Lawmakers accused BP Plc Chief Executive Tony Hayward of evasion and ducking responsibility for the worst oil spill in U.S. history at a hearing on Thursday that was rocked by a Republican member of the panel apologizing to the company.
In his first appearance before Congress since the start of the 59-day-old crisis in the Gulf of Mexico, a tired-looking Hayward sat alone at the witness table, repeatedly declining to go into details of the spill pending the results of investigations.
Incensed lawmakers took turns during more than three hours of questioning to lambast the British energy giant.
Under your leadership BP has taken the most extreme risks, Democratic lawmaker Henry Waxman told Hayward, who sat impassively during the barrage. BP cut corner after corner to save a million dollars here and a few hours or days there.
But BP got unexpected support when Republican congressman Joe Barton of Texas, a major recipient of oil and gas industry campaign contributions, apologized to Hayward for BP having been pressured by the White House into setting up a $20 billion escrow account for spill damages.
It is a tragedy of the first proportion that a private corporation can be subjected to what I would characterize as a shakedown, a $20 billion shakedown, Barton said.
Republican leaders quickly denounced Barton, who withdrew his apology to BP and said he was sorry for using shakedown.
Democrats, scrambling for ammunition against Republicans before November's congressional elections, jumped on the gaffe, which Vice President Joe Biden called outrageous.
Even though Barton was quickly discredited, he is not alone in thinking the government might have overstepped its bounds by telling BP what to do with its money.
They are responsible, they should be held responsible and they should pay. But you shouldn't make them set aside money of shareholders, in many cases, taxpayers, simply so that you can claim a political victory, said Christopher Zook, chairman and chief investment officer of CAZ Investments in Houston.
That said, does it wreck shareholder value? No more than if they actually had to write a check for $20 billion, which they may end up having to pay.
$20 BILLION AND RISING?
The leak, a mile under water, was triggered by an explosion on an offshore rig on April 20 that killed 11 workers and ruptured BP's well, unleashing a torrent of crude into the Gulf of Mexico.
The disaster has soiled 120 miles of U.S. coastline, threatened multibillion-dollar fishing and tourism industries and killed birds, dolphins and other sea life.
BP and the White House agreed on Wednesday the oil company will set up a $20 billion fund for compensation claims arising from the spill. But many see costs going much higher.
Louisiana Treasurer John Kennedy estimated on Thursday that environmental and economic damage could range from $40 billion to $100 billion, with his state losing $100 million to $150 million in wages each month.
While Hayward was testifying in Washington, BP continued to siphon off oil from its ruptured well in the Gulf.
The Obama administration's point man for the disaster, Admiral Thad Allen, said BP was ahead of schedule in drilling a relief well to permanently cap the huge leak.
But credit ratings agency Standard & Poor's downgraded BP on Thursday, citing growing liabilities and the White House deal as a competitive disadvantage. Financial analysts BofA Merrill Lynch and Seymour Pierce downgraded BP from their top ratings.
To raise cash, BP might try to sell up to $10 billion in bonds as early as next week, sources familiar with the matter said.
A successful bond deal will signal confidence in BP and mean that even more investors -- new bondholders -- are committed to seeing BP survive. It makes bankruptcy more politically unpalatable, said Adam Cohen, founder of research firm Covenant Review in New York.
But some bankers and analysts were skeptical about a bond, saying BP might be better going to the loan market for funds.
The company was not immediately available for comment.
BP IGNORED WARNINGS
Lawmakers have said BP ignored warnings from contractors and their own employees, choosing faster and cheaper drilling options that increased the danger of the well rupturing.
Executives from other major oil companies distanced themselves from BP at another congressional hearing this week, saying BP failed to adhere to industry standards in building its Macondo well in the Gulf of Mexico.
Hayward urged lawmakers on Thursday to await the outcome of an investigation into the spill and defended his three years as BP's chief executive. He said he had made dramatic safety improvements but conceded more could be done.
As he spoke, a live video feed on BP's website showed black crude continuing to gush into the Gulf from under a containment cap placed on top of the leak to try to siphon off the oil and channel it to a ship on the surface.
Hayward's opening statement to the hearing was interrupted by a protester with her hands painted black.
You need to be charged with a crime, Tony. You need to go to jail, she yelled and was hustled out by police.
Environmentalists worry the political theater playing out in Washington is taking the focus off the disaster confronting Gulf Coast communities.
This oil is already into the wetlands and more is coming up every day. You cannot clean it out of there, John Hocevar, a marine biologist with Greenpeace, told Reuters in Louisiana. The impact of the spill is going to be felt for decades.
In London, BP's stock rose nearly 7 percent, catching up with gains in its U.S.-listed shares on Wednesday after the spill fund deal gave investors enough clarity about liabilities to offset disappointment over a suspended dividend.
The stock lost some of those gains in New York trading, closing 0.4 percent lower.
Investors need to think of it as a speculative investment at this point, Brian Youngberg, energy analyst at investment firm Edward Jones said of BP's shares. You're getting no income and you're hoping things go better.
(Additional reporting by Jeffrey Jones in Louisiana, Deborah Zabarenko, Timothy Gardner, Alina Selyukh in Washington, Kristen Hays in Houston, Raji Menon and Sarah Young in London, Chuck Mikolajczak, Michael Erman, Dena Aubin and Walden Siew in New York; Writing by Ross Colvin and Peter Henderson; editing by David Storey and John O'Callaghan)