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Crisis in the Gulf: Where were the watchdogs?

chart_map_oil_spill4.top.gifRed shades indicate concentration of oil patches and where government believes oil will be by Sunday. Gray line indicates margin of error. By Steve Hargreaves, senior writer


NEW YORK (CNNMoney.com) -- After a week grilling oil executives over what caused the Gulf of Mexico oil spill, lawmakers are setting their sights on government regulators next week.

They'll be asking the watchdogs about just what kind of role they had in approving the ill-fated drilling operation, and why they weren't better prepared to deal with the disaster.

At least four hearings are scheduled, including a Senate appearance Monday by Homeland Security Secretary Janet Napolitano and Coast Guard Rear Admiral Peter Neffenger. More hearings are slated for Tuesday with other members of the administration.

High on lawmakers' hit list is the Interior Department's Minerals Management Service, the agency that issues permits for offshore drilling.

MMS issued the permits for the BP-contracted Deepwater Horizon drill rig, which exploded April 20 and subsequently sank, claiming 11 lives and leaving an uncapped oil well spewing into the Gulf.

The agency has been hammered by critics ever since for lax oversight and a cozy relationship with the oil industry.

"Department of the Interior has treated the Gulf of Mexico as a sacrifice area where laws are ignored and wildlife protection takes a backseat to oil-company profits," Miyoko Sakashita, oceans director for The Center for Biological Diversity, said Friday in announcing a lawsuit against the government, one of many. (Complete coverage on CNN)

Earlier this week President Obama said he would split the MMS into two parts to avoid the agency's conflict of interest: ensuring the safety of offshore drilling, which may involve slowing down operations, and maximizing government oil royalties.

But that's likely to be just the first step in the overhaul of the agencies that regulate the industry.

While the inquiry in Washington continues, oil gushes into the Gulf at what the Coast Guard says is a rate of about 200,000 gallons a day, although some say it could be much higher.

25 days of leaking oil

Stopping the leak: BP (BP) and other engineers are working around the clock to stem the flow. They currently have four options that they are working on simultaneously.

They include using pipes or a dome to channel oil to the water's surface, where it can be offloaded to waiting ships.

BP may also seal a second leak by injecting bits of golf balls and old tires right into the well at high pressure -- a method that's actually worked elsewhere in the past.

Ultimately, a second well will have to be drilled into the failed well to permanently seal it, but that could take months.

Where's the oil: While an estimated 5 million gallons of oil have so far spilled into the Gulf -- nearly half the amount that came from the Exxon Valdez spill -- and only a relatively small amount has washed up on shore.

The slick itself is now more like a patchwork of oil floating around the Gulf, just off the mouth of the Mississippi river.

Experts aren't sure what's keeping it in the Gulf, but it could be a combination of favorable winds and tides, attempts to burn off the heavier crude, and the massive amount of chemical dispersants BP is spraying on the slick.

The fact the oil is still mostly at sea is good news for BP. Experts have said costs, as well as environmental impact, won't mount significantly until the oil reaches shore.

Who's responsible: Under federal law, BP and its minority partners that own the well are responsible for all the costs to clean up the oil.

But when it comes to compensating fisherman for lost catch, hotels for lost business, or towns for lost tax revenue, it gets quite murky.

Estimates for total costs, including clean up, fines and damages caused to the economy range from $2 billion to $14 billion, and largely depend on when the leak can be stopped and where the oil makes landfall.

BP may have some of these economic damage costs capped by a federal law that limits liabilities to $75 million, although there are efforts under way to raise that cap. BP has said itself it expects to pay more that $75 million in damages.

It's also unclear how much responsibility BP's subcontractors, including oil well services company Halliburton (HAL, Fortune 500) and drilling rig owner Transocean (RIG), will bear.

What caused the spill: During congressional testimony executives from BP, Halliburton and Transocean all blamed each other, in what President Obama said Friday was "a ridiculous spectacle."

It was also revealed that the well failed some key tests hours before the explosion, tests that may have indicated highly flammable natural gas had seeped into the well. These results were known to BP, lawmakers said.

For now, questions about what BP officials knew during those key hours, and who decided to continue working on the well, remain unanswered.

"This is one of the key things the investigation is going to have to look at," Lamar McKay, chairman and president of BP America, said during the hearings. To top of page

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