Sunday, November 16, 2014

Who was responsible for the Gulf of Mexico oil leak in 2010: BP, Transocean, or Halliburton?

Catastrophic damage to an offshore oil well in 2010 caused an explosion on the Deepwater Horizon oil rig that killed eleven workers and leaked an estimated nearly 5 million barrels (206 million gallons) of oil into the Gulf of Mexico. The oil leaked continuously from the well, which was located a mile beneath the ocean's surface, beginning after the explosion on April 20 and lasting until the well was finally plugged in August and declared permanently sealed in September. Pinning responsibility on a single entity proved difficult as the several companies involved pointed fingers at each other.

BP owned the well but blamed the accident on Transocean, the owner of the failed blowout preventer device. BP's initial message to the public was that they did not cause the accident but they would take responsibility for the cleanup. The executive editor of Advertising Age was quoted in the New York Times as calling this "a fine line between what they want to say for legal reasons and what consumers want to hear".

BP's CEO Tony Hayward told the BBC on May 6, 2010 that his company "will be judged not on the basis of an accident that, you know, frankly was not our accident."

At a May 11 hearing before the U.S. Senate Energy and Natural Resources Committee, representatives of three oil companies blamed each other for the accident. Halliburton, which cemented BP's well, claimed to have met BP's stated requirements for the task and cited the failure of Transocean's blowout preventer. Transocean's CEO said the blowout preventer was successfully tested a week before the accident; he also blamed BP and Halliburton for the inadequate cementing believed to have led to the explosion. BP's president said that Transocean, as owner/operator of the drilling rig, was responsible for safety.

President Obama later complained, "I did not appreciate what I considered to be a ridiculous spectacle during the congressional hearings into this matter. You had executives of BP and Transocean and Halliburton falling over each other to point the finger of blame at somebody else. is pretty clear that the system failed, and it failed badly."

In an interview on CBS's "60 Minutes" on May 16, explosion survivor Mike Williams described how problems on the Deepwater Horizon had been ignored in the past. Rep. Ed Markey (D-MA) told reporters, "BP has lost all credibility," and, furthermore, he warned of the extent of the ongoing leak, "it is clear that they have been hiding the actual consequences of this spill."

On June 8, federal authorities asking BP to immediately provide containment plans for the leak and contingency cleanup plans for the upcoming hurricane season. BP said that a new, better-fitting cap on the leaking well would be implemented in early July. The next day, as reported by CNN, BP submitted "a three-element plan that included the current container cap, a choke line to pump additional oil to the surface and a kill line intended to capture oil left in excess after the first two methods. The kill line...would not be operational until mid-July, a date that was unacceptable to the government."

Later that month, the CEO of Anadarko Petroleum Corp., which owned a 25 percent stake in the well, accused BP of "gross negligence or willful misconduct". BP's CEO Tony Hayward denied this and said he expected Anadarko to "live up to their obligations." Anadarko eventually agreed in October 2011 to pay $4 billion to BP as part of a settlement.

Government bureaucratic incompetence was also blamed. Only weeks after the leak began, Secretary of the Interior Ken Salazar said that the Minerals Management Service would be restructured. The same government agency had been responsible both for collecting money from oil companies and for enforcing their environmental compliance. In the future, these tasks would be managed by separate agencies.

At a House subcommittee hearing on June 15, 2010, Rep. Markey complained that the five largest oil firms – ExxonMobil, Chevron, ConocoPhillips, BP, and Shell Oil – had written disaster response plans using "the exact same words" and obviously had spent "zero time and money" on them. Rep. Henry Waxman (D-CA) pointed out that four of these firms explained how they would protect walruses in the Gulf of Mexico, when there are none for thousands of miles.

On June 17, when questioned by Congress about why BP designed a riskier well that saved the company $7-10 million, BP CEO Tony Hayward said that it wasn't his personal decision, adding: "I am not a cement engineer," "I am not a drilling engineer," and "I'm not an oceanographic scientist" when asked about those specific areas. Hayward said that the majority of the company’s safety violations over the five previous years – 760 violations at BP, compared to 8 at Sunoco, 8 at ConocoPhillips, and 1 at ExxonMobil – occurred in 2005 and 2006 before he became CEO. That same day, The Economist reported: "After adjusting for declines in the wider stockmarket, about $90 billion has been wiped off the combined value of BP (which has a 65% stake in the stricken field), its two minority partners, Anadarko and Mitsui, and the rig’s owner, Transocean. About $65 billion of this relates to BP alone."

Slowly, BP's share of the responsibility came to light. For example, BP decided to run only one pipe down the length of the well. This increased the risk that a gas bubble would rush up the pipe, so contractors recommended 21 centralizers when cementing the pipe, but BP used only six. A BP manager sent an email on April 16 regarding this decision: "Who cares, it's done, end of story, will probably be fine."

A Congressional investigator provided a document to the New York Times showing that BP chose the riskier of two methods when sealing the well. In the absence of an industry standard, they chose a single-barrier casing that would make it easier for them to drill into the same hole in the future rather than a double-barrier option to protect against gas leaks.

The chief mechanic for the Deepwater Horizon testified on June 1 at the Congressional hearing that, on the morning of the explosion, Transocean crew members had argued with BP's well site leader who insisted on using saltwater instead of heavier drilling fluid. "Well, this is how it's going to be," the BP leader told the crew, according to the witness. BP officials said in Washington that the crew did not pump in enough liquid to buffer between water and drilling mud. The pipe gave a reading of zero on the "negative pressure" test, not because the well was properly sealed, but because it was clogged with the fluid.

Additionally, workers from the drilling services contractor Schlumberger left without performing a "cement bond log" test. Later in the day, rig workers knew that gas was escaping through the cement. The explosion occurred that evening.

As the lead operator of the offshore drilling project, BP is responsible under the federal Oil Pollution Act of 1990 for all cleanup costs up to $75 million, and possibly more if found at fault. A proposed "Big Oil Bailout Prevention Act" (S. 3305) would have raised the liability cap to $10 billion and would have been made retroactive to apply to the 2010 leak, but it never became law. In any case, BP voluntarily paid significantly more than its legal obligations.

In June 2010, BP agreed to fund a $20 billion fund for victims' compensation. A year and a half after the explosion, BP's website indicated that over $7 billion had already been paid out of escrow. The company's efforts included skimming or burning over one million barrels of oily liquid from the ocean's surface, making payments to unemployed oil rig workers, granting money to affected U.S. states, and founding the Gulf of Mexico Research Initiative. Due to these expenses, the company reported a $4.9 billion loss in 2010.

By contrast, Transocean's CEO received a raise and the company called 2010 its "best year" in safety despite the deaths of its employees in the Deepwater Horizon explosion, although it was later compelled to apologize.

In January 2011, a U.S. government commission on the oil leak delivered its 380-page final report to the President. They reiterated the conclusion of the Columbia space shuttle investigation: "complex systems almost always fail in complex ways."

Following its own internal investigation in 2010, BP continued to place some blame on Halliburton and Transocean; those companies continued to blame BP's well design.

The costs of the accident will haunt BP for years to come. At the time the leaking well was permanently sealed on Sept. 19, 2010, BP said that the spill had already cost it $9.5 billion and would eventually cost it $32 billion. Since then, the payouts and projected costs have continued to increase. In July 2013, PBS NewsHour reported that "BP says it has spent $25 billion so far. That includes money for claims the company has paid out in the form of a multi-billion-dollar settlement that keeps growing and the cost of cleanup and remediation. It doesn’t include another $4.5 billion in fines it owes the government over the next five years. BP has set aside as much as $42 billion for a total potential tab when all is said and done." Image above: Fire boat response crews battle the Deepwater Horizon fire in the Gulf of Mexico. Photo by the U.S. Coast Guard. © public domain, Wikimedia Commons.

Originally posted to Helium Network on Nov. 28, 2011.

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