This statement by Tony Hayward is just one of the many ironies in an environmental disaster of epic proportions. Not just Hayward, but the unfortunate many thousands of people who resided around the Gulf of Mexico would have liked to have had their lives restored to what they were like before that fateful day on April 20, 2010. That evening, at approximately 10 p.m., the first in a series of explosions that killed 11 people occurred on an oil drilling rig in the Gulf of Mexico. The explosion shot huge plumes of flames and smoke hundreds of feet into the air. The name of the rig was Deepwater Horizon, and it was owned by Transocean but had been under contract to BP since September 2007.2 Another irony of the disastrous day was it had started on such a positive note. Four Transocean executives had landed, by helicopter, that morning on the Deepwater Horizon to recognize the employees for their outstanding safety record.3 A critical problem that occurs at any offshore oil rig is that goals and objectives of the different companies involved in the process can conflict. This was the case on the Deepwater Horizon. The crew members stated that there was a “natural conflict” of interest between Transocean and BP. BP focused on getting the job done as quickly as possible to reduce costs. The speed of work became even more imperative when the Deepwater Horizon operation was already running over budget. The Deepwater Horizon work was 43 days overdue, which had cost BP $21 million. Conversely, Transocean received a leasing fee of $500,000 for every day BP continued to use the rig. Thus, Transocean had a financial incentive for delaying the completion of the project because it would create more revenue for the company. In addition, Halliburton was hired to provide the cementing process needed to plug the final hole, and a subsidiary of Halliburton was responsible for checking the drilling fluids. Another company was responsible for providing the drilling fluid system, another provided the well casing, and still another company gave the worker remote-control vehicles used to check the bottom of the ocean. The result was that multiple companies were doing multiple specific jobs on the Deepwater Horizon, which resulted in a breakdown of leadership and a chaotic atmosphere where no one was in control.

Halliburton had warned BP on April 1, 2010, that BP’s use of cement was not in accordance with Halliburton’s best practices. On April 18, 2010, Halliburton sent BP another warning, explaining that the method used by BP to cement the plug could result in a “severe” gas flow problem if the casing being cemented around the pipe was not centered.

As the explosions hit the rig, panic ensued among the crew members. The safety guidelines required that they had to call two senior management members and be told what to do. The safety guidelines also required that multiple people had to jointly make a decision about how to respond to “dangerous” levels of gas, yet the procedures did not identify who would make a decision about whether to shut down the rig. Transocean responded after the disaster by stating its chain of command was in place and did not hinder the process to start an emergency shutdown of the rig. At the time of the blast, Captain Kuchta, the captain of the ship/rig, was entertaining two BP executives who were honoring the Deepwater Horizon for its 7 years without a serious accident.5 At 9:47 p.m., the workers heard a hissing of methane gas. This is a huge red flag because methane gas is usually in or near crude oil reservoirs. The pressure of the methane gas forced the gas to move up quickly through the pipe toward the top of the rig. As the methane gas moved upward, the captain of a supply ship docked at the Deepwater Horizon described the flow of drilling mud through the top of a pipe like lava from a volcano.

Because no methane gas had reached the top of the derrick yet, the Deepwater Horizon was not at a safety level where there is a “dangerous” level of gas present, meaning the emergency protocol was not initially started.

Therefore, the crew was not notified of the danger, and no order was issued to shut down the rig. Within minutes, the methane gas ignited, probably due to a spark from an engine. This fire destroyed critical parts of the platform that were needed to attempt to shut down the rig. In addition, large parts of the rig were on fire and the explosion allowed crude oil to leak into the ocean.

A series of explosions followed that destroyed the motor room and blew crew members across the rig. There were no fire pumps available that they could use to try to put out the fire so the crew members started moving toward abandoning the rig. The crew members did not know what to do until the public address system started blaring that there was a fire on the rig. The crew members found they could only get to two lifeboats, which could each hold as many as 75 crew members. At this point, flames were shooting 250 feet out of the well pipe, and one crane boom had collapsed and melted due to the intense heat from the fire. Many crew members could not find their way because debris blocked their paths and destroyed staircases. Crew members who were injured littered the remaining part of the platform. No one took charge on the rig to try to produce an orderly evacuation. One Transocean executive was helping the injured workers onto the lifeboat and told the deck crew not to lower the lifeboat until it was full.

Simultaneously, the 50 people inside the boat were yelling at the deck crew to lower the lifeboat while it was still operational. The panic continued as crew members could not wait any longer and jumped into the dark cold ocean 75 feet below. Once word had reached the Transocean managers that people were jumping overboard, a “man overboard” call was given, and the supply ship that had moved away from the Deepwater Horizon returned to see a sea of shining objects near the crippled rig. The shiny objects were the reflective life vests of the crew members. The supply ship put a small boat into the ocean and started to retrieve the workers.

Although the abandon ship order should have been given by the captain and top executives at Transocean, one of the subordinates finally announced on the PA system to abandon ship after one lifeboat had already been released. By the time the 10 remaining people got to the boarding station for the lifeboats, they realized they were too late. The first boat was out of view and the second lifeboat was on the water moving away from the rig. The crew members found a 25-foot life raft that they inflated, and some of the people jumped in. The people still remaining had to jump into the ocean. After landing on the water, the 25-foot life raft floated but did not move away from the rig. Panic started again with the thought that the intensity of the fire from the rig was creating a fire draft that was pulling the raft back toward the rig. The supply ship with the rescue team realized that this was not the case. The crew had forgotten to release the rope that was attached to the rig on the life raft. A member of the rescue team yelled for them to cut the line, and the life raft was set free. The supply ship, the Bankston, which just happened to be at the Deepwater Horizon, is the epitome of being at the right place at the right time. The Bankston rescued 115 crew members, including 16 who were seriously injured. Untold lives would have been lost if the Bankston had not been there to rescue the crew.

The Sinking of the Deepwater Horizon

Two days later, still burning and now out of control, the Deepwater Horizon sank into the Gulf of Mexico.

This was the ultimate worst-case scenario because Transocean and BP had zero control over the crude oil dumping into the ocean. The official response from a vice president of Transocean was that their response team “was not able to stem the flow of hydrocarbons” into the ocean.7 On April 24, 2010, approximately 1,000 barrels of crude oil was leaking from an underwater pipeline that had linked the Deepwater Horizon to the seabed.8 Two days later, the estimated release of oil had increased from 1,000 to 5,000 barrels a day.

The initial investigation found that the Deepwater Horizon did not have a remote control shutoff switch that is used in other countries as a final emergency safety measure to stop underwater oil spills. The switch, called an acoustic switch, is operated with a remote control that sends acoustic pulses through the water to trigger an underwater valve called the blowout preventer. The blowout preventer will shut down the flow of oil from the well, even if the oil rig is damaged and inoperative. The acoustic control is a “redundant” back to the two primary methods of shutting down the rig: the hard-wired controller, the primary safety measure, and the dead-man switch, which is the secondary safety measure. The hard-wired controller is handled manually, but the dead-man switch should work automatically to cut the flow of oil from the rig. The acoustic control is the third level of safety. Both Norway and Brazil require all offshore oil rigs in their territory to have one just in case of an extreme disaster such as the Deepwater Horizon. The U.S. regulators had previously considered in 2000 requiring an acoustic safety switch, but the oil companies had complained to the Department of the Interior about the potential cost and effectiveness.

The Minerals Management Service

The Minerals Management Service (MMS) in the U.S. Department of the Interior is the government agency responsible for regulating offshore oil drilling. The MMS warned offshore rig operators on at least three separate occasions that they needed to have this additional backup system in place in case of an emergency. In 2000, 2004, and 2009, MMS gave warnings, but never made the backup system a mandatory part of the drilling operations. The oil industry continued to reassure MMS that there would never be a need for this additional safety system because the other two systems are sufficient. Yet, from 2001 to 2007, the oil industry was responsible for 1,443 drilling accidents to offshore operations that resulted in 41 deaths, 302 injuries, and 356 oil spills. The MMS rationalized that the industry was the best expert to determine what type of safety measures are needed in offshore drilling. Furthermore, in 2009, BP joined forces with other offshore operators to oppose more stringent safety and environmental standards for the rigs as well as more frequent regulatory inspections. BP told MMS that “extensive, prescriptive” government regulations were not needed in the offshore oil drilling industry and that the operators should be able to design the process needed to ensure a safe offshore operation. The deputy inspector of MMS stated a few weeks after the explosion, in response to criticisms about the minerals service, that MMS has inspectors going offshore every day when weather conditions make it feasible to check rig operations and that enforcement of the regulations is strict, with MMS shutting down offshore operations 117 times in 2009. However, based on requests from the operators, MMS inspections of blowout preventers became less frequent and occurred once every 2 weeks, although it previously had been once a week. The oil rig operators complained that the inspections disrupted the operations with their frequency.10 One of the challenges is that MMS has two potentially conflicting duties.

The MMS is responsible for the enforcement of safety and environmental regulations, yet it is also responsible for encouraging growth in the oil drilling industry. The incentive for continued growth is that MMS collects royalty payments from oil companies as well as levies fines against the same companies. Therefore, there is a potential conflict of interest in having the enforcer also be financially rewarded by letting the oil rig operators do whatever they want. The secretary of the interior, Ken Salazar, who controls MMS, admitted that the oil companies have had a history of “running the show” and getting the full cooperation from the MMS.

However, MMS is only part of the regulatory enforcement that the oil rig companies must accommodate.

The Environmental Protection Agency (EPA) examines oil rigs to ensure there are no environmental violations. The U.S. Coast Guard inspects the vessels and crew to ensure the ships are seaworthy, and the National Oceanic and Atmospheric Administration (NOAA) is responsible for monitoring weather conditions.11 The MMS concluded in 2003 that the acoustic switch should not be required on offshore oil rigs because they are very costly and the rigs already had a backup system with the dead-man switch. The cost of the acoustic trigger is approximately $500,000. A week after the disaster, the estimated cost of the Deepwater Horizon disaster was $560 million for the oil rig and $6 million a day to try to battle the oil spill.12 On May 27, 2010, the director of MMS, S. Elizabeth Birnbaum, resigned from her position. President Barack Obama had commented that Birnbaum had failed to provide enough urgency in turning around the MMS and that the president wanted people to fix problems instead of making excuses when things break down.

BP’s Problematic Safety Past

BP has faced a number of safety challenges in the past. In 2005, a BP refinery exploded in Texas City, Texas, and killed 15 workers. The refinery was built in 1934 and was acquired by BP when it bought Amoco oil.

Workers in the Texas City plant filled a 170-foot tower with liquid hydrocarbons, including gasoline. The liquid mixture rose too high in the tower, yet the workers did not recognize it, probably because they had been on 12-hour shifts continuously for more than a month. The mixture overflowed the top of the tower and was released into the sky. At that same moment, a contractor started his stalled pickup truck, which produced enough spark to ignite an inferno. The U.S. Chemical Safety Board concluded that the explosion was “caused by organizational and safety deficiencies at all levels of BP.”14 The Occupational Safety and Health Administration (OSHA) found more than 700 violations related to the Texas City explosion and fined BP $87.4 million. Investigators had discovered that routine maintenance had been delayed at the refinery in an effort to reduce costs by BP. In 2007, this supported the view of the independent review panel that was appointed by BP to examine BP’s safety track record and concluded that BP’s culture supported the belief that the company focuses on profits before safety when managers make decisions.15 In August 2010, BP agreed to pay a $50.6 million fine for safety violations related to the Texas City explosion. In addition, BP promised to invest $500 million to improve safety at the plant.16 In 2006, 200,000 gallons of crude oil spilled in Alaska North Slope after an oil pipeline ruptured. Investigators had found that several miles of the pipe were corroded and undermaintained. In addition, investigators found that the pipes were also poorly inspected. BP paid more than $20 million in criminal fines and restitution for the North Slope oil spill.17 In May 2011, BP paid an additional $25 million in civil fines to settle charges related to its involvement in two oil spills from its network of Alaska pipelines in 2006. BP was charged with willfully failing to comply with a government order to maintain the pipeline and avoid corrosion on the pipes.....

Questions

1. Identify the stakeholders in this case and comment on how they have been affected by the Deepwater Horizon disaster.

2. Blame is usually part of disasters. Comment on the actions of Tony Hayward.

3. How long does it take geographical areas to recover from disasters such as the one described in the case?

Can the area ever have complete economic recovery? Explain.

4. Comment on the ironic event of the Deepwater Horizon’s safety awards just hours before the disastrous event.