Anadarko Petroleum Corp. president and chief executive Jim Hackett told U.S. senators today that the Macondo well disaster points to that “proper procedures and practices need to be followed” when drilling.
“Our view is that this accident was preventable, this tragic accident. You need to use the proper engineering practices and procedures, and it is clear we have lessons learned from this for the industry, where if we do have, in fact, this series of bad engineering decisions ever happen again—and we hope to goodness we never do—we are in a position to assure the public that there is a better response capability.”
Hackett testified before the U.S. Senate Subcommittee on Federal Financial Management, Government Information, Federal Services, and International Security on “The Gulf of Mexico Oil Spill: Ensuring a Financially Responsible Recovery, Part II.” Hackett was joined by Ken Feinberg, administrator of claims against the $20-billion BP Plc fund, and Naoki Ishii, president of Japan-based Mitsui & Co. Ltd.’s U.S. Gulf of Mexico operating company Moex Offshore 2007 LLC.
Hackett’s answer was in response to subcommittee chairman Sen. Thomas Carper’s question of what Hackett and Ishii would have been done differently if drilling the well, in hindsight, “to avert this disaster we are going to be facing for some time.”
Anadarko and Mitsui are partners with BP in the Macondo deepwater well project. Neither has paid to BP more than $400 million of claims and other bills that is a percentage portion of what BP has incurred since the well’s April 20 blowout. Anadarko has stated the blowout “may” be a result of “gross negligence or willful misconduct” and that it is continuing its own investigation.
Senators admonished Anadarko in the hearing today for not paying a portion of the bills, meanwhile, suggesting that not doing so means Anadarko is not accepting responsibility to American taxpayers. Hackett says the $20-billion claims fund BP agreed to with President Obama is a deal BP made for its reasons.
Ishii repeated several times during the hearing that Mitsui relied entirely on BP to do a good job on the well, that it had confidence in BP’s reputation and that it was additionally assured when investing in the well by the fact that the U.S. government had permitted the well and it was already being drilled. “This was the first deepwater drilling project (for us)…We were not involved in any of the decision-making, so we relied on BP,” Ishii said.
He assured the senators, “We will honor all of our legal obligations…(yet) it is important we properly investigate and find out why this accident occurred.”
Hackett said, “We are in our own dispute among the parties (about the bills).”
Sen. John McCain asked why Anadarko won’t pay BP. Hackett said, “We don’t think it is necessary to do so.” Anadarko has not set money aside for it but it has substantial assets, he added. Cash on hand at the end of the first quarter was $3 billion, it has an undrawn credit facility and its assets’ value is more than $20 billion.
“We have a very strong balance sheet. There is cash on hand,” Hackett said.
McCain said, “It’s pretty clear you’re going to litigate.” But he suggested Anadarko put money aside and start paying bills to improve its image among Americans and its reputation in the energy industry.
Sen. Claire McCaskill asked, “Why would you suffer that kind of public relations disaster (for not ponying up)?” Hackett said, “The American public is being kept whole.” He added, “What we have learned in the past few months (about the well) causes us great concern.”
McCaskill concluded, “I think you’ve made a mistake (to not pay the bills)…No one is going to make you pay anything unless you’re liable for something.”
Well, no one in court may do that, but not in the U.S. Senate.
Nonoperating partners in wells participate in well-design decisions, but day-to-day decisions during drilling are made by the operator, which was BP in the case of the Macondo project. Hackett said the Macondo project was fairly unextraordinary in the deepwater-drilling business, as the nature of the Gulf, and at that water and subsea depths, is well understood today.
Hackett concluded, “I don’t think my beliefs are at all compromised by this position (of not paying BP)…(But,) we stand ready to honor our obligations if BP fails.”
Ishii said he received a letter from BP one week prior to the blowout that there were problems with the well and that drilling would be stopped. Hackett said reports from BP indicated drilling was proceeding without irregularity: “There wasn’t anything I received that I read through the 19th that would have been a red flag for us.”
For more than 60 tweets from the hearing, see http://twitter.com/NissaDarbonne. For a replay of the proceedings, see http://hsgac.senate.gov/public/index.cfm?FuseAction=Hearings.Hearing&Hearing_ID=54709e95-c25d-4dcc-95e3-95dc1e7733a7.
Also of interest is BP’s simultaneous testimony for the U.S. Department of Interior in New Orleans today: http://www.c-span.org/Watch/Media/2010/07/22/HP/R/35876/BP+staff+Widow+testify+at+Deepwater+Horizon+Hearing.aspx
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