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.
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."
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.