ONE YEAR LATER

Lessons from Deepwater Horizon tragedy continue to unfold

BY JAMES SHANNON

BUSINESS JOURNAL

April 20 marked the one year anniversary of the Deepwater Horizon tragedy, the  massive explosion and fire on an offshore drilling rig that killed 11, injured 16 and unleashed the biggest maritime oil spill in history.

By the time the gushing wellhead was capped on July 15, the public had been treated – if that’s the right word - to 83 days of non-stop media coverage featuring millions of words of reportage, commentary and rank speculation presented over often-vivid footage of the spill. Beyond the images of oil-soaked birds, frantic hotel-keepers and mournful shrimpers whose livelihoods had been disrupted were questions about what the continuing environmental drama meant not just for British Petroleum but for entire the oil and gas industry. Some pundits went so far as to speculate this spill might be the beginning of the end for fossil fuel as an energy source.

As Mark Twain once famously declared, “Rumors of my death have been greatly exaggerated“ – and the industry has not only survived but will undoubtedly prosper, albeit with an increased focus on safety and environmental stewardship.

At the last minute before the one-year anniversary, a flurry of lawsuits were filed by virtually all the parties involved, with each company pointing the finger at the other guy. This timing of this legal equivalent of a circular firing squad was mandated by requirements imposed by the fact the spill took place at sea, bringing the affair under the mantle of maritime law.

As those with potential damage claims arising from the Eagle Otome incident in the Port of Port Arthur in early 2010 learned, maritime law marches to the beat of its own legal drummer even when the body of water is the intracoastal canal.

BP filed lawsuits seeking over $40 billion from Transocean, owner of the Deepwater Horizon rig; Cameron International, the maker of the failed blowout preventer on the well; and Halliburton, the cement contractor on the well.

In its complaint against Transocean, based in Vernier, Switzerland, BP accused them of “misconduct” and asserted, “The simple fact is that on April 20, 2010, every single safety system and device and well control procedure on the Deepwater Horizon failed, resulting in the casualty.”

There appears to be some support for BP’s position. The same week the lawsuit was filed, the US Coast Guard released a 288-page report that detailed Transocean’s poor maintenance, inadequate training and the bypassing of alarms and automatic shutdown systems that prevented the crew from shutting down the runaway well after it blew. The report said these deficiencies led to a chaotic abandonment of the blazing Deepwater Horizon rig.

"The investigation revealed that Deepwater Horizon and its owner, Transocean, had serious safety management system failures and a poor safety culture," the Coast Guard report concluded.

For its part, Transocean filed a counter-suit against BP insisting “that under the drilling contract for Deepwater Horizon, BP has agreed, among other things, to assume full responsibility for and defend, release and indemnify Transocean from any loss, expense, claim, fine, penalty or liability.”

In the lawsuit BP filed against Halliburton, they charge their former partner with “improper conduct, errors and omissions, including fraud and concealment” concerning the cement used in the well.

BP asserted, “The record is clear that Halliburton's misconduct contributed to the accident and spill, and BP has filed this action to preserve its legal rights."

In their counter-suit, Halliburton also said they were contractually indemnified because the other parties' actions or omissions were to blame and called BP "negligent, grossly negligent, and/or acted with willful misconduct."

The Halliburton filing also said, "BP utterly failed to meet its duties and obligations, and knew so at the time… BP recklessly sacrificed safety for monetary savings and gain. BP carelessly ignored failed well integrity test results to move forward with procedures that put the well into an underbalanced condition that led to the blowout."

In addition, BP was also sued that week by its minority partners in the well, Mitsui subsidiary Moex Offshore and Anadarko Petroleum. Both said they should not be liable for any of the damages or cleanup costs related to the accident.

The intense legal wrangling was not the only commemoration of the one-year anniversary of the Deepwater Horizon oil spill. Secretary of the Interior Ken Salazar issued a statement on April 20 that said, “Today, we remember the eleven men who died in the Deepwater Horizon explosion.  They were sons, fathers, husbands and brothers... Today, we also recognize the thousands of women and men who have worked tirelessly and relentlessly over the last year to contain the spill, clean marshes and coastlines, rehabilitate wildlife, and put the Gulf Coast on the path to restoration.  We honor their service and sacrifices for our country.”

Meanwhile, the political and social fallout from the spill has taken some unexpected twists and turns. The ban on deepwater drilling in the Gulf announced by Salazar in May and lifted early in October no doubt imposed hardships on rig operators, their customers and employees, but its impact was not as dire as many predicted.

By Feb. 3 of this year, the New Orleans Times-Picayune newspaper reported, “While a backlog of drilling permits in Washington continues to feed oil industry angst, new data shows that more rigs are in the Gulf of Mexico than before the BP oil spill, indicating that operators might have more confidence in the future than they are letting on.”

In the months since the well was capped, learned observers have been able to gain some perspective on what happened at Deepwater Horizon, with valuable insights gleaned from such diverse sources as the conservative website Weekly Standard and The New Yorker.

Writing for the Weekly Standard, Andrew B. Wilson agreed with the conclusion of experts who said the Gulf oil spill was a preventable disaster but added, “Politicians may demand that oil rigs, artificial heart valves, airplanes, and other useful devices be made absolutely safe, but in the real world that engineers deal with, there is no such thing as 100 percent safety. Owing to human error in operating a system, or to some flaw in the original design, accidents are going to happen.”

.

Wilson also chided BP’s top management for what he called their “history of ‘green-washing,’ or playing up to environmental activists, while taking a cavalier attitude toward risk management in the operation of oil rigs, refineries, and other facilities.”

Whatever BP action or inaction that may have contributed to the disaster, Raffi Khatchadourian’s piece for The New Yorker detailed the scope of the company’s response.

“BP began to acquire matériel on a vast scale,” he wrote. “Every week, responders were using roughly three million hazmat suits, far more than the world’s supply, so Logistics teams scoured the globe for stockpiles and alternatives to make up for the shortfall… By midsummer, more than eight hundred skimmers had been mobilized by the shore and around the wellhead” in what was described as “the largest offshore-skimming operation in the history of spill response.”

Khatchadourian also acknowledged the response of some state officials.

“Louisiana officials, meanwhile, opened barriers restraining the Mississippi River; the water’s outward force appears to have greatly prevented the oil from penetrating too deeply into certain bayous,” he added.

Wilson gave credit to a higher authority.

“If there was an unexpected hero to the story, it was Mother Nature,” he observed. “In the first few weeks after the blowout, BP CEO Tony Hayward was excoriated in the news media for stating that the ‘Gulf of Mexico is a very big ocean’ and ‘the environmental impact of this disaster is likely to be very, very modest.’ It now appears that he was right. The Gulf oil spill is, indeed, much less of a calamity than most people expected. Said one environmental scientist in late July: ‘Mother Nature is doing what she is supposed to be doing and we’re losing most of [the spilled oil] to microbial degradation in the open ocean.’ By early August, an oil slick that had been the size of Kansas had all but disappeared, idling hundreds of skimmers.”

Khatchadourian said he believed the intense media scrutiny was essential in generating public pressure to resolve the crisis.

“Call it hysteria or call it a fully mobilized civil society: something was accomplished, and the Gulf is in better shape for it,” he insisted. “And looking back on the season of Deepwater Horizon, one wonders what else we might be able to engineer, or just make less dirty, if we put our minds to it, and yell a little.”