US Oil Executives Testify at House Hearing on Gulf Spill

Deepwater Horizon Gulf of Mexico Oil Spill

WASHINGTON (Dow Jones Newswires), June 15, 2010

U.S. oil executives, facing a backlash against the entire oil industry as a BP spill in the Gulf of Mexico persists through an eighth week, on Tuesday will tell Congress that the industry should understand what happened and learn from the catastrophic failure of the mile-deep well.

The testimony from Exxon Mobil, ConocoPhillips, Royal Dutch Shell, BP and Chevron marks the first time that the industry as a group has testified before Congress since the April 20 explosion of the Deepwater Horizon rig and the ensuing damage to Gulf Coast shores, tourism businesses and commercial fishing operations.

But while the oil companies will agree on the need to learn from the disaster, they will take sharply different approaches to get out in front of brewing outrage in a Democratic-controlled Congress. Shell President Marvin Odum will emphasize the company's investments in renewable energy and in fuels such as natural gas, and will throw his weight behind cutting greenhouse-gas emissions--all policies that are favored by Democrats.

Exxon will put distance between BP and other deepwater drilling operations, with Chief Executive Rex Tillerson planning to testify that "when you properly design wells for the range of risk anticipated," then "tragic incidents like the one we are witnessing in the Gulf of Mexico today should not occur," according to the text of prepared remarks.

Chevron Chief Executive John Watson will say that the industry must "step up and restore our country's confidence in the safety of drilling operations." He also will say that "we can produce that energy safely--including in the deepwater." The Obama administration has imposed a six-month moratorium on drilling new wells in the deepwater of the Gulf of Mexico--an area that accounts for 25% of domestic oil production. In an interview with The Wall Street Journal on Monday, Watson called that moratorium "unnecessary."

The testimony comes less than 24 hours after the House Energy and Commerce Committee disclosed new information that suggested that BP officials took shortcuts out of concern about costs. The panel wrote BP Chief Executive Tony Hayward, who is to testify on Capitol Hill on Thursday, to expect tough questions about BP's decisions in the days and hours before the catastrophic explosion.

According to the letter from the panel, a BP drilling engineer told a colleague that the well had been a "nightmare well." But the same drilling engineer also emphasized the time and cost savings that would result from choosing the less-protective of two options for the casing in the well--using a single string of steel casing instead of hanging two steel liners, the letter said.

He also made a case for using six centralizers--devices to keep the casing centered--instead of the 21 called for by contractor Halliburton, according to the letter. In spite of warnings from Halliburton about a "SEVERE gas flow problem" stemming from the use of just six centralizers, BP went ahead, according to the letter, which was based on interviews with officials involved in activities on the Deepwater Horizon and documents provided to the committee.

BP America Inc. Chairman Lamar McKay will not acknowledge those disclosures in his prepared testimony. Instead, he will say that "BP will not rest until the well is under control and we discover what happened and why." Like Shell's Odum, he also will emphasize BP's investments in renewable energy, and will express support for cutting greenhouse-gas emissions through one of several approaches that have been floated by Democrats.

"BP supports an economywide price for carbon," McKay will say.

ConocoPhillips Chief Executive James Mulva will shy away from making judgments about the causes of the fatal BP oil-well explosion, saying that "the companies involved and the regulators will speak to that." But he will say that "environmental stewardship and energy resource development are not inherently contradictory," a position that is at odds with environmentalists who say that the BP disaster underscores that offshore drilling is unsafe.

Mulva also will come out against other priorities of the environmental community, saying that federal mandates that utilities generate a certain amount of energy from renewable sources would exemplify "a policy that attempts to pick energy winners."

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



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