Exxon, Others Slammed for `Carbon-Copy' Oil-Spill Plans
Lamar McKay, chairman and president of BP America Inc., arrives for a House Energy and Commerce Committee hearing in Washington, D.C. Photographer: Brendan Hoffman/Bloomberg
June 15 (Bloomberg) -- U.S. Representative Edolphus Towns, a Democrat from New York and chairman of the House Oversight Committee, talks about BP Plc's oil spill in the Gulf of Mexico and the outlook for offshore drilling and industry regulation. Towns talks with Carol Massar and Matt Miller on Bloomberg Television's "Street Smart." (Source: Bloomberg)
June 15 (Bloomberg) -- Gianna Bern, president of Brookshire Advisory & Research, talks about the impact the BP Plc oil spill in the Gulf of Mexico will have on U.S. offshore drilling and today's congressional testimony by oil industry executives. Bern talks with Betty Liu on Bloomberg Television's "In the Loop." (Source: Bloomberg)
Exxon Mobil Corp., ConocoPhillips, Chevron Corp. and Royal Dutch Shell Plc are as ill-prepared as BP Plc to halt and clean up an offshore oil spill because they all use “carbon copy” disaster plans, lawmakers said.
Eight weeks after a drilling rig leased by BP exploded in the Gulf of Mexico, killing 11 workers and triggering the worst spill in U.S. history, executives from the companies sought at a House Energy Committee hearing to distance themselves from BP’s practices that lawmakers said put profits before safety.
Lawmakers faulted the four executives for disaster-response plans that would halt oil leaks at the sea floor using the same techniques that failed for BP at its Macondo well. The same firm wrote the plans and included references to making sure crude doesn’t injure walruses, which don’t live in the Gulf of Mexico.
“The oil company response plans are great for public relations but these plans are virtually worthless in the event of a spill,” said Representative Bart T. Stupak, a Michigan Democrat. “It could be said that BP is the one bad apple in the bunch, but unfortunately, they appear to have plenty of company.”
Energy companies, rig operators and lawmakers in oil- producing states have urged the Obama administration to lift or shorten a six-month moratorium on deepwater exploration that has idled more than two dozen drilling vessels and threatens thousands of jobs. Lawmakers said today they’re not convinced the industry takes safety seriously.
‘Magic Button’
“You can’t have a contingency plan that says cross your fingers and hope the blowout preventer works,” said Representative Joe Barton of Texas, the committee’s senior Republican. “They pushed the magic button on the BP rig and it didn’t work.”
Exxon wouldn’t have used the well design, cement mixture or testing procedures BP employed at the Macondo well, CEO Rex Tillerson told lawmakers today. The BP project faced “a lot of indications of problems” in the weeks before the explosion, Tillerson said. Shell’s U.S. president, Marvin Odum, and Chevron CEO John Watson said they wouldn’t have drilled the well in the same manner as BP.
“Our internal review confirmed what our regular audits have told us,” Watson told the committee. “Chevron’s drilling and control practices for deepwater wells are safe and environmentally sound.”
‘Deliberate Deception’
The CEOs testified a day after the committee released internal BP documents that lawmakers said showed the company put cost concerns ahead of safety in the days leading up to April 20. BP Chief Executive Officer Tony Hayward is to appear before a subcommittee June 17, his first congressional testimony since the well exploded.
In a preview of questions Hayward may face, Markey asked Lamar McKay, president of BP America Inc., today why BP’s initial estimates of the spill’s flow rate turned out to be several times less than the actual leak. The initial estimates reflected either a “deliberate deception or gross incompetence,” Markey said.
“We are sorry for everything the Gulf coast is going through,” McKay said.
BP, the biggest Gulf of Mexico oil producer, made five “questionable decisions” aimed at cutting costs and speeding completion of an overdue project before the disaster, Democratic Representatives Henry Waxman of California and Stupak wrote in a letter to Hayward released yesterday.
Walruses in Plans
Markey pressed the CEOs on why their safety plans for a Gulf spill described the effects on walruses. Two of the companies also incorporated contact information for a Florida marine researcher who died in 2005, Markey said.
“The plan needs to be updated more frequently,” ConocoPhillips CEO James Mulva said. “Obviously, it is embarrassing.”
“It’s unfortunate that walruses were included, and it’s an embarrassment,” Tillerson said.
President Barack Obama plans to speak to the nation tonight on the spill, and the administration is demanding that BP set up an escrow account for damage claims. BP Chairman Carl-Henric Svanberg has been called to the White House tomorrow.
Industry groups oppose the six-month ban, which Obama put in place to give a presidential commission time to probe the spill. Pressed by Louisiana Democratic Senator Mary Landrieu, who said her state could lose 330,000 jobs from the moratorium, Interior Secretary Ken Salazar last week said the ban may be shortened.
Lost Jobs, Wages
“We acknowledge the reasons for the president’s decision to pause deepwater drilling,” Shell’s Odum said in his prepared remarks. “But it is not without consequence: thousands of lost jobs, and billions in lost wages and spending. And not only on the Gulf Coast, but also in places like Alaska.”
Seventeen House members from Gulf coast states including Barton and Representative Ted Poe, a Texas Republican, today called on Obama to end the drilling ban. The group will meet Salazar tomorrow to discuss the impact of the moratorium.
“Many offshore drilling companies and suppliers will not be able to survive this six-month period and will either go out of business or move their employees and assets abroad,” the group said in a statement. An extended suspension may cost more than 20,000 jobs in Gulf region, according to a statement.
Exxon’s Rigs Moving
Exxon, based in Irving, Texas, has drilled 262 deep-water wells in the past decade, 35 of which were in the Gulf, Tillerson said. The company will send deepwater drilling rigs to other parts of the world during the administration’s moratorium, he said.
“We will redirect our human resources, the technical talent, to other parts of the world where we’re allowed to work, and we will redirect the equipment elsewhere,” Tillerson said. “This stuff is too expensive to let them sit around.”
When the moratorium is lifted and federal regulators allow deepwater drilling to resume, there may be few rigs available for the work, said Gianna Bern, president of Brookshire Advisory & Research Inc. in Flossmoor, Illinois, which advises oil companies on strategy and risk management.
Drilling vessels are steaming out of the Gulf for assignments in the South China Sea and off the Indonesia coast, said Bern, a former BP crude trader. Those vessels won’t be able to return to U.S. waters for a year or longer, she said.
“The moratorium will likely draw drilling rigs away from the Gulf of Mexico to overseas basins, further delaying development and negatively affecting crucial U.S. jobs that support these operations,” Watson said. “Any extension of the moratorium will only exacerbate the economic consequences.”
To contact the reporters on this story: Jim Efstathiou Jr. in Washington at jefstathiou@bloomberg.net; Joe Carroll in Washington at jcarroll8@bloomberg.net.
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