The BP Deepwater Horizon spill is a multifaceted disaster that, despite popular opinion, cannot be explained by any one root cause. The April 20, 2010, oil spill was a point of crisis for oil giant BP, and CEO Tony Hayward faced a significant challenge in responding to this crisis.

The events leading up to the BP blowout unearth a highly complex network of circumstances, which though preventable, together culminated in the worst environmental disaster in American history. Repercussions of the incident are still felt today, and all stakeholders involved have an opportunity to learn about the significance of crisis management.

Events Leading Up to the BP Spill

In March 2008, the Occupational Safety and Health Administration (OSHA) stated on public record that BP had one of the worst safety records in its industry. This same month, the Minerals Management Service (MMS) gave BP an exclusive right to drill a parcel of Gulf of Mexico floor called Block 252, for a fixed fee of $34 million. Over the coming months, BP boarded a rig to supervise contractors who set out to drill the Macondo well using Transocean rigs.

On October 2009, Hurricane Ida hit the drilling site, damaging BP’s oil rig and requiring BP to rent a more technologically sophisticated rig, called Deepwater Horizon. 

The Point of Crisis

On April 9, 2010, BP exerted unreasonable pressure during drilling and fractured the rock in its well. According to the National Commission on the BP Deepwater Horizon Oil Spill and Offshore Drilling (2011, 94), “BP informed its lease partners Anadarko and MOEX that ‘well integrity and safety’ issues required the rig to stop drilling further.” BP management compared safety to profit maximization and made the decision to plug the fractures rather than cease drilling in an effort to maximize profit. The plug worked, but BP knew it was precarious and that it needed to mitigate this risk by balancing pressure carefully. After the incident, the BP wells leader admitted that losing returns “was the No. 1 risk.”

The Warning Signs

When BP and Halliburton tested float valves, BP used a decision tree to evaluate the job based on whether there were lost returns on the cement factor, rather than on engineering or risk principles, and decided the test went well enough to excuse Schlumberger technicians, who were also scheduled to perform cement evaluation tests. That decision, which was based on an effort to save the company time and money, was another example of a decision that could have prevented the oil well blowout that is ironically costing over $20 billion in remediation to date.

BP is documented to have sought Halliburton’s counsel on how it could use cement centralizers to mitigate some of this drilling risk. However, because of low inventory, BP again allegedly compromised on quality and safety by changing Halliburton’s design and using the wrong kind of cement centralizers.

Halliburton conducted a routine cement slurry test revealing that the foam was unstable, but the company did not adequately report or address it. This event was sadly not uncommon among the various subcontractors on the Deepwater Horizon project. There appeared to be a team culture of poor communication driven by an effort to save time, money, and reputation, which ironically resulted in catastrophic loss of the same, at the expense of stakeholders of this project.

The company finished its cement job and began to lock down the Macondo well so it could move a smaller rig into place, but BP had amended the Deepwater’s procedures to omit a pressure test (which would have checked the bottomhole cement job), among other things. (Incidentally, on April 12, BP had sent its amendments to the procedure to the MMS, but there is no evidence that the new procedures were reviewed.) This combination of events, caused by several actors, was highly uncanny and improbable, and given the circumstances of the weak cement job, their occurrence proved to be deadly. The more that the details of the story were unraveled, the more it became evident that multiple parties and stakeholders participated in the negligence, insufficient funding, and insufficient communication in the lead-up to the Deepwater Horizon explosion.

BP was also discovered to have used a broken pressure gauge during this same time. This too became a critical issue that, if it had been prevented, could have possibly averted the disaster. Still, the root cause of these errors is unclear, as the disaster could have been prevented with tighter risk management protocol, more sufficient inspection, as well as closer attention to fluctuation in gauge readings. Nonetheless, incompetence and risk mitigation planning negligence again appeared to be rife on the job.

Other important precrisis warnings included the fact that the well was leaking and was in danger of exploding. The site workers were also found to have not adequately read or responded to the confounding results of the pressure test that showed they needed to use a different gauge to detect a leak that was later found in the well. This also indicated negligence (and incompetence) on behalf of site workers. Drill-pipe pressure increased 250 pounds per square inch (psi) as shown on the monitor, but no one appeared to be checking the monitor. As could be expected from these warnings, the pressure relief valve soon blew. In response, the pumps were shut off; but pressure increased and no one seemed trained to know the significance of this issue and appropriate action was not taken. The warning signs were ignored.

Next, mud emerged on the rig floor, indicating that there was a problem in the well. Six-eight minutes passed before this issue was addressed, and the spill was not diverted overboard. The lack of response indicated negligence in emergency response training and a disregard for the warning signs that a crisis was coming.

After countless emergency indications, a high enough concentration of natural gas leaked into the air to cause an ignition. This explosion forced 5 million barrels of oil into the Gulf of Mexico over 87 days—the worst environmental disaster in American history.

The Aftermath—Response to the Crisis

During the emergency response, scientists, including Ian MacDonald of Florida State University, alleged that BP withheld the facts around the spill, likely to protect its reputation. Possibly because of this obfuscation, it took 87 days until the well was finally capped on July 15, 2010.

Aside from some controlled burning and microbial digestion, only upon the capping of the well did the remediation of the oil’s damage truly begin. BP set up a $20 billion claims fund, which was still being administered as of March 2012. It is estimated that BP will pay $585 million in pollution violations. The company “has claimed about $40 billion in charges to cover the costs of litigation and cleanup” and set aside $3.5 billion to cover expected Clean Water Act fines on the estimated 3.2 million barrels spilled. However, the ripple effect of the spill has had no small impact on the Gulf Area tourism and fishing, which has somehow gone unaccounted for in BP’s legal restoration. 

More recently, a scientific study of the ongoing after effects of the spill on mice and dolphins in that area, found that “the effects on the mouse immune system . . . were strikingly similar to what we saw in the dolphins,” says De Guise (an investigating scientist). “We want to show the likelihood of a cause and effect relationship and add to the weight of (evidence that oil impacts the immune system in a way that is very reproducible across species. The changes that we found in the Barataria Bay dolphins are specific to oil and not related to something else” (Hancock, 2021). Importantly, it was reported from the same scientist that, “I think it is the first time we find such evidence across generations in a wild animal population, and that is scary. It raises concern for the long-term recovery of these dolphins. These are long-lived mammals and, in many ways, not unlike humans who live in the area and depend on natural resources. It is interesting science, but it is very scary”(Ibid.). 

The legal aftermath of the spill is also very consequential, as hundreds with legal claims charging harm from the disaster are still pending. For example, a Florida man, Christopher F. Causey, whose case represents “the 504 lawsuits still outstanding from ordeal, Florida District Judge Casey Rodgers said in her order filed Jan. 11” (White, 2021). The U.S. Department of Justice (DOJ) earlier in the aftermath filed a civil suit against BP and its business partners. This civil suit is expected to be followed by criminal charges—so much so that BP has already divested some assets. Other legal updates on the spill can be found in White (2021).

Legislatively, oil companies are likely to face much more strict safety, environmental, risk management, and reporting standards in the future. From the federal government level, Barack Obama, who was president at the time of the crisis, began pushing for the cut of oil subsidies, which could lead to higher oil prices for consumers. 

This type of large environmental crisis required swift corrective action and strategic public relations. There are many lessons to be learned from the way BP continues to handle the consequences of the accident and the way it employed crisis management.....

Questions for Discussion

1. Who and what factors were responsible for the Deepwater Horizon oil spill?

2. Evaluate BP’s corporate culture from an ethical standpoint. What role did top management have in shaping that culture?

3. What actions could/should BP management have taken in response to the many early-warning signs? Did the “inaction” of BP demonstrate the company’s ethics? Explain.

4. What responsibility did BP’s partners and oversight agencies like OSHA have in the crisis?

5. How did BP’s corporate strategy affect its ethical decision making?

6. Do companies like BP have an ethical responsibility to protect the environment? Why or why not?