What happened? That was the $14 billion question at the Senate Energy Committee’s hearing on the Gulf oil spill on Tuesday. But in answering that question, executives from the three companies involved in the disaster—BP (which leased the rig), Transocean (which owned the rig), and Halliburton (which cemented the base of the rig)—pre-empted a second one: Who’s to blame?
The answer, in each case: not me.
“I can already see the liability chase,” said Robert Menendez of New Jersey before the main panel had even begun. “It’s like a bit of a Texas two-step: ‘Oh yeah, we’re responsible.’ But BP says Transocean, Transocean says Halliburton. So I can see the liability chase that’s gonna go on. I’m looking forward … to see who’s gonna fess up to what.”
Oh, the suspense. The blame-shifting began the moment the executives opened their mouths. In his prepared statement, Lamar McKay, president of BP America, referred repeatedly to the rig as the Transocean Deepwater Horizon (italics mine). “We don’t know yet precisely what happened the night of April 20th,” he said. But he seemed pretty sure that whatever went wrong, it was on Transocean’s watch. “Transocean, as owner and operator of the Deep Water Horizon drilling rig, had responsibility for the safety of drilling operations,” he said. He also emphasized that the leak sprang when the rig’s 450-ton blowout preventer—which, by the way, was built and operated by Transocean—failed.
Steven Newman, chief executive of Transocean Ltd., didn’t see it that way. In fact, it was far from clear that the leak had anything to do with the blowout preventer. “Over the past several days” (actually, the past several minutes) “some have suggested” (for instance, the guy to his right) “that the blowout preventers used on this project were the cause of the accident,” Newman said in his prepared remarks. “That simply makes no sense.” After all, drilling was complete on April 17, and the hole was sealed up. If there was anything to blame, it was “a sudden, catastrophic failure of the cement, the casing, or both. Therein lies the root cause of this occurrence; without a disastrous failure of one of those elements, the explosion could not have occurred.” The company responsible for the cement? Halliburton.
Tim Probert, Halliburton’s chief health, safety, and environmental officer, pointed out that Halliburton is “contractually bound to comply with the well owner’s instructions.” Translation: They were just following orders. Like his colleagues, Probert warned against “a rush to judgment.” However, he said, two things were for sure: The casing was cemented 20 hours before the accident—meaning Halliburton had mostly completed its job. And “had the BOP [blowout preventer] functioned as expected, this catastrophe may well not have occurred.” Back to you, Transocean. (For a more detailed account of what may have happened to the rig, see here.)
The senators lost patience quickly. “There’s going to be plenty of time to try to figure out who is to blame,” said Lisa Murkowski of Alaska. “I would suggest to all three of you that we are all in this together.”
Still, senators focused most of their heat on BP. Oregon’s Ron Wyden demanded to see an itemized list of reforms the oil giant had implemented after the fatal explosion in a Texas refinery in 2005 and a leaky Alaskan oil pipeline in 2006. Menendez criticized BP’s frenetic response to the spill as indicative of poor planning. “I get the impression you’re making this up as you go along,” he said. Murkowski said it “amazes” her that BP hasn’t tested chemical dispersants—the fluids being used to break up the oil slicks—at deep levels before.
McKay took his flogging. Where he drew the line, though, was on the question of liability. After the Exxon Valdez spill in 1989, Congress passed a law capping liability for damages from oil spills at $75 million, not counting cleanup. Members now want to raise the cap to $10 billion. But, Maria Cantwell said, “to make that retroactive is nearly impossible.” She therefore wanted to know what kinds of claims BP would honor. McKay repeated the mantra of his boss, BP CEO Tony Hayward:
McKay: We have said exactly what we mean: We’re going to pay all legitimate claims.
Cantwell: So harm to the fishing industry, both short term and long term, you’re going to pay?
McKay: We’re going to pay all legitimate claims.
Cantwell: If it’s an impact on business lost from tourism, you’re going to pay.
McKay: We’re going to pay all legitimate claims.
Cantwell: To the state and local governments for lost tax revenue, you’re going to pay.
McKay: Question mark.
Cantwell: Long-term damages to the Louisiana fishing industry and its brand.
McKay: I can’t quantify or speculate on “long term.” I don’t know how to define it.
Cantwell: Additional trouble from depleted fisheries and their recovery.
McKay: We’re going to pay all legitimate claims.
Cantwell: Shipping impacts.
McKay: Legitimate claims.
Cantwell: Impacts on further drilling operations. [Long pause.]
It was good theater (although “legitimate claims” doesn’t have the same ring as “shitty deal“). But it’s unclear what Cantwell expected him to say. A blanket promise to cover all claims filed by anyone at any time simply wasn’t going to happen. The phrase “legitimate claim” might sound like condescending business speak—or cover for future legal stonewalling. Yet the message is pretty clear: We won’t be handing out wads of cash. “I’m trying to give you as clear an answer as I possibly can,” McKay said. “This is not about legal words. This is about getting it done and getting it done right.” Cantwell said she’d have to take his word for it. But she doesn’t want to see BP “in some court debating what is a legitimate claim.”
That’s hard to avoid. The way to calculate damages from environmental disasters is far from settled law, even after Exxon Valdez. Unless Congress expects BP to pay every last claim no matter what, this whole mess will end up in court. Until then, perhaps McKay should consult his thesaurus for a few alternate phrases for “legitimate claims”—if only to make his next congressional testimony go more smoothly.
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