It’s been a bruising week for BP in New Orleans. A “classic failure” of management and cost-cutting led to 2010′s fatal oil rig explosion, a court heard this week as the civil trial over the Deepwater Horizon disaster began.
It’s now almost three years since the tragedy killed 11 men and triggered the worst oil spill in US history. The impact is still being felt in the gulf where disturbing numbers of dolphins and turtles are still being found dead on the beaches.
This trial is meant to determine, once and for all, who bears the most blame for what went wrong. There’s little doubting BP should get the biggest share, but as the trial gets into full swing, some of the disaster’s major players are getting a free pass: Washington in general, the Obama administration in particular, and us.
Washington has long been a fan of the petro-dollar and Obama is proving another fickle enthusiast, flirting with the industry one moment, even as he snaps at it the next – like the coquettish mistress of an oil tycoon.
Judge Carl Barbier started hearing a case that many thought would never come to trial after settlement talks appeared to collapse. Now, the court is packed with 11 teams of lawyers representing BP, contractors Transocean, Halliburton and Cameron, five Gulf states and the US Justice Department. Lawyers, once more, look set to be the only winners.
Barbier marshals the courtroom with amused authority. Told the plaintiffs had no further questions last week, he replied: “How many lawyers did it take to decide that?” But even he seems to fear this one will run over its three-month allotment.
Every day brings more coverage of the oil giant’s behavior as lawyers try to prove “gross negligence” – a charge that would almost quadruple BP’s eventual likely fine. Former boss Tony Hayward and current executives have been grilled repeatedly about whether massive cost reductions led to the tragedy, as corners were cut. Legal experts have called the case a “bloodbath” that BP should stop.
Given that the government is fighting this case, no one has brought up one of the major reasons this tragedy occurred in the first place: the Obama administration turned a blind eye to the massive risks BP was undertaking in the Gulf and handed it a free pass to drill. Well before the disaster, Obama was making encouraging noises to the oil industry about permits for exploratory wells in new areas of the Gulf – as the White House sought to bolster the US’s energy security and win over political support from Republicans for other bills.
The administration followed up Obama’s industry cooing by giving BP a “categorical exclusion” from the legal requirement that it produce a detailed environmental impact study of the Deepwater Horizon drilling operation. The exclusion came even though the well was among the deepest ever drilled in the Gulf, at the very limits of the available technology in what’s known as “ultra-deep” water.
When things went wrong, Obama turned on BP. After the full scale of the disaster became apparent, Obama passed the buck in a style almost as slick as the spill:
“Let me be clear: BP is responsible for this leak; BP will be paying the bill.”
Of course, President Obama is not alone in Washington. Politicians and regulators have been doing favours for Big Oil for as long as the black stuff has been extracted. George W Bush was a huge friend of the industry. The regulator, the Minerals Management Service (MMS), was created under Ronald Reagan, another Big Oil pal, in what seems to have been, in effect, a deliberate policy of rubber-stamping whatever the industry wanted.
The MMS was fatally compromised at its most basic level – charged with both collecting revenue for the government from oil and gas drilling and with granting the permits that generated that revenue: a classic conflict of interest. It became so good at enabling the industry’s excesses that the industry returned the favour, embroiling the agency in a drugs-and-sex scandal that forced high-level resignations and a re-branding aimed at expunging its tarnished record.
Given its dual role, it’s little wonder that the MMS was so keen to pass a BP drilling plan that failed to discuss how to prevent a deepwater blowout and which, bizarrely, listed walruses as a Gulf of Mexico marine mammal. After the MMS was abolished, regulatory responsibility was taken over by the Bureau of Ocean Energy Management, Regulation and Enforcement (BOEMRE – an anagram of BORE ME). In any case, the new agency soon rediscovered its predecessor’s passion for signing deep-sea drilling permits.
The White House angered environmentalists by speedily lifting restrictions on deep-water drilling after the BP disaster, even though the technical problems that led to the 2010 Gulf spill remain. The White House’s own commission called for a sweeping overhaul of the industry, though that has yet to materialise.
The Southern Environmental Law Center has filed two legal challenges against the Obama administration, charging that the White House “dismissed the lessons learned during the Deepwater Horizon disaster and failed to obtain essential information about the status of life and resources still suffering from the 2010 oil spill.” But gas prices hit in California this month, a price consumers think is “insane”. Politicians of all persuasions know that voters believe cheap gas is an American right. So it’s back to “Drill, baby, drill,” as Sarah Palin had it.
And why, after all, was BP so desperate to cut costs?
Simple: because its shareholders wanted better returns. In September 2007, Hayward took over at BP following a “dreadful” quarter: profits had slumped 12%, to a measly .3bn. Hayward blamed excessive caution, so costs were slashed and risk was encouraged. Kevin Lacy, a former BP Gulf executive who resigned over his safety concerns before the spill, was asked if he was ever told to put costs before safety. He paused for six seconds, before saying:
“I was never given a directive to cut corners or deliver something not safely but there was tremendous pressure on costs.”
And where was that pressure coming from? Ultimately, from shareholders: BP’s shares are held by most British pension funds – all of which probably recycled paper as they pushed BP to cut costs. In other words, there’s plenty of blame to go round.
If you fly over the Gulf today, you will see the sheen of oil everywhere. Each oily patch constitutes an act of negligence to some degree, but some spillage is probably inevitable given the 4,000 active oil and gas platforms in the Gulf.
Pumping 4.9m barrels into the Gulf seems pretty gross to me, but Barbier’s legal mind may see things differently. No matter what he eventually decides, BP is not the only one being tarred by the evidence emerging in his New Orleans court.
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