Deepwater Horizon- Does The Penalty fit the Crime?

The U.S. Environmental Protection Agency, EPA, announced last Thursday that Transocean Deepwater Inc., Transocean Ocean Holdings LLC,Transocean Offshore Deepwater Drilling Inc., Transocean Deepwater Inc. and Triton Asset Leasing GMBH have signed a cooperation and guilty plea agreement with the U.S. government pleading guilty to criminal violation of the clean water act, and agreed to pay $400 million in criminal fines and penalties and have agreed to pay an additional $1 billion to resolve federal Clean Water Act civil penalty claims for the 87 day oil spill at the Macondo Well and the Transocean drilling rig Deepwater Horizon back in 2010.

Under the settlement, the Transocean must also implement court-enforceable measures to improve the operational safety and emergency response capabilities at all their drilling rigs working in waters of the United States. These measures are aimed at reducing the chances of another blowout and release/spill of oil and at improving emergency response capabilities and will be in place for at least five years.

Back on November 15, 2012, BP agreed to plead guilty to 11 counts of felony manslaughter, one count of felony obstruction of Congress, and violations of the Clean Water and Migratory Bird Treaty Acts., all arising from the 2010 Macondo Well/ Deepwater Horizon blowout that killed 11 people and caused the largest oil spill and what EPA called in their press release the largest environmental disaster in U.S. history. BP agreed to pay $4.5 billion, including $1.26 billion criminal fine, to end all criminal charges and resolve securities claims against them.

In addition, on November 28^th 2012 EPA announced that it had temporarily suspended BP Exploration and Production, Inc., BP PLC and affiliated companies (BP) from new contracts with the federal government. This includes oil development leases in a Gulf as well as contracts with the Department of Defense. The suspension does not affect existing agreements and contracts BP has with the government. Since the Deepwater Horizon accident, the US has granted BP more than 50 new leases in the Gulf of Mexico, where the company has been drilling since the government lifted the drilling moratorium. In addition, in 2011 BP was the largest fuel supplier to the U.S. Department of Defense and is likely to be the largest supplier in 2012, and 2013. BP has also reached an agreement to settle claims from fishermen and others affected by the oil spill for $7.8 billion that was approved by a federal judge on December 21, 2012. According to a press release by BP, this raises to $41.95 billion the charge taken against income in the third quarter financial statements. BP’s financial statements as of  December 31, 2012 will reflect this additional charge that reflects the criminal settlements, the $18 billion spent on cleanup costs and the $15 billion  paid into the trust fund to compensate victims.  This settlement only addresses economic and property damage and does not address claims made by cleanup workers and other who say exposure to oil or oil dispersant has made them sick.

Separate from the corporate charges and settlements, a federal grand jury has indicted two BP supervisors, Robert Kaluza and Donald Vidrine who were on board the Deepwater Horizon with seaman manslaughter and involuntary manslaughter for each of the 11 men killed in the blast, as well as a criminal violation of the clean water act. Robert Kaluza and Donald Vidrine were the on-site supervisors representing BP on the Deepwater Horizon drill rig. They were the Well Site Leaders known colloquially as the “company men.” Their job was to ensure that BP had “well control” by supervising the implementation of BP’s drilling plan and ensuring the safety of the operation.

According to charges filed by the United States against Mr. Kaluza and Mr. Vidrine on April 20^th 2010 a negative pressure test was performed on the well to ensure that the temporary cement seal just installed would hold when the drilling mud was removed when the well displacement took place. During the test the pressure quickly built up above acceptable values. Each time the pressure was bled off it built up again along with abnormal fluid flow.

The two men were presented with what the U.S. Government characterizes as a nonsensical explanation that this was due to a "bladder effect” and directed the testing of the “kill line.” The government charges that rather than consult with BP engineers on shore about the continued high pressure in the drill pipe and ask for advice, Mr. Kaluza and Mr. Vidrine passed the negative pressure test. The government characterizes this as gross negligence.

The well was not secure. The abnormal readings during the negative pressure test were the indication that the well was not secure and Mr. Kaluza and Mr. Vidrine failed to adequately account for the abnormal readings during the testing. The government charges that these two men by deeming the negative pressure test a success allowed the displacement of the well to proceed and resulted in the blowout that killed 11 men aboard the rig that same evening. Mr. Kaluza and Mr. Vidrine are charged with involuntary manslaughter, seaman manslaughter and criminal violation of the Clean Water Act. Both men have pleaded not guilty in a New Orleans court. They face up to 10 years in prison on each of 11 counts of seaman's manslaughter and eight years in prison on each of 11 counts of involuntary manslaughter. The trial has been delayed until 2014 to allow the defense to adequately prepare.

Finally, former senior BP executive David Rainey pleaded not guilty to obstruction of justice charges for lying about how much oil was gushing out of the runaway well. He faces five years in prison if convicted.

BP Banned from Additional Drilling Leases and New Contracts with U.S.

The U.S. Environmental Protection Agency (EPA) announced on Wednesday that it has temporarily suspended BP Exploration and Production, Inc., BP PLC and affiliated companies (BP) from new contracts with the federal government. This includes oil development leases in a Gulf as well as contracts with the Department of Defense.

The BP suspension will temporarily prevent the company and from getting new federal government contracts, grants or other covered transactions until the company can demonstrate to the EPA that it meets Federal business standards. The suspension does not affect existing agreements and contracts BP has with the government. In 2011 BP was the largest fuel supplier to the U.S. Department of Defense and is likely to be the largest supplier in 2012, and 2013. This past September (2012) a Division of BP products of North America Inc., was awarded a contract for fuel with a maximum $816 million, and in May 2012 BP West Coast Products, L.L.C., doing business as Arco, La Palma, Calif., was awarded a contract with a maximum $782 million for fuel. So, for the short term, BP was barred from the Gulf oil lease auction and needs to demonstrate and document good behavior and environmental practices in fulfillment of their existing contracts.

On November 15, 2012, BP agreed to plead guilty to eleven counts of Misconduct or Neglect of Ship Officers, one count of Obstruction of Congress, one misdemeanor count of a violation of the Clean Water Act, and one misdemeanor count of a violation of the Migratory Bird Treaty Act, all arising from the 2010 Deepwater Horizon disaster that killed 11 people and caused the largest oil spill and EPA is calling in their press release the largest environmental disaster in U.S. history. BP agreed to pay $4.5 billion, including a record $1.26 billion criminal fine, to end all criminal charges and resolve securities claims against them. Separate from the corporate manslaughter charges, a federal grand jury has indicted two BP supervisors who were on board the Deepwater Horizon with  manslaughter and involuntary manslaughter for each of the 11 men killed in the blast, as well as a criminal violation of the clean water act.

The Gulf Oil Spill Update and the Magic of Nature

Oil began gushing from the BP-Horizon Macondo well into the waters of Gulf of Mexico on the night of April 20th with the explosion of the Deepwater Horizon oil rig. The blowout preventer failed that night and in subsequent days BP was unable to trigger the device. Finally, BP sealed shut a provisional cap over the wellhead and stopped the oil from flowing into the Gulf of Mexico on July 15, 2010, after eighty six days later and an estimated 205,800,000 gallons of oil were released into the Gulf of Mexico.

Nonetheless, the new cap has only been a temporary solution. Permanently plugging the leak will take place early next month using the relief well that has been drilled. A relief well is actually an intercept well that will be used to cut into the Macondo well and pump in mud and cement to permanently seal it. There is risk that in an attempt to permanently seal the well, oil will be released again. So, as both a safety precaution and a collection of evidence in investigating the leak, BP is preparing to remove the failed blowout preventer and capping stack from the damaged Macondo oil well in the Gulf of Mexico. The failed blowout preventer is expected to be removed on Monday or Tuesday and replaced with another blowout before the weekend according to the National Incident Commander Thad Allen. Allen said the blowout preventer is a key piece of evidence in the investigation of the explosion and oil spill, including those by the U.S. Department of Justice and a joint probe by the Coast Guard and the U.S. Bureau of Ocean Energy Management.

Meanwhile, there has been keen interest and worry about the environmental impact from the oil spill. The US government now reports a total of 45,840,000 gallons of oil have been recovered or burned. A total of more than 11,140,000 gallons of oil from the open water have been removed by controlled burns. The government lists 34,700,000 gallons of an oil-water mix have been recovered. In an effort to accelerate the breakdown of the oil approximately 1.84 million gallons of dispersants had been released into the waters of the Gulf of Mexico, both on the surface and in the sub-sea. The long term impacts of this release especially the deep water release of dispersants is unknown, but the underwater plume of oil that was previously observed now appears to be gone.

Several teams of scientists have been following and investigating the oil plume that formed deep below the surface. The plume was created when the chemical dispersant (Corexit 9500) was dumped around the wellhead in an effort to break up the torrent of crude oil gushing from the seabed and prevent a large quantity of flammable oil from reaching the surface. The plume continued spreading through the water even after the well was finally plugged July 15 but has not been observed recently. Several scientific groups have been investigating this plume and its apparent fate.

Terry Hazen is a microbial ecologist with Lawrence Berkeley National Laboratory Earth Sciences Division, (Berkley Lab) and principal investigator with the Energy Biosciences Institute, lead a study from Berkeley Lab. Hazen and his team reported on the new microbes in the online journal Sciencexpress in August. He conducted this research under an existing grant he holds with the Energy Biosciences Institute (EBI) to study microbial enhanced hydrocarbon recovery. EBI is a partnership led by the University of California (UC) Berkeley and including Berkeley Lab and the University of Illinois that is funded by a $500 million, 10-year grant from BP. Results reported in Sciencexpress are based on the analysis of more than 200 samples collected from 17 deepwater sites between May 25 and June 2, 2010.

Hazen and his colleagues determined that natural bioremediation of the oil plum is taking place. They found that microbial activity is causing faster than expected biodegradation. Their research found that the dominant microbe in the oil plume is a new species, closely related to members of Oceanospirillales family of known microbes. The Berkeley Scientists attribute the faster than anticipated rates of biodegradation at the 4.7 degree Celsius temperature several thousand feet below the surface in part to the nature of the Gulf light crude, which contains a large volatile component that is more biodegradable, to the use of the dispersant.

Both the Berkeley Lab and the Wood Hole Oceanographic Institute had found only mildly depressed levels of oxygen (from 67% oxygen saturation outside the plume to 59% saturation within the plume). Wood Hole Oceanographic Institute had reported earlier that the lack of oxygen dead zone anticipated by predicted bacterial digestion of the plume indicated that the plume was being bioremediated slower than expected. While their observations explain the lack of a dead zone, do not explain the disappearance of the plume.

A third group of scientists at University of California at Santa Barbara, who are also attempting to characterize the microbial response to the oil plume felt that the Berkeley Scientists were measuring the dilution rate for the plume more so than the bioremediation rate. Dr. Hazen agreed that dilution was a factor. The Berkeley Scientists will continue to sample the area in the coming weeks including sediment cores near the well head. However, recent observations confirmed that the plume may be gone, thanks to a combination of microbial action and dilution. While the new species of microbe may not be quite as miraculous as its press coverage, still, microbes are present, oxygen saturation while mildly depressed has not created dead zones in the Gulf of Mexico and the plume is gone.

BP Oil Leak Update

A “leak” or “spill” does not covey the damage and impact of the 1.5 million to 2.5 million gallons of oil that the government and BP currently estimate are released each day from the BP-Horizon Macondo well into the waters of Gulf of Mexico and began on the night of April 20th with the explosion of the Deepwater Horizon oil rig. However, since June 4th when the first successful cap, “top hat,” was installed, BP has been capturing a portion of the oil, anywhere from 840,000 to 1.2 million gallons of oil a day. The cap was leaking and it was impossible to estimate the true flow rate, so the actual amount of oil being spewed into the Gulf waters has only been estimated.

Given a good weather window, BP with the approval of the Administration’s on-site commander Admiral Allen have decided to remove the old cap, install a new better fitting cap and attach to well to another ship, the Helix Producer which can capture up to an additional million gallons of oil a day at the same time. Both of these actions were planned to take place, but not simultaneously. It was originally planned to attach the Helix Producer then replace the cap.

On Saturday, July 10th 2010 robotic submarines removed the leaking cap from the gushing gulf oil well. This was the first step in installing the new cap which is designed to fit more snugly and help BP catch all the oil. However, until the cap is secure, millions more gallons of crude oil will flow freely into the Gulf for at least two days until the new tighter-fitting cap called ‘Top Hat Number 10” is functioning and will enable more oil to be caught. We are all hopeful that this procedure hit no delays and that the new cap will be in place today. Meanwhile, the Helix Producer is being attaché to the system. With Top Hat Number 10 and Helix Producer in place, the system will be capable of capturing 2.5 million to 3.4 million gallons of oil a day and we may finally know what the true flow rate of the Macondo well has been.

None the less, the new cap is only a temporary solution. Hope for permanently plugging the leak which has spilled between 87 million and 172 million gallons of oil into the Gulf of Mexico as of July 10th still lies with the two relief wells being drilled. The first of the relief wells is still estimated to be completed by mid-August. The relief well is actually an intercept well that will drill into the leaking Macondo well and pump in mud and cement to permanently seal it. That is the plan but it is much more complicated than that.

To intersect the leaking well, BP has been drilling a new well parallel to Macondo well. At the last five feet, the intension is to shift directions slightly and drill directly into the Macondo well. BP is bouncing electromagnetic waves through rock to measure the distance between the relief well and the interception target as they near their goal. In the June 28th technical briefing by BP, it was pointed out that BP started drilling the relief well at the surface some 2,800 feet away from the well horizontally. Now, they are within 20 feet of the existing well and have been paralleling the well. On June 28th the relief well was at a depth of 16,770 feet with another 900 feet to go vertically before they try to cut into the Macondo well sideways. Before they do that BP is going to have to ensue that they are exactly where they think they are and lined up within the last 100 feet before they cut. They will have drilled over a mile to hit a less than 10 inch pipe. Once they have managed to intercept the well, they then will have to kill it. None of these steps is easy or certain.

The Deepwater Horizon BP Oil Spill

On the night of April 20th, 2010 a rush of methane gas up the well pipe to the sea surface occurred and the Deepwater Horizon Oil rig exploded, killing 11 workers and injuring 17. The oil well head, almost a mile deep, began gushing oil into the Gulf of Mexico. From the start Louisiana officials have argued that keeping oil away from the coastline, protecting the estuaries, marshlands and beaches to protect not only the ecology of the area, but also the fishing and tourist industries was of first importance. There was no immediate response, no deploying of manpower and resources to protect the coast for days as the oil gushed into the Gulf.

On April 22nd the Navy and Coast Guard were sent to fight the fire from the explosion. Since then, BP was left to respond to the spill and for days on end the oil catching booms sat idle. This is not the first blowout in history, though the difficulty of staunching the flow was compounded by the extreme depth of the well. For 40 days BP bumbled along trying different ideas to staunch the flow, these; however, were basically the same approaches used in the past. In 1979 when the Mexican Ixtoc well blew out in 150 feet of water it took just about nine months to staunch the flow. The Deepwater Horizon is about a mile deep so the difficulty of responding the spill ins not to be underestimated. The Mexican national oil company Pemex tried to stop the flow with drilling mud, and then with steel and lead balls dropped into the wellbore. It tried to contain the oil with a cap, but failed in all attempts despite being only 150 feet deep. Finally, after nine months a relief well successfully plugged the hole with cement and the flow was stopped after 138 million gallons of crude was released into the Gulf of Mexico.

Though BP has systematically tried to stop the flow by first an attempt to activate the blowout preventer valves, then by trying the first dome which became clogged with icy hydrates and failed, then by trying to divert and capture the flow with an insertion tube, followed by trying to plug the hold with mud and debris (as the Mexicans did). Finally this week BP was able to cut the riser and lower the second containment cap in place. This cap captured 6,077 barrels of oil during its first 24 hours in operation. This is estimated to be somewhere between 25%-50% of the flow. There are four vents at the top of the cap which are now open to relieve pressure and if they are successfully closed without blowing out the seal, the captured flow could be increased. This cap is a temporary measures to capture the flow until two relief wells are completed in the next three months and the Deepwater Horizon can be permanently sealed.

BP is preparing backup systems in the containment effort (risk management learned a little late). Several more caps are in the Gulf. BP plans to replace the currently installed cap with a heavier and more tightly sealed cap designed with storage capacity in case a hurricane forces the containment ship to leave the area. BP and US regulators appeared to believe that because there had not been such a catastrophic blowout in the Gulf since 1979, it would not happen. We were not prepared; we did not have an emergency plan or procedures to mitigate the impact from a catastrophic blowout. Inappropriate risk management took place and was compounded by inappropriate emergency response.

A thick film coats the shore from Louisiana to Florida, and tar balls and orange foam have washed up on Gulf Coast beaches, too. These are the immediate effects of a spill are obvious along with the images of oil soaked and suffocating and dead seabirds washing up on shore. More than 597 birds have been found dead along the coast, according to a federal tally released Friday. In addition more than 243 sea turtles have also been found dead. Dead dolphins were also washing ashore, 31 were dead as if June 7th. But some types of ecological damage are hard to measure and can take years to document. This ecological tragedy is immense. As David Leonhardt pointed out in the New York Times, people in general do a lousy job of estimating risk. Maybe requiring emergency response preparation and maintaining emergency response forces and measures is the true job of government.

The Worst Oil Spill in US History

On the night of April 20th, 2010 a rush of methane gas up the well pipe to the sea surface occurred and the Deepwater Horizon Oil rig exploded, killing 11 workers and injuring 17. The oil well head, almost a mile deep, began gushing oil. For 40 days oil has gushed into the Gulf of Mexico. Initially it was reported that the oil was being released at a rate of 1.000 barrels a day. That estimate was shortly upped to 5,000 barrels a day. On May 27th the US Geological Survey estimated that the well was actually leaking 12,000-19,000 barrels of oil a day (between 504,000 and more than 1,000,000 gallons a day) making this the largest oil spill in US history. However, it may be even worse. The Marin e Science Institute at UC Santa Barbara which participated in creating the estimate issued a separate statement from their participating scientist, Dr. Ira Leifer, stating that the rate at which oil was spilling into the Gulf of Mexico was significantly larger than the 12,000-19,000 barrel a day estimate. There's almost as much uncertainty about what is happening to the oil already in the water. The oil slick observed so far has covered as much 28,958 square miles, with the exact size and location of the slick fluctuating from day to day depending on weather conditions. Scientists have also discovered underwater plumes of oil not visible from the surface.The extent of the plume is not fully known at this point and the impact from the chemicals being used to break up the oil so it degrades more easily is not known. These chemicals are being used in amounts and at water depths never before tried and the impact on the marine environment is unknown. This is an ecological disaster.

On April 20th the Deepwater Horizon Oil rig exploded. On April 22nd the Navy and Coast Guard were sent to fight the fire from the explosion. Since then, BP was left to respond to the spill and for days on end the oil catching booms sat idle. The Oil Pollution Act of 1990 mandates a National Response Team. Currently that consists of Homeland Security Secretary, a National Incident Commander and the on-site coordinator, the Coast Guard. For 40 days oil has flowed into the Gulf of Mexico at a rate of at least 500,000-1,000,000 gallons a day. For 40 days Louisiana officials have argued that keeping oil away from the coastline, protecting the estuaries, marshlands and beaches to protect not only the ecology of the area, but also the fishing and tourist industries was of first importance. For 40 days BP bumbled along trying different ideas to staunch the flow. The federal government has had more than a dozen congressional hearings and scores of hours of witness testimony but failed to deploy the military, the coast guard and call up the National Guard to protect Louisiana’s coastline. Great, we now have a federal government that is so bloated and inefficient that all they can do is have hearing to allot blame. The Director of the Minerals Management Service of the Federal Land Management Bureau was pushed to resign after 38 days of oil flowing into the Gulf.

BP and regulators widely believed that because there had never been such a catastrophic blowout in the Gulf, it would not happen. We were not prepared; we did not have an emergency plan or procedures to mitigate the impact from a catastrophic blowout. Inappropriate risk management took place and was compounded by inappropriate emergency response. Though BP has systematically tried to stop the flow by first an attempt to activate the blowout preventer valves, then by trying to dome the flow, then by trying to divert and capture the flow with an insertion tube, now by trying to plug the hold with mud and debris so they can once more try to dome the well head, they have made little if any progress and have wasted valuable time trying to figure out what to do. These plans should have already been in place for measures to stem the flow. These actions were always temporary emergency measures, an emergency response to prevent an ecological and economic catastrophe which is befalling Louisiana and the adjacent states. A permanent solution was and always will be to drill relief wells ahead of this well. On May 2, 2010, BP began drilling the first deep-water intercept relief well, which is located one-half mile from the Deepwater Horizon well, in a water depth of over a mile. A second relief well was begun on May 16. These wells are estimated to take 90 days to complete. This blowout required three prong actions, stemming the flow, capturing the released oil to protect the environment and ecological balance and the permanent solution of drilling a relief well. BP was left to putz around with no strategic plan of action, and piecemeal deploying of resources while our government kept “our foot on the neck of BP” whatever that means. We do; however, have a lovely government sponsored website with cool video clips and everything.