New Federal Report Spreads Blame in Gulf Blowout, Spill

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September 14, 2011

By Russell Gold

A federal investigation into the cause of the Deepwater Horizon disaster in the Gulf of Mexico points the finger at BP PLC, but also its contractors, for a litany of failures that led to the deadly well blowout and oil spill last year, according to a person who has seen a government report.

The report will contain about 50 recommendations for changes to offshore oil work, according to the person, and is expected to be released as early as Wednesday, after 17 months of investigation of the incident. The explosion in April 2010 killed 11 men and led to the worst offshore oil spill in U.S. history.

The findings don’t stray far from other earlier reports, including faulting BP for seeking to save time and cut costs without considering the ramifications, according to the person.

The report also blames the crew of the drilling rig, owned by Transocean Ltd., for continuing its work on the well after encountering multiple hazards and signs of trouble.

The lead cause of the incident was a failure of the cement at the bottom of the well to stop oil and gas from flowing up, the report finds. Halliburton Co. was in charge of the cementing process.

However, the report found that Transocean, the owner of the rig and equipment, wasn’t at fault for failing to maintain the blowout preventer, a giant set of valves that was designed to shut off the well in an emergency, according to the person familiar with the matter.

A BP spokeswoman said the company hadn’t seen the report, but based on evidence submitted to the investigators it expected the report would “conclude that the accident was the result of multiple causes, involving multiple parties.” Halliburton and Transocean didn’t respond to requests for comment late Tuesday.

The oil industry is particularly focused on this report because the Bureau of Ocean Energy Management, Regulation and Enforcement, which handled the investigation along with the U.S. Coast Guard, has regulatory oversight over offshore operations. While other investigations have been higher profile, the recommendations in this report could change how the offshore oil industry operates in the Gulf of Mexico, a prolific oil and natural-gas region where a series of large discoveries have been announced in recent months.

The release of the report comes amid the unexpected departure of a top federal investigator on the assignment just days ago.

The report has been delayed several times and has missed two deadlines. Tensions between the Bureau of Ocean Energy Management’s lead investigator, J. David Dykes, and others at the Washington, D.C.-based agency headquarters involved in the investigation, grew contentious in recent months after the report was written by investigators in the New Orleans office, according to people in the agency. At issue was the wording of the report, the person familiar with the report said, but it is unclear if the dispute was over the substance of the findings.

Mr. Dykes left the agency earlier this month after a 12-year government career, most recently as chief of the Gulf of Mexico Office of Safety Management. Efforts to reach Mr. Dykes were unsuccessful.

Perry Jennings, president of the union that represents Bureau of Ocean Energy Management workers in the Gulf region, said the reaction to Mr. Dykes’s departure has been “shock and indignation. It’s a serious loss to us as an agency. He was a straight shooter.” Mr. Jennings and other government officials said Mr. Dykes took a job with Chevron Corp.

Soon after the Deepwater Horizon drilling rig exploded into flames, the Coast Guard and Minerals Management Service—the former name of the Bureau of Ocean Energy Management—convened a joint investigative team to determine what caused the incident.

While the investigative body wasn’t as prominent as the National Commission on the BP Deepwater Horizon Oil Spill and Offshore Drilling, appointed by President Obama, it was the most exhaustive. Chaired by Mr. Dykes and Coast Guard Captain Hung M. Nguyen, the panel held hearings for 28 days, questioning survivors, government regulators as well as engineers and managers from BP and its contractors. Transcripts from these hearings formed the basis of several other investigations.

Originally intended to produce a single report, the Coast Guard tired of waiting and issued its own investigative findings in April of this year, dealing with maritime issues, according to people involved. But the bureau report on offshore drilling was pushed back, missing a late June deadline.

On Tuesday afternoon, bureau spokeswoman Melissa Schwartz said the report took longer than expected because “it was more complicated an investigation than anyone realized” and the report went through several drafts in an effort to make it accessible to people outside the industry. She declined to comment on the findings.

The bureau appears to already be addressing the report’s findings. In a speech on Tuesday, agency director Michael Bromwich said new proposed rules would authorize any employee to stop work on an offshore facility if he or she believed the situation was dangerous.

The report faults the crew of the rig for failing to do this, according to the person with knowledge of it.

(c) 2011 Dow Jones & Company, Inc.

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