US Oil-Spill Panel: Industry's Safety Culture in Doubt

WASHINGTON (Dow Jones Newswires), Jan. 11, 2011

A U.S. commission investigating the Deepwater Horizon oil spill released its findings into the causes of the 2010 disaster, saying BP, Halliburton and Transocean committed "identifiable mistakes," and that systematic failures raise doubts about the safety of the entire oil-drilling industry.

In a widely anticipated report released Tuesday, the commission and its panel of experts said government oversight of the industry will require "fundamental reform" and that oil companies will need to "dramatically" step up their safety practices.

The panel faults BP, Halliburton and Transocean for failing to train their workers to identify risks they faced and to respond to problems that emerged before and after the Macondo well in the Gulf of Mexico blew out.

"Most of the mistakes and oversights at Macondo can be traced back to a single overarching failure--a failure of management," the report concluded. "A blowout in deepwater was not a statistical inevitability."

"We believe if these recommendations are followed and the course we have set out is taken, we will go a long way to restoring the faith of the country in a vital enterprise," said William Reilly, the panel's co-chair.

Offering a long list of recommendations, the panel urges congressional action so the U.S. Interior Department can create an independent "safety agency" to oversee offshore drilling. It also recommends "significantly increased funding" for government agencies that oversee spill response and planning.

The panel also said Congress should use 80% of the fines assigned to the companies under the Clean Water Act to restore the Gulf of Mexico. It asked the oil industry to create a "Safety Institute" that polices oil and drilling companies' operations.

The Deepwater Horizon incident reveals "such systematic failures in risk management that they place in doubt the safety culture of the entire industry," the report said.

Formed by President Barack Obama in May, one month after the Deepwater Horizon rig exploded, killing 11 workers and triggering the worst offshore spill in U.S. history, the National Commission on the BP Deepwater Horizon Oil Spill and Offshore Drilling was given the task of conducting the most high-profile investigation of the disaster.

Many of the commission's recommendations surfaced in previous months during many public and closely tracked deliberations. Indeed, Tuesday's report included few, if any, surprises.

The commission's findings will nevertheless play a large role in future debates over oil-spill legislation, which the U.S. Congress failed to pass last year, as well as the development of future standards.

A major point of contention will involve liability caps, which set the maximum amount of dollars that oil companies will be forced to pay as a result of a spill. Sen. Robert Menendez (D., N.J) plans to introduce a bill in coming days that removes caps altogether, placing companies on the hook for the full value of any disaster.

However, Gulf Coast lawmakers, such as Sen. Mary Landrieu (D., La.), strongly oppose unlimited caps because they say it would squeeze out smaller producers that couldn't afford unlimited liabilities.

The spill commission said Congress should "significantly increase" the liability-cap levels, but it didn't identify a maximum amount.

After the report was released, BP said in a statement that it would work with government and the oil industry to "implement operational and regulatory changes that will enhance safety practices."

"Given the emerging consensus that the Deepwater Horizon accident was the result of multiple causes involving multiple parties, we support the Commission's efforts to strengthen industry-wide safety practices," the company said.

The full cost of the Deepwater Horizon spill is still unclear. In addition to a $20 billion fund that BP created for clean-up work, BP and its partners and contractors could face billions of dollars more in penalties, fines and legal damages.

Even before the panel released its report, government officials, oil-industry officials and environmental groups started to put their spin on the findings.

The American Petroleum Institute, the main lobbying arm of the oil industry, tried to cast the Deepwater Horizon spill as an isolated incident that shouldn't indict the entire industry. It also defended recent actions to improve safety standards.

Government officials at the Interior Department and the White House also took steps to highlight recent efforts to tighten standards and oversight. "While we have already taken significant action, the Commission's recommendations will help inform the work that remains to be done," the White House said in a statement.

Environmental groups, meanwhile, urged Congress to move quickly to implement the panel's findings.

"We can't undo the damage or bring back the lives we've lost, but we can learn from our mistakes," said Peter Lehner, executive director of the Natural Resources Defense Council. "This report is the right place to start."

Copyright (c) 2010 Dow Jones & Company, Inc.


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