Better weather aids fight on oil slick

VENICE, Louisiana (Reuters) - A flotilla of nearly 200 boats tackled a massive oil slick in the Gulf of Mexico on Tuesday, taking advantage of calm weather to intensify the fight to reduce the spill and limit its impact on the U.S. shoreline.

Energy giant BP Plc, under heavy pressure in Washington, struggled to plug a gushing undersea leak that threatened to wreak havoc on Gulf Coast fishing and tourism and reshape the U.S. political debate on offshore drilling.

Crude oil prices tumbled on Tuesday, though, as traders downplayed the current threat to production and shipping in the Gulf region. BP shares also showed signs of stabilization after a nearly two-week skid.

Calmer seas after days of high winds aided one of the biggest oil containment operations ever attempted.

Boats were laying down and repairing miles of boom lines strung along Gulf shores to try to fend off and contain a drifting slick estimated to be at least 130 miles by 70 miles in size.

Weather forecaster Accuweather.com said favorable winds and waves could keep the slick from reaching the Gulf coastline for a few more days or longer.

"With the conditions turning better and better, it's encouraging," Coast Guard Petty Officer Matthew Schofield said from the Joint Information Center in Roberts, Louisiana.

"It's a moving target ... There are a lot of factors in how it moves and disperses," he said of the slick. "There have been no reports of thick oil on shore."

BP shares showed signs of bottoming out on Tuesday. BP's London-listed shares, which did not trade on Monday due to a public holiday, were down 2.9 percent at 556 pence, slightly less than a 3.2 percent fall in the STOXX Europe 600 Oil and Gas index. In New York, BP American Deposit Receipts traded up 1.2 percent after falling on Monday.

The stock has fallen about 17 percent in the two weeks since the company announced an explosion and fire on the Deepwater Horizon drilling rig, which subsequently sank, unleashing a massive oil flow into the sea.

Oil prices dropped 3.6 percent in line with the weak euro and expectations that inventory reports on Wednesday will show rising U.S. stockpiles. Traders are also less worried that the Gulf oil spill will disrupt production and tanker traffic.

The leak, still weeks or months away from being stopped, threatens to eclipse the 1989 Exxon Valdez catastrophe in Alaska, the worst previous U.S. oil spill to date.

'DISASTER FOR YEARS AND YEARS'

"Our biggest concern is that the oil comes in in any kind of volume and settles in the cane. Once it settles it destroys the cane and kills the shrimp," charter boat captain Dan Dix said in Venice, Louisiana.

"If you kill the shrimp, you kill the fish that feed off the shrimp, and if you kill the fish then there is nothing left in the Gulf of Mexico. That would absolutely be a disaster for years and years," he said.

U.S. Defense Secretary Robert Gates approved requests from three more governors of Gulf Coast states to fund the deployment of thousands of National Guard troops to respond to the oil slick, the Pentagon said.

In addition to backing Louisiana's request for up to 6,000 Guard members, Gates also approved requests from Mississippi for 6,000 Guard members, Alabama for 3,000 and Florida for 2,500.

"We are committed to preventing as much of the economic damage as possible by working to contain the impact of this potentially devastating spill," President Barack Obama said.

BP said it was rushing efforts to plug the leak.

It has completed the first of three massive steel and concrete domes it will try to place this week over one of three leaks nearly a mile under the water's surface. The 98-tonne, 40-foot iron box is designed to channel oil through a pipe to the surface where it can be collected on a barge.

But BP has never deployed the structure at a depth of 5,000 feet and cannot guarantee the effort will pay off.

Drilling started Sunday on a relief well that could cap the oil spill on the Gulf floor, but the operation is expected to take two to three months to complete.

The accident highlighted the difficult politics of balancing U.S. energy security and worries about protecting the environment and industries that depend on it, like fishing.

It forced Obama to suspend plans to expand offshore oil drilling, unveiled last month partly to woo Republican support for climate legislation.

Florida Democratic Senator Bill Nelson, a fierce opponent of offshore drilling because of the environmental risks it entails, said the expanded drilling proposals were "dead on arrival" in Congress.

In an effort to keep climate control legislation moving forward, the bill's sponsor, independent Senator Joseph Lieberman of Connecticut, said language in the bill would be modified to allow energy exploration and drilling at least 75 miles off the Florida coast, against an initial requirement of 50 miles.

California Governor Arnold Schwarzenegger pulled his support for expanded drilling off his state's coast, citing the Gulf spill. His reversal came after he had called for more oil drilling off California to raise money to help cover a $20 billion state budget shortfall.

But the governors of Texas and Mississippi warned against a rush to judgment against offshore oil drilling.

GRANTS FOR THREATENED STATES

The Mississippi River delta and other areas of the U.S. Gulf Coast are threatened by contact from the leak, spewing from the ocean floor at a rate estimated at more than 5,000 barrels (210,000 gallons/795,000 liters) a day.

BP said it is releasing $25 million each in block grants to Louisiana, Mississippi, Alabama and Florida to jump-start clean-up projects. The funding can be used for numerous expenses such as vessels for hire.

BP has spent several years working to burnish its environmental image. It now faces a public relations nightmare as well as intense pressure from the Obama administration to get the situation under control.

On Tuesday, Florida Governor Charlie Crist said it was possible that his state could sue BP over any damage Florida might suffer from the spill.

Crist said local communities on the Florida Panhandle coast should press ahead with preparations to protect their shoreline from oil contamination, even though it was not clear exactly when and to what extent the drifting slick would impact there.

(Additional reporting by Matt Daily and Tom Bergin in London; Pascal Fletcher in Miami; Michael Peltier in Pensacola; and Ricard Cowan in Washington; Writing by John Whitesides and Ros Krasny; Editing by Eric Beech)