Deepwater Horizon Joint Investigation Team Concludes BP, Transocean and Halliburton Violated Safety Regulations

The federal investigative team reviewing the April 20, 2010 Deepwater Horizon explosion that killed 11 workers, injured 16 and resulted in a catastrophic oil spill that lasted 87 days spilling millions of barrels of oil into the Gulf of Mexico has laid most of the blame for the tragedy on BP, but the news isn’t good for Transocean or Halliburton, either.

The Bureau of Ocean Energy Management, Regulation and Enforcement (BOEMRE)/U.S. Coast Guard Joint Investigation Team (JIT) was formed on April 27, 2010, by a convening order of the Departments of the Interior and Homeland Security to investigate the causes of the Deepwater Horizon explosion, loss of life and resulting oil spill, and to make recommendations for safe operations of future oil and gas activities on the U.S. Outer Continental Shelf (OCS). The JIT held seven sessions of public hearings, received testimony from more than 80 witnesses and experts and reviewed a large number of documents and exhibits pertaining to all aspects of the investigation.

During its investigation, the JIT found evidence that BP, and in some instances its contractors, violated the following federal regulations in effect at the time of the blowout:

· 30 CFR § 250.107 – BP failed to protect health, safety, property, and the environment. BP and Transocean did not: (1) perform all operations in a safe and workmanlike manner; or (2) maintain all equipment and work areas in a safe condition.

· 30 CFR § 250.300 – BP, Transocean and Halliburton (Sperry Sun) did not prevent conditions that posed unreasonable risk to public health, life, property, aquatic life, wildlife, recreation, navigation, commercial fishing or other uses of the ocean.

· 30 CFR § 250.401 – BP, Transocean and Halliburton (Sperry Sun) failed to take necessary precautions to keep the well under control at all times.

· 30 CFR § 250.446(a) – BP and Transocean failed to maintain the blowout preventer (BOP) system in accordance to API RP 53 section 18.10 and 18.11.

· 30 CFR § 250.420(a)(1) and (2) – BP and Halliburton did not cement the well in a manner that would properly control formation pressures and fluids; and prevent the direct or indirect release of fluids from any stratum through the wellbore into offshore waters.

· 30 CFR § 250.427(a) – BP failed to use pressure integrity test and related hole‐behavior observations, such as pore pressure test results, gas‐cut drilling fluid and well kicks to adjust the drilling fluid program and the setting depth of the next casing string.

Among other findings, the report states, “The panel found evidence that BP personnel were compensated and their performance reviewed, at least in part, based upon their abilities to control or reduce costs. At some point in 2008, BP implemented an ‘every dollar counts’ program that was focused on reducing costs by improving the efficiency of drilling operations.”

And, the report continues, “Performance evaluations reflected this cost‐cutting focus. An ‘operational’ performance measure for BP drilling personnel was delivering a well with costs under the authorized expenditure amount. There was no comparable performance measure for occupational safety achievements.”

The investigative team noted that in the weeks leading up to April 20, the BP Macondo team made a series of operational decisions that “reduced costs and increased risks.” For example, when considering the lock‐down sleeve installation on the Macondo well in January 2010, Mark Hafle, a BP drilling engineer, and Merrick Kelley, BP’s subsea wells team leader, reviewed the $2.2 million of incremental cost benefit to BP.

According to the report, Hafle discussed this further with Drilling Team Leader David Sims, and they “agreed that BP should move forward with the lockdown sleeve installation after setting the surface cement plug and prior to the departure of the Deepwater Horizon from the Macondo well. This decision affected the procedure for the setting of the surface plug, the displacement, and the negative test sequence.”

On the day of the blowout, a BP contractor suggested making an additional wash run due to his concerns about achieving a successful lead impression tool impression. John Guide, BP wells team leader, responded by saying, “[W]e will never know if your million dollar flush run was needed. How does this get us to sector leadership?”

Specifically, the report states that BP made a series of decisions that contributed to the Macondo blowout, including:

· BP, Transocean and Halliburton each had “stop work” programs, but the panel found no evidence to suggest that the rig crew members were aware of the multiple anomalies that occurred on April 19‐20. The failure of the rig crew to stop work on the Deepwater Horizon after encountering multiple hazards and warnings was a contributing cause of the Macondo blowout.

· The panel found no evidence that BP performed a formal risk assessment of critical operational decisions made in the days leading up to the blowout.

· Many of the decisions made leading up the Deepwater Horizon blowout – including the timing of the installation of the lock‐down sleeve, the conducting of multiple operations during mud displacement and the use of lost circulation material pills as spacer lowered the costs of the well and increased operating risks. These decisions were not subjected to a formal risk assessment.

· Multiple decisions (the number of centralizers run, the decision not to run a cement evaluation, the decision not to circulate a full bottoms‐up, and others) were in direct contradiction with the DWOP guidance to keep risk as low as reasonably practical.

The report is comprised of Volume I, which covers the areas of investigation under the jurisdiction of the Coast Guard, and Volume II, which covers the areas of the investigation under BOEMRE jurisdiction. It also includes a supplement to Volume I – the Final Action Memo from Coast Guard Commandant Adm. Bob Papp.

In the wake of the Deepwater Horizon tragedy, BOEMRE launched the most aggressive and comprehensive reforms to offshore oil and gas regulation and oversight in U.S. history. The reforms strengthen requirements for everything from well design and workplace safety to corporate accountability. An additional rule, which will be made available for public comment in the coming weeks, will incorporate additional safety requirements that are related to the findings of the investigation. For more information on BOEMRE’s new heightened safety standards, go to: http://www.boemre.gov/Reforms.htm.

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