(Updates with shares in sixth paragraph.)
Feb. 26 (Bloomberg) -- The mishandling of an oil-rig safety test by BP Plc and Transocean Ltd. officials was a major cause of an explosion that led to the 2010 Gulf of Mexico oil spill, lawyers for the U.S. and spill victims said at a trial.
BP and Transocean supervisors’ failure to properly interpret results of a pressure test on the Macondo well off the coast of Louisiana cost 11 rig workers their lives and sent millions of gallons of oil spewing into the Gulf, Michael Underhill, a U.S. Justice Department lawyer, and Jim Roy, an attorney for plaintiffs suing the companies, told a judge yesterday.
“BP put profits before people, profits before safety and profits before the environment,” Underhill said in opening statements that began this morning in New Orleans in a trial before U.S. District Judge Carl Barbier, who is overseeing litigation over the spill.
Barbier will decide who is liable for damages tied to the largest offshore spill in U.S. history and whether BP, Transocean or other companies that worked on the project were grossly negligent in their handling of the rig and well. His ruling on that issue will affect how much each company may have to pay.
BP executives’ “missteps and reckless decisions” about the safety test were prompted by pressure to generate billions in profits regardless of the costs, Underhill said in his statement.
BP shares fell 1.5 percent to 444.40 pence at 8:57 a.m. in London trading.
The blowout and explosion aboard the Deepwater Horizon drilling rig spilled more than 4 million barrels of oil into the Gulf. The accident sparked hundreds of lawsuits against London- based BP, Vernier, Switzerland-based Transocean, owner of the rig, and Houston-based Halliburton Co., which handled cement work on the well.
For BP, the well’s owner, a finding of gross negligence would mean the company is liable to the U.S. for as much as $17.6 billion in Clean Water Act fines, as well as unspecified punitive damages to claimants who weren’t part of the $8.5 billion settlement the company reached last year. For Transocean and Halliburton, a gross negligence finding would mean they could be held liable for punitive damages.
One of the disaster’s root causes was the “willful failure of Transocean to give its Deepwater Horizon crew adequate training” on interpreting safety tests, Roy said in his opening statement. “This gross and extreme departure from good oil- field practice rests with the management of Transocean,” Roy said.
BP, over-budget and behind schedule for the Macondo well, cut corners and ignored tests showing unsafe pressure levels as it tried to complete the project, Roy said yesterday. Spill victims also contend that Halliburton’s cement job was defective and that Transocean disabled safety systems and failed to maintain the rig and adequately train its crew.
BP sued its contractors, claiming Transocean failed to maintain the drilling rig and Halliburton provided defective cementing services and concealed flaws with the cement before and after the explosion. Transocean and Halliburton pointed fingers back at BP.
Barbier will apply maritime law, which governs this phase of the litigation. A trial on efforts to contain the spill is set for September. One or more trials on damages will follow, barring any out-of-court settlements.
The judge will apportion fault for the explosion and spill among BP and its subcontractors. Halliburton and Transocean are only responsible for punitive damages, based on Barbier’s ruling last year that the project contract required BP to indemnify them for compensatory damages.
BP must pay any compensatory damages awarded to plaintiffs who haven’t previously settled their claims. Those plaintiffs, including businesses such as banks and casinos and those harmed by the deep-water drilling moratorium imposed by the U.S. after the spill, are also seeking punitive damages. BP has said it will fight these claims.
Safety tests showing the Macondo well was unstable were misinterpreted by BP officials, who should have immediately ceased to drill, Underhill said.
BP executives could have avoided the explosion if an on- site supervisor walked over to the drilling area and closed operations after questions were raised about the so-called negative-pressure test, the government lawyer added.
Months before the explosion, BP officials were aware of problems on the Deepwater Horizon rig, Underhill said. For example, oil company executives knew Halliburton’s cement job on the well was substandard, he said.
BP officials didn’t want to delay drilling operations to fix the cement problems, Underhill said. “Who cares, it’s done, end of story,” Brett Cocales, a BP engineer responded in an e- mail to concerns about the cement, according to Underhill.
Luther Strange, Alabama’s attorney general, told the judge yesterday that BP put profit ahead of safety and that led to the Deepwater Horizon disaster.
“BP was blinded by their bottom line,” Strange said. “Money mattered more than the environment, it mattered more than the jobs destroyed and the lives of workers on the rig. Greed devastated the Gulf.”
Michael Brock, one of BP’s lawyers, countered in his opening statement that the oil company wasn’t defending itself by pointing fingers at the Macondo well’s contractors. The company’s presentation is based on “pointing out facts” about what led to the explosion and spill, he said.
One reason the rig blew was the failure of the vessel’s 400-ton blowout preventer to properly serve as the last line of defense against an explosion, Brock added.
Maintenance issues played a role in the system’s failure, he said. Investigators found the blowout preventer had dead batteries in one of its sections and faulty wiring in another. “It was Transocean’s responsibility to maintain” the rig’s safety equipment, Brock said.
BP wasn’t the only company involved in the rig that put profit ahead of all other consideration, Roy said. Transocean officials’ push to maximize revenue generated by the Deepwater Horizon rig meant the company had never called the vessel back to port for maintenance in its nine-year career, Roy said.
BP officials had found more than 390 maintenance problems with the rig that would have required more than 3,000 hours to correct, the lawyer for spill victims said.
Transocean adopted a “run it ‘til it breaks philosophy’’ and that led to repeated equipment failures on the rig that were left unaddressed, Roy added.
Those failures included the so-called blowout preventer. Transocean officials knew they were required to maintain the device and failed to do so, Roy said.
A Transocean official acknowledged in a 2009 document the driller often focused so much on ‘‘saving money in the short term’’ that it affected maintenance and safety issues, Roy said.
Brad Brian, one of Transocean’s lawyers, countered in his opening statement that the drilling firm properly trained the Deepwater Horizon crew in safety procedures and the rig wasn’t neglected by the company.
Transocean’s training program met the standards set by the oil industry, Brian said. Every company ‘‘can do better” on training, but Transocean didn’t ignore the need to have drilling crews exposed to rig-safety instruction, he added.
The Deepwater Horizon was “one of the best rigs in the world,” Brian said. It was inspected hundreds of times by government officials and found to be in proper operating condition. For example, the U.S. Coast Guard certified the rig as being in “excellent condition” in 2009, he said.
While both BP and Transocean officials wound up misinterpreting the well-pressure test, BP executives had the final say on such safety tests, Brian noted. “The problem here wasn’t with the rig or the crew,” he said. “The problem was the well and how BP managed it.”
Donald Godwin, a lawyer for Halliburton, said it was BP’s and Transocean’s mishandling of the safety tests that caused the disaster and not his client’s cement. BP is “seeking to pass the buck on their wrongdoing” to Halliburton, Godwin said.
Had the pressure test on the well been properly interpreted, “there would have been no blowout,” Godwin said. The oil company also “saved time and money” by not doing proper testing on the well cement, he said. Had those standard tests been done, Halliburton could have moved to fix any problems and the well’s failure could have been avoided, Godwin added.
The case is In re Oil Spill by the Oil Rig Deepwater Horizon in the Gulf of Mexico on April 20, 2010, MDL-2179, U.S. District Court, Eastern District of Louisiana (New Orleans).
--With assistance from Margaret Cronin Fisk in Detroit and David Wethe and Laurel Brubaker Calkins in Houston. Editors: Glenn Holdcraft, Andrew Dunn