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Four Reasons Why Measuring Flow in BP's Spill Matters

Having a lower estimate for the amount of oil that has flowed into the Gulf could mean BP would be subject to fewer financial penalties, from royalties on the lost oil to fines for spilling it, as well as helping its public image.

June 8: This post has been corrected.

Estimating oil flow from BP's ruptured well in the Gulf of Mexico has consistently been a subject of contention among the oil company, the government and the skeptics who believe that official estimates significantly low-ball the scale of the disaster.

Both BP and the government knew early on that the disaster could be far worse than what official statements reflected. Early last month, behind closed doors, BP officials told some lawmakers that the spill rate could be as much as 60,000 barrels a day. Last week the Center for Public Integrity reported that even before a leak was announced, the Coast Guard's estimate of flow rate in case of a blowout was changed from 8,000 barrels a day to between 64,000 and 110,000 barrels a day.

BP's executives have said that the oil flow is "impossible to measure," and that the company's top priority is plugging the well rather than measuring it.

But having a lower estimate for the amount of oil that has flowed into the Gulf matters for several reasons:

Flow rates affect how much BP could be fined.

Under the Clean Water Act, for instance, the U.S. could seek civil fines "for every drop of oil that's spilled into the nation's navigable waters," according to McClatchy. That would be a fine of $1,100 per barrel, unless a judge finds that the spill was caused by gross negligence -- in which case the fine could be up to $4,300 a barrel. (Reuters points this out in an earlier piece.)

A lower spill rate, for that reason, could save the company millions in fines.

Flow rates could affect how much BP owes the government in royalties.

Under its drilling lease, BP owes the government royalties on all the oil and gas that's "lost or wasted" if the leak is found to be a result of company negligence, according to Bloomberg.

When the official flow rate was still at 5,000 barrels a day, Bloomberg reported that those royalty payments could be as much as $1.1 million a day, but it based those calculations on higher estimates of flow rates from scientists. BP's royalty debt would be far less if calculated with the official estimates.

Flow rates affect response.

As we noted last week, BP's own Oil Spill Response Plan, drafted prior to the Gulf disaster, stated that measuring the size and volume of an oil spill was "critical to initiating and sustaining an effective response."

BP spokesmen have since said that calculating the flow of oil is "not relevant," "might even detract" and "would not affect" the company's response to the disaster.

Flow rates affect the company's public image.

Rep. Ed Markey, D-Mass., said weeks ago on CBS' "Face the Nation" that BP has misled the public about the magnitude of the spill and warned people to avoid buying into its PR game.

"I do not think people should really believe anything BP is saying in terms of the likelihood of anything that they are doing is going to turn out as predicted," Rep. Markey said.

The company has already spent millions on ad campaigns and public relations to address the Gulf disaster, though the precise amounts remain unclear.

I called BP to ask if the company has both a financial and public relations incentive to keep estimates on the low side. BP spokesman Mark Proegler told me "that's not the case," and that the Unified Command -- which includes BP -- continues to refine flow rate estimates.

"We've been transparent with everything we've done," BP spokesman Mark Proegler told me. "I am proud to work for BP and I'm very proud of the way we're doing the response. Every piece of information is out there transparently and I would take issue with anyone who suggests otherwise."

Correction: This post has been corrected to state that Bloomberg's previous calculation of BP's royalty debt was not based on the official, 5,000-barrels-a-day flow rate estimate at the time of its publication. Instead, the calculation was based on higher estimates of flow rate calculated by independent scientists.

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