Posted on 10 Nov 2010
The BP oil spill in the Gulf of Mexico wasn't an anomaly but rather reflected systemic problems in the offshore-drilling industry according to officials investigating the causes of disaster, findings that could have repercussions for the entire oil industry.
The co-chairman man of the commission looking into the disaster, William Reilly, told reporters that he initially thought the April 20 blowout of a BP PLC well was a "unique set of events and challenges and unlikely to recur." But he said that since the investigation has unfolded, he has decided that the situation is "mores serious than that—it is a systemic problem."
Former Florida Sen. Bob Graham, in a separate statement, said, "The problem here is that there was a culture that did not promote safety, and that culture failed."
Their statements came during a daylong hearing where the Obama administration's top offshore oil-safety regulator, the chief executive of Exxon Mobil Corp. and the head of the U.S. unit of Royal Dutch Shell PLC offered sometimes contrasting views of what should be done to prevent a repeat of the explosion that touched off the worst offshore oil spill in U.S. history.
Testimony during two days of hearings this week led by Messrs. Graham and Reilly has painted a picture of managers aboard the Deepwater Horizon drilling rig—which was destroyed in the blast—operating on the fly, changing complex plans and making a series of decisions that increased the risks of a catastrophic blowout.
While commission officials stopped short of blaming these decisions on a desire to cut costs, they have said that cost pressures loomed over the operation.
Mr. Reilly on Tuesday questioned BP's management of the operation, and also the roles of some major contractors—Halliburton Co., which performed critical operations to seal and cement the well, and Transocean Ltd., which owned the rig.
"The one thing that we have learned is that three very important and respected institutions which are active throughout the Gulf all are implicated in egregiously bad decisions that contributed to the catastrophe that would suggest to me that solution will have to be systemic," Mr. Reilly said.
A finding by the commission that the offshore oil industry has systemic safety shortcomings could present costly challenges for the players. Industry executives have consistently said the Deepwater Horizon disaster, while tragic, was a one-off occurrence that didn't suggest pervasive safety problems. Other companies have distanced themselves from BP, claiming their safety standards would have prevented a similar disaster on their rigs.
A conclusion by Mr. Reilly and his colleagues that mistakes aboard the Deepwater Horizon reflect a culture of complacency in the industry could bolster calls for tighter regulations and stricter limits on drilling.
Oil executives are already concerned by signs that the Obama administration will move slowly to issue new permits for offshore drilling, and require expensive new safety measures.
Exxon Mobil CEO Rex Tillerson told commission members Tuesday that it was critical for the industry to instill a strong safety culture. "It's in the companies' best interests to improve in this area," he said.
But Mr. Tillerson said it would be tough for regulatory agencies to hire people skilled enough in the complex technology of deepwater drilling to oversee such operations effectively. "We are an industry hiring the best and brightest people, and we pay them so they will come work for us," he said. "It's a difficult challenge for [regulatory agencies] to have people at the same level of competency."
The Interior Department has asked Congress for an additional $75 million to hire more-skilled workers, such as petroleum engineers, instead of relying so much on rig inspectors using a check-the-box oversight approach.
It isn't clear whether that request will find support among newly empowered Republicans in Congress or from oil-industry leaders.
Marvin Odum, head of Shell's U.S. operations, said Tuesday that money for additional regulators should come from taxes and other levies already paid by the oil industry.
"I do think funding should come from the federal government," he told the panel.
Speaking later to reporters, he said that "there is a tremendous amount of funding that comes from the industry to the government through royalties and all the taxes—corporate taxes and otherwise. I think the way we ought to look at this is how do we use a portion of those funds to appropriately fund the regulat