You said how much?

You said how much?

“WHO cares, it’s done, end of story, will probably be fine.” Thus, in an e-mail, a manager at BP wrote of the decision to use only a few “centralisers” when cementing into place the pipe that ran from an oil reservoir 13,000 feet (4,000 metres) below the sea floor to Deepwater Horizon, the drilling rig floating 5,000 feet above it. The cement failed—considerably more likely with fewer centralisers, experts say—four days after the e-mail was sent, on April 20th. Oil and gas rushed up the well, dooming the rig and 11 of her crew. Two months on, after perhaps 3m barrels of oil have leaked into the Gulf of Mexico, the story has still not ended and a lot of people, from those who dwell on the gulf coast to the chief executive of BP and the president of the United States, care very much indeed.

BP’s chief executive, Tony Hayward, has been the face (and voice) of a company America has come to hate. Shareholders have dropped its stock as if it were not merely oily but radioactive. America’s chief executive, lacking the ability to stop the leak, has found that he needs, as he put it, an ass to kick, and BP’s ass is the obvious choice. The spill was the subject of Barack Obama’s first address to the nation from the Oval Office, on June 15th, the day after he paid another visit to the stricken coast. He vowed to make BP pay for the damage it had caused, promised a sharpening of oil-industry regulation and told Americans that the country must seek to reduce its appetite for oil.

The speech did not meet with marked enthusiasm. Making BP pay, though, does, and at a meeting with Mr Obama on June 16th the company’s bosses agreed to put $20 billion into an escrow fund that would be used to pay for damages and lost earnings. BP will also pay no dividend, as some American politicians have been demanding, for at least the next three quarters. And it will set up a $100m fund to compensate unemployed oil-rig workers affected by the suspension of deep-water drilling. Will that be enough to bring at least some semblance of peace?

For now, the company’s punishment continues. The suspect cementing is just one of the issues about which the House of Representatives committee on energy and commerce, chaired by Henry Waxman, intended to grill Mr Hayward on June 17th. The committee has unearthed several instances in which BP managers seem to have chosen cheaper, rather than safer, options. With the centralisers, an earlier decision—to run only one pipe down the well, making it easier for gas and oil to get up—had been taken with the proviso that extra care would be needed in cementing. But extra care was apparently not exercised: six centralisers were used although 21 had been recommended by contractors. BP’s own inquiries into the cause of the disaster see the cement as one of the key points where failure needs to be investigated.

Mr Waxman’s hearing seems likely to reinforce the perception of BP as an evil rogue. In 2005 an explosion at its rundown Texas City refinery killed 15 workers. It received 97% of all operational safety and health citations for “wilful” and “egregiously wilful” breaches at American oil refineries between June 2007 and February 2010—a remarkable share even allowing for close scrutiny after Texas City.

This is not to say that BP is necessarily uniquely dangerous. Some other oil companies say that they would not have sanctioned all, or even any, of BP’s decisions about cementing, pipes and so on. But at Senate hearings on June 15th executives of some of those companies had to admit that their plans for responding to oil spills in the gulf were embarrassingly similar to a much-excoriated one submitted by BP. The plans recommended contacting dead experts and set out provisions for dealing with oil-soaked walruses (of which there are plenty in the Arctic but none in the gulf). All the companies operating in the gulf had, like BP, been risking a blowout that they had no technical means of dealing with, should it occur. As Amy Myers Jaffe, an oil expert at Rice University, puts it, the industry’s strategy on blowouts was not to have them, rather than to work out how to put one right quickly.

The likely bill for BP comes in three parts. The first element is the direct costs of plugging the well and cleaning up the pollution, which under the Oil Pollution Act (OPA), passed in 1990 after the Exxon Valdez spill, must be borne by the company. Using estimates of the likely size of the spill and the cost per barrel of cleaning up after Exxon Valdez, UBS reckons the bill could be $12 billion, of which BP’s share would be $8 billion (assuming the costs are not tax-deductible). An alternative approach is to assume BP carries on spending at its recent rate of about $40m a day for, say, a year. That works out at a total of $16.2 billion, or $10.5 billion for BP after its minority partners stump up their share. But those partners may try not to, instead suing BP for negligence. Suits involving BP, Transocean, Cameron (provider of the blowout preventer) and Halliburton (contractor for the cement) appear to be almost inevitable.

Then there are fines. Penalties under the Clean Water Act are based on the number of barrels deemed spilled, and range from $1,100 to $4,300 a barrel, depending on the extent to which the leak is the result of negligence. Suppose that capping plans paid off but that the total spill were assessed at the top end of current estimates, say 4m barrels, and BP were found wilfully negligent. The company could be facing a fine of $17 billion.

On top of that comes compensation for lost economic activity, lost federal, state and local taxes and damage to the environment. The OPA limits this to $75m, but BP said more than a month ago that it would waive the cap and honour all legitimate claims. It is possible to reach hair-raising figures: the annual revenue of the tourist and fishing industries in the four states most affected, Alabama, Louisiana, Mississippi and Florida, is between $15 billion and $30 billion. Against that, by June 15th only 63 miles (101km) of coastline was currently affected, according to the combined response team (see map on previous page). Perceptions may be a bigger threat to tourism than oil; on his latest visit Mr Obama purposefully chose to walk on a clean beach. Most guesses, based on the idea that BP will have coastline and sea largely clean within a year, put the company on the hook for a further $5 billion-10 billion.

That suggests a total for clean-up costs and damages of $20 billion and fines of up to $17 billion (again, assuming no tax relief). That the decline in BP’s market value is two to three times larger than that partly reflects the uncertainty of the operation taking place. But it also reflects a fear that the demand for compensation both from government and private concerns, which could have recourse to a whole panoply of legislation, is spiralling out of control. A BP insider says that what has spooked investors is the prospect of unlimited liability.

However, suggestions that BP could go bust are wide of the mark. That would require either a further catastrophe in the gulf or an unlimited and unprecedented broadening of government fines and private litigation. A BP bled to bankruptcy would not be good for the American government either, scaring off other firms in capital-intensive industries. It is likely, though, that BP will be financially weakened by the lasting blow to its reputation in America and elsewhere, paying a chunk of its cashflow in litigation costs and fines over years, with the ultimate bill taking a long time to become clear.