, gallons overall continue to grow. But for everyone else, in most of the states without 2% unemployment and record income growth, it’s set to be a street fight over a shrinking share of gallons.

“The industry is due for right-sizing,” says Scott Barrett, vice president of client success for Kalibrate Technologies, Florham Park, N.J., which provides fuel market analysis services. “As demand falls, the product offer changes, and traditional gas stations and nozzles will disappear from the marketplace.

“The folks winning are those who can weather the storm of the demand drop and find other ways to improve profitability, whether it is food offers, an enhanced c-store offer or a more broad fuel market offer.”

“Volume as we knew it peaked 10 years ago,” says Mike Thornbrugh, spokesperson for QuikTrip Corp., Tulsa, Okla., referring to overall market demand. “That and more and more pipes of business are entering the market as we’re entering their market. It’s old-fashioned slug-it-out retail. We plan on lasting 15 rounds.”

QuikTrip, with nearly 700 sites in 11 states, has honed its Generation 3 stores for this environment; the sites are designed to drive inside and outside sales partly by making the lot easier to maneuver.

“The old traditional convenience-store-vs.-convenience-store model is over,” says Thornbrugh. “We’re competing against everybody and everybody is competing against us. The next five to 10 years will be interesting to see who is going to remain standing and who is not.”

For Santa Clara, Calif.-based Robinson Oil Corp., California gasoline demand peaked in 2006, a year before much of the rest of the country. The chain has 34 Rotten Robbie sites throughout the state, which over the past seven years has seen an 8% drop in gasoline volumes. And according to some estimates, it could see a drop of a billion gallons by 2020 because of government policy and consumer migration to more fuel-efficient vehicles.

“As volumes decline, the question is: Can they decline less at your stores than competitors’ stores?” says Tom Robinson, CEO and president. “You can do that by spending money on stores, trying to upgrade programs, trying to upgrade your offering, trying to use technology as a way to build connections or relationships with consumers.”

“I don’t think there’s a single thing we’re going to do that’s going to be that [magic] bullet,” Robinson continues. “All of the above is a way that companies are going to survive and prosper.”

CT Senator Murphy Proposes to Raise Federal Gas Tax 12-cents over two year!

Click Here to see complete proposal – Email comments to mike@gasda.org >CT Senator Murphy proposal to Raise the Federal Gas Tax 12-cents over two years 6-19-2014

Speedway’s Acquisition of Hess C-Stores ‘Fits Like a Glove’

Deal “tees us up for long-term growth,” says CEO Heminger
Published in CSP Daily News By Abbey Lewis, Executive Editor

FINDLAY, Ohio — When Hess Corp. filed for a tax-free spinoff of its retail business in January, could dealmakers ever have imagined that the convenience store brand as they knew it would completely cease to exist in just three short years? The iconic bold green and white logo will soon make way for another icon, albeit a Midwestern one: Speedway’s red and white logo.

As reported in a 21st Century Smoke/CSP Daily News Flash, in a move that gives Marathon Petroleum Corp.’s Speedway LLC ownership of all of Hess’s retail locations, transport operations and shipper history on various pipelines for a total consideration of $2.87 billion, the acquisition represents a strategic move for Speedway to push beyond its Midwestern roots eastward. Continue Reading…

House Energy Panel Questions Gasoline Reserve

Republicans probe DOE’s authority, budget for refined-products stockpile
Published in CSP Daily News FUELS NEWS May 28, 2014

DOE Debuts First Regional Gasoline Reserves5/2/2014

WASHINGTON — Despite a briefing by the U.S. Department of Energy (DOE), Republicans on the House Energy Committee remain unsatisfied about the management details of the Strategic Petroleum Reserve (SPR) and an emergency, one-million-barrel gasoline reserve planned for the Northeast, according to a report in Reuters.

Leaders of the House and Energy Commerce Committee had recently written Secretary of Energy Ernest Moniz for more details about the management of the SPR after the department held its first test sale of crude from the government stockpile since 1990. The federal government created the SPR on the Gulf Coast in the 1970s after the Arab Oil Embargo to provide a cushion in the event of another major supply disruption. It currently holds around 691 million barrels of oil. Continue Reading…

Diversion of state gas tax funds puts gas station owners in jeopardy!

Published: Saturday, February 18, 2012
By Luther Turmelle, North Bureau Chief
lturmelle@nhregister.com / Twitter: @lutherturmelle

Connecticut lawmakers have until the end of the current legislative session to fix a problem with the state’s underground fuel tank cleanup program, or risk having federal environmental regulators cease recognizing it as a viable alternative to self-insurance for service station owners. Continue Reading…

Attorney General Extends Notice Reasonable Anticipation of Imminent Abnormal Disruption in Market for Energy Resources

Due to Hurricane Irene’s continuing potential to affect fuel distribution and sale in the State of Connecticut, the Attorney General extends the notice issued on August 26, 2011, pursuant to Conn. Gen. Stat. § 42-234(d), of the reasonable anticipation of an imminent abnormal disruption in the market for energy resources. Continue Reading…

CFTC Commissioner vowes to guard against excessive specualtion in oil and grain markets!

Key regulator: Speculators swamping oil, grain markets
Kevin G. Hall | McClatchy Newspapers – July 9, 2011
WASHINGTON — In the sharpest criticism yet of excessive speculation in oil markets, the head of a key regulatory agency presented data Thursday showing that almost nine in 10 traders betting that oil prices would rise were financial speculators, not actual end-users of oil.
Continue Reading…