Hearing Prompts Blame Game on Oil Spill

Oil, scooped up with a bucket from the Gulf of Mexico off the side of the supply vessel Joe Griffin, is seen in the hands of an AP reporter at the site of the Deepwater Horizon oil spill in the Gulf of Mexico, off the coast of Louisiana Monday, May 10, 2010. (AP Photo/Gerald Herbert)
AP Photo/Gerald Herbert
Last Updated 6:40 p.m. ET

The blame-game was in full swing as Congress began hearings on the massive oil spill that threatens sensitive marshes and marine life along the U.S. Gulf Coast, even as the cause of the explosion on the Deepwater Horizon offshore rig and spill has yet to be determined.

Congress demanded answers Tuesday about what could become the worst offshore oil spill in U.S. history.

What senators got was finger-pointing as executives of three companies involved in the disaster - BP, Transocean and Halliburton - blamed one another, CBS News Correspondent Nancy Cordes reports.

BP PLC told senators Tuesday its massive spill was caused by the failure of a key safety device made by another company. In turn, that company, Transocean, said BP was in charge, and that a third company which poured concrete to plug the exploratory well didn't do it properly. The third company, Halliburton, says it was only following BP's plan.

"I hear one message, and the message is don't blame me," Sen. John Barrasso, R-Wyo., said.

Some damage estimates now exceed $10 billion, and BP's head promised lawmakers he would pay all "legitimate" claims, Cordes reports. The legal liability limit currently stands at $75 million.

Tuesday morning's hearing by the Energy and Natural Resources Committee, and the afternoon session before the Environmental and Public Health Committee gave lawmakers their first chance to question the executives publicly about the April 20 rig fire, attempts to stop the flow of oil, and efforts to reduce the damage.

since last month's rig explosion, reports CBS News correspondent Tara Mergener.

Special Section: Gulf Coast Oil Disaster
Gulf Oil Spill, by the Numbers

Lawmakers are asking oil industry giant BP why its drilling plans discounted the risk that such a catastrophic pipeline rupture would ever happen, and why it assumed that if a leak did occur, the oil would not pose a major threat.

During the morning hearing, the executives' opening statements brought into the open fissures among the companies caught up in the accident and its legal and economic fallout.

BP, which operated the rig, told lawmakers that Transocean's blowout preventer failed to shut off the oil flow.

"That was to be the fail-safe in case of an accident," Lamar McKay, chairman of BP America, said, pointedly noting that the 450-ton blowout preventer - as well as the rig itself - was owned by Swiss-based Transocean Ltd.

"Sadly and for reasons we do not yet understand, in this case, they were not. Transocean's blowout preventer failed to operate," Mckay said.

Of the 126 people on the Deepwater Horizon rig when it was engulfed in flames, only seven were BP employees, said McKay.

Despite making such statements Tuesday morning, in the afternoon Environmental and Public Health Committee hearing McKay reminded senators about the multiple investigations looking into the explosion and then said "it is inappropriate to draw any conclusions before the facts are known."

In its testimony, Transocean - the rig's owner - shifts the blame to BP.

"Offshore oil and gas production projects begin and end with the operator, in this case BP," said Transocean CEO Steven Newman. He said it was BP that prepared the drilling plan and was in charge when the drilling concluded and the crew was preparing to cap the well 5,000 feet beneath the ocean;s surface.

To blame the blowout preventers "simply makes no sense" because there is "no reason to believe" that the equipment was not operational, Newman argues.

Newman also cites a third company, Halliburton Inc., which as a subcontractor was encasing the well pipe in cement before plugging it - a process dictated by BP's drilling plan.

"The attention now being given to the BOPs [blowout preventers] in this case is somewhat ironic because at the time of the explosion, the drilling process was complete," said Newman. "The well had been sealed with casing and cement, and within a few days, the BOPs would have been removed. At this point, the well barriers - the cementing and the casing - were responsible for controlling any pressure from the reservoir."

"The BOPs were clearly not the root cause of the explosion," he said.

Halliburton claims its crews finished a cementing operation 20 hours before the rig burst into flames.

A Halliburton executive, Tim Probert, asserted at the hearing that the company's work was finished "in accordance with the requirements" set out by BP and to accepted industry practices. He said pressure tests were conducted after the cementing work was finished to demonstrate well integrity.

Both BP and Transocean are conducting separate investigations into what went wrong. All executives said Tuesday that all testimony and analysis generated by their investigations would be shared with the government.

Sen. Mary Landrieu, D-La., asked McKay pointedly, "Will BP pay?" beyond the $75 millions it would be legally bound to pay, even if the company were not found to be grossly negligent.

"We've been very clear, our CEO Tony Hayward has been very clear, and we are going to pay all legitimate claims," McKay said.

"Define 'legitimate,'" Landrieu asked.

"Substantiated claims," McKay said. "There's the intent to be fair, responsive and expeditious. As to the $75 million that you mention, we think we're going to exceed that obviously and that is irrelevant. We have been very clear we're going to pay the claims and the entire resources of BP are behind this.

Sen. Maria Cantwell, D-Wash., noted that some analysis has suggested the losses and costs involved could be as high as $14 billion, and asked if BP's payments would go that high.

"I am saying we will pay all legitimate claims, yes," McKay said.

Transocean's Newman was circumspect: "As the lease operator, that falls on BP," he said.

McKay repeated the question on impacts, from fishing to local communities: we will pay all legitimate claims.

When asked if governments would be compensated for lost tax revenues, McKay responded, "Question mark."

While senators questioned BP's track record on accidents and suggested there was a pattern of poor safety practices, McKay said a new corporate culture has promoted safety, and he defended the company's safety record in the Gulf of Mexico.

Since the accident, McKay said, BP has conducted testing of blowout preventers worldwide and asked for information on any modifications made.

McKay said, "We do have reason to believe [the Deepwater blowout preventer] was modified."

Transocean's Newman confirmed the BOP was modified in 2005, saying it was done at BP's request and expense, to allow for more efficient testing. Newman said other BOPs have been similarly modified, and that there have been no incidents related to those modifications.

Landrieu asked if safety standards set by the Minerals Management Service for domestic offshore drilling are the highest internationally.

"The regulatory regimes we operate in around the world vary from very minimal to quite stringent," said Newman [Transocean operates in approximately 30 countries], "and I would characterize the U.S. as being closer to the end of quite stringent."

"But we're not the most stringent?" Landrieu asked.

"I think there are aspects of the regulatory regime in places like the U.K. and Norway that would be more stringent than the U.S."

Landrieu also questioned whether Transocean's recent acquisition of another company may have diluted its safety resources, and said attention should be given to companies whose mergers may compromise the safety of their operations.

The committee chairman, Sen. Jeff Bingaman, D-N.M., opened the morning hearing Tuesday saying it was not enough "to label this catastrophic failure an unpredictable and unforeseeable occurrence."

"At the heart of this disaster are three interrelated systems - a technological system of materials and equipment; a human system of persons who operated the technological system; and a regulatory system. These interrelated systems failed in a way that many had said was virtually impossible," he said. "We need to examine closely the extent to which each of these systems failed to do what it was supposed to do."

Extending concern to those whose jobs and way of life are impacted by the disaster, Bingaman said, "We owe it to them to see that disasters like this never happen again."

Sen. Lisa Murkowski of Alaska, the panel's ranking Republican, said it is essential to determine if the rig operators followed regulations and the law.

But Murkowski added that the oil spill reflected a "cold reality," saying, "The production of energy will never be without risk or environmental consequence."

Murkowski said that due to America's energy needs, more domestic production should be pursued, and claimed polls show the public has not turned away from offshore drilling.

"Our nation will need a lot of oil for a long time to come. . . . This incident notwithstanding, we need to safely produce the maximum amount of that energy here at home," she said.

The executives didn't receive better treatment Tuesday afternoon.

Sen. Barbara Boxer, D-Calif., the Environmental committee chairwoman, talked about BP's application for a waiver from submitting an environmental impact report before building the Deepwater Horizon rig.

In the application, Boxer said the company reassured the government by saying its equipment would likely prevent the rig from impacting the Gulf.

"We can't have a world where people say one thing before they get a permit and then just act like they haven't said it," Boxer told McKay. "You said we won't have a problem … This is just unacceptable. It doesn't build our confidence in the future."

Lawmakers are questioning the response to the disaster as well. So far, attempts to control the oil leak have been unsuccessful - and wildlife is being impacted.

On its emergency response to this deep-water spill - which took several days to create and deploy the 100-ton containment dome (which, when lowered, failed) - BP's McKay said that "We've not dealt with a situation like this before."

McKay said that looking forward, and with hindsight, "there will be some ideas about making sub-sea response better."

A few protestors held up signs during the hearing but were quiet, but once the hearing was gaveled to a close, one man in the audience chanted, "Hey, hey, Lamar McKay, how many fish did you kill today?"

In the opening panel, the former chief of the Minerals Management Service's Offshore Regulatory Program, Elmer "Bud" Danenberger, defended the integrity of federal safety inspectors.

"These people won't take a doughnut from industry," he told the committee.

Danenberger called for an independent commission of technical and regulatory experts to study offshore drilling safety, data on blowout preventer performance, and streamlining the regulatory regime. "The less complicated the authority in the regime, the more effective," he said.

Texas A&M University professor Dr. F.E. Beck discounted the suggestion that failure of the blowout preventer may have been an act of terrorism, owing to the multiple personnel required to operate it. "A single person would have a hard time doing it. The risk of terrorism on a rig like this would be extremely minimal," he said.

In the afternoon's Environment & Public Works Committee hearing, Sen. Frank Lautenberg, D-N.J., slammed the oil companies, saying that offshore drilling is unsafe and unreliable.

"Oil drilling is a 19th century answer to a 21st century problem," Lautenberg said. "It's inherently dangerous, inherently dirty and inherently destructive to our environment."

Sen. Sheldon Whitehouse, D-R.I., said, "Anybody who believes 'drill, baby, drill' is the answer, go tell that to the tourist economy, go tell that to the fishing community of Louisiana."

On Tuesday, Lautenberg introduced a bill to impose an annual fee of $10 for every acre leased to oil companies for offshore drilling (which would raise about $1.8 billion annually).

This past weekend, plans to use a 100-ton containment box over the leaking well head failed. BP now hopes to have a smaller box in place by the end of the week.

Crews are also spraying chemical dispersants near the well, even though environmental officials say the effects of those chemicals are still widely unknown.

"What is this going to do to the biological life cycle of the fisheries, the long term health of our wildlife out there?" asked Louisiana Gov. Bobby Jindal.

Two days of public hearings on the cause of the explosion are also beginning later today in Louisiana by the Coast Guard and the Interior Department's Minerals Management Service. The list of witnesses scheduled to testify includes a Coast Guard search and rescue specialist, crew members from a cargo vessel that was tethered to the Deepwater Horizon rig, and two Interior inspectors.


In Other Developments:

• Interior Secretary Ken Salazar will propose splitting up the Minerals Management Service, an administration official, who asked not to be identified because the plan is not yet public, told The Associated Press. One agency would be charged with inspecting oil rigs, investigating oil companies and enforcing safety regulations, while the other would oversee leases for drilling and collection of billions of dollars in royalties.

• Homeland Security Secretary Janet Napolitano will tour the Mobile Incident Command Center with Alabama Governor Bob Riley, and meet with federal, state and local officials to discuss the response effort. She will also speak with media later this afternoon.

• The Environmental Protection Agency gave the go-ahead Monday to use oil dispersing chemicals near the sea bottom where the oil is leaking, although the agency acknowledged ecological effects of the chemical are not yet fully known. Two tests have shown the procedure helps to break up the oil before it reaches the surface.

• BP said it has spent $350 million so far on spill response activities.

• President Obama, after being briefed on the latest developments on Monday, directed that more independent scientists get involved in seeking a solution to the spill. Energy Secretary Steven Chu will take a team of scientists to BP in Houston.

• BP said it has received 4,700 claims for damages related to the spill and so far has paid out $3.5 million on 295 of the claims.

For more info:
The Senate Committee on Energy & Natural Resources hearing on the Deepwater Horizon accident and other current issues related to offshore oil and gas development will be held Tuesday, May 11 at 10 a.m. ET.

Witnesses:
Panel 1
Dr. F.E. Beck, Associate Professor, Texas A&M University - Opening Statement (pdf)
Elmer "Bud" Danenberger, Former Chief, Offshore Regulatory Program, Minerals Management Service - Opening Statement (Word doc)

Panel 2
Lamar McKay, President and Chairman, BP America, Inc. - Opening Statement (pdf)
Steven Newman, President and Chief Executive Officer, Transocean Limited - Opening Statement (pdf)
Tim Probert, President, Global Business Lines; Chief Health, Safety and Environmental Officer, Halliburton - Opening Statement (pdf)

The Senate Committee on Environment & Public Works will examine issues surrounding the oil spill in the Gulf, including the impact on the economy and the environment, Tuesday, May 11 at 2:30 p.m. ET.

Witnesses:
Panel 1
Lamar McKay, President and Chairman, BP America, Inc. - Opening Statement (pdf)
Steven Newman, President and Chief Executive Officer, Transocean Limited - Opening Statement (pdf)
Tim Probert, President, Global Business Lines; Chief Health, Safety and Environmental Officer, Halliburton - Opening Statement (pdf)

Panel 2
Dr. Steve Bortone, Executive Director, Gulf of Mexico Fishery Management Council - Opening Statement (pdf)
Garret Graves, Director, Governor's Office of Coastal Activities, State of Louisiana
Keith Overton CHA, Chairman of the Board, Florida Restaurant and Lodging Association and Senior Vice President and Chief Operating Officer, TradeWinds Island Resorts - Opening Statement (pdf)
Dr. Eric May, Distinguished Research Scientist, Living Marine Resources Cooperative Science Center, Department of Natural Sciences, University of Maryland Eastern Shore - Opening Statement (pdf)
Meg Caldwell JD, Director, Environmental and Natural Resources Law & Policy Program; Executive Director, Center for Ocean Solutions, Woods Institute for the Environment, Stanford University - Opening Statement (pdf)
Lieutenant General Thomas G. McInerney, United States Air Force (Ret.) - Opening Statement (pdf)