BP's Disgusting Move

The recent court ruling on 2010's Gulf oil spill has probably been among the more popular stories about BP (NYSE: BP  ) in the past seven days. A federal judge ruled that the integrated super-major is still obligated to honor its contract with Transocean (NYSE: RIG  ) and Halliburton (NYSE: HAL  ) and cover some of the damage claims awarded against the two contractors. Not surprisingly, the sparring sides were quick to claim victory for themselves. However, what caught my attention was a relatively minor development, which paints a somewhat unflattering picture of BP.

Not that minor, though
On Monday, the court unsealed 30 motions -- 17 of them filed by BP -- that sought to limit and block testimony by experts who made thorough investigations into a number of issues behind the well blowout. BP had attempted to block California-based Robert Bea and William Gale from testifying in the trial, which begins Feb. 27.

In a report (PDF file, Adobe Acrobat required) published last March by the University of California, Berkeley, the two make a comprehensive study on the causes of and factors behind the blowout. One of the conclusions reached: "This disaster was preventable if existing progressive guidelines and practices [had] been followed -- the Best Available and Safest Technology." The report goes on to reveal BP's corporate culture "that was embedded in risk-taking and cost-cutting."

The study exposes that rather than quantify risk in terms of safety and consequence, BP's business model was primarily based on managing risk in context of the portfolio of assets it controlled. In other words, the company was more interested in cutting down costs, improving capital efficiency, and closing the competitive gap -- all by taking risks and compromising on safety.

Laughable
And now, it has been revealed that BP wanted to block those who made this report from testifying in the trial. The reason? The experts have ignored the "safety culture of the other parties" involved. I actually find this downright laughable given the company's history of accidents.

The Texas City Refinery explosion in 2005, which killed 15 workers, and the Prudhoe Bay oil spill in 2006 never really seemed to have been a wakeup call for the company. In the aftermath of Hurricane Dennis in 2005, BP's 15-story oil platform -- the Thunder Horse -- in the Gulf of Mexico was listing dangerously to one side. According to The New York Times, this platform was "meant to be the company's crowning glory, the embodiment of its bold gamble" to be ahead in the race against its competitors.

Foolish bottom line
As Fool analyst Alyce Lomax argues, shoddy corporate management structures are responsible for a tragedy of the scale of the Deepwater Horizon disaster. I find no reasons to disagree. Which is why there are reasons to be disgusted with BP's legal maneuvers to evade a fair judgment.

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Fool contributor Isac Simon does not own shares of any of the companies mentioned in this article. The Motley Fool owns shares of Transocean. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.


Read/Post Comments (14) | Recommend This Article (11)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On February 01, 2012, at 3:51 PM, NeilCDenver wrote:

    The Bureau of Ocean Energy Management, Regulation and Enforcement (BOEMRE) differs with your assessment of BP's deepwater accident history. In fact, they consider it one of the best.

    President Obama began the witch-hunt by condemning BP almost a full year before the Coast Guard and BOEMRE completed their investigations. It noteworthy that the Coast Guard is indecisive as to whether or not their direction of water from the fire-boats, which were under their supervision, contributed to the sinking of the rig and subsequent disaster.

    Also note that the federal government's Claims Chief, Kenneth Feinberg, was willing to settle claims up to 4-times the verifiable income loss. Even the 'village idiot' would require tax returns from the Internal Revenue Service, which were never required. IMO, the IRS should receive and audit all claims made so that the American taxpayers have not been cheated out of any taxable income owed.

  • Report this Comment On February 01, 2012, at 5:17 PM, logicmustprevail wrote:

    This reply is not respectful. Please do your research before putting the negative commentary to someone's thoughtful post... I am copying the text from BOEMRE.gov: "On October 1, 2011, the Bureau of Ocean Energy Management, Regulation and Enforcement (BOEMRE), formerly the Minerals Management Service (MMS), was replaced by the Bureau of Ocean Energy Management (BOEM) and the Bureau of Safety and Environmental Enforcement (BSEE) as part of a major reorganization." Not sure of the facts of the original post.

  • Report this Comment On February 01, 2012, at 5:51 PM, Curmudgeon44 wrote:

    I see two other people already said what I wanted to. Among oil company people, BP has established a sorry record for safety which is widely recognized. The Houston refinery disaster was an example, and it was entirely preventable.

    While for a limited time BP's accident history may not have been horrible, BP's history across the corporation is distinctly inferior. A company such as Exxon-Mobil will partner with many other competing companies, but I believe they refuse to partner with BP on safety concerns.

    Hope this helps -- C44

  • Report this Comment On February 01, 2012, at 6:13 PM, Sunny7039 wrote:

    All I can say is THANK YOU for this article. And what's more important, environmental disasters are increasingly likely to take place as riskier and riskier moves are going to be made to harvest all sorts of ever-dwindling resources.

    If we don't put the spotlight on these corporations (and it surely isn't just one, though this one is one of the worst), we will ultimately have only ourselves to blame. Related to that, it is overly optimistic to tell oneself that it's "just BP" that does this. That is not the lesson to draw.

    I know what someone is going to say . . . "hey, are you willing to pay $7 for gas?"

    Actually, yes. I'm very careful with money and I will find a way to manage. But more important, you're setting up a false dichotomy. We WILL be paying that much anyway. The only question is, how polluted will we be in the meantime? And what will that do to the next generation, and the one after that?

  • Report this Comment On February 01, 2012, at 7:02 PM, Mega wrote:

    "According to The New York Times, this platform was meant to be the company's crowning glory, symbolizing the bold gamble to be ahead in the race against its competitors."

    This is borderline plagiarism. It's not OK to use 90% of the same words as your source. You need to either significantly rephrase or quote.

  • Report this Comment On February 01, 2012, at 10:37 PM, BuyloPESellHiPE wrote:

    BP should Pay and then some.

  • Report this Comment On February 01, 2012, at 10:53 PM, Tenbears wrote:

    Since day 1 of this disaster I have been constantly amazed with how little blame and bile has been aimed at Transocean.

    I do not deny that BP have a lot to answer for, with the way operations were handled; but Transoceans efforts to remain "blame free" are certainly more disgusting to me.

    As much as its "BPs well"; it was Transocean's vessel; they have the power and the responsibility to shut down operations and to safe guard the personnel onboard - not to mention the mutli-million dollar vessel.

    It is wrong and naive to think that its a one way street on a rig; to assume "what the customers wants / says; goes" - say if they were drilling a reservoir and there was gas readings (from the mud) and BP said "Lets have a BBQ on the rig floor"; would the Transocean OIM have said "OK, fire it up, if thats what you want Boss"???

    Of course not. So when there was practices going on that they disagreed with; why didn't they shut it down?

    BP will surely pay (I believe they already have started - or put fund aside, or whatever). But Transocean MUST be responsible for some of it.

    That court case will run for years.

  • Report this Comment On February 02, 2012, at 12:46 AM, isacsimon wrote:

    @ Megashort,

    <<According to The New York Times, this platform was meant to be the company's crowning glory, symbolizing the bold gamble to be ahead in the race against its competitors.>>

    Apologizes for not putting the phrase in quotes. Instead, I hyperlinked it to the original NY Times article.

    Nevertheless, you have a point there.

    Thanks!

    Isac

  • Report this Comment On February 02, 2012, at 12:59 AM, isacsimon wrote:

    @ Sunny7039

    <<And what's more important, environmental disasters are increasingly likely to take place as riskier and riskier moves are going to be made to harvest all sorts of ever-dwindling resources.>>

    Makes perfect sense. You got a point there.

    Fool on!

    Isac

  • Report this Comment On February 02, 2012, at 1:03 AM, isacsimon wrote:

    @Tenbears

    <<As much as its "BPs well"; it was Transocean's vessel; they have the power and the responsibility to shut down operations and to safe guard the personnel onboard - not to mention the mutli-million dollar vessel.>>

    Again, a pertinent point. The article wasn't to take sides, but to highlight the problems as @Sunny7039 pointed out.

    Thanks!

    Isac

  • Report this Comment On February 02, 2012, at 2:18 AM, sushibn wrote:

    So easy to blame BP...But Halliburton cementing was also defaulting in Australia in 2010....

    Trancocean rigs are getting older +/- 10 years....The blowout preventer as far as i can remember did not work for Cameron....Mitsui...Andanarko als sharing the blame...with BP....but in fact lately only BP pay for having renting all this to get oil....???

    Exxon pay not even 1.8B US for Exxon Valdez??

    BP will pay what $20-$25B price in already...Have a life USA?? lol blame your companies too...lol for the mess...just like Chevron in Brazil??? but it's true Cheney ex VP of USA was CEO of HALLIBURTON...RIGHT???

  • Report this Comment On February 02, 2012, at 2:20 AM, sushibn wrote:

    Again, a pertinent point. The article wasn't to take sides, but to highlight the problems as @Sunny7039 pointed out.???

    With this Title...?? BP's Disgusting Move ???

    YA RIGHT????

  • Report this Comment On February 02, 2012, at 9:22 AM, Bobo131313 wrote:

    This is not true. As an oilfield worker I've worked with BP many many times and their operations policy has always been that their operational programs and procedures are used UNLESS a government regulation (remember, BP is global and works with many governments not just the US) or third parties procedure is more stringent related to safety.

    So for example if BP's policy to test an annular preventer at high pressure of 3,500 psi for 5 minutes but the third party said it needed to be held at 4,000 psi for 10 minutes they would use the third party's test requirement even though it's much more difficult to test this equipment at that pressure and 9 times out of 10 more costly.

    Also, before any third party employee works for them they have to take a safety orientation class and upon cometion of the class a hardhat sticker is given to the employee that says 'no accidents, no harm to people, no harm to the environment'.

    People act like BP is some big bad monster when in reality they are just a provider to the modern way of life. Drilling for oil and gas is an extremely dangerous task and with all the enefits we get from it omes accidents. It's either trade your car, plastic, air transportation, and home heat / cooling for a cave or accept the fact that it needs to be done.

  • Report this Comment On February 02, 2012, at 9:37 AM, Spike000 wrote:

    "A company such as Exxon-Mobil will partner with many other competing companies, but I believe they refuse to partner with BP on safety concerns."

    This is one of the funniest things I've read in a while... I hope it was intentional, but just in case:

    There was a little oops moment Exxon had in Prince William Sound in 1989. They spilled less oil than the BP spill, but the oil was in a more isolated area that made response efforts difficult. You may attack this as a statement of opinion, but in terms of both monetary support and personnel, Exxon was drastically slower to respond to their accident than BP. In fact, the punitive damages in the case ($5B) are STILL being litigated by Exxon (who is still seeking a reduction). Without waiting to be sued, BP stepped up and started paying people out.

    The comment above addresses this, but it's ridiculous to assume that one supermajor would be terribly unsafe while all the others are great. They all purchase the same equipment and rigs from the same suppliers. Also, most Exxon, Chevron, Shell, and BP employees didn't start with that company--there is a huge amount of switching between companies in the oil industry. If you're going to be critical of culture or safety practices, I'd urge you to consider the industry as a whole instead of a single company.

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