Bloomberg News

BP Misled Regulators About Macondo Well, Expert Testifies

February 28, 2013

BP Plc (BP/) officials misled federal regulators about conditions at the Macondo well and forged ahead with “unsafe and dangerous” drilling operations before the fatal explosion that killed 11 rig workers and sent oil spilling into the Gulf of Mexico, an expert witness said.

BP’s internal records for the Macondo project conflicted with numbers sent to drilling regulators and established a pattern of “consistent misreporting” of well pressures, Alan Huffman, a Houston-based petroleum geophysicist, testified for the U.S. government in a trial over claims tied to the 2010 Gulf spill. The fudged numbers allowed BP to continue drilling for oil, he said.

The oil company created “a very misleading impression” about the well’s safety conditions and engaged in drilling operations that “I’ve never seen an operator do,” Huffman told a judge yesterday in New Orleans.

After hearing evidence in the trial, U.S. District Judge Carl Barbier in New Orleans will decide who is liable for damages tied to the largest offshore spill in U.S. history and whether BP, Transocean Ltd. (RIG:US) or other companies that worked on the project were grossly negligent in their handling of the rig and well. His ruling in the nonjury trial on that issue will affect how much each company may have to pay.

The Deepwater Horizon rig explosion sent more than 4 million barrels of oil spewing into the Gulf. The accident sparked hundreds of lawsuits against London-based BP, Vernier, Switzerland-based Transocean, owner of the rig, and Houston- based Halliburton Co. (HAL:US), which handled cement work on the well.

Pollution Fines

For BP, the well’s owner, a finding of gross negligence would mean the company is liable to the U.S. for as much as $17.6 billion in Clean Water Act fines, as well as unspecified punitive damages to claimants who weren’t part of the $8.5 billion settlement the company reached last year. For Transocean and Halliburton, a gross negligence finding would mean they could be held liable for punitive damages.

Lawyers for the government and spill victims contend BP was over budget and behind schedule on the Macondo well, prompting the company to cut corners and ignore safety tests showing the well was unstable.

They also allege Halliburton’s cement job was defective. They claim Transocean officials disabled safety systems on the rig, failed to properly maintain the platform, and never adequately trained its well crew to handle crisis situations.

Transocean, Halliburton

BP sued its contractors, claiming Transocean employees’ miscues on the rig were the main cause of the explosion and that Halliburton concealed flaws with cement work done on the drilling line. Transocean and Halliburton have said BP was at fault.

Huffman’s testimony is part of the goverment’s effort to persuade Barbier that BP’s handling of the Macondo well was so grossly negligent that it warrants a punitive damage award.

Huffman said BP’s Macondo operations had been flawed since 2009 when the company began to fudge numbers on the well’s pressure tests. Federal regulations require oil companies to maintain a safe pressure “margin” to avoid explosions, he said.

The company violated federal regulations by continuing to drill at the Macondo site without safe margins, Huffman said. At the time, such wells were regulated by the U.S. Minerals Management Service, he said.

‘Exceedingly Egregious’

“Once they had determined the drilling margin was gone, they had to go to MMS before they drilled another foot below the surface,” Huffman said. The decision to drill deeper without permission was “exceedingly egregious,” he added.

His review of the well’s records found conditions that were bad “beyond anything I have seen in my career and needed to be brought to the government’s attention,” Huffman testified.

He said BP’s push to continue drilling operations left the Macondo well so delicate and fragile that the company was at risk of “losing the well completely.”

Under cross-examination by BP lawyer Matt Regan, Huffman acknowledged he had never been on an offshore oil rig and wasn’t an expert on every regulation that covers oil-drilling operations.

“My judgment on this matter was based on BP’s behavior at this well” and an interpretation of regulations that “I use every day in this job,” said Huffman, who serves as a consultant to oil companies on drilling-safety issues.

Cost-Cutting Push

Also yesterday, Barbier heard testimony from a BP drilling supervisor who said the company pushed to cut costs over a two- year period before the Deepwater Horizon explosion.

“I was never given a directive to cut corners or deliver something unsafe, but there was tremendous pressure to cut costs,” Lacy said in a video deposition. BP managers encouraged him to cut as much as $350 million in costs in 2009 alone, he said.

Experts who reviewed the rig explosion for spill victims pinpointed the cost-cutting effort as contributing to safety system failures that led to the disaster. That prompted BP crews to forgo standard safety tests on rigs, the plaintiffs’ contend.

The case is In re Oil Spill by the Oil Rig Deepwater Horizon in the Gulf of Mexico on April 20, 2010, MDL-2179, U.S. District Court, Eastern District of Louisiana (New Orleans).

To contact the reporters on this story: Jef Feeley in New Orleans federal court at jfeeley@bloomberg.net; Allen Johnson Jr. in New Orleans federal court.

To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net


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Companies Mentioned

  • RIG
    (Transocean Ltd)
    • $18.21 USD
    • 1.43
    • 7.85%
  • HAL
    (Halliburton Co)
    • $39.44 USD
    • 1.33
    • 3.37%
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