Feds kick off oil spill sanctions against BP, Transocean & Halliburton

The federal government today kicked off the process of fining BP, Transocean and Halliburton for violating offshore drilling rules tied to the 2010 oil spill.

The companies could be forced to pay as much as $45.7 million for 15 separate violations of those rules, which range from failing to keep BP’s Macondo well under control to working unsafely at the site.

The Interior Department’s Bureau of Safety and Environmental Enforcement launched the process by sending the three firms formal “incidents of non-compliance.” The documents lay out the violations but do not specify how long they occurred — a major factor in calculating the final penalty.

The foundation for the fines was built in September, when a Coast Guard and Interior Department investigation concluded that failures by all three companies led to the blowout of the Macondo well, killing 11 workers and unleashing the nation’s worst oil spill.

“The joint investigation clearly revealed the violation of numerous federal regulations designed to protect the integrity of offshore operations,” said bureau Director Michael Bromwich in a statement. “To ensure the safe and environmentally responsible conduct of offshore operations, companies that violate federal regulations must be held accountable.”

The bureau’s sanctions are separate from fines and other penalties that are expected to be imposed under the Clean Water Act, which could reach to $21 billion for BP, based on estimates that the Macondo well gushed 4.9 million barrels of oil into the Gulf of Mexico.

The government is accusing BP of violating seven regulations governing work on the outer continental shelf. Transocean, which owned the Deepwater Horizon drilling rig, and Halliburton, which performed cementing work at the site, are each charged with four violations.

The violations carry a penalty of up to $35,000 per day per incident. In the case of the oil spill, violations may have covered 87 days — the time crude was gushing into the Gulf — creating a maximum potential tab per incident of $3.05 million. But some infractions may cover just one day, with a total cost of just $35,000.

Halliburton did not immediately respond to requests for comment.

BP stressed in a statement that “has taken steps to enhance safety and risk management throughout its operations and is in the process of implementing new voluntary standards in the Gulf of Mexico that exceed current regulatory requirements and strengthen oversight of contractors.”

Transocean said it would appeal. The company could be helped on two fronts. First, Transocean has stressed that its contract with BP specifically indemnifies the drilling contractor for all fines and penalties. Second, both Transocean and Halliburton could contest the violations on the grounds that as drilling contractors they are immune from offshore regulations that typically are imposed only on primary operators.

The action marks the first time the government has moved to sanction contractors for violating offshore regulations, a departure from the government’s traditional focus squarely on the oil and gas companies working on the outer continental shelf.

Traditionally, the government agencies that oversee offshore drilling have focused on oil and gas companies operating in coastal waters, and not the contractors and service companies that may collaborate on projects.

But under Bromwich, the agency has concluded that its regulatory reach extends to drilling rig owners, service firms and other contractors that work for the operators. Bromwich said that determination was affirmed by a legal interpretation made by Interior Department’s solicitor.

BP said the Obama administration’s decision to seek penalties against Transocean and Halliburton “makes clear that contractors, like operators, are responsible for properly conducting their deep-water drilling activities and are accountable to the U.S. government and the American public for their conduct.”

“We continue to encourage other parties — including Transocean and Halliburton — to acknowledge their responsibilities in the accident, make changes to help prevent similar accidents in the future and step forward to fulfill their obligations to Gulf communities,” BP added.

Executives from all three companies are set to testify before the House Natural Resources Committee on Thursday. It will be the first time the firms have testified on Capitol Hill since the Coast Guard and Interior Department’s report on the Deepwater Horizon disaster was issued last month.

Here are the federal regulations that BP is accused of violating:

  • 30 CFR 250.107(a)(1) – BP failed to protect health, safety, property, and the environment by failing to perform all operations in a safe and workmanlike manner.
  • 30 CFR 250.300 – BP did not take measures to prevent unauthorized discharge of pollutants into offshore waters.
  • 30 CFR 250.401(a) – BP failed to take necessary precautions to keep the well under control at all times.
  • 30 CFR 250.420(a)(1) and (2) – BP did not cement the well in a manner that would properly control formation pressures and fluids and prevent the direct or indirect release of fluids from any stratum through the wellbore into offshore waters.
  • 30 CFR 250.427 – BP failed to conduct an accurate pressure integrity test.
  • 30 CFR 250.446(a) – BP failed to maintain the Deepwater Horizon BOP system in accordance to API RP 53 section 18.10.3.
  • 30 CFR 250.1721(a) – BP failed to obtain approval of the Temporary Abandonment procedures actually used at the Macondo well.

Here are the federal regulations that Transocean is accused of violating:

  • 30 CFR 250.107(a)(1) – Transocean failed to protect health, safety, property, and the environment by failing to perform all operations in a safe and workmanlike manner.
  • 30 CFR 250.300 – Transocean did not take measures to prevent unauthorized discharge of pollutants into offshore waters.
  • 30 CFR 250.401(a) – Transocean failed to take necessary precautions to keep the well under control at all times.
  • 30 CFR 250.446(a) – Transocean failed to maintain the Deepwater Horizon BOP system in accordance to API RP 53 section 18.10.3.

Here are the federal regulations that Halliburton is accused of violating:

  • 30 CFR 250.107(a)(1) – Halliburton failed to protect health, safety, property, and the environment by failing to perform all operations in a safe and workmanlike manner.
  • 30 CFR 250.300 – Halliburton did not take measures to prevent unauthorized discharge of pollutants into offshore waters.
  • 30 CFR 250.401(a) – Halliburton failed to take necessary precautions to keep the well under control at all times.
  • 30 CFR 250.420(a)(1) and (2) – Halliburton did not cement the well in a manner that would properly control formation pressures and fluids and prevent the direct or indirect release of fluids from any stratum through the wellbore into offshore waters.

Incident of Non-Compliance issued to BP

Incident of Non-Compliance issued to Transocean

Incident of Non-Compliance issued to Halliburton

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