Former BP executives offer conflicting safety accounts as Gulf oil spill trial continues
Two former high-ranking executives of BP gave conflicting accounts Wednesday of the London-based oil giant’s alleged culture of stressing costs over safety during the second day of testimony in the civil trial to determine liability for the massive 2010 Gulf of Mexico oil spill.
The plaintiffs’ attorneys played video testimony from former BP chief executive Tony Hayward and Kevin Lacy, BP’s former senior vice president for drilling operations in the Gulf.
Hayward, best known for a series of public missteps he made in the wake of the accident, was repeatedly pressed on statements he had made about cutting costs and shaking up management after BP posted a “dreadful third quarter” in 2007, months after he assumed BP’s top job.
Plaintiffs’ attorney Robert Cunningham questioned Hayward, who retirement from BP in October 2010, about a September 2007 article in The Guardian. The British newspaper reported that Hayward planned to “slash management layers from 11 to seven, deploying some staff and removing others to kick-start an oil group that, he believes, has become over-cautious despite the fatal Texas City refinery fire and other major accidents in the US.”
Cunningham also grilled Hayward in the 20-minute video about his 2010 speech at BP’s annual meeting, which he gave April 15, five days before the Deepwater Horizon rig exploded and sank, killing 11 people and sending oil gushing into the Gulf.
The speech highlighted Hayward’s push to cut costs and increase production. “The drive to increase efficiency and reduce costs remains a key focus for everyone at BP,” Hayward said, according to a transcript of the speech released by BP. “We started more than two years ago in our effort to counter cost inflation and drive much greater efficiency into our business.”
Hayward said costs at BP’s upstream unit were 12 percent lower in 2009 compared to a year earlier, and expressed optimism that BP would reduce its expenses even further over the next three years. Hayward said the unit had cut its cash costs in 2009 by more than $4 billion, which came amid lower oil and gas prices and a weak refining margin.
Despite the tough fiscal climate, BP had distributed $10.5 billion to its shareholders, Hayward said at the meeting, as its production rose by 4 percent and it started seven major projects.
BP has tried to have portions of Hayward’s testimony excluded from the civil trial because Hayward was questioned about BP’s past safety violations, including the 2005 explosion at the Texas City refinery, which killed 15 people and injured 180 others.
Several times during Cunningham’s questioning, Hayward leaned back in his chair, fidgeted with his glasses, or let out a long sigh.
“We have rules that govern this process, and they’re not made by you or by me and I will ask you to answer only the question I ask you,” Cunningham told Hayward during a particularly testy exchange of the video testimony.
Following Hayward, Lacy, BP’s former senior vice president for drilling operations for the Gulf, said in video testimony that he reached an agreement with BP to resign in December 2009 – four months before the Gulf spill – because he believed the company was not committed to improving its offshore safety procedures.
Lacy testified that he was “never given a directive to cut corners or to deliver something not safely, but there was tremendous pressure on costs.” He was assigned performance goals, with the potential for bonuses, by BP’s management indicating that “hundreds of millions of dollars” would need to be trimmed in order to meet targets, he testified.
From 2008 to 2009, Lacy said BP’s Gulf drilling budget was cut by $250 million to $300 million, while production increased 54 percent.
Perhaps the most widely watched testimony Wednesday morning came from Alan Huffman, a well design and pressure expert who was questioned by lawyers for the Department of Justice.
Huffman, chief technology officer for Fusion Petroleum Technologies Inc., testified about the steps that operators take to control the mud weight in an oil well, ensuring that it is heavy enough to overbalance the pressure in the rocks around the well, but not so burdening that the formation becomes fractured.
In a 2011 expert report submitted on behalf of the Justice Department, Huffman said “prudent well operators also maintain a cushion between the well’s mud weight and its fracture gradient,” known as a “safe drilling margin.”
But BP, Huffman testified Wednesday, “played it fast and loose” with pressure integrity tests on its Macondo well that would indicate whether it was safe to drill in the months leading up to the accident.
Huffman’s report concluded that BP did not maintain a safe drilling margin on multiple occasions while drilling the Macondo well, and that it had falsely reported its pressure integrity results to offshore drilling regulators. During questioning, Huffman called the behavior “particularly egregious, and I would totally argue unsafe and dangerous, not just regulatory violations here, unsafe from any industry practice that I am aware of.”
Citing internal BP emails, Huffman testified BP officials “recognized the risk of drilling ahead” without a safe margin, which included potentially losing the well.
Attorneys for BP, which operated the ill-fated Macondo well, and Transocean, which owned and operated the Deepwater Horizon rig for BP, were slated to cross-examine Huffman as the civil proceedings continued into the afternoon.
Earlier Wednesday, Lamar McKay, former president of BP America and current chief executive of BP’s upstream unit, wrapped up questioning that carried over from Tuesday.
During questioning from Transocean attorney Kerry Miller, McKay said the Deepwater Horizon rig had a good safety record until the Macondo blowout.
BP agreed to plead guilty to felony manslaughter, environmental crimes and obstruction of Congress and pay a record $4 billion in criminal fines and penalties for its conduct leading to the disaster, which killed 11 people and caused the largest environmental disaster in U.S. history
Miller read through some of the key points of BP’s plea agreement, before circling back to Transocean’s deal, in which the rig owner pleaded guilty to a single violation of the Clean Water Act and agreed to pay $400 million in criminal fines and penalties.
“We’ve agreed that we’re part of the responsibility for this tragic accident,” McKay said. “We’ve apologized for that, we’ve accepted responsibility for that in many different ways, so I would agree that we are a part of the cause of this accident, yes.”
During questioning, Miller grilled McKay about whether the Deepwater Horizon disaster could have been prevented if BP had not misinterpreted the so-called negative pressure test, which was carried out by a Transocean crew being supervised by BP.
That test was used to determine whether the cement poured into the well to seal it off from the formation underground holding oil and gas had worked.
“There were misinterpretations of the negative pressure test,” McKay said, “and that was one of the causes among others that was stated by ourselves as well in the plea agreement with the US government.”
The plaintiffs’ attorneys played video testimony from former BP chief executive Tony Hayward and Kevin Lacy, BP’s former senior vice president for drilling operations in the Gulf.
Hayward, best known for a series of public missteps he made in the wake of the accident, was repeatedly pressed on statements he had made about cutting costs and shaking up management after BP posted a “dreadful third quarter” in 2007, months after he assumed BP’s top job.
Plaintiffs’ attorney Robert Cunningham questioned Hayward, who retirement from BP in October 2010, about a September 2007 article in The Guardian. The British newspaper reported that Hayward planned to “slash management layers from 11 to seven, deploying some staff and removing others to kick-start an oil group that, he believes, has become over-cautious despite the fatal Texas City refinery fire and other major accidents in the US.”
Cunningham also grilled Hayward in the 20-minute video about his 2010 speech at BP’s annual meeting, which he gave April 15, five days before the Deepwater Horizon rig exploded and sank, killing 11 people and sending oil gushing into the Gulf.
The speech highlighted Hayward’s push to cut costs and increase production. “The drive to increase efficiency and reduce costs remains a key focus for everyone at BP,” Hayward said, according to a transcript of the speech released by BP. “We started more than two years ago in our effort to counter cost inflation and drive much greater efficiency into our business.”
Hayward said costs at BP’s upstream unit were 12 percent lower in 2009 compared to a year earlier, and expressed optimism that BP would reduce its expenses even further over the next three years. Hayward said the unit had cut its cash costs in 2009 by more than $4 billion, which came amid lower oil and gas prices and a weak refining margin.
Despite the tough fiscal climate, BP had distributed $10.5 billion to its shareholders, Hayward said at the meeting, as its production rose by 4 percent and it started seven major projects.
BP has tried to have portions of Hayward’s testimony excluded from the civil trial because Hayward was questioned about BP’s past safety violations, including the 2005 explosion at the Texas City refinery, which killed 15 people and injured 180 others.
Several times during Cunningham’s questioning, Hayward leaned back in his chair, fidgeted with his glasses, or let out a long sigh.
“We have rules that govern this process, and they’re not made by you or by me and I will ask you to answer only the question I ask you,” Cunningham told Hayward during a particularly testy exchange of the video testimony.
Following Hayward, Lacy, BP’s former senior vice president for drilling operations for the Gulf, said in video testimony that he reached an agreement with BP to resign in December 2009 – four months before the Gulf spill – because he believed the company was not committed to improving its offshore safety procedures.
Lacy testified that he was “never given a directive to cut corners or to deliver something not safely, but there was tremendous pressure on costs.” He was assigned performance goals, with the potential for bonuses, by BP’s management indicating that “hundreds of millions of dollars” would need to be trimmed in order to meet targets, he testified.
From 2008 to 2009, Lacy said BP’s Gulf drilling budget was cut by $250 million to $300 million, while production increased 54 percent.
Perhaps the most widely watched testimony Wednesday morning came from Alan Huffman, a well design and pressure expert who was questioned by lawyers for the Department of Justice.
Huffman, chief technology officer for Fusion Petroleum Technologies Inc., testified about the steps that operators take to control the mud weight in an oil well, ensuring that it is heavy enough to overbalance the pressure in the rocks around the well, but not so burdening that the formation becomes fractured.
In a 2011 expert report submitted on behalf of the Justice Department, Huffman said “prudent well operators also maintain a cushion between the well’s mud weight and its fracture gradient,” known as a “safe drilling margin.”
But BP, Huffman testified Wednesday, “played it fast and loose” with pressure integrity tests on its Macondo well that would indicate whether it was safe to drill in the months leading up to the accident.
Huffman’s report concluded that BP did not maintain a safe drilling margin on multiple occasions while drilling the Macondo well, and that it had falsely reported its pressure integrity results to offshore drilling regulators. During questioning, Huffman called the behavior “particularly egregious, and I would totally argue unsafe and dangerous, not just regulatory violations here, unsafe from any industry practice that I am aware of.”
Citing internal BP emails, Huffman testified BP officials “recognized the risk of drilling ahead” without a safe margin, which included potentially losing the well.
Attorneys for BP, which operated the ill-fated Macondo well, and Transocean, which owned and operated the Deepwater Horizon rig for BP, were slated to cross-examine Huffman as the civil proceedings continued into the afternoon.
Earlier Wednesday, Lamar McKay, former president of BP America and current chief executive of BP’s upstream unit, wrapped up questioning that carried over from Tuesday.
During questioning from Transocean attorney Kerry Miller, McKay said the Deepwater Horizon rig had a good safety record until the Macondo blowout.
BP agreed to plead guilty to felony manslaughter, environmental crimes and obstruction of Congress and pay a record $4 billion in criminal fines and penalties for its conduct leading to the disaster, which killed 11 people and caused the largest environmental disaster in U.S. history
Miller read through some of the key points of BP’s plea agreement, before circling back to Transocean’s deal, in which the rig owner pleaded guilty to a single violation of the Clean Water Act and agreed to pay $400 million in criminal fines and penalties.
“We’ve agreed that we’re part of the responsibility for this tragic accident,” McKay said. “We’ve apologized for that, we’ve accepted responsibility for that in many different ways, so I would agree that we are a part of the cause of this accident, yes.”
During questioning, Miller grilled McKay about whether the Deepwater Horizon disaster could have been prevented if BP had not misinterpreted the so-called negative pressure test, which was carried out by a Transocean crew being supervised by BP.
That test was used to determine whether the cement poured into the well to seal it off from the formation underground holding oil and gas had worked.
“There were misinterpretations of the negative pressure test,” McKay said, “and that was one of the causes among others that was stated by ourselves as well in the plea agreement with the US government.”
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