Oil spill panel calls for tighter federal rules, new fees for drilling

The presidential oil spill commission said Tuesday that the federal government should require tougher regulation, stiffer fines and a new industry-run safety organization, recommendations that face an uncertain future in the new Congress.

Former senator Bob Graham (D-Fla.), one of the commission's co-chairmen, said that the Deepwater Horizon accident was "both foreseeable and preventable," and that Congress and the administration needed to enact reforms in order to prevent a repeat of the massive BP oil spill in the Gulf of Mexico last year.

"I am sad to say that part of the answer is the fact that our government helped let it happen," Graham said. "Our regulators were consistently outmatched."

The panel proposed several safeguards aimed at strengthening regulators' control over the oil and gas industry, including establishing an independent safety agency within the Interior Department that would be headed by someone for a fixed term in order to insulate the appointee from political interference. Graham said such a person should have "a background of both science and management."

It also called for funding the regulatory agency that oversees offshore drilling, the Bureau of Ocean Energy Management, Regulation and Enforcement (BOEMRE), with fees from the companies who are tapping into the nation's petroleum resource.

William K. Reilly, the commission's other co-chairman, emphasized that it would be a mistake to focus just on the three companies involved in last year's accident. "The solution to the problem has to be industry-wide."

Graham, who along with Reilly will testify before both the Senate Committee on Energy and Natural Resources and the House Natural Resources Committee on Jan. 26, said he hoped the "searing impact" of the Deepwater Horizon explosion and its aftermath would "override an ideological preference for less government, less government intrusion and less government cost" that could impede legislative action.

Both Louisiana Sens. Mary Landrieu (D) and David Vitter (R) endorsed the panel's recommendation that 80 percent of the Clean Water Act fines and penalties linked to the Gulf of Mexico oil spill go to environmental restoration. Landrieu said it would give "added ammunition" to a proposal that already has White House support.

But in a sign of how the two parties remain divided on how to regulate drilling, Landrieu said the report found a path forward for deepwater drilling while Vitter criticized it for failing to do so.

"The report could have easily said 'end of deepwater drilling,' but it doesn't," Landrieu told reporters in a conference call. "I think that's the really big takeaway - that this commission, having examined a horrible incident that occurred, has basically concluded that deepwater can be done safely."

In an interview, Vitter said he was concerned the report "didn't make any statement, any observation about the gulf still almost being shut down, nine months after the fact."

He added that although he was open to creating a new safety office within Interior, and didn't object outright to the idea of imposing fees to help regulate offshore energy exploration, he lacked confidence in the administration's ability to oversee drilling operations.

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Federal investigators again try to question BP spill witnesses

A federal investigative panel will begin its next round of hearings Monday into the Deepwater Horizon disaster and call witnesses who can address alleged shortcuts in the drilling of the BP oil well, problems with the failed blowout preventer and the confused scene after an explosion on the rig.

Whether all of those witnesses testify remains to be seen.

After challenges to the investigative board's authority and competence, the hearings are shaping up as a test of the panel as well as the parties under investigation.

At the previous round of hearings last month, some witnesses canceled at the last minute. One invoked his Fifth Amendment right to remain silent. Lawyers for other witnesses accused the board -- a joint panel of the U.S. Coast Guard and the Bureau of Ocean Energy Management, Regulation and Enforcement -- of ignoring their clients' legal rights and the rules governing the proceedings.

Toward the end of the last day of testimony, July 23, the Coast Guard officer presiding over the hearings, Capt. Hung Nguyen, implied that the board could put aside federal rules of evidence. The comment appeared to provide ammunition to the board's critics.

Referring to the federal rules of evidence, Nguyen said: "It's possible we can use it. It's possible we don't have to use it."

"It doesn't say you don't have to. It says they should be followed . . . . ," said Transocean lawyer Edward F. Kohnke IV.

"Should, not shall," Nguyen replied, according to recordings and a privately commissioned transcription.

But in the official transcript released by the panel, Nguyen's response is: "Sure. Sure."

A Coast Guard spokeswoman said that nothing in the transcript had been changed and that it is possible the person transcribing the hearing misheard the statement.

On Thursday, the Coast Guard and the Bureau of Ocean Energy Management added two legal professionals to what had been a six-member board, a move that followed complaints that the panel lacked legal expertise.

The new members are Wayne R. Andersen, a retired federal judge, and Capt. Mark R. Higgins, a Coast Guard staff judge advocate.

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Extensive corrosion threatens BP pipelines in Alaska, risking explosions, spills

The extensive pipeline system that moves oil, gas and waste throughout BP's operations in Alaska is plagued by severe corrosion, according to an internal maintenance report generated four weeks ago.

The document, obtained by the journalism group ProPublica, shows that as of Oct. 1, at least 148 BP pipelines on Alaska's North Slope received an "F-rank'' from the company. According to BP oil workers, that means inspections have determined that more than 80 percent of the pipe wall is corroded and could rupture. Most of those lines carry toxic or flammable substances. Many of the metal walls of the F-ranked pipes are worn to within a few thousandths of an inch of bursting, according to the document, risking an explosion or spills.

BP oil workers also say that the company's fire and gas warning systems are unreliable, that the giant turbines that pump oil and gas through the system are aging and that some oil and waste holding tanks are verging on collapse.

In an e-mail, BP Alaska spokesman Steve Rinehart said the company has "an aggressive and comprehensive pipeline inspection and maintenance program," which includes pouring millions of dollars into the system and regularly testing for safety, reliability and corrosion. He said that although an F-rank is serious, it does not necessarily mean there is a current safety risk.

Rinehart added that the company will immediately reduce the operating pressure in worrisome lines until it completes repairs. "We will not operate equipment or facilities that we believe are unsafe," he said.

Rinehart did not respond to questions about what portion of its extensive pipeline system was affected or whether 148 F-ranks were more or less than normal, except to say that the company has more than 1,600 miles of pipelines and does more than 100,000 inspections a year.

In 2006, two spills from corroded pipes in Alaska placed the company's maintenance problems in the national spotlight. At the time, BP temporarily shut down all transmission of oil from the North Slope to the continental United States, cutting off about 8 percent of the nation's oil supply, while it examined its pipeline system.

Photos taken by employees in the Prudhoe Bay drilling field this summer, and viewed by ProPublica, show sagging and rusted pipelines, some dipping in gentle U-shapes into pools of water and others sinking deeply into thawing permafrost. Marc Kovac, a BP mechanic and welder, said that some of the pipes have hundreds of patches on them and that BP's efforts to rehabilitate the lines were not funded well enough to keep up with their rate of decline.

"They're going to run this out as far as they can without leaving one dollar on the table when they leave," Kovac said.

BP Alaska's operating budget is private, so the picture of its maintenance program is incomplete. But documents obtained by ProPublica show that BP has pumped hundreds of millions of dollars into maintenance and equipment upgrades on the North Slope since the 2006 spills. In 2007, BP's maintenance budget in Alaska was nearly $195 million, four times what it was in 2004, according to a company presentation. In 2009, $49 million was budgeted to replace and upgrade systems that detect fires and gas leaks alone.

Despite the investment, workers say that the capabilities of equipment of all types continue to be stretched and that maintenance plans set years ago remain incomplete.

BP employees told ProPublica that several of the 120 turbines used to compress gas and push it through the pipelines have been modified to run at higher stress levels and higher temperatures than they were originally designed to handle. They also said giant tanks that hold hundreds of thousands of gallons of toxic fluids and waste are sagging under the load of corrosive sediment and could collapse.

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Afghan government awards oil contract in first phase of revenue-generation plan

KABUL - The Afghan government on Monday awarded a small but potentially path-breaking crude oil contract, marking the first phase of an effort that U.S. and Afghan officials say could bring the cash-strapped government significant revenue.

The six-month deal for crude from the Angot field in Sar-i-Pol province in Afghanistan's north was designed as a confidence-building venture for one of the world's least-attractive foreign-investment markets.

If successful, Afghan and U.S. officials hope the deal will put Afghanistan on the hydrocarbon industry map and attract direly needed private investment to this landlocked country, which is kept solvent by international donors.

"This is just the beginning," Afghanistan's Minister of Mines Waheedullah Shahrani said in an interview. "But the potential is great."

Angot is among a handful of developed fields in the Amu Darya Basin, which straddles Afghanistan and Turkmenistan. The Afghan side of the basin has an estimated 80 million barrels of proven crude reserves, according to the U.S. Geological Survey. The nearby Afghan-Tajik Basin could hold as much as 1.5 billion barrels worth of crude, according to a study the agency commissioned in 2006. Together, the two areas have the potential to generate hundreds of millions of dollars per year in government revenue over the next two decades, U.S. officials estimate.

If the Afghan government manages to attract energy companies to develop its oil sector over the next few years, the country could meet its own fuel needs and perhaps export oil sometime in the next decade, U.S. officials said.

"This step means that Afghanistan is now an oil-producing nation, creating jobs for Afghans and an environment that will enable future investment in developing the oil sector," said U.S. Deputy Under Secretary of Defense Paul A. Brinkley, who oversees the Pentagon's business stabilization efforts in Iraq and Afghanistan.

Brinkley's office has invested nearly $1.5 million dollars in devising the strategy to revive Afghanistan's oil sector, which has been paralyzed for decades because of war and poor governance.

American officials acknowledge the challenges are huge. The country remains mired in a nearly decade-long war. Its entrenched culture of corruption has long dissuaded foreign investors. Its politics remain volatile. And its regulatory and legal sectors are arbitrary and vulnerable to cronyism.

"There's huge room for error," said a senior American official involved in the effort who spoke candidly on the condition of anonymity. "The whole thing could fall flat on its face."

Ben Lando, who runs the Iraq Oil Report and has studied emerging oil markets, said, too, that oil wealth can be destabilizing in the short term.

"There's a good chance Afghanistan could be stricken by the resource curse rather than come to use its oil for the benefit of its citizens," Lando said. "Oil wealth has a history of having a deteriorating effect on unstable governments with underdeveloped institutions and institutionalized corruption."

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BP cost-cutting measures are focus of U.S. inquiry into gulf spill

METAIRIE, LA. - There's been a lot of talk about the "safety culture" at BP in the wake of the Deepwater Horizon disaster in the Gulf of Mexico. Now, federal investigators are probing what looks to them like BP's save-money culture.

At a federal hearing this week, an investigator revealed that BP's top manager on a drilling rig is given a performance evaluation that includes the category "Every Dollar Counts and Simplification."

Of 13 employee evaluations reviewed by investigators, 12 had documented ways they had saved the company large sums of money, typically six-figure amounts, and one had put together a spreadsheet showing that he could account for $490,000 in savings, said Jason Mathews, an investigator for the Bureau of Ocean Energy Management, Regulation and Enforcement, which is conducting the joint inquiry with the Coast Guard.

BP witnesses have acknowledged this week and in previous hearings that oil drilling is a business, and costs have to be taken into account. But they've said safety always comes first, and they denied compromising safety to save money.

But the government this week raised the question of whether BP took incremental shortcuts because it felt rushed to finish the problem-plagued Macondo exploration well, a job costing BP about a million dollars a day. Simply leasing the Deepwater Horizon rig from Transocean was costing $525,000 a day. Eleven people died when the mile-deep well blew out April 20, and more than 4 million barrels of oil spewed into the Gulf of Mexico in the nation's worst offshore oil spill.

The hearing at a Holiday Inn conference room was packed with lawyers for oil companies and rig workers. Although not a trial, but rather a fact-finding inquiry, the hearings have had plenty of courtroom theatrics, including turbo-charged lawyers leaping to their feet to belt objections. There has been a smattering of accusations lobbed across the room to the effect that some attorneys are trolling for material for civil lawsuits.

One document introduced into evidence this week showed that the Macondo job, originally projected as a $96 million operation, was on track to cost $58 million more than anticipated.

BP kept track of estimated completion dates for drilling jobs, and tried to figure out where the rig could go next so that it could stay active and have minimal down time. E-mails discussed by attorneys this week showed that BP hoped to squeeze in a quick job in May - plugging a well called Nile - before tackling a more complex job at another site, the Kaskida well, that might take six months.

"I know you all are under pressure to finish Macondo so we can get Nile P&A moving and not jeopardize the Kaskida well," one BP employee, Merrick Kelley, wrote to Macondo well team member Brian Morel a week before the blowout.

On April 9, David Sims, a BP manager, explained to colleagues in an e-mail that the Nile job was a "gap-filler" between Macondo and Kaskida, and that he hoped the government regulatory agency, the Minerals Management Service, would provide some flexibility in its approved date for starting the Kaskida job because of delays in completing Macondo.

The Macondo well had been a "nightmare," in the words of one team member. The widow of a worker killed in the explosion testified this summer that her husband had told her that "Mother Nature just doesn't want to be drilled here." The first rig to drill the well was damaged in a hurricane and had to quit the job. The Deepwater Horizon, drilling fast, suffered a stuck drill pipe March 8 when the hole collapsed. The crew had to start over, drilling a new hole.

Mathews, the investigator, asked John Guide, the BP well team leader for the Macondo job, whether cost-consciousness colored decisions involving safety.

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'Culture of complacency' at BP set stage for oil spill, commission chief says

Monday was a relatively good day for BP in the glare of oil spill inquiries. Tuesday was a bad day.

Drilling experts and corporate rivals testifying before a presidential oil spill commission blasted BP Tuesday for decisions about the Deepwater Horizon drilling rig that might have removed obstacles to the April 20 blowout that led to the massive Gulf of Mexico oil spill.

BP's final well designs were "deficient in detail," said Steve Lewis, a drilling engineer with Seldovia Marine Services, who later added that the "the operational detail in my mind was totally deficient" and "totally inadequate."

Shell Oil's chief well scientist Charlie Williams said his company typically uses three to five plugs when temporarily abandoning a well. BP used one. And John Rogers Smith, associate professor of petroleum engineering at Louisiana State University, said the way BP replaced drilling mud with seawater was "not prudent."

The commission's co-chairman William K. Reilly opened the day saying that a "suite of bad decisions" revealed "a culture of complacency" at BP as well as its main contractors Transocean and Halliburton. He concluded the day saying that the deepwater drilling disaster was the result of systemic problems, not isolated ones.

The renewed criticism of BP came one day after Fred H. Bartlit Jr., the general counsel of the National Commission on the BP Deepwater Horizon Oil Spill and Offshore Drilling, seemed to absolve BP of allegations that it let cost worries trump safety concerns. Bartlit said Monday that "to date, we have not seen a single instance where a human being made a conscious decision to favor dollars over safety."

The commission members backpedaled from that assessment and even Bartlit sought to explain himself. Reilly said that the commission staff "did not ascribe motive to any of those decisions." Bartlit said the commission was still investigating and could draw inferences about whether time- and money-saving measures had increased risks on the Deepwater Horizon, where 11 workers died in the April 20 explosion.

But the question of motive - whether BP was rushing to finish a costly and tardy well - hung over the entire day. A representative of a plaintiffs' attorney group noted that several lawyers at Bartlit's firm are doing work for Halliburton.

Lewis said he had seen copies of internal BP communications suggesting that the London-based oil giant was worried about finishing the Macondo oil well and moving the drilling rig to Kaskida, another Gulf of Mexico location, where a BP lease would expire by May 16 if certain work weren't done there.

"They had commitments to wells, regulatory commitments, that were required to maintain in the one case a viable lease that required well work," Lewis said.

Commission staff attempted to rebut Lewis later. Bartlit said that "we have more facts than Mr. Lewis" and that "it does not appear to us that there was a rush to get to another lease."

Commission sources and those close to BP later added that by early April BP had weighed the option of dropping a plan for work that was originally to have been done after Macondo but before Kaskida. That intermediate job would have permanently plugged the Nile well, not far from Macondo, and would have taken about a month.

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BP finishes pumping cement in final stage of 'static kill'

BP has finished pumping cement into the blown-out Macondo well in the Gulf of Mexico as part of its efforts to permanently plug the source of the nation's worst oil spill, the company said Thursday.

Engineers started the cementing operation at 10:15 a.m. EDT and completed it at 3:15 EDT. It was the second step in the "static kill," in which heavy mud was first pumped into the well from the surface to stop it from leaking crude into the gulf.

BP said in a statement that the static kill procedure will "complement" a separate effort to plug the well through a relief well that is nearing completion in a technique known as the "bottom kill."

Earlier, the company announced that retired Coast Guard Adm. Thad W. Allen, the national incident commander for the disaster, had authorized the cementing operation, which was under consideration following the successful effort to pump mud into the well.

The development comes a day after the Macondo well became an apparently harmless hole in the seafloor, clogged with 13-pound-per-gallon gunk, and barely more of a threat to spew oil into the Gulf of Mexico than to start gushing lemonade.

On the 107th day of the Deepwater Horizon disaster, the well that tormented the nation had flatlined. Federal officials then green-lighted the cementing of the well, already jammed with mud, late Wednesday. Federal waters are reopening gradually to fishing. The oil slick, the once-horrific expanse of red-orange mousse and silver sheen, has largely disappeared, federal scientists said Wednesday, even though the amount of oil left is more than four times that dumped by the Exxon Valdez.

The Obama administration breathed a sigh of relief, holding a midday news conference featuring top officials who claimed credit for guiding BP in getting the well under control. Officials hastened to remind the public that Macondo won't be incontrovertibly dead until a relief well drills into it near its base and plugs it with cement. But even the cautious Allen, the official in charge of the federal response to the disaster, called the static kill a "fairly consequential" event and a "very significant step."

About three-quarters of the nearly 5 million barrels of oil that escaped Macondo has evaporated, dissolved or been dispersed by chemicals, skimmed by boats, burned, weathered and, most important, devoured by the Gulf of Mexico's permanent oil-eating microbial workforce, according to a study released Wednesday by the National Oceanic and Atmospheric Administration and Interior Department.

"Mother Nature is assisting here considerably," said NOAA administrator Jane Lubchenco.

This should terminate, once and for all, the more apocalyptic scenarios for the demise of the gulf and the spread of oil to Atlantic shores. There is no sign that the oil is going to ride the Loop Current onto the beaches of South Florida, the Outer Banks, Bermuda, Ireland and so on.

Just a month ago, the spill was an uncontrolled calamity: Macondo mocked the technological skills of the world's petroleum engineers, and oil was slathering birds and turtles and tar-balling hundreds of miles of coastline. The turning point came when BP put a new tight-fitting cap on the well July 12 and closed the valves three days later, cutting off the ugly geyser of oil that had become a dominant image of the summer.

Federal scientists have said that vigilance would be called for even after the static kill procedure worked, which, according to BP in a 2 a.m. announcement, it did. BP sent out a bulletin declaring success after spending eight hours pumping mud into the well from surface ships.

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