Problem With Cap Causes More Oil to Gush in Gulf

By LIZ ROBBINS

BP’s effort to contain the oil spill in the Gulf of Mexico suffered another setback Wednesday, when a discharge of liquid and gases forced the company to remove the containment cap that for three weeks had been able to capture much of the oil gushing from its damaged well.

Adm. Thad W. Allen of the Coast Guard, at a briefing in Washington, said a remote-controlled submersible operating a mile beneath the surface had most likely bumped a vent and compromised the system. Live video from the seafloor showed oil and gas storming out of the well unrestricted.

This was yet another complication in BP’s two-month-old struggle to contain the tens of thousands of barrels of oil spewing into the gulf.

On Tuesday, BP said it had been able to capture 16,665 barrels of oil through its containment cap, two-thirds of the total recovery operation. Another system, connected to a Q4000 vessel, is still operating since it is connected through a separate pipe near the seabed, rather than directly atop the failed blowout preventer. This system siphons the oil and gas and then burns it on the ship.

But at 8:45 a.m. local time on Wednesday, workers noticed liquids escaping from a valve connected to the Discoverer Enterprise drill ship collecting the oil. Admiral Allen said that a vent sending warm water to prevent hydrates from forming had been damaged. “When they thought that that line might have been compromised, they elected to remove the cap,” Admiral Allen said.

BP was inspecting the pipe, and if workers observe that hydrates — ice-like crystals — have formed, they might have to adjust the line before putting the cap back on.

Neither BP nor the Coast Guard could determine immediately how long it would be before they could reattach the lower marine riser package cap, however. “We’re still developing the facts,” Admiral Allen said.

Also Wednesday, Admiral Allen said that two people working with the overall response efforts had died. One person was the operator of a vessel assisting the cleanup in Gulf Shores, Ala., who was found dead on his docked boat. The other person died in a swimming pool accident. Neither death appeared to be directly related to the people’s specific duties in the effort, Admiral Allen said.

Stan Vinson, the coroner in Baldwin County, Ala., said the man found dead on his boat was William Allen Kruse of Foley, Ala. He was a 55-year-old charter boat captain hired by BP. “A single wound to the victim’s head appears to be self-inflicted,” Mr. Delmore said in a statement.

As oil gushed fiercely from a mile under the surface Wednesday, some beleaguered fishermen in the gulf received a reprieve. The National Oceanic and Atmospheric Association said it opened a small portion — 8,000 square miles — of previously closed fishing area in the Gulf of Mexico, because it had not observed oil in the area. One area, south of Mississippi, had only been closed since Monday.

Two-thirds of the federal waters of the Gulf of Mexico are still open for fishing, and N.O.A.A. said that the closed area now represents 78,597 square miles.

Still, Florida residents directly experienced the effects of the oil: tar balls and oil mousse (with the consistency of sludge) washed up on the shore of Pensacola Beach and forced the closure of several areas for swimming, according to a spokeswoman for the Mobile, Ala. Incident Command.

In Washington, Interior Secretary Ken Salazar said Wednesday that he was preparing new evidence to support a six-month moratorium on deepwater oil and gas drilling in the Gulf of Mexico and was prepared to vigorously challenge a federal judge’s ruling on Tuesday that the drilling ban was unjustified.

Appearing before a Senate committee, Mr. Salazar said that the “pause” in the drilling of 33 deepwater wells in the gulf was essential until the causes of the April 20 BP Deepwater Horizon explosion and oil leak were fully understood.

A federal judge in New Orleans ruled on Tuesday that the moratorium Mr. Salazar imposed in May was not supported by the facts or law and was causing extreme economic distress throughout the Gulf Coast. The Obama administration quickly announced it would appeal the ruling and Mr. Salazar promised a new order within days to justify the drilling halt.

But Mr. Salazar left open the possibility that the moratorium could be revised or even lifted for certain types of wells in the gulf before the six months are up.

At the same hearing, the man whom Mr. Salazar and President Obama have designated to oversee reforms of offshore drilling he plans to create an investigative unit to root out corruption and speed reorganization of the office.

Michael R. Bromwich, who was appointed director of the Minerals Management Service last week, said in testimony before the Senate Appropriations Committee that the new investigations team would report directly to him and would work closely with the Interior Department’s inspector general’s office, which has issued several tough reports on misconduct at the minerals service in the last decade.

Mr. Bromwich, a former inspector general in the Justice Department, said the new unit will quickly act on charges against agency officials or the companies they are supposed to regulate.

Also in Washington on Wednesday, the House voted to grant subpoena power to the commission appointed by President Obama to investigate the accident and recommend ways to make offshore drilling safer. The bill, sponsored by Representative Lois Capps, Democrat of California, passed by a vote of 420-1.

“With the commission expected to begin its investigation in the coming weeks, it must have subpoena power to ensure access to all the evidence it needs from BP and other private entities to undertake a complete inquiry on the causes of the spill and make meaningful recommendations on how to prevent similar disasters,” Ms. Capps said in a statement.

Drilling Moratorium Means Hard Times for Gulf Rig Workers

By TOM ZELLER Jr.

In addition to the fishermen and hoteliers whose livelihoods have been devastated by BP’s hemorrhaging undersea oil well, another group of Gulf Coast residents is beginning to suffer: the tens of thousands of workers like Ronald Brown who run the equipment or serve in support roles on deepwater oil rigs in the Gulf of Mexico.

Mr. Brown, known as Rusty to his friends, is a “shakerhand.” In the rugged vernacular of offshore drilling, that means he monitors the mud flowing back from the drill hole thousands of feet below.

He works aboard the Ocean Monarch, which was idled along with 32 other oil rigs when the Obama administration ordered a six-month moratorium on all deepwater drilling after the April 20 Deepwater Horizon disaster. The rig’s owner is now seeking customers in other parts of the world. If the rig moves, Mr. Brown and his fellow motormen, roughnecks and roustabouts will be left behind, jobless, with few alternatives that would pay anything close to the $3,500 to $4,000 a month typical for such jobs.

On Wednesday, President Obama and BP announced that the company had voluntarily agreed to create a $100 million fund to compensate such rig workers. That’s a modest sum, critics say, given the potential economic losses. Each rig job supports roughly four additional jobs for cooks, supply-ship operators and others servicing the industry. Together, they represent total monthly wages of at least $165 million, according to estimates by a Louisiana oil industry group.

Still, Mr. Brown is grateful for any assistance. “Every little bit is going to help until we figure out where else to go,” he said. “But I’m not looking forward to unemployment, and I don’t know how quickly we’ll be able to get some of it.”

In an address to the nation Tuesday night, Mr. Obama apologized for the effect on oil workers who had nothing to do with the BP accident. “I know this creates difficulty for the people who work on these rigs,” he said. “But for the sake of their safety, and for the sake of the entire region, we need to know the facts before we allow deepwater drilling to continue.”

The full economic impact of the drilling moratorium is still unclear, since many of the layoffs are just beginning and no one knows how long the ban will last.

The Louisiana Mid-Continent Oil and Gas Association has warned that many of the affected rigs will seek to drill in other countries, imperiling roughly 800 to 1,400 jobs per rig, including third-party support personnel.

The securities firm Raymond James & Associates predicts that the moratorium could last well into 2011, directly jeopardizing 50,000 jobs and potentially gutting blue-collar communities that rely heavily on the economic activity that comes with deepwater work. “Just as the demise of auto plants and steel mills in the Upper Midwest devastated entire towns, an extended drilling ban could eventually have a similar effect in the Gulf Coast,” the company said in a report Monday.

Lawrence R. Dickerson, the chief executive of Diamond Offshore Drilling, which owns the Ocean Monarch and five other deepwater rigs in the gulf, was less pessimistic, suggesting that 15,000 to 20,000 rig and associated service jobs were at risk. He predicted that some deepwater rigs would remain in the area awaiting a resumption of drilling, but that all would be forced to cut staff as the moratorium continued.

Three Diamond rigs are already prospecting for jobs in the Mediterranean and West Africa. Should they leave, they would take less than half of their crew with them, Mr. Dickerson said.

The halt in drilling in waters deeper than 500 feet came in response to the still-unchecked gusher of oil that followed the Deepwater Horizon explosion, which killed 11 workers. The goal was to give the government time to review the rules and oversight of such wells, and the shutdown was welcomed by many Americans who have watched the environmental disaster unfold.

But like fishing and tourism, deepwater drilling is also crucial to the Gulf economy.

At a Congressional hearing last week, Senator Mary Landrieu, a Democrat from Louisiana, confronted Interior Secretary Ken Salazar with a list of local companies that serviced and depended on offshore energy development. She said that a temporary drill ban, even if it only lasted a few months, could affect as many as 330,000 people in Louisiana alone. That would “potentially wreak economic havoc on this region that exceeds the havoc wreaked by the spill itself,” she said.

Until two weeks ago, the Ocean Monarch — a mammoth, $300 million semi-submersible not unlike the Deepwater Horizon owned by Transocean — was poised to drill a well in 4,000 feet of water at a spot more than 100 miles offshore. About 115 workers from a variety of companies were onboard.

After the moratorium, Cobalt International Energy, the company that had hired the Monarch and spent $60 million preparing to drill the well, said it was looking to dissolve the contract.

Those negotiations continue, but when two New York Times reporters visited the rig last week, it was squatting in just 50 feet of water 27 miles off the coast of Louisiana. On the deck, 75-foot segments of riser pipe were stacked in tidy rows two stories high, and the rig’s manifest listed just 77 crew members aboard.

At a meeting with the crew, Mr. Dickerson talked about the uncertain future. “You know, if we can’t go back to work for a minimum six months or longer, it’s awfully hard to leave rigs sitting here,” he said.

Once a rig moves, it tends to stay put, fulfilling multiyear contracts. Lower-level jobs are normally filled using the host country’s work force.

After the meeting with Mr. Dickerson, a handful of rig workers — burly men in oil-stained T-shirts and overalls — shared their gnawing fear that the jobs that paid their modest mortgages, doctor bills and children’s tuitions were about to disappear.

Louis Alvarez, a motorman and 21-year veteran with Diamond Offshore, said that a layoff could hinder plans that he and his wife had made to send their son to college in the fall. “It’s a shame that I have to tell my 18-year-old son that he might have to help his daddy buy groceries,” he said.

Mr. Brown, the shakerhand, began to cry when he said that his wife, Athena, was now looking for a job.

A broad-shouldered, broad-faced man, Mr. Brown, 29, is paid roughly $22 an hour to work the rig’s standard two-week-on, two-week-off cycle, supplemented by occasional overtime. That’s enough to support Athena and their three children: 5-year-old Shiloh, 3-year-old Maelah, and 1-year-old Bennett, who wears a brace to help correct club feet.

The job prospects around their home in Magee, Miss., a dilapidated town of about 4,000, are few. Tyson Foods and Polk’s Meat Products have plants in the area, but would be unlikely to match a rig worker’s paycheck.

In an interview at their home, Mrs. Brown said that someday, the country might find a low-cost alternative to oil.

“But we don’t have an option right now,” she said. “For us to stop drilling in the gulf is like ending our lives as far as the way we live. It’s really that scary.”

Rob Harris contributed repor

2 Times as Bad

The oil spill off the Gulf of Mexico is even worse than previously thought, with twice as much oil spewing into the ocean than earlier estimations suggested, figures show.

Latest estimates from scientists studying the disaster for the US government suggest 160-380 million litres (42-100 million US gallons) of oil have already entered the Gulf. Most experts believe there is more oil gushing into the sea in an hour than officials originally said was spilling in an entire day.

It is the third – and perhaps not the last – time the Obama administration has had to increase its estimate of how much oil is gushing.

The revised figures suggest the disaster will be far more costly for BP, which has seen its stock plummet since the 20 April explosion that killed 11 workers and triggered the spill. Shares tumbled almost 7% to a 13-year low yesterday over fears that the US department of justice could block the company's dividend, due next month. This morning the shares bounced, rising 7%.

If the flow continues, it will easily become the worst oil spill in peacetime history. The Exxon Valdez disaster of 1989 involved a comparatively minor 41m litres of oil.

"This is a nightmare that keeps getting worse every week," said Michael Brune, executive director of the Sierra Club, the biggest grassroots environmental organisation in the US. "We're finding out more and more information about the extent of the damage … Clearly we can't trust BP's estimates of how much oil is coming out."

Trying to clarify what has been a contentious and confusing issue, US officials gave a wide variety of estimates last night.

US Geological Survey director, Marcia McNutt, who is co-ordinating the figures, said as much as 8m litres a day could have been flooding into the Gulf, twice as much as the US government has ever conceded to up to now.

The estimate was for the flow before 3 June when a riser pipe was cut and then a cap placed on it. No estimates were given for the amount of oil gushing from the well after the cut, which BP said would increase the flow by about 20%. Nor are there estimates since a cap was put on the pipe, which already has collected more than 11m litres.

The estimates are incomplete and different teams have come up with different numbers. A new team from the Woods Hole Oceanographic Institute came in with even higher estimates, ranging from 3.8m litres to 8m litres a day. If the high end is true, that means nearly 400m litres have spilled since 20 April.

Even using other numbers that federal officials and scientists call a more reasonable range would estimate that about 238m litres have spilled since the rig explosion.

By comparison, the worst peacetime oil spill, 1979's Ixtoc 1 in Mexico, was about 530m litres over 10 months. The Gulf spill has not yet reached two months. The new figures mean Deepwater Horizon is producing an Exxon Valdez-size spill every five to 13 days.

Previous estimates had put the range roughly between 1.9m and a 3.8m litres day, perhaps higher. At one point, the federal government claimed only 160,000 litres were spilling a day and then it upped the number to 795,000 litres.

Further Social Deterioration

On Monday May 31, 2010, 8:55 pm EDT

ST. PETERSBURG, Fla. — For Alex Pemberton and Susan Reboyras, foreclosure is becoming a way of life — something they did not want but are in no hurry to get out of.

Foreclosure has allowed them to stabilize the family business. Go to Outback occasionally for a steak. Take their gas-guzzling airboat out for the weekend. Visit the Hard Rock Casino.

“Instead of the house dragging us down, it’s become a life raft,” said Mr. Pemberton, who stopped paying the mortgage on their house here last summer. “It’s really been a blessing.”

A growing number of the people whose homes are in foreclosure are refusing to slink away in shame. They are fashioning a sort of homemade mortgage modification, one that brings their payments all the way down to zero. They use the money they save to get back on their feet or just get by.

This type of modification does not beg for a lender’s permission but is delivered as an ultimatum: Force me out if you can. Any moral qualms are overshadowed by a conviction that the banks created the crisis by snookering homeowners with loans that got them in over their heads.

“I tried to explain my situation to the lender, but they wouldn’t help,” said Mr. Pemberton’s mother, Wendy Pemberton, herself in foreclosure on a small house a few blocks away from her son’s. She stopped paying her mortgage two years ago after a bout with lung cancer. “They’re all crooks.”

Foreclosure procedures have been initiated against 1.7 million of the nation’s households. The pace of resolving these problem loans is slow and getting slower because of legal challenges, foreclosure moratoriums, government pressure to offer modifications and the inability of the lenders to cope with so many souring mortgages.

The average borrower in foreclosure has been delinquent for 438 days before actually being evicted, up from 251 days in January 2008, according to LPS Applied Analytics.

While there are no firm figures on how many households are following the Pemberton-Reboyras path of passive resistance, real estate agents and other experts say the number of overextended borrowers taking the “free rent” approach is on the rise.

There is no question, though, that for some borrowers in default, foreclosure is only a theoretical threat for a long time.

More than 650,000 households had not paid in 18 months, LPS calculated earlier this year. With 19 percent of those homes, the lender had not even begun to take action to repossess the property — double the rate of a year earlier.

In some states, including California and Texas, lenders can pursue foreclosures outside of the courts. With the lender in control, the pace can be brisk. But in Florida, New York and 19 other states, judicial foreclosure is the rule, which slows the process substantially.

In Pinellas and Pasco counties, which include St. Petersburg and the suburbs to the north, there are 34,000 open foreclosure cases, said J. Thomas McGrady, chief judge of the Pinellas-Pasco Circuit. Ten years ago, the average was about 4,000. “The volume is killing us,” Judge McGrady said.

Mr. Pemberton and Ms. Reboyras decided to stop paying because their business, which restores attics that have been invaded by pests, was on the verge of failing. Scrambling to get by, their credit already shot, they had little to lose.

“We could pay the mortgage company way more than the house is worth and starve to death,” said Mr. Pemberton, 43. “Or we could pay ourselves so our business could sustain us and people who work for us over a long period of time. It may sound very horrible, but it comes down to a self-preservation thing.”

They used the $1,837 a month that they were not paying their lender to publicize A Plus Restorations, first with print ads, then local television. Word apparently got around, because the business is recovering.

The couple owe $280,000 on the house, where they live with Ms. Reboyras’s two daughters, their two dogs and a very round pet raccoon named Roxanne. The house is worth less than half that amount — which they say would be their starting point in future negotiations with their lender.

“If they took the house from us, that’s all they would end up getting for it anyway,” said Ms. Reboyras, 46.

One reason the house is worth so much less than the debt is because of the real estate crash. But the couple also refinanced at the height of the market, taking out cash to buy a truck they used as a contest prize for their hired animal trappers.

It was a stupid move by their lender, according to Mr. Pemberton. “They went outside their own guidelines on debt to income,” he said. “And when they did, they put themselves in jeopardy.”

His mother, Wendy Pemberton, who has been cutting hair at the same barber shop for 30 years, has been in default since spring 2008. Mrs. Pemberton, 68, refinanced several times during the boom but says she benefited only once, when she got enough money for a new roof. The other times, she said, unscrupulous salesmen promised her lower rates but simply charged her high fees.

Even without the burden of paying $938 a month for her decaying house, Mrs. Pemberton is having a tough time. Most of her customers are senior citizens who pay only $8 for a cut, and they are spacing out their visits.

“The longer I’m in foreclosure, the better,” she said.

In Florida, the average property spends 518 days in foreclosure, second only to New York’s 561 days. Defense attorneys stress they can keep this number high.

Both generations of Pembertons have hired a local lawyer, Mark P. Stopa. He sends out letters — 1,700 in a recent week — to Floridians who have had a foreclosure suit filed against them by a lender.

Even if you have “no defenses,” the form letter says, “you may be able to keep living in your home for weeks, months or even years without paying your mortgage.”

About 10 new clients a week sign up, according to Mr. Stopa, who says he now has 350 clients in foreclosure, each of whom pays $1,500 a year for a maximum of six hours of attorney time. “I just do as much as needs to be done to force the bank to prove its case,” Mr. Stopa said.

Many mortgages were sold by the original lender, a circumstance that homeowners’ lawyers try to exploit by asking them to prove they own the loan. In Mrs. Pemberton’s case, Mr. Stopa filed a motion to dismiss on March 17, 2009, and the case has not moved since then. He filed a similar motion in her son’s case last December.

From the lenders’ standpoint, people who stay in their homes without paying the mortgage or actively trying to work out some other solution, like selling it, are “milking the process,” said Kyle Lundstedt, managing director of Lender Processing Service’s analytics group. LPS provides technology, services and data to the mortgage industry.

These “free riders” are “the unintended and unfortunate consequence” of lenders struggling to work out a solution, Mr. Lundstedt said. “These people are playing a dangerous game. There are processes in many states to go after folks who have substantial assets postforeclosure.”

But for borrowers like Jim Tsiogas, the benefits of not paying now outweigh any worries about the future.

“I stopped paying in August 2008,” said Mr. Tsiogas, who is in foreclosure on his house and two rental properties. “I told the lady at the bank, ‘I can’t afford $2,500. I can only afford $1,300.’ ”

Mr. Tsiogas, who lives on the coast south of St. Petersburg, blames his lenders for being unwilling to help when the crash began and his properties needed shoring up.

Their attitude seems to have changed since he went into foreclosure. Now their letters say things like “we’re willing to work with you.” But Mr. Tsiogas feels little urge to respond.

“I need another year,” he said, “and I’m going to be pretty comfortable.”

Spill now the worst ever in US

COVINGTON, La. (AP) -- The Gulf oil spill has surpassed the Exxon Valdez as the worst in U.S. history, according to new estimates released Thursday, but the Coast Guard and BP said an untested procedure to stop it seemed to be working.

A team of scientists trying to figure out how much oil has been flowing since the offshore rig Deepwater Horizon exploded April 20 and sank two days later found the rate was at least twice and possibly up to five times as high as previously thought.

Even using the most conservative estimate, that means the leak has grown to nearly 19 million gallons, surpassing the size of the 1989 Exxon Valdez disaster, which at about 11 million gallons had been the nation's worst spill. Under the highest estimate, nearly 39 million gallons may have spilled.

U.S. Geological Survey Director Marcia McNutt said two different teams of scientists calculated that the well has been spewing between 504,000 and more than 1 million gallons a day.

BP and the Coast Guard estimated soon after the explosion that about 210,000 gallons a day was leaking, but scientists who watched underwater video of well had been saying for weeks it was probably more.

Last week, BP inserted a mile-long tube to siphon some of the oil into a tanker. The tube sucked up 924,000 gallons of oil, but engineers had to dismantle so they could start the risky procedure known as a top kill to try to cut off the flow altogether by shooting heavy drilling fluid into the well.

If that works, BP will then inject cement into the well to seal it. The top kill has been used above ground but has never before been tried 5,000 feet beneath the sea. BP pegged its chance of success at 60 to 70 percent.

Lt. Commander Tony Russell, an aide to Coast Guard Adm. Thad Allen, said Thursday that the flow of mud was stopping some oil and gas but had a ways to go before it proved successful.

"As you inject your mud into it, it is going to stop some hydrocarbons," he said. "That doesn't mean it's successful."

BP spokesman Tom Mueller also discounted news reports that the top kill had worked.

"We appreciate the optimism, but the top kill operation is continuing through the day today -- that hasn't changed," he said Thursday morning. "We don't anticipate being able to say anything definitive on that until later today."

Oil has been coating birds and delicate wetlands along the Louisiana coast, and the political fallout from the spill has reached all the way to Washington, where Democratic sources said Thursday that the Obama administration has fired the head of the U.S. Minerals Management Service in response to blistering criticism over lax oversight of offshore drilling.

The sources, speaking on condition of anonymity before the official announcement, told The Associated Press that President Barack Obama would announce the decision Thursday. Elizabeth "Liz" Birnbaum had run the service in the Interior Department since July 2009.

Fishermen, hotel and restaurant owners, politicians and residents along the coast are fed up with BP's failures to stop the oil, and the anger has turned toward Obama and his administration. Polls show the public is souring on their handling of the catastrophe.

On Wednesday, the Coast Guard pulled commercial fishing boats from oil cleanup efforts in Breton Sound off the Louisiana coast after several people became ill. Crew members on three vessels reported nausea, dizziness, headaches and chest pains, the Coast Guard said. Four people were hospitalized, including one who was flown to a hospital.

If the top kill fails, BP says it has several backup plans, including sealing the well's blowout preventer with a smaller cap, which would contain the oil. An earlier attempt to cap the blowout preventer failed. BP could also try a "junk shot" -- shooting golf balls and other debris into the blowout preventer to clog it up -- during the top kill process.

The only permanent solution is drilling a second well, but that will take a couple of months.

Though the spill is now the biggest in U.S. history, it's not the biggest ever in the Gulf. An offshore drilling rig in Mexican waters -- the Ixtoc I -- blew up in June 1979, releasing 140 million gallons of oil.

Chrysler 1.9B loss to tax payers

Martin Crutsinger, AP Economics Writer, On Monday May 17, 2010, 9:25 pm

WASHINGTON (AP) -- The Treasury Department said Monday it will lose $1.6 billion on a loan made to Chrysler in early 2009. Taxpayer losses from bailing out Chrysler and General Motors are expected to rise as high as $34 billion, congressional auditors have said.

Treasury said Monday that Chrysler repaid $1.9 billion of a $4 billion loan, which was extended before the company filed for Chapter 11. The government hopes to get another $500 million from the company that emerged from bankruptcy, Chrysler Group LLC.

Treasury officials said that the government had no plans to boost its stake in the new Chrysler to cover those losses. It also acknowledged another $1.9 billion in potential losses from a separate loan that had been made to the company that went through bankruptcy proceedings. It indicated slim hopes of recouping much if anything from that separate $1.9 billion loan.

The original $4 billion loan was made in January 2009, when the Bush administration was scrambling to rescue Chrysler, GM and their auto financing arms.

The Congressional Budget Office estimated in March that the government's $85 billion bailout of the automakers would cost taxpayers $34 billion.

Much of it will depend on how much the government recovers from its eventual sale of nearly 61 percent of GM and about 10 percent of Chrysler.

GM has said it could conduct a public stock offering later this year. Chrysler officials have said a public stock offering is not likely before 2011.

The Treasury Department made the announcement about the loss from Chrysler on a day when GM reported its first quarterly profit in nearly three years. That moved GM closer to a stock offering that would repay at least part of the $43 billion it owes the government.

Chrysler Holding is the parent company of the old Chrysler. It is owned by private equity firm Cerberus Capital Management. Cerberus bought Chrysler from Daimler AG in 2007.

Chrysler came close to running out of money at the end of 2008, so the U.S. government stepped in, authorizing $15.5 billion in aid and appointing Fiat SpA to run the new Chrysler after it emerged from bankruptcy protection. The old Chrysler's assets, along with its finance arm, became Chrysler Holding.

Treasury said it has received repayments of $3.9 billion to date, including the $1.9 billion repayment and a $1.5 billion loan paid off by Chrysler Financial. Chrysler also assumed $500 million of Old Chrysler's debt, reducing the debt to the government.

Dome doesn't work

(Reuters) - BP Plc suffered a setback on Saturday in an attempt to contain oil gushing into the Gulf of Mexico with a huge metal dome when crystallized gas filled the structure, a blow to hopes of a quick, temporary solution to a growing environmental disaster.

U.S. | Green Business

Word of the snag came as balls of tar appeared in waters off a popular Alabama island beach in what may be the first evidence of spilled oil washing into a populated area.

BP engineers have moved the four-story containment dome -- which was seen as the best short-term way to stem the flow from a ruptured oil well -- off to the side on the sea floor and will take two days trying to come up with a solution, Doug Suttles, chief operating officer, told reporters.

The problem is gas hydrates, essentially slushy methane gas that would block the oil from being siphoned out the top of the box. As BP tries to solve it, oil keeps flowing unchecked into the Gulf in what could be the worst U.S. oil spill.

"I wouldn't say it's failed yet. What I would say is what we attempted to do last night didn't work because these hydrates plugged up the top of the dome," Suttles said.

"What we're currently doing, and I suspect it will probably take the next 48 hours or so, is saying, 'Is there a way to overcome this problem?'"

The company, under pressure from the Obama administration to limit the damage to the Gulf and coastlines of four states, expected hydrates, but not the volumes encountered after a crew lowered the dome nearly a mile to the sea floor.

Possible solutions may involve heating the area or adding methanol to break up the hydrates, Suttles said.

Officials had already warned there was no guarantee that the technology would work at such water depth. It hopes to attach a pipe to the 98-ton dome to pump oil to a tanker, with the aim of capturing about 85 percent of the leaking crude.

The spill threatens an economic and ecological disaster targeting beaches, wildlife refuges and fishing in Louisiana, Mississippi, Alabama and Florida. It has forced President Barack Obama to rethink plans to open more waters to drilling.

On Dauphin Island, Alabama, a barrier island and beach resort full of weekend swimmers and beachcombers, workers assisting the protection operation found tar balls and tar beads washing ashore on Saturday.

They will be tested to determine if they come from the oil slick in the Gulf. Such balls were not uncommon and previously had washed up on the Gulf coast.

"No, we cannot confirm that it's from the oil spill, but we certainly assume that to be the case. We won't know for certain until some tests are completed," Dauphin Island Mayor Jeff Collier said.

The only shore contact so far has been in the uninhabited Chandeleur Islands off Louisiana, mostly a wildlife reserve.

"I have never seen this and I am here once a week every summer. This is the first time I have seen any thing like this here," said Molly Hunter, 34, of Mobile, holding up a chunk of tar about the size of an open hand.

RELIEF WELL

Suttles said BP may now try to plug up the damaged blowout preventor on the well or attach a new one on top of it.

It also is drilling a relief well to halt the leak -- which began after the Deepwater Horizon rig exploded on April 20, killing 11 crew members -- but it could take three months.

In the initial blast, a natural gas cloud enveloped the rig and exploded just as visiting BP officials were celebrating seven accident-free years in the rig's crew quarters, according to accounts by survivors of the blast.

According to transcripts of interviews obtained by Robert Bea, a University of California Berkeley engineering professor, a giant methane bubble rushed up the drill pipe and filled the air above the deck of the drilling platform with flammable gas, followed by a scalding flood of crude that spilled onto the drill deck and ignited.

After several days of calm weather, winds began to pick up on Saturday, preventing controlled burns of the thickest concentrations of oil. Crews conducted five burns on Friday.

Nearly 200 boats deployed protective booms and used dispersants to break up the thick oil on Saturday. Crews have laid almost 900,000 feet of boom, and spread 267,000 gallons (1 million liters) of chemical dispersant.

In Bayou La Batre, the heart of Alabama's seafood industry, the docks were largely quiet as thousands of shrimpers and seafood processors remained idled by fishing restrictions.

About 30 oyster-processing plants have run out of product and shut down, putting as many as 900 people out of work, said Wayne Eldridge, owner of J&W Marine Enterprises and an oyster plant operator himself.

"I'm screwed," Eldridge said. "The biggest thing is I've got 35 people unemployed there."

LIABILITY

BP Chief Executive Tony Hayward said a $75 million legal cap on the liabilities for economic damages under federal law, which some U.S. lawmakers now want to raise, would not be a limit and renewed promises to meet all "legitimate" claims.

BP suffered another blow on Friday when ratings agency Standard & Poor's lowered its outlook to negative from stable and indicated a ratings downgrade was likely.

S&P also cut its outlook for Anadarko Petroleum Corp, which has a 25 percent stake in the ill-fated well, to stable from positive, saying it is "potentially liable for significant costs and liabilities relating to the clean-up."

Oil has been gushing into the Gulf at a rate estimated at a minimum of 5,000 barrels (210,000 gallons/795,000 liters) a day since the well ruptured. Ian MacDonald, biological oceanographer at Florida State University, told Reuters this figure was too conservative, putting his guess as high as 25,000 barrels (1.05 million gallons/4 million liters) a day.

In New Orleans, about 200 people holding banners saying "Clean It Up" protested on Saturday against BP, the spill and its environmental consequences.

The rally, organized by the environmental group Sierra Club, is one of a series of demonstrations due to take place across the country in the next 10 days, organizers said.

A sheen of oil has engulfed much of the Chandeleur Islands, barrier islands that are part of Louisiana's Breton National Wildlife Refuge, the first confirmation of the oil slick hitting land. Some oiled birds have been found in recent days.

(Additional reporting by Matt Bigg in New Orleans; Chris Baltimore in Houston; Tom Brown and Pascal Fletcher in Miami; Steve Gorman in Dauphin Island, Alabama; writing by Jeffrey Jones and John Whitesides; Editing by Xavier Briand)