BP Profit Push ‘Root Cause’ of Gulf Spill, Witness Says
By Jef Feeley, Margaret Cronin Fisk & Allen Johnson Jr. - Feb 27, 2013 3:23 AM ET
BP Plc (BP/)’s push to maximize profits and cut costs at the Macondo well was a “root cause” of the explosion that led to the 2010 Gulf of Mexico oil spill, a safety expert who studied the disaster said.
BP executives pressured supervisors of the Deepwater Horizon rig to speed up drilling operations and hold down expenses as part of a corporate culture that put profit ahead of safety,Robert Bea, a retired engineering professor from the University of California, yesterday told the judge who is hearing claims over the spill.
The Macondo well operators faced “intense pressure to save time and money” and because of that, the company “made sacrifices in safety,” Bea said. It was “tragic and egregious” that BP didn’t implement its safety system on the rig, he added.
Late on Feb. 25, BP resumed negotiating a possible settlement with the U.S. and states affected by spill, according to a person familiar with the situation.
The talks stopped the night of Feb. 24 while the parties got ready for the trial that began Feb. 25, the person said, asking not to be named because of a lack of authority to talk about the matter. The negotiations restarted after the first day of trial, said the person.
Though it may take weeks before an agreement is reached, a settlement should come before the end of the trial, according to the person. BP rose 0.1 percent in London trading at 8:20 a.m.
After hearing evidence in the trial, U.S. District Judge Carl Barbier in New Orleans will decide who is liable for damages tied to the largest offshore spill in U.S. history and whether BP, Transocean or other companies that worked on the project were grossly negligent in their handling of the rig and well. His ruling on that issue will affect how much each company may have to pay.
The April 20 explosion aboard the Deepwater Horizon drilling rig killed 11 workers and sent more than 4 million barrels of oil spewing into the Gulf. The accident sparked hundreds of lawsuits against London-based BP, Vernier, Switzerland-based Transocean Ltd. (RIG), owner of the rig, and Houston-based Halliburton Co. (HAL), which handled cement work on the well.
For BP, the well’s owner, a finding of gross negligence would mean the company is liable to the U.S. for as much as $17.6 billion in Clean Water Act fines, as well as unspecified punitive damages to claimants who weren’t part of the $8.5 billion settlement the company reached last year. For Transocean and Halliburton, a gross negligence finding would mean they could be held liable for punitive damages.
Lawyers for the government and spill victims contend that BP was over-budget and behind schedule for the Macondo well, which was costing the oil company $1 million a day to operate, and that prompted officials to cut corners and ignore safety tests that showed the well was unstable.
They also alleged Halliburton’s cement job was defective and Transocean officials disabled safety systems on the rig, failed to properly maintain the platform and never adequately trained its well crew to handle crisis situations.
BP sued its contractors, claiming Transocean employees’ miscues on the rig were the main cause of the explosion and that Halliburton concealed flaws with cement work done on the drilling line. Transocean and Halliburton pointed fingers back at BP.
Bea, who has served as a BP consultant at various times since 2001, was hired by spill victims to investigate the causes of the Deepwater Horizon disaster in April 2011. He’s recognized as an expert in safety systems and has probed such high-profile disasters as the Exxon Valdez oil spill in 1989 and the Columbia explosion in 2003.
The professor’s review of the Macondo well explosion and spill found BP’s failure to implement a comprehensive system to insure its businesses operated safely led to the disaster. BP’s culture rewarded operators who found and extracted oil quickly and cheaply rather than supervisors who emphasized safe production practices, Bea testified.
To maximize profits, BP adopted an “Every Dollar Counts” culture that put cost cutting ahead of safety concerns, Bea said. That mantra extended to rigs such as the Deepwater Horizon, he added.
On the drilling platform, BP managers’ cost cutting included forgoing testing on the well’s cement work and dragging their feet in creating systems to provide alerts if safety equipment, such as the rig’s so-called “blowout preventer,” wasn’t properly maintained, the professor said.
BP also failed to take many concrete steps to heed Bea’s warnings that the company needed to beef up its “process safety systems,” the professor said. Those warnings started in 2003, he added.
BP officials acknowledged that the “largest risk to the company” was an uncontrolled blowout on a deep-sea rig, Bea added.
Under cross-examination by BP lawyer Mike Brock, Bea acknowledged BP had made some moves to improve its safety system since Bea began serving as one of the company’s consultants.
The company developed an “operating management system” focused on improving the safety of the company’s business operations, Bea said. Still, that system wasn’t in place on the Deepwater Horizon when it exploded in 2010, the professor said.
Brock pointed to an April 15, 2010, press release by former BP Chief Executive Officer Tony Hayward that ranked the company’s priorities as “safety, people, performance.” That release was issued five days before the rig exploded. Bea acknowledged Hayward’s comment was a “positive statement” in regards to emphasizing safety over profits.
Bea, however, said he couldn’t always tell in the company’s public statements whether executives were referring to safety systems or workers’ personal safety.
Hayward stepped down in September 2010 as part of the fallout from the rig explosion and oil spill. The executive faced public anger in the U.S. and criticism from lawmakers over his handling of Deepwater Horizon disaster. The executive drew the ire of spill victims after he told a reporter “I’d like to have my life back” weeks after the incident.
Under U.S. maritime law, which Barbier is using for the trial, Transocean was legally responsible for providing for the personal safety of workers on the Deepwater Horizon as the drilling contractor, Bea said.
BP, as the well owner, was responsible for putting systems in place to insure the project was conducted safely, the professor added. This includes systems to review the well design and operations and whether its contractors conduct proper maintenance on their equipment.
Under questioning by Brock, Bea said he was aware the BP executive who came up with the “Every Dollar Counts” slogan testified in a deposition that the company still listed safety as its “number one priority.”
Lamar McKay, the former head of BP’s U.S. unit, testified yesterday that company officials understood they had “ultimate responsibility” to create risk-management systems for off-shore oil fields they leased.
Still, the responsibility for an individual well’s operational risks was shared by the contractors BP hired to help build and run it, he said. Managing risks “are sometimes a team effort,” said McKay, who is now head of BP’s worldwide oil exploration and production efforts.
McKay said that contractors don’t use BP’s safety systems on their platforms because they have their own policies and procedures for their equipment. BP incorporates the contractors’ safety approaches in their overall system for oil-drilling projects, he said.
The case is In re Oil Spill by the Oil Rig Deepwater Horizon in the Gulf of Mexico on April 20, 2010, MDL-2179, U.S. District Court, Eastern District of Louisiana (New Orleans).
To contact the reporters on this story: Jef Feeley in New Orleans federal court email@example.com; Allen Johnson Jr. in New Orleans federal court; Margaret Cronin Fisk inDetroit at firstname.lastname@example.org.
To contact the editor responsible for this story: Michael Hytha at email@example.com