BP Not Alone in Lax Practices, Obama Spill Panel Says
(Corrects value of crude pumped in 13th paragraph of story published Jan. 5.)
BP Plc (BP/)’s Gulf of Mexico oil spill was caused by poor management practices that are “systemic” in the industry and may recur absent “significant reform,” according to a presidential panel probing the spill.
Bad decisions by BP and its main contractors, Halliburton Co. (HAL) and Transocean Ltd (RIG), coupled with lax government oversight, caused the worst U.S. offshore oil spill, the National Commission on the BP Deepwater Horizon Oil Spill said today.
The April 20 blowout of BP’s Macondo well, which killed 11 workers, destroyed Transocean’s $365 million Deepwater Horizon rig and spewed crude for 87 days, was avoidable and not the result of “aberrational decisions,” the panel said in a report.
“Do we have a single company, BP, that blundered with fatal consequences, or a more pervasive problem of a complacent industry?” commission co-chairman William Reilly, a former administrator of the Environmental Protection Agency, said in a statement. “Given the documented failings of both Transocean and Halliburton, both of which serve the offshore industry in virtually every ocean, I reluctantly conclude we have a system- wide problem.”
BP said the report supports its conclusions that the catastrophe was a result of “multiple causes, involving multiple companies,” Scott Dean, a spokesman for the London- based oil company, said in an e-mail today.
Procedures in the final hours before the blowout “were crafted and directed by BP engineers and approved in advance by federal regulators,” Lou Colasuonno, a Transocean spokesman said in an e-mail.
‘Selectively Omitted’
The commission “selectively omitted information we provided to them in response to their numerous inquiries,” Teresa Wong, a Halliburton spokeswoman, said in an e-mail. “Halliburton acted at the direction of BP.”
The panel, appointed by President Barack Obama, will present its full report on the spill Jan. 11. The single chapter released today on the causes of the blowout 5,000 feet (1,524 meters) below the surface faults industry and government regulators for failing to identify and manage risks that ultimately overwhelmed safeguards.
“This disaster likely would not have happened had the companies involved been guided by an unrelenting commitment to safety first,” commission co-chairman Bob Graham, a former Democratic U.S. senator and Florida governor, said in a statement. “And it likely would not have happened if the responsible governmental regulators had the capacity and will to demand world-class safety standards.”
Government’s Failures
Failures by government contributed to the blowout, the commission said. Efforts to expand oversight, tighten safety requirements and boost funding for government inspectors were “either overtly resisted or not supported” by members of Congress and several administrations, according to the report.
“The Obama administration has launched the most comprehensive reforms in U.S. history to ensure the safe development of offshore oil and gas regulation,” Interior Department spokeswoman Kendra Barkoff said today in an e-mail.
Regulators “will continue to make the changes necessary to restore the American people’s confidence in the safety and environmental soundness of oil and gas drilling and production on the Outer Continental Shelf, while balancing our nation’s important energy needs,” Barkoff said.
No New Permits
Fishing grounds covering thousands of square miles were closed and deep-water exploratory drilling was halted after the well blew out about 40 miles off the Louisiana Coast. Almost three months after the drilling ban was lifted, regulators have yet to issue any new exploration permits for a region that produces more oil than the U.K., Qatar or Indonesia, and pumped $35.3 billion in crude in 2009.
The report lists a series of missteps by London-based BP, Halliburton, Transocean and regulators, “each of which increased the risk of a well blowout.” Allowing oil and gas to enter the well, identified as the immediate cause of the failure, compromised safeguards “until the blowout was inevitable and, at the very end, uncontrollable,” the commission said.
Today’s report suggests changes that would add costs for offshore drillers. One recommendation would require the installation of a device to anchor steel pipe in the well to equipment on the sea floor before an exploration rig leaves the job. Industry practice up until now has been to delay that work until less costly rigs used to bring a well into production are brought in.
Regulatory Changes
Commission members have also suggested a need for more extensive regulatory changes. Less than a month after the blowout, Obama vowed to revamp a system in which regulators enforcing safety and environmental rules also awarded leases and collected fees. Interior Secretary Ken Salazar began reorganizing the agency on May 19.
Reilly questioned that effort at a Sept. 27 commission hearing, asking Salazar if he had considered shifting some authority outside of the department.
“I know it’s unfair to ask a Cabinet officer to talk about how seriously he might have considered moving an enterprise outside his own agency, but has that come up?” Reilly said.
Testing Cement
Halliburton and BP lacked a management process to ensure adequate testing of cement used to prevent oil and gas from seeping into the well, the report found. Both companies were aware that tests of the cement before the blowout showed the recipe wasn’t stable, according to an Oct. 28 report from the commission.
Because the cement flowed miles below the rig floor, the drilling crew had no way to directly check whether it set properly leaving the crew to rely on “subtle, indirect indicators,” according to the report. Results of a test to evaluate the integrity of the cement job, which repeatedly showed oil and gas flowing into the well, was improperly interpreted, according to the report.
The decision to accept the results without a review by engineers onshore “suggests a lack of onboard expertise and of clearly defined responsibilities,” according to a Nov. 17 report from the National Academy of Engineering and National Research Council, a technical panel probing the spill.
No Consulting
“The BP well-site leaders did not consult anyone on shore about the anomalous data observed during the negative-pressure test,” according to today’s report. “Had they done so, the Macondo blowout may not have happened.”
The report also found that changes to the design of the well and to drilling procedures in the days and weeks before the blowout were made “without any formal risk analysis or internal expert review.”
Even with more resources, regulators would have lacked properly trained inspectors able to enforce regulations effectively, the panel said. In an example cited by the commission, BP asked regulators on April 16 to set a cement plug, needed to temporarily abandon the well, 3,300 feet below the sea floor, contrary to regulations stating it should be no more than 1,000 feet below.
An official with the Minerals Management Service, the agency formerly charged with overseeing offshore drilling, approved the request in less than 90 minutes after a conversation with a BP official, the commission said.
‘Cursory Review’
“MMS’s cursory review of the temporary abandonment procedure mirrors BP’s apparent lack of controls governing certain key engineering decisions,” the panel said. “Like BP, MMS focused its engineering review on the initial well design, and paid far less attention to key decisions regarding procedures during the drilling of the well.”
Minerals Management Service Director Elizabeth Birnbaum resigned after the blowout. The agency was replaced by the Bureau of Ocean Energy Management, Regulation and Enforcement, which is implementing rules meant to prevent a Macondo-like disaster.
Lawmakers failed last year in efforts to pass a measure revamping oversight of offshore drilling.
To contact the reporters on this story: Jim Efstathiou Jr. in New York at jefstathiou@bloomberg.net or Katarzyna Klimasinska in Washington at kklimasinska@bloomberg.net;
To contact the editor responsible for this story: Larry Liebert at lliebert@bloomberg.net.
BP Spill Report Faults Industry for Lax Oversight
Derick E. Hingle/Bloomberg
Oil burns near the source of the BP Plc Deepwater Horizon spill in the Gulf of Mexico in July 2010.
Oil burns near the source of the BP Plc Deepwater Horizon spill in the Gulf of Mexico in July 2010. Photographer: Derick E. Hingle/Bloomberg
Jan. 6 (Bloomberg) -- BP Plc’s oil spill was caused by “systemic” management failures at the company and its main contractors, showing the need for “significant reform” of the industry, the presidential panel probing the accident said. Bloomberg's Lizzie O'Leary reports. (Source: Bloomberg)
Oil Gushes From Failed Blowout Preventer
BP
Oil gushes from a valve atop the failed blowout preventer at the BP Deepwater Horizon oil spill site in July 2010.
Oil gushes from a valve atop the failed blowout preventer at the BP Deepwater Horizon oil spill site in July 2010. Source: BP
BP Not Alone in Lax Practices, Obama Spill Panel Says
Mark Wilson/Getty Images
Oil Spill Commission Chairman former Senator Bob Graham.
Oil Spill Commission Chairman former Senator Bob Graham. Photographer: Mark Wilson/Getty Images
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