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
I guess this is one case where a lawsuit is a much better deterrant than civil penalities.
Don’t worry BP.
Republicans will call this a “shakedown” and apologize for the inconvenience.
There goes the swimming pool.
$45 mil is their dinner tip.
The federal regyulations are specific in their wording. 30CFR250 only applies to the lease holder or operator, in this case BP. BOEMRE is wrong in their attempt to apply them to contractors.
AnimuX wrote: “Don’t worry BP.
Republicans will call this a “shakedown” and apologize for the inconvenience.”
LOL!
Too close to the truth!
What a joke.
Like the guy above says it’s a dinner tip for those guys.
When are htese local defenders gonna look at the track record for those scumbags and realize BP gives the godd operators a really bad name.
I am from a Humble oil Family. My dad officed right under the Petroleum club, but could name every rice farmer in Katy who let us pipe thru.
30CFR250 only applies to the lease holder or operator
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Title 30: Mineral Resources
Subpart D—Oil and Gas Drilling Operations
§ 250.400 Who is subject to the requirements of this subpart?
The requirements of this subpart apply to lessees, operating rights owners, operators, and their contractors and subcontractors.
When will the State of Louisiana and the United States of America file their claims as first beneficiaries of any production from the Macondo well as due compensation for lost royalties/taxes on crude and natural gas released and not sold as contractually agreed? A clear and unjustified wastage of values and resources owed to these parties.
Would it surprise anyone here to know that the Greatest Trustbuster of them all was a Republican named Teddy Roosevelt?
Would it also surprise anyone here to learn that the chief architect and manager of the dismantlement and/or implementation of the Anti-Trust Acts along with Glass Steagall along with Acts put on the books by FDR to prevent the excesses by the banks and Wall Street from again causing a financial crisis as in 1929 was that Great Hero of the Liberal Democrats one William Jefferson Clinton?
slap on the wrist of the one percenters make the fine 457 million. TAX THE RICH!!!!!!
$45.7 million doesn’t even cover Chenney’s pocket change.
They’ll just pass that on to us, so they really don’t care what you fine them.
“The foundation for the fines was built in September … failures by all three companies led to the blowout of the Macondo well, killing 11 workers and unleashing the nation’s worst oil spill”
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Why were the unsafe acts of those three companies NOT known at the time of the occurrences? What was the department doing that has the responsibility of knowing those companies are operating safely? Is the US Government the one responsible for the Oil Spill because it was not doing its job?
How much of the $45.7million will actually be used to repair habitat damages and reestablish all the industries that were adversely affected – how much of it will actually end up in the pockets of politicians, bureaucrats and attorneys?
This is almost as disgusting as the original Oil Spill.
The CFRs charged against Halliburton are all items totally controlled by BP and BP alone. The forth item – BP modified the cement formulation and instructed Halliburton to use with out testing. Halliburton recommended 24 casing centralisers and warned BP in writing that the cement would probably fail if less were used. BP decided to use only six. Even with written warning BP chose not to test cement job with a cement bond log or pressure testing. This is all documented in the investigation records. It would appear that the US D of I is totally ignorant of 1)Who is the controlling party on the drilling rig and 2) of their own rules and regulations.
Thad wrote: BP modified the cement formulation and instructed Halliburton to use with out testing….
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The # of centralizers is a red herring as far as the base cement failure is concerned. [The blowout came up the casing, not the backside.] And of course, RIG conducted a positive pressure test & the infamous negative pressure test.
From the Chief Counsel‘s Report:
“Significant problems remain even if the Chief Counsel‘s team accepts Halliburton‘s assertions about when the April 18 test had been completed. While Halliburton argues that its computer system generated a notice that the April 18 test results were available before its personnel pumped the cement job, it has carefully avoided saying that any of its engineers actually knew that the results were available, let alone reviewed them, before pumping the job.”
“Gagliano also testified that he would have recommended that BP perform a cement bond log given the reduction in the number of centralizers but did not do so because “we do not recommend running a [cement] bond log”362 and, anyway, he “was never asked.”
Obama doesn’t want to fix the oversight lacking, he just wants to skewer the companies involved. It happens. Making BP pay for the excessive claims isn’t enough? Where are the permits for the rest of the exploration companies? Thousands of jobs are lost because of the Obama Agenda. Get this over with.
Thad, ever hear of Stop Work authority? If any Halliburton employees believed that anything they were asked to do was unsafe, they had the power and responsibility to say no.
I’ve stopped unsafe work at both vendor and client sites on projects both related and unrelated to my visits. Was I fired for slowing up work? Not even close. Usually, the company sends an attaboy e-mail thanking you for pointing out unsafe behavior.
Ntangle, perhaps you should read this timeline:
http://www.nasa.gov/offices/oce/appel/ask-academy/issues/volume4/AA_4-4_ACS_deepwater_horizon_lessons.html
BP clearly called the shots and didn’t evaluate all the data coming in. It explains that Halliburton didn’t even have complete well information initially. It also appears that the centralizers are an important step for cement flow. BP is clearly at fault here… they just don’t want to get stuck with the bill even though their guys called the shots…
The crony capitalist system will ensure that money either goes to BP executives & lawyers or to Washington politicians & lawyers.
The people and wildlife along the Gulf Coast have been ignored thus far, and likely continue to be ignored by those in power.
skew2: The lesser # of centralizers isn’t listed as a cause in the JIT’s Summary of Panel Conclusions. They’re for controlling the uniformity of the annulus’ spacing. But they do nothing for the inside of the production casing, where the blowout had to pass thru a base cement barrier.
On the timeline in your link, note that HAL initiated the last cement tests early on 4/18, but they’ve also said that 48 hrs is needed for such tests. The primary cement job was completed before 48 hrs had passed. And as Rod J. noted, RIG & HAL had stop work authority, in case they had significant trepidations. From the JIT report’s conclusions: “The Panel concluded that a combination of contamination, overdisplacement,
and possibly nitrogen breakout of the shoe cement were causes of
the blowout.”
11 fathers, husbands, sons, REAL MEN were killed and another 100 men were lucky to survive. It has nothing to do with Obama or Bush and sure as hell doesn’t involve Teddy Rosevelt. Politics had nothing to do with BP’, Halibuton or Transocean’s failures.
In 2005, Obama wasn’t president when BP Texas City blew up killing 15 people. Politics had nothing to do with these events or when 3 men were killed on a land rig in Texas where Haaliburton overpresurized their equipment.
Bottom line, it’s the golden rule “He who has the gold, makes the rules.”
@ ntangle — Centralisers are very critical for at each place where the liner touches the formation there is NO cement. The blow out came up the outside of the liner into the 9 5/8″ casing. The negative pressure test that did not show it was good was ignored. The negative pressure test was not on the liner cement but on the temporary abandonment plug at 8,400′. The test is to ascertaint that it was safe to displace the 14.7 ppg with 9.0 ppg seawater a decrease in hydrostatic pressure of 2,700 psi.
Thad said: The blow out came “up” the outside of the liner into the 9 5/8? casing….The negative pressure test was not on the liner cement but on the temporary abandonment plug at 8,400?….
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Why do you ignore the shoe track barrier? From the JIT report:
“The Panel concluded that hydrocarbon flow during the blowout occurred through the 9?7/8 x 7 inch production casing from the shoe track as a result of float collar and shoe track failure.”
“There are a number of alternative ways a rig crew can conduct an accurate negative test. In the case of the Macondo well, the barrier being tested was the cement in the shoe track of the wellbore.”
@ntangle the 7′ was a liner hung off the end of the 9 5/8″ csng. The shoe track refers to the open hole formation at shoe of the 7″ liner prior to the cement job. D9o you actually know what a negative pressure test is, how it is done and why. It is to simulate the effect of a hydrostatic equivlent on the temporary abandonment plug at 8,400′. A reduction in hydrostatic of 2,700 psi. A negative pressure test with seawater on the 7″ liner shoe, a reduction in hydrostatic pressure of 4,700 psi. Why would the 7″ liner shoe be tested when it was the integerty of the TAP that was in question. If the liner shoe had been tested to a seawater eqv hydrostatic as you claim there wouldh have been no need for a TAP. And if the cement failed with only 2,700 psi reduct at the TAP why did it not fail wit
Thad said: “And if the cement failed with only 2,700 psi reduct at the TAP why did it not fail wit”
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Regardless of the TAP location and the amount of displacement, the purpose of a –P test in general is to insure well integrity for an underbalanced condition. The results for anyone to see now, indicate substantial DP pressure rise (as measured by transducers at the wellhead) when it should’ve been static. They bled it off and tried again, with similar results. That indicates hydrocarbon inflow even then, whatever the underbalance value was.
The +P test @ 2500 psi (before the -P tests) indicated casing integrity, probably to the top wiper plug (per the reports). That and other factors, e.g. pressure modeling, the static kill, etc., indicate the most probable flow path was via the 7” and then the 9.875” of course. Rather than a casing breach somewhere above the top wiper plug or perhaps a burst rupture disk, as you may be implying.
@ntangle you have just said it. BP took two reading on the negative pressure test both indicated failure and BP still displaced to seawater above the TAP. Point in fact no matter what the condition of the cement at the 7″ liner or at the TAP the well was static with the full hydrostatic of the drilling fluid. It was not until the displacement of the drlg fluid above the TAP that failure was induced. If either of the cement barriers had been good there would have been no blow out. And BP did not get a positive good test on either.
Thad said: If either of the cement barriers had been good there would have been no blow out.
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Exactly. Which is why more centralizers wouldn’t have stopped the blowout. As I said before, they do nothing for the base cement barrier inside the 7″. It failed for reasons other than the # of centralizers.
Let me put it another way. There’s no evidence that the foamed cement in the annulus failed because of a lesser # of centralizers. But there’s plenty of evidence that the base cement in the 7” failed, which was unrelated to centralizers.
The 7″ liner is across the production (pressured) zone and where ever the liner touches the formation there is no cement. For the pressured fluids, oil/ gas, to cause a blow-out it must migrate from the production zone either down and across the liner shoe and up the liner OR from the production zone up the outside of the liner and into the 9 5/8″ csng. Whatever occured one thing is definite, the cement job across the pressured production formation failed. Over displacement, not enough centralisers, bad cement formulation????, a cement bond log and pressure test would have detected the weakness. It was BP’s decision not to test. Also mentioned in the investigation was a BP internal audit 2 yrs previous that claimed Halliburton was not technically qualified to cement in deep water. BP’s own audit makes it negligent that BP decided not to test.