Death officially came to Macondo early in the morning on September 19, 2010. The notorious oil well took its name from the town in novelist Gabriel García Márquez’s One Hundred Years of Solitude. In the novel, the town grows from an isolated settlement to a thriving community before being deluged by a four-year rainfall and obliterated by a giant windstorm. The death of the Macondo well arrived much less dramatically, almost anticlimactically, after months that seemed like years to residents of the Gulf Coast. For four months, on and off, the drill bit of the relief well had been churning on its intercept course. Finally, it had hit its mark. A final cement pressure test just before six o’clock confirmed that the well had done its job. The relief well had intersected Macondo some 13,000 feet underground three days before the final pronouncement of the well’s death. Crews then pumped cement into the original well bore through the new hole, sealing them both. By the time the well was killed, it was largely a symbolic victory for BP. The well hadn’t spewed oil in two months, since the installation of the temporary cap in July. Killing the well, though, was an important step for BP, proof that the company could honor its pledge to fix what had gone so terribly wrong.
The effort to bring a final end to Macondo fell to John Wright, a quiet, unassuming engineer who’d earned a reputation as the world’s best runaway well assassin. Wright had swept-back gray hair and the top of his mouth was hidden by the bristles of a gray mustache. When he wasn’t on a rig, his office attire, like many veterans of the front lines of the oil business, was jeans and cowboy boots. The intensity of oil well fires had created a cottage industry in the middle of the last century, as fearless entrepreneurs like Red Adair built companies that did nothing but combat the industry’s most ferocious mistakes. Adair, immortalized in the John Wayne movie Hellfighters, died in 2004, but the techniques that he pioneered lived on. Wright worked for Boots & Coots, a well-control company formed by two of Adair’s protégés, and his specialty was the drilling of relief wells. He’d been involved in 83 of them, including the one that killed the infamous Piper Alpha blowout in the North Sea in 1988. He had directed 40 projects himself and had never missed an intercept, and he had no intention of making Macondo his first miss.1 His margin of error in trying to hit the Macondo well two miles underground was about 3½ inches. The process involves directional drilling, in which the drill bit is turned at an angle as it nears the problem well. Using electromagnetic testing and other high-tech imaging equipment, the drill bit gradually closes in on its mark.
Wright began drilling the first relief well on May 2, and he spent the next four months on one of the drill ships among the fleet that had assembled at the Macondo site.
When Wright began the project, he felt as if the eyes of the world were on him, counting on him to end the environmental nightmare. He wasn’t used to such widespread attention. By the time Wright’s relief well got close, though, much of the public pressure to kill the well had subsided. With no oil flowing, the desperation that had pervaded BP’s efforts throughout the early part of the summer had eased.
The end came quietly. After months of determined drilling, there was no celebration. After all, 11 people had died, the Gulf had been compromised, and people’s livelihoods, both along the coast and in his own industry, had been devastated. “Maybe it’s like firefighters after they finish putting out a fire in an apartment where people are killed,” Wright said. “I guess they feel satisfied they put the fire out, but it’s not a celebratory-type feeling.”2 The same was true outside the industry. News of the well’s death paled compared with the fervor of its initial explosion. “We can finally announce that the Macondo 252 well is effectively dead,” retired Coast Guard Admiral Thad Allen, who oversaw the government’s response effort, declared. “The Macondo well poses no continuing threat to the Gulf of Mexico.” There was no press conference, no fanfare. Allen’s statement was sent to reporters by e-mail.
The Macondo well, however, had left an indelible mark on the Gulf. The economic, political, and legal repercussions would continue for years. Lingering long after the slick had dissipated were questions about offshore drilling in general and BP more specifically. In the wake of the disaster, the government issued new regulations for shallow-water wells, and while the process technically allowed new drilling to move forward, the government issued few permits in the summer and fall. Oil companies struggled to sort through the new requirements.
In the deepwater, the government lifted the drilling moratorium in October, a month early, but drilling remains halted as companies sort out new regulations. A government report released in mid-September found that the industry’s earlier fears that the moratorium would kill jobs were overblown. By mid-September, only four rigs had left the Gulf. Only 2,000 jobs on deepwater rigs had been lost temporarily, and the entire impact of the drilling ban would probably be less than 12,000 jobs in the Gulf region, the study found.
In the offshore industry, the administration’s nonchalance felt like cold indifference, an attempt to avert political fallout while ignoring the economic reality that was unfolding in the Gulf. Many drilling companies had avoided layoffs by accepting lower day rates to keep their rigs in place. Other rigs had been brought ashore for maintenance. The result was that the rig owners, not the oil companies, were bearing the financial brunt of the drilling ban. Noble Corporation, one of the biggest drillers in the Gulf, estimated that it was losing more than a million dollars a day as a result of the moratorium, even though it hadn’t laid off any workers. More than 200 jobs that it would have filled for projects that were coming on line were put on hold.
While such costs may be borne by the drilling companies and their shareholders in the short term, the broader cost implications of the Macondo disaster are likely to affect every aspect of offshore drilling. Even the industry’s primary mouthpiece, the American Petroleum Institute, agrees that stricter regulations are inevitable. Companies that operate in the Gulf now have to account for “political risk,” the concept that another company’s mistake could affect everyone’s operations. That sort of uni-lateral and unpredictable government action is more typically associated with Third World countries. Now, oil companies, drillers, contractors, and transport companies will all have to factor it into their risk-reward ratios for operating in the Gulf. More regulation and more uncertainty mean more costs, and more costs in one of America’s most prominent energy fields ultimately mean higher gasoline prices for American drivers. Had the United States not been crawling out of recession at the time the Deepwater Horizon exploded, consumers might already be feeling the effect.
Congress also has considered raising the spill liability cap under the Oil Pollution Act to $10 billion from the current $75 million. BP waived that limit and agreed to pay all reasonable spill-related expenses, but there’s no guarantee that other oil companies would do the same if they were faced with a similar disaster. The higher cap, though, might scare away smaller oil companies. Even large independents like Anadarko have had to rethink their liability for drilling in the Gulf. Higher caps may mean that only the supermajors—such as Exxon Mobil, Shell, Chevron, and BP—will have the financial means to shoulder the risk of deepwater drilling in the future. In other words, in an attempt to ensure that oil companies pay more for spills, Congress may create an incentive not just against environmental disasters, but against drilling in general. The result would be a concentration of some of the Gulf’s richest fields in the hands of just a few giant companies.
The industry bristles at such possibilities, grousing that its stellar safety record is being ignored because of the mistakes of at most a few companies, and especially because of BP’s habit of cutting corners. As if to refute the argument, on September 2, an explosion rocked another Gulf rig, this time in shallow water. Thirteen workers evacuated into the water and were later rescued. No one was killed and no oil spilled, but the blast bolstered the critics of drilling and emboldened supporters of the moratorium. The rig was operated by Mariner Energy, which was being bought by Apache.
While Congress mulls the policy response, the environmental impact of the spill also remains in dispute and may not be fully understood for decades. In late August, the government declared that most of the oil that had still been floating in the Gulf had disappeared. The warm waters, intense sun, and oil-eating microbes native to the area had broken it down. Many scientists found the numbers vague and overly optimistic. The government estimated that the Macondo well had released almost 5 million barrels of oil between late April and mid-July. Some of that had been captured during BP’s early attempts to curb the flow from the leaking well. That still left almost 4 million barrels leaking into the sea, and, of that, almost 3 million were supposed to have been handled by skimming, burning, evaporation, and microbes. While those natural processes will break down oil, it doesn’t typically happen that quickly. So where did it all go?
One theory is that it sank. Samantha Joye, a professor with the University of Georgia, collected sediment samples from the seafloor and found layers of oily material, some as much as two inches deep. The goo contained small tar balls that looked like “little microscopic cauliflower heads.” Beneath the oily layer, her samples revealed dead shrimp, worms, and other tiny sea creatures. Joye believes that the material may have accumulated when BP had sprayed dispersants liberally on the slick to break up the oil earlier in the summer, or it may be mucus excreted from the oil-eating bacteria that feasted on the slick. The mucus is “kind of like a slime highway from the surface to the bottom, because the slime gets heavy, and it sinks.”3 Meanwhile, the efficiency of the microbes themselves is suspect. The study that led to the government’s assertion that the microbes had eaten most of the oil was done by the Energy Biosciences Institute at the University of California, Berkeley.4 That’s the institute, formerly headed by Energy Secretary Stephen Chu, which was funded by BP.
Some of the worst fears about the spill—that it would kill the Gulf, that it would enter the loop current and be sucked around Florida and up the eastern seaboard, that a hurricane might stir up the slick and cause oil to rain down on land— never materialized. But scientists are concerned that sea life may be affected for generations. Meanwhile, seafood sales across the Gulf, even in areas that were not affected by the spill, remain sluggish amid public fears that all marine life was tainted by the oil slick. Seafood restaurants and wholesalers are among the litany of businesses that have sued BP over the spill.
Despite John Browne’s efforts to build BP into a global oil power, it remained an industry stepchild, and its handling of the Deepwater Horizon disaster only reinforced the disdain of its peers. After the well was finally killed, Exxon Mobil Chairman Rex Tillerson, who had declared to Congress that his company would have never have drilled the well the way BP did, questioned the company’s and the government’s approach to plugging the well. Rather than try riskier measures that had a higher chance of success, BP engineers, with anxious government scientists looking over their shoulder and sometimes second-guessing their decisions, opted for safer options that had less chance of succeeding. “The lowest risk and lowest-chance-of-success options were chosen first,” Tillerson said at a government forum on the spill response in late September. He stressed that the accident was preventable. “When you focus on safe operations and risk management, tragic accidents like this one that occurred in the Gulf of Mexico simply do not occur.”
BP, despite all its talk of change and lessons that can be learned from the Gulf spill, seems to be following a familiar pattern. In early September, it released the results of its internal investigation into the cause of the disaster. In keeping with the statements of BP executives dating to early May, it found that a number of bad decisions, mostly by Transocean and Halliburton, had sealed the Horizon’s fate. BP investigators found that the cement job at the bottom of the well failed, allowing hydrocarbons to enter. They questioned the makeup of the cement as well. The gas flowed up the production casing, the innermost part of the well, meaning that the issues of the long string and the number of centralizers didn’t matter, BP found. It blamed the Transocean rig crew for not recognizing that gas had entered the well during a 40-minute period before the explosion when they could have shut down the well and saved the rig. That 40-minute period happened to be when the BP company man on the rig was in his office. After the flow reached the surface, the crew sent it to a separator, designed to remove the drilling mud from the gas. Normally, that would have been the right decision, but given the intensity of the flow, it diverted the gas onto the floor of the rig rather than overboard, allowing it to get sucked into the Horizon’s diesel engines and ignite. The nettlesome blowout preventer should have activated automatically, even after the rig lost power, but it didn’t. BP found “potential weaknesses” in the testing and maintenance of the preventer.
Yet the study ignored BP’s responsibility, as the leaseholder, to ensure that proper maintenance procedures were followed. The report did cast some blame on BP’s employees, noting that the company men on the rig, along with the Transocean crew members, failed to properly interpret the results of the negative-pressure tests before the explosion. It also blamed its drilling engineers in Houston for not exercising more oversight of the cement process.
Once again, the Horizon disaster had an eerie parallel to the Texas City refinery explosion. The report was reminiscent of the Mogford report that investigated the refinery blast. Both placed the blame on contractors and on midlevel BP managers. Once again, though, BP’s investigation ignored the broader context, failing to ask why its employees weren’t more diligent in their decision making. BP’s engineers clearly were concerned about the cost overruns and time delays on Macondo. In compiling the internal report, investigators never explored whether those pressures might have trumped safety concerns. Nor does it address BP’s fractured management system or the culture that talks about safety, yet emphasized profit.
Across the company, the familiar pattern persists. About a month after the Horizon explosion, a pump station along the Trans-Alaska Pipeline, about 100 miles south of Fairbanks, was shut down after a test of the station’s fire detection system caused a failure of both main and backup power. The power loss triggered an opening of relief valves, releasing about 100,000 gallons of oil from an overflow storage tank to a secondary containment area.5 Compared with the oil flowing from the Macondo well, it was a pittance, but the pipeline operations continue to be dogged by allegations of poor maintenance from employees.
A few weeks before the Horizon disaster, a fire broke out in a hydrogen compressor at the Texas City refinery and compromised the seal on the ultracracker. This was the same unit that had been ravaged by fire in the summer of 2005 and prompted the Chemical Safety and Hazard Investigation Board to label the plant an “imminent hazard.” The malfunction forced BP to flare off gases, including benzene, a known carcinogen. Rather than shut down the unit, plant officials kept it running for the next 40 days while the damage was repaired, releasing more than a half-million pounds of pollutants in the process. While BP filed the required “emissions event” report with state regulators, it never informed its workers or Texas City residents of the release. By early August, after the release had become public knowledge, thousands of residents, citing a variety of health concerns, jammed conference halls where local trial lawyers were signing up potential plaintiffs for what they expected would be a $10 billion civil class-action lawsuit. Lawyers called on the Houston judge, Lee Rosenthal, to revoke BP’s probation for violating federal air pollution laws in 2005. The Texas attorney general’s office sued BP Products North America over the benzene release, citing a pattern of bad practices and repeated violations at the refinery.
In late September 2010, BP agreed to pay yet another record fine, this time $15 million for pollution violations related to fires at the Texas City refinery in 2003 and 2004. Katherine Rodriguez, whose father Ray Gonzalez, died after being burned by superheated water in September 2004, wondered if the latest fines would have any more impact than the previous ones. “It’s very frustrating for us to see it going on and on and on and nothing happens,” she said. She has begun pressing for changes in workplace safety laws. The regulatory environment in the United States, though, remains tilted in companies’ favor.
All of these incidents happened against a backdrop of record operating profits for BP. With the fallout from the Horizon accident straining the company’s resources, BP’s culture of getting more for less is likely to intensify the company’s operational shortcomings. Perhaps the most consistent aspect of BP in the decade since it acquired Amoco and Arco, the bedrock of the safety lapses that pervade its operations, is management’s stubborn refusal to see any connection between its cost cutting and the disasters that have become BP’s hallmark.
In mid-September, Tony Hayward appeared before a committee of the British Parliament, which was considering imposing restrictions on offshore drilling as a result of the Horizon accident. Once again, as he and John Browne before him had done so many times, he rejected any connection between BP’s woes and cost cutting. Despite the Texas City refinery explosion, the leaks in Alaska, the trading violations, the problems with Thunder Horse, the ongoing dispute with OSHA over work conditions at its refineries, the latest gas release in Texas City, and, most of all, the Deepwater Horizon disaster, Hayward clung to his company line.
“It’s easy for some parties to suggest that this is a problem with BP. I emphatically do not believe that is the case,” he said. It was one of his last public appearances as chief executive. Bob Dudley took over a couple of weeks later. Hayward’s stubborn refusal to acknowledge the role of BP’s culture, of its top-down focus on financial performance over operating performance, raised questions about whether Dudley would also parrot the company line of his predecessors. Would the company change? Had it really learned any of the “lessons” that it so frequently talked about? Had executives learned the terrible price of stressing financial performance over operations? Or would more employees be put at risk? “It’s very dangerous to join up dots that may not be appropriate to join up,” Hayward said.
Even without connecting the dots, the pattern is painfully clear. Hayward, like Browne before him, was blind to the consequences of his actions because, as Texas City firefighter David Teverbaugh noted, neither chief executive ever stood amid the charred rubble and burned flesh of their own decisions. To the company’s management, BP’s mistakes are always accidents that could happen to any oil company. But equipment changes and mea culpas don’t address the underlying problem that has plagued BP for the past decade. Its culture has resisted change and has clung to fundamental principles that emphasize financial performance over safety, not overtly, but subtly. As it attempts to recover from the Horizon disaster, BP faces a financial outlook unlike anything that it has confronted since William Knox D’Arcy sought the investment of Burmah Oil to keep the company in business. If the relentless cost cutting under Browne and Hayward spawned a culture of disaster, what will happen when the inevitable next round of budget cuts are demanded of its managers?
The tragedy of the Deepwater Horizon has few victories. The well was finally killed, but not before it had exacted a huge cost. BP, of course, has paid a financial price, and it has paid with its reputation. Tony Hayward and Andy Inglis, BP’s exploration chief and a former Browne turtle, paid with their jobs. BP’s shareholders, including thousands of British pensioners, have paid with lost investments and dividends. Gulf residents have paid with lost livelihood. The Obama administration and political leaders in the United States have paid with a loss of confidence in their ability to bring Big Oil to heel when it engages in practices that threaten the public welfare. Most of all, the 11 men who died aboard the Deepwater Horizon the night of April 20 paid with their lives. Their families will pay for a lifetime, as wives grow old without husbands and children grow up without fathers.
The pattern that Hayward emphatically refuses to see continues. As Bob Dudley prepared to take office in early October, he once again reshuffled management, ousting Andy Inglis, the former Browne turtle who had been running the exploration business at the time of the Horizon disaster. Dudley, in an e-mail to employees, vowed to realign company incentives to ensure “the right balance between the short and long term.” He created a new safety division that would oversee operations worldwide and report to him. He announced a new management team that, once again, was drawn from among the insular ranks of longtime BP employees. Most had joined in the 1980s, and none has worked for BP fewer than 19 years.
Dudley will try once again to change BP’s culture without changing the people, much as Hayward tried and failed to do. Yet after all that’s happened, Dudley must recognize the deep and dangerous problems that plague BP, that remain a threat to both worker safety and the environment. His new safety initiative and executive reshuffle must, at least, be an admission of the company’s past mistakes.
In an interview from London the day before he officially became chief executive, Dudley told the Houston Chronicle “I wouldn’t describe it as an admission of anything.”