A fateful reminder... September 09 2014

...of why enforcement and oversight of a transparent design and operating system must be agreed to put fracking on the same safety footing as our Nuclear Power Industry?

Extracted and adapted from Sunday Times article by Danny Fortson – 7/9/14

One hundred feet, it turns out, made all the difference.

It was April 9, 2010. Drilling on the Macondo reservoir, 40 miles off the coast of Louisiana, was already 54 days behind schedule and $60m over budget. Each day BP spent trying to finish the troublesome well, some 18,000ft beneath the deck of the Deepwater Horizon oil rig, lost it another $1m.

The walls at the bottom of the 2.5-mile well had failed just a few days before. BP had to stop drilling and pump in millions of gallons of drilling “mud” to prop it open. The “margin” – the measure of the pressure between the oil, the well bottom, and the drilling fluid being pumped in to keep it from spewing up uncontrollably – was virtually zero.

Yet the drill bit had, at long last, reached the first of two targeted reservoirs. BP would be able to plug the “well from hell” and move on.

All it needed was another 100ft to punch through the bottom of the reservoir, which would be vital to test how productive it could be. Having already pushed its luck, BP decided to push it 100ft more.

Alan Huffman, an expert witness of the US government, called the decision “one of the most dangerous things he had ever seen in his 20 years’ experience”. Eleven days later, a geyser of crude burst forth. The Deepwater Horizon exploded and sank. Eleven workers died; their bodies were never recovered. Crude spewed into the Gulf of Mexico for nearly three months.

BP has been struggling to rehabilitate itself ever since. Last week the FTSE 100 giant was hit with the worst possible outcome. An American court ruled that BP was “grossly negligent”, a legally extreme finding that opens up BP to $15bn (£9.2bn) in fines on top of the $43bn it had already paid to clean up beaches, settle lawsuits and pay for funerals.

In a damning 153-page decision, Carl Barbier, the 70 year old New Orleans judge overseeing the case, discarded BP’s argument that the tragedy was the result of multiple mistakes by multiple parties. He apportioned 67% of the blame – and eventual damages payments – to the company. Transocean, the owner of the Deepwater Horizon, and Halliburton, the company contracted to cement the well, were liable for 30% and 3%, respectively.

Both were negligent, in Barbier’s view, but only BP was deemed to have met the harsher standard of gross negligence and wilful misconduct. Analysts at Investec said: “This, we understand, is effectively a moral division.”

From the beginning BP was the villain in the public eye. Last week’s verdict means it now is legally too. Barbier accused it of “reckless” conduct. The decision to drill the final 100ft “was the initial link in a chain that concluded with the blowout, explosion and oil spill”.

Brian Gilvary, BP’s finance director, said the company “strongly disagreed” with the judge’s “erroneous” ruling. BP pledged to appeal, a process that will probably drag on for years.

From the earliest days of the crisis, when the underwater “spill-cam” of inky crude billowing into the sea was on an endless loop on America’s cable news channels, BP was adamant. The company would not, it claimed, be found grossly negligent. That would be a bridge too far.

Indeed, the term itself was a subject of great debate at the trial. Barbier devoted eight pages of his judgement to the duelling interpretations put forth by BP and the American government before siding with the latter. It classified gross negligence as “an extreme departure from the care required under the circumstances or a failure to exercise even slight care”.

BP claimed prosecutors would have had to prove intent; that BP proceeded “with conscious indifference to the rights, safety, or well being of others”.

Barbier’s dismissal of that argument was crucial. It made finding the company guilty that much easier, and in turn opened the door to much heavier fines. Under the Clean Water Act, BP is liable for $1,100 for every barrel spilt. The gross negligence ruling means that BP could be forced to pay up to $4,300 a barrel. The company has set aside $3.5bn for such penalties. If it loses the appeal that figure could rise to nearly $18bn.

The legal wrangling is far from over. Barbier must still hand down his ruling on the second phase of the trial, which was held to determine how much oil was spilled. The government claims 4.2m barrels were released. BP reckons just over half that figure (2.5m barrels) escaped. The final sum is critical, as it too will affect the amount of damages.

The final stage of the trail, set to determine an over damages sum, to be split among BP and its co-defendants, will not start until January. The judge is expected to take eight factors into account, including BP’s response to the spill, which could mitigate the severity of the penalty.

In the judgement, Barbier methodically catalogued the chain of errors and “profit-driven decisions” that led to the catastrophe. The well was drilled with fewer safety back-up measures than expected for such high-temperature, high-pressure wells.

Warning signs mounted. There were unexpected gas “kicks” – sharp releases of hydrocarbons into the well bore. At one point all the drilling mud BP had pumped underground disappeared, indicating a big breach – or several – in what was supposed to be a sealed hole. This took five days to repair.

Weeks behind schedule and millions over budget, the crew were under huge pressure to finish the job.

On the fateful night of April 20, Don Vidrine, the senior BP manager on the rig at the time, misread a key pressure test that should have raised alarm bells. Mark Hafle, an engineer who was monitoring the data in Houston, “told Vidrine essentially that the test could not be considered a success given the inconsistent pressure readings”, Barbier wrote.

Vidrine didn’t run another test. Hafle didn’t insist on one. Thirty six minutes later, the Deepwater Horizon exploded. There is little argument over the facts. BP’s best hope is that the appeal court will decide to evaluate them in a more favourable light.