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BP’s Cost Chiselers Back in Action

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Tue, Dec 7, 2010 at 1:24 am

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BP’s Cost Chiselers Back in Action

Late last week, as the presidential oil spill commission’s co-chair and staff blamed BP’s cost-cutting and “failure of management” for the devastating spill in the Gulf of Mexico, BP managers claimed that the government estimate of the amount of the spill by should be cut 20% to 50%, which would save the company billions in fined.

So what if independent scientists say the government estimate is far too low, not too high? BP is expert at ignoring facts and such cuts could save the company up to $10 billion, based on the federal fines of up to $4,300 a barrel BP could be assessed for the disaster at the Deepwater Horizon drilling platform. The latest federal estimate of the spill is 206 million gallons, close to 5 million barrels.

BP hasn’t offered any estimate of its own, or any evidence to support a reduction. Then again, this is the same company that ignored all kinds of evidence of the dangers of its plan for capping its Macondo well, as it rushed to finish capping the well and save half a million dollar a day in rent for the drilling platform.

It also fought for drastically low-ball estimates of the well flow at the beginning of the spill, perhaps dooming efforts to cap the well. From BNet:

BP initially argued that measuring the size of the Gulf oil spill was an unnecessary distraction to the task of stopping the gushing well. The federal government acquiesced and put out a low-ball estimate of 5,000 barrels of oil a day based on satellite imagery. It would be five weeks before a federal team, called the Flow Rate Technical Group, would provide more accurate data. And even those numbers were low compared with what they would eventually determine.

Why does that matter? The damaged Macondo well may have been stopped earlier had there been more accurate spill data. The failed plan to pump heavy drilling mud into the top of the well in May was designed to work off the government’s then low-ball estimate that 5,000 barrels of oil were flowing from the well, noted the Houston Chronicle. Engineers warned at the time that the plan would fail if 15,000 or more barrels were flowing.

BP’s out-of-the-blue demand for a reduction in liability occurred as the federal oil spill commission issued a staff report that laid blame squarely on BP, and on its culture of cost-cutting. From the Wall Street Journal:

On Thursday, the staff of the BP Deepwater Horizon Oil Spill and Offshore Drilling Commission took aim at the oil giant, saying that BP “did not have policies and systems in place” to “ensure that decisions made to reduce costs and improve efficiency do not increase risks or diminish safety.” It said if it did have policies, those policies were not enforced at the Macondo well.

It concluded that without such policies, “financial pressures will likely bias decisions in favor of time and cost savings.”

The GOP co-chair of the commission, William Reilly, said “The series of decisions that doomed Macondo evidenced a failure of management and good management could have avoided a catastrophe.”

Reilly also did a verbal double-take when told about BP’s claim that the spill was up to 50% less than the government estimate: “They are going to argue that it is 50 percent less?  Wow.”

Wow, indeed.

At least the commission has stepped decisively away from the conclusions of its own chief lawyer, Fred Bartlit, who declared at the last hearing that no one overseeing the rig had made a bad decision on the basis of cost-cutting.

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This post was written by:

Judy Dugan

- who has written 655 posts on Oil Watchdog.

Judy Dugan concentrates as an advocate on health care reforms, oil industry issues and telecommunications. She also writes and edits foundation publications and conducts media outreach.

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