Friday, January 7, 2011

White House Probe Blames BP, Industry in Gulf Blast

By Stephen Power and Ben Casselman, The Wall Street Journal (WSJ), Jan 6, 2011
The explosion that triggered last year's Gulf of Mexico oil spill was an avoidable disaster that resulted from management failures by BP PLC and its contractors, a presidential commission has concluded. But the accident also reflected systemic failures by oil companies and regulators to deal with the risks of deep-water exploration, the panel said.

A report by the National Commission on the BP Deepwater Horizon Oil Spill and Offshore Drilling castigates BP and two of the British oil giant's contractors—[Vernier, Switzerland-based] Transocean Ltd. and [Houston-based] Halliburton Co.—for missteps that contributed to the worst offshore oil spill in U.S. history and the deaths of 11 rig workers.

The problems go far beyond BP, however, the report concludes—disputing oil-industry arguments that the April 20 explosion on the Deepwater Horizon rig was a one-time event caused by unusual and risky decisions by the oil company.

The panel said all three companies did a poor job of assessing the risks associated with their decisions and failed to adequately communicate, either with one another or with their own employees. Federal regulators lacked training and manpower to properly police the industry, the report finds.

The blowout "was not the product of a series of aberrational decisions made by rogue industry or government officials that could not have been anticipated or expected to occur again," according to a chapter of the report released Wednesday. "Rather, the root causes are systemic and, absent significant reform in both industry practices and government policies, might well recur."

The commission plans to issue the full report next week. ...

BP said the excerpt released Wednesday, like the company's own internal investigation, concluded the accident "was the result of multiple causes, involving multiple companies."

BP added that it was working to ensure that lessons learned led to improvements in deep-water drilling, and that it had already made changes to strengthen safety and risk management.

A Transocean spokesman said procedures at the well in the final hours were directed by BP and approved by regulators. "Based on the limited information made available to them, the Transocean crew took appropriate actions to gain control of the well," he said.

Halliburton, which handled a cement seal on the well, said cement jobs "can go wrong even under optimal conditions." The company added that its cement mixture was designed to BP's specifications and passed its final laboratory test.

President Barack Obama, in setting up the seven-member panel last summer, said he wanted it to recommend safety and environmental precautions the government should take to prevent mishaps. Several other government entities, including the Justice Department, are conducting their own investigations.

A U.S. Department of Interior spokeswoman said the Obama administration had announced a slew of new safety regulations since the accident, including requirements that drilling projects meet new standards for well design, casing and cementing, and be independently certified by a professional engineer.

But the economic and political environment has changed since the summer, when images of oil fouling Gulf beaches provoked outrage toward BP and rekindled worries about the safety of offshore oil drilling.

Since then, U.S. gasoline prices have risen to an average of more than $3 a gallon, unusually high for winter. [Compare this with the UK or Israel's gasoline prices, here -- D.R.] Republicans, who are generally more supportive of the oil industry and domestic exploration, have regained control of one chamber of Congress. Read More

(Read related blog posts here and here -- D.R.)

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