[Senate Hearing 111-1239]
[From the U.S. Government Publishing Office]
S. Hrg. 111-1239
ECONOMIC AND ENVIRONMENTAL IMPACTS OF THE RECENT OIL SPILL IN THE GULF
OF MEXICO
=======================================================================
HEARING
before the
COMMITTEE ON
ENVIRONMENT AND PUBLIC WORKS
UNITED STATES SENATE
ONE HUNDRED ELEVENTH CONGRESS
SECOND SESSION
__________
MAY 11, 2010
__________
Printed for the use of the Committee on Environment and Public Works
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Available via the World Wide Web: http://www.gpo.gov/fdsys
______
U.S. GOVERNMENT PUBLISHING OFFICE
22-444 PDF WASHINGTON : 2017
-----------------------------------------------------------------------
For sale by the Superintendent of Documents, U.S. Government Publishing
Office Internet: bookstore.gpo.gov Phone: toll free (866) 512-1800;
DC area (202) 512-1800 Fax: (202) 512-2104 Mail: Stop IDCC,
Washington, DC 20402-0001
COMMITTEE ON ENVIRONMENT AND PUBLIC WORKS
ONE HUNDRED ELEVENTH CONGRESS
SECOND SESSION
BARBARA BOXER, California, Chairman
MAX BAUCUS, Montana JAMES M. INHOFE, Oklahoma
THOMAS R. CARPER, Delaware GEORGE V. VOINOVICH, Ohio
FRANK R. LAUTENBERG, New Jersey DAVID VITTER, Louisiana
BENJAMIN L. CARDIN, Maryland JOHN BARRASSO, Wyoming
BERNARD SANDERS, Vermont MIKE CRAPO, Idaho
AMY KLOBUCHAR, Minnesota CHRISTOPHER S. BOND, Missouri
SHELDON WHITEHOUSE, Rhode Island LAMAR ALEXANDER, Tennessee
TOM UDALL, New Mexico
JEFF MERKLEY, Oregon
KIRSTEN GILLIBRAND, New York
ARLEN SPECTER, Pennsylvania
Bettina Poirier, Staff Director
Ruth Van Mark, Minority Staff Director
C O N T E N T S
----------
Page
MAY 11, 2010
OPENING STATEMENTS
Boxer, Hon. Barbara, U.S. Senator from the State of California... 1
Inhofe, Hon. James M., U.S. Senator from the State of Oklahoma... 3
Lautenberg, Hon. Frank R., U.S. Senator from the State of New
Jersey......................................................... 5
Vitter, Hon. David, U.S. Senator from the State of Louisiana..... 6
Cardin, Hon. Benjamin L., U.S. Senator from the State of Maryland 9
Alexander, Hon. Lamar, U.S. Senator from the State of Tennessee.. 10
Klobuchar, Hon. Amy, U.S. Senator from the State of Minnesota.... 11
Specter, Hon. Arlen, U.S. Senator from the State of Pennsylvania. 12
Whitehouse, Hon. Sheldon, U.S. Senator from the State of Rhode
Island......................................................... 13
Udall, Hon. Tom, U.S. Senator from the State of New Mexico....... 13
Merkley, Hon. Jeff, U.S. Senator from the State of Oregon........ 14
Shelby, Hon. Richard C., U.S. Senator from the State of Alabama.. 15
Landrieu, Hon. Mary L., U.S. Senator from the State of Louisiana. 18
Baucus, Hon. Max, U.S. Senator from the State of Montana......... 21
Nelson, Hon. Bill, U.S. Senator from the State of Florida........ 22
Menendez, Hon. Robert, U.S. Senator from the State of New Jersey. 23
LeMieux, Hon. George S., U.S. Senator from the State of Florida.. 24
Carper, Hon. Thomas R.., U.S. Senator from the State of Delaware,
prepared statement............................................. 132
WITNESSES
McKay, Lamar, Chairman and President, BP America................. 26
Prepared statement........................................... 29
Responses to additional questions from:
Senator Boxer
Senator Whitehouse....................................... 43
Newman, Steven, President and Chief Executive Officer,
Transocean, Ltd................................................ 52
Prepared statement........................................... 54
Responses to additional questions from:
Senator Boxer
Senator Baucus........................................... 79
Response to an additional question from Senator Carper....... 80
Responses to additional questions from:
Senator Cardin........................................... 81
Senator Merkley.......................................... 84
Probert, Tim, President, Global Business Lines, Chief Health,
Safety and Environmental Officer, Halliburton.................. 94
Prepared statement........................................... 96
Responses to additional questions from Senator Boxer......... 100
Response to an additional question from Senator Carper....... 105
Responses to additional questions from:
Senator Cardin........................................... 105
Senator Merkley.......................................... 108
Bortone, Stephen A., Ph.D., Executive Director, Gulf of Mexico
Fishery Management Council..................................... 152
Prepared statement........................................... 155
Responses to additional questions from Senator Boxer......... 158
Overton, Keith, Chairman of the Board, Florida Restaurant and
Lodging Association; Senior Vice President and Chief Operating
Officer, TradeWinds Island Resorts............................. 160
Prepared statement........................................... 163
Responses to additional questions from Senator Boxer......... 168
May, Eric B., Distinguished Research Scientist, Living Marine
Resources Cooperative Science Center, Department of Natural
Sciences, University of Maryland Eastern Shore................. 174
Prepared statement........................................... 176
Responses to additional questions from Senator Boxer......... 183
Response to an additional question from Senator Carper....... 186
Caldwell, Margaret R., Director, Environmental and Natural
Resources Law and Policy Program, Senior Lecturer in Law,
Stanford Law School; Executive Director, Center for Ocean
Solutions, Stanford University................................. 187
Prepared statement........................................... 189
McInerney, Thomas G., Lieutenant General, U.S. Air Force
(retired)...................................................... 199
Prepared statement........................................... 201
ECONOMIC AND ENVIRONMENTAL IMPACTS OF THE RECENT OIL SPILL IN THE GULF
OF MEXICO
----------
TUESDAY, MAY 11, 2010
U.S. Senate,
Committee on Environment and Public Works,
Washington, DC.
The full Committee met, pursuant to notice, at 2:30 p.m. in
room 406, Dirksen Senate Office Building, Hon. Barbara Boxer
(Chairman of the full Committee) presiding.
Present: Senators Boxer, Inhofe, Baucus, Carper,
Lautenberg, Cardin, Klobuchar, Whitehouse, Udall, Merkley,
Specter, Vitter, Barrasso, and Alexander.
OPENING STATEMENT OF HON. BARBARA BOXER,
U.S. SENATOR FROM THE STATE OF CALIFORNIA
Senator Boxer. We are going to get started. Senator Inhofe
has informed me we have five votes that may start at 3:30, so
we are going to get through as much as we can.
What we are going to do is try to keep our opening remarks
to 3 minutes if we can. And if you give up your opening
statement, you will get that extra 3 minutes added onto your
question time. So, that is how we will go. We will start off by
hearing from colleagues on the Committee, and then we will turn
to our distinguished panel of Senators.
Today we will hear about an oil spill that could be one of
the greatest environmental disasters our Nation has ever seen.
My heart goes out to the families of those who lost their
lives.
Our ocean environment is not only a God given treasure and
our legacy; it is also a great economic asset. In California,
for example, ocean-related tourism, recreation and fishing
generate $23 billion in economic activity each year and support
390,000 jobs. California's 19 coastal counties account for 86
percent of the State's annual economic activity, or more than
$1 trillion. Nationwide, we are talking about $130 billion of
economic activity on our beautiful coasts and 2.4 million jobs
annually.
Louisiana is the largest seafood producer in the Lower 48
with a total economic impact of $2.4 billion. Recreational
fishing in Louisiana generates an additional $1 billion in
retail sales a year. The Gulf Coast is also home to remarkable
wildlife refuges. One of the first refuges, Breton National
Wildlife Refuge, was established by Teddy Roosevelt to protect
the numerous species of birds that use the islands for nesting
and wintering.
We are all united in our top priority, stopping the spill,
cleaning up the oil, and protecting the threatened and natural
resources of the region.
As I analyze what happened here and the policies and
practices surrounding offshore oil drilling, a number of issues
come to the forefront.
First, it is imperative that the impacts to businesses,
jobs and environment are taken care of quickly. Those
responsible must provide the resources, and that means we need
to change the law regarding limits on liability. This idea has
strong support, and I will work with my colleagues to move
forward with legislation as soon as possible.
Second, I am pleased that Interior Secretary Salazar is
already discussing separating mineral extractions
responsibility from safety and environmental oversight. I have
already discussed this idea with Energy Committee Chairman
Bingaman, and I believe we will work together on legislation.
And there is a strong argument for supporting this separation.
The MMS found that any type of spill was remote, the impacts
limited, and therefore MMS supported categorical exclusions on
a site by site basis. Categorical exclusions. BP said, in its
oil expiration plan, there would be no significant impact on
any natural resources, and MMS went along.
In addition, I am concerned that reports of corruption in
MMS, including illicit activities which were brought out by a
press investigation, could have played a role in these
decisions in this approach, and I will introduce, without
objection, the IG report into the record.
Clearly, stronger, more independent oversight of oil
company activities is needed. With so much of the region's
economy at risk, why were exploration plans and environmental
documents prepared with little to no analysis of the threat of
a serious spill?
Third, has the push to drill in ultra-deep water and expand
exploration outpaced the oil companies' ability to respond to
oil spill disasters in waters so deep they have been described
as inner space?
A fourth area of great concern to me is the lack of
sufficient back-up safety systems. How do you go ahead and hold
a party on a rig to celebrate safety when you do not even have
an effective plan in case the blowout preventer fails?
Sixth, I am concerned about the cement application since I
have learned that it could have been a cause of a serious
blowout on Australia last year. I want to find out more about
the condition of the cement, the companies' experience and
practice in carrying out this sensitive part of the operation.
This Committee has an important role to play. It is
responsible for a number of areas directly related to the oil
spill, including the Oil Pollution Act, environmental aspects
of Outer Continental Shelf lands, air and water pollution,
fisheries and wildlife, and regional economic development
through the EDA.
So, today's hearing is just the first step in this
Committee's oversight of the oil spill in the Gulf. Next week
we will have a hearing with Administration officials to get
even more answers.
Moving forward, we all must work together to stop the
spill, repair the damage and find out why it happened so that
nothing like this ever occurs again.
I look forward to the testimony from all our witnesses.
Senator Inhofe.
[The referenced report was not received at time of print.]
OPENING STATEMENT OF HON. JAMES M. INHOFE,
U.S. SENATOR FROM THE STATE OF OKLAHOMA
Senator Inhofe. Thank you, Madam Chairman.
I agree with you that our prayers are with the families and
loved ones that were lost. And I want to recognize all the men
and women of the oil and gas industries who work every day to
provide the energy to fuel America. And another thanks to all
of the volunteers from the conservation groups to fisherman to
Gulf Coast residents who are helping with the response effort.
The fact that we are holding all of these hearings this
week is a little disturbing to me. My feelings are that the
people testifying today in all of these hearings should be
spending their valuable time assisting with the response
effort. This incident was, indeed, tragic and we will feel the
consequences for some time, even as we try to understand what
happened. I hope today's hearing will enlighten us as to the
possible causes of the spill.
There will be a number of hearings this week on the
subject, and I hope they remain focused on the facts and what
we need to do to solve the problem. With this in mind, I think
Congress should focus on three priorities, which I think the
Chairman agrees, we need to mitigate and contain environmental
impacts, provide assistance to the Gulf's commercial and
recreational fishing industries, and investigate the causes so
we can prevent a disaster of this kind from happening again. If
we stay focused on those priorities, then we can make prudent
short- and long-term policy decisions as we address this spill.
One of our witnesses today is Lieutenant General Tom
McInerney. He will help us put this in a proper perspective. I
remember Tom so well. I was there 20 years ago, the Exxon
Valdez, and I remember what happened.
And I can also remember that people at that time were
saying, some of the extremists environmentalists, we are going
to parlay this Exxon Valdez into a retardation of the effort to
explore and develop our own resources in the North Slope, which
was exactly the wrong thing at that time because that was a
transportation accident, and if we do not produce our domestic
resources then we are going to be bringing in from other areas,
and the likelihood of a transportation accident would be that
much greater.
There was point made recently by the New York Times
columnist Tom Friedman. He noted that some may attempt to
overreach for an end to offshore production. But he wrote, now
I'm quoting now, and you would not have expected this from him,
``We need to remember that even if we halted all offshore
drilling, all we would be doing is moving the production to
other areas outside the United States with even weaker
environmental law.'' And that is exactly the point. I agree
with him.
As investigations of this tragic event continue, I want to
make a few things clear. If we find gross negligence or other
violations of Federal law on the part of oil companies and
their subcontractors, then we will hold them accountable. But
by the same token, if the Federal officials failed to exercise
proper oversight or implement specific requirements, then we
will hold them accountable, too.
Madam Chair, let us work together to find out what happened
and take the responsible path forward.
[The prepared statement of Senator Inhofe follows:]
Statement of Hon. James M. Inhofe,
U.S. Senator from the State of Oklahoma
Thank you, Madam Chairman. I first want to say that our
prayers are with the families who lost loved ones in the tragic
explosion in the Gulf. I also want to recognize all the men and
women in the oil and gas industry who work every day to provide
the energy we need to fuel America. And a note of thanks to all
of the volunteers--from conservation groups to fishermen to
Gulf Coast residents--who are helping with the response effort.
Before I begin, let me say that the fact that we are
holding this hearing today troubles me a great deal. It's too
early to begin assessing what caused this terrible tragedy. And
the people testifying today should be spending their valuable
time assisting with the response effort.
This incident was indeed tragic. We will feel its
consequences for some time, even as we try to understand what
happened. We also continue to assess the extent of the
environmental and economic impacts. I hope today's hearing will
enlighten us as to the possible causes of the spill. There will
be a number of hearings this week on this subject--I hope they
remain focused on the facts and what we need to do to solve
this problem.
With that in mind, I think Congress should focus on three
priorities as we move forward. We need to:
Mitigate and contain the environmental impacts,
Provide assistance to the Gulf's commercial and
recreational fishing industries, and
Investigate the causes so we can prevent a disaster of
this kind from happening again.
If we stay focused on those priorities, then we can make
prudent short- and long-term policy decisions as we address
this spill and its causes.
One of our witnesses today, Lt. Gen. Thomas McInerney
(Ret.), will help move us in that direction. He will provide
some valuable historical perspective: Lt. Gen. McInerney led
the military's response to the Exxon Valdez oil spill, which
occurred over 20 years ago.
At the time, I was serving on two House committees
investigating the causes of Exxon Valdez. In 1990 Congress
unanimously passed the Oil Pollution Act, OPA, a sensible bill
that serves as the controlling statute covering offshore
accidents such as the one we are dealing with now. In fact,
this Committee has jurisdiction over OPA.
Though Congress stepped up to the task, we can't forget
that Exxon Valdez was politicized--and continues to be
politicized--by certain activist groups bent on blocking access
to America's domestic resources. I believe their actions made
America more dependent on foreign oil, from countries that have
few environmental restrictions. It's also important to note
that Exxon Valdez was a transportation-related incident. The
fact that we have grown more dependent on foreign oil means we
have more tanker traffic, and thus we have created greater risk
of an accident occurring than what would normally be the case
if we had produced the oil right here at home.
This was a point made recently by New York Times columnist
Tom Friedman. He noted that some may attempt to ``overreach''
for an end to offshore production. But, he wrote, ``we need to
remember that even if we halted all off-shore drilling, all we
would be doing is moving the production to other areas outside
the U.S., probably with even weaker environmental laws.''
Exactly.
Yet some activist groups refuse to acknowledge this
reality--and just as they did in 1990 they are exploiting the
Gulf tragedy for political gain. Again, I urge my colleagues to
remain focused on mitigating the damage, getting all the facts,
and investigating the causes. If we need to pass legislation,
let's be sure it solves the problem. Let's protect the marine
environment, but remember we can do that--and indeed the
industry has done that in the vast majority of cases--in tandem
with oil and gas production. In other words, the two are not
mutually exclusive.
In the meantime, there is an aggressive, ongoing response
effort. I spoke with EPA Administrator Jackson, and she assured
me that the agency is doing all it can to respond. I appreciate
her leadership efforts thus far. I've also contacted the Coast
Guard to get its perspective on the response effort. My staff
is communicating with the Pentagon. I also launched a Web page
that serves as a clearinghouse for information on the spill.
If we find gross negligence or other violations of Federal
law on the part of oil companies or their subcontractors, then
we will hold them accountable. By the same token, if Federal
officials failed to exercise proper oversight or implement
specific requirements, then we will hold them accountable, too.
Madam Chair, let's work together to find out what happened
and take the responsible path toward a legislative solution, if
needed. That's what the American people want and what the
residents of the Gulf Coast deserve.
Senator Boxer. Thank you.
Senator Lautenberg.
OPENING STATEMENT OF HON. FRANK R. LAUTENBERG,
U.S. SENATOR FROM THE STATE OF NEW JERSEY
Senator Lautenberg. Thanks, Madam Chairman.
Testifying before us today are the worldwide leaders in
offshore oil drilling, BP, Halliburton, Transocean. These are
the companies involved in the spill. It is devastating to the
Gulf Coast of the United States. And ultimately what this spill
shows is that offshore drilling cannot reliably be conducted
safely. And if these three giant profitable companies cannot
get it right, nobody can.
The bottom line is that if you drill in the ocean, oil
spills cannot be a surprise. And all it takes is one major
spill to destroy a coastline. And since the year 2002, we have
had six major spills in USA waters. And that is in addition to
what might be addressed at times as minor spills. And they are
not minor if it is on your seashore.
The Deepwater Horizon case shows us that no rig is too big
to spill. In fact, there was a similar major spill off the
coast of Australia just last year. Halliburton did the
cementing on that rig and has been blamed for the 10,000-
square-mile oil spill that ensued.
Halliburton cemented its first offshore oil rig off the
coast of Louisiana in 1938. And now, even after 72 years, they
still have not got it right. They cannot guarantee that we are
going to be protected against severe damage to our precious
resources.
Oil drilling is a 19th century answer to a 21st century
problem. It is inherently dangerous, inherently dirty, and
inherently destructive to our environment.
The lesson of this oil spill disaster is that we need to
move away from oil, find better ways, cleaner energy,
renewable, to power our country. And that is why I am
introducing a bill that is beyond the Petroleum Act which would
impose a fee on each acre of offshore oil leases. The money
generated by that fee is estimated to be nearly $2 billion a
year, problems that have not then appeared with the incredible
growth in profits that these companies have seen.
And I look at this, and I remember a time when America was
in uniform. I was one of those people. Now, what did we do when
we sat up, when our country and our people were under assault?
We said that maybe we ought to attach some of the excess
profits that are being made when our country is under the kind
of assault that it is.
And Madam Chairman, we are going to look at all options
that come before us in order to adjust the situation as we see
it.
Thank you.
Senator Boxer. Thank you.
Senator Vitter.
OPENING STATEMENT OF HON. DAVID VITTER,
U.S. SENATOR FROM THE STATE OF LOUISIANA
Senator Vitter. Thank you, Madam Chair.
This incident is clearly a major human disaster, and again,
I repeat, my heart and prayers go out with all of ours to the
families directly involved starting with the 11 deceased or
missing, all their families. And it is a major environmental
disaster.
Clearly, we need to learn an enormous amount from these
events, and significant changes will have to be made to Federal
law and policy and procedure in light of that.
Having said that, and acknowledging that this sort of
hearing is absolutely necessary, I want to repeat a concern
that I made in a letter last week to the Chair that having this
and many other hearings on Capitol Hill while there is still an
ongoing disaster in the Gulf, while the flow is unabated, 5,000
barrels a day continuing to come up, I think is a mistake, and
I think by definition is pulling some amount of focus and
resources away from that ongoing disaster.
And I make that plea again as a resident of the Gulf Coast,
and I ask that my letter be made part of the record for this
hearing.
Second, Madam Chair, you mentioned a number of responses
that have to happen. First, stopping the flow. Absolutely.
Second, you said cleaning up the oil. I want to suggest
inserting a step between one and two, and you may well consider
this as part of cleaning up the oil. But two, I think we need
to separate it out and define it differently.
Before we clean up the oil, we need to protect the coast
and the marsh before the oil gets there and stop as much of
that oil getting there as possible. In particular, in the
Louisiana ecosystem, which for the most part is not a
traditional beach. If the oil comes in past the barrier
islands, past the beaches we have and infiltrates the
marshland, it is 100 times more ecologically devastating,
particularly for the long-term.
And so I think there needs to be a very specific focus on
protecting the beach and barrier islands and marsh and
preventing as much of that exposure as possible.
I look forward to this hearing, and I will be particularly
focused on about five topics.
No. 1, I would like an update on all efforts to stop the
flow, including the relatively new idea of a junk shop approach
to putting material in the BOP or the piping.
No. 2, and related to my last point, we have a real problem
getting boom and related assets to the Gulf region, and I would
like some thoughts about the supply chain ramping up on that
and the inequity which exists now, disadvantaging Louisiana in
terms of how much boom is getting there versus other places.
No. 3, there is a very innovative proposal put out by the
State of Emergency Dredging to build up the barrier islands and
to extend some of our barrier islands to protect the coastline.
No. 4, I am very concerned that all sorts of labor and
assets are being brought into the Gulf Coast, and existing
labor and assets right there are not first being utilized.
And No. 5, the first industry, and part of our society that
will be devastated by this, is seafood, and certainly I want to
talk about that with our witnesses.
Thank you, Madam Chair.
[The referenced letter follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Senator Boxer. Thank you, Senator.
Senator Cardin.
OPENING STATEMENT OF HON. BENJAMIN L. CARDIN,
U.S. SENATOR FROM THE STATE OF MARYLAND
Senator Cardin. Well, Madam Chair, first, thanks for
holding this hearing.
Clearly, our first priority right now is to clean up and
mitigate the damage that has already been caused and to find
out what happened in the Gulf of Mexico and to learn from this.
That is our first priority.
I have the honor of chairing the Subcommittee of Water and
Wildlife of the Environment and Public Works Committee. And we
have a responsibility to understand what this is going to cause
to our environment. It is a reminder to me that we need an
energy policy in this country that makes us secure, deals with
economic job growth and deals with our environment. And this
oil spill, to me, is just another reminder that we need to get
on with that work. We also need an alternative to oil. That is
clear to me. And this bill only underscores that.
This spill is going to have a devastating impact on
wildlife and water quality. There are 280 species of migratory
and resident birds that go through the Gulf, coming from Canada
to South America. Five species of sea turtles, 20 species of
whales and dolphins, several species of tuna, swordfish,
grouper, snapper and other fish, shrimp, oysters and blue crab.
So, this is going to have a major impact on the environment,
not only of the Gulf of Mexico and the surrounding States, but
for the entire region around there.
And I have not even addressed the consequences if the BP
spill gets into what is known as the Loop Current that Senator
Nelson continues to remind us about. That literally could bring
the oil up the Atlantic Coast and could affect the Chesapeake
Bay, Assateague, and Ocean City in my home State of Maryland.
That is why I was relieved when the President said that
Site 220--it is a lease-sale 220, offshore from the Maryland
coast about 50 miles--that he is going to put a hold on that
effort. This is real, that we could have additional drilling in
the mid-Atlantic. The President said he will put a hold on it.
I think we need to have a permanent ban.
And quite frankly, I think we have a responsibility to stop
further explorations in new areas. I am particularly concerned
along the Atlantic. If we had a similar episode along the mid-
Atlantic, it would have generational impact on the Chesapeake
Bay, on our beaches and our economy. It is just not worth the
risk.
And yes, our first priority will be to clean up and
mitigate. But I hope we will learn from what happened in the
Gulf and not put other communities at such risk.
There is a better way for energy for America. We know that.
Let us get on with an energy policy that makes sense for our
economy, makes sense for our environment, and makes sense for
our security.
Senator Boxer. Thank you, Senator Cardin.
Senator Alexander.
OPENING STATEMENT OF HON. LAMAR ALEXANDER,
U.S. SENATOR FROM THE STATE OF TENNESSEE
Senator Alexander. Madam Chair, thank you for holding the
hearing.
This is an environmental catastrophe. We need to stop the
spill, repair the damage, and find out what happened. But I
would like to make three points.
First, that, unfortunately, all forms of energy have its
risk. Connecticut knows about gas plants blowing up. West
Virginia knows about coal mine tragedies. Tennessee knows about
coal ash spills.
And even in some of the cleaner forms of energy, as
unfortunate as the oily waterfowl images that we see are, the
American Bird Conservancy might want us to remember that the
current 225,000 wind turbines that we have in America kill
275,000 birds a year, and one wind farm in California killed 90
golden eagles in 1 year. So, there are risks in every form we
have.
Second, this should spur us more rapidly toward clean
energy. There is bipartisan support for that on this Committee
and in the Congress. First, electric cars. If we electrified
half of our cars and trucks in 20 years, which we could do
without building a new power plant by plugging them in at
night--it is a very ambitious goal--that would be the best way
to reduce our use of oil.
Yet we would still need, by most estimates, about 12
million barrels a day, and if we did not, we would have $14 and
$16 gasoline. We would still use a lot of oil. And in the Gulf
right now, thousands of wells produce about one-third of all
the oil that is produced in our United States.
Third, we need to focus on energy research and development.
We have strong bipartisan support for that, for finding the
500-mile battery, the solar panel that is one-fourth as cheap
as it is today, the way to recapture carbon from coal plants.
Finally, I would suggest something that might not seem so
obvious which is that oil regulators might learn from nuclear
regulators. The number of persons who have died from a nuclear
accident at a commercial plant in the United States is zero.
The number of sailors who have died in a nuclear navy, based
upon a nuclear reactor, is zero.
Is the regulatory responsibility for oil spread too thin?
There are 14 agencies or so who look after oil. One, the
Nuclear Regulatory Commission, looks after nuclear power.
Second is accountability. The Navy has a remarkable safety
record operating reactors. This is because of accountability. A
former sub captain, Bill Ostendorff, now a Commissioner of the
Nuclear Regulatory Commission, testified last week before this
Committee that every officer, every captain, knows his mistakes
will be carried with him through his career, and a fourth of
his commanding officer classmates were disciplined at some
point in their careers. Maybe we need some of that kind of
accountability in oil.
And finally, the nuclear industry has shown that safety can
be efficient as well as cheap. We now run our reactors faster
than anybody in the world 90 percent of the time, and that is
efficient, and that is cheap.
So, I think there are lessons that can be learned from the
nuclear industry, and there are clear, clean energy options,
nuclear, electric cars and energy research and development that
we can pursue in a bipartisan way.
Thank you, Madam Chair.
Senator Boxer. Senator, thank you. And as you know, we all
want to work with you in terms of your recent catastrophe from
the flooding. We are working together to try to help you on
that.
Senator Alexander. I know that you are, and I thank you,
and I thank Senator Inhofe both, for your----
Senator Boxer. I know how hard you have been pushing on
that, and we are ready to help.
Senator Alexander. Thank you so much.
Senator Boxer. Senator Klobuchar.
OPENING STATEMENT OF HON. AMY KLOBUCHAR,
U.S. SENATOR FROM THE STATE OF MINNESOTA
Senator Klobuchar. Thank you very much, Madam Chair.
On Friday I saw firsthand the miles and miles of orange in
the sea, the oil slick. The scope of this disaster is
staggering. But for 11 families, the lost cannot be quantified.
Eleven families lost a loved one in this tragedy, and I can
only imagine what their families are going through.
I could not help but think of our bridge collapse on August
1, 2007. I said that day a bridge in the middle of America just
should not fall down. Well, an oil rig off the pristine shores
should not just explode in a massive fireball and threaten our
Nation's coastline.
Madam Chairman, we all know that accidents happen. But some
accidents are not acceptable. It is not acceptable for a
floating oil rig the size of a football field to burst into
flame. It is not acceptable that 11 people died, that thousands
of our Nation's rarest and most precious wildlife are
threatened, and that the livelihood of millions of people on
the Gulf Coast has been turned upside down.
As a former prosecutor, I know that when tragedies strike,
people want answers. The American people want to know when this
disaster will end. First and foremost, they want to know how it
will end. They want to know who is responsible. They want to
ensure that the victim's families and the American taxpayers
are adequately compensated and that measures are taken so that
an incident like this never happens again.
I saw when I was there how hard Federal officials,
countless volunteers, industry employees are working to clean
up the oil and prevent further leakage. But there are still
many questions that need answers.
BP was responsible for a similar explosion in March 2005
that killed 15 employees, left 170 injured and prompted the
U.S. Chemical Safety and Hazard Investigation Board to conclude
that--and this is a quote--the Texas City disaster was caused
by organizational safety and safety deficiencies at all levels
of the BP Corporation, warning signs of a possible disaster
were present for several years, but company officials did not
intervene effectively to prevent it.
The American people want to know what changed between the
2005 disaster and the disaster last month. Mr. Probert, the
American people also would like to know if Halliburton cement
work somehow contributed to this disaster. And the people in
our country are not dumb. They know that in instances like this
there is going to be a lot of finger pointing, like when a
group of kids knock a baseball through the neighbor's window
and none of the kids want to own up to the mistake.
But in this case the consequences are not simply the cost
of repairing a broken window. For 11 families, the consequences
are too difficult to contemplate. For the American people, the
consequences? Well, it could be one of the most costly
environmental disasters in our history.
Madam Chairman, the role of this Committee is to examine
the costs and associated responsibilities to look at the
environmental damage. I hope the testimony at today's hearing
will provide the answers that the America people are waiting
for.
My major focus after seeing this disaster is to make sure
that it never happens again and to end it as soon as possible.
I thank you for convening this hearing.
Senator Boxer. Thank you very much, Senator.
Senator Whitehouse.
Senator Whitehouse. I would be delighted to yield to
Senator Specter. I understand that he----
Senator Boxer. Senator Whitehouse yields to Senator
Specter.
Senator Specter.
OPENING STATEMENT OF HON. ARLEN SPECTER,
U.S. SENATOR FROM THE STATE OF PENNSYLVANIA
Senator Specter. Thank you, Madam Chair, for convening
these hearings.
I think that rather than viewing this catastrophic spill as
an impediment to establishing a national energy policy we
should use it to spur us on. Because we know that we cannot
rely on oil drilling offshore.
I believe that these hearings really need to explore a
number of questions that have been raised as to the cause of
the incident. First, the allegation has been made that the
technology has not changed much in 20 years. Booms, skimmers,
chemical dispersants. They have played down the possibility--
the oil companies have--of uncontrolled blowouts. They said
that blowout preventers were practically foolproof. But
Government regulators, back in 2003, had disputed that.
The underground blowout in East Timor last year was a
warning. It leaked for some 10 weeks, causing enormous damage.
There is evidence that the industry was not willing to pay for
enough boats and booms to enclose such a fast growing spill.
The oil companies could have had some version of the
containment dome ready before the spill rather than building
one after it happened.
These are issues these hearings need to explore, and we
need to take whatever steps are necessary through regulation to
prevent a recurrence.
This Committee reported out a bill some months ago, and a
number of our colleagues, Senator Kerry and Senator Lieberman,
are working on legislation. And I think this incident
underscores the need to move ahead.
But we now know that, on the current state of the record,
that we cannot rely on offshore drilling, that the
environmental risks are much too serious. We have quite an
array of Senators from States impacted by this array, more
Senators on the witness table than usually appear on the Senate
floor, almost a quorum at the witness table. And the stream may
carry it up throughout the entire East Coast, so there is more
concern to be had.
I look forward to the cooperation of the Republicans with
the Democrats to move ahead to find answers to these questions.
Thank you, Madam Chair.
Senator Boxer. Thank you very much, Senator Specter.
Senator Whitehouse.
OPENING STATEMENT OF HON. SHELDON WHITEHOUSE,
U.S. SENATOR FROM THE STATE OF RHODE ISLAND
Senator Whitehouse. Thank you, Madam Chair.
First, let me join my colleagues who have expressed their
condolences to the families of the 11 workers who lost their
lives, and I join in wishing a speedy recovery to all of those
who are injured.
This incident clearly requires us to reset a lot of
assumptions. We were told something like this cannot happen. It
did. We were told that the industry was prepared for it. In
fact, it looks as if the contingency planning was far from
adequate. We are told we have adequate environmental laws. It
is not clear that our environmental laws are strong enough and
adaptive enough for a continuing spill of this variety that at
present has absolutely no end in sight.
There are questions of accountability and cost, and who
should answer for this, and how much it will cost, and why
taxpayers should end up paying anything for this when all is
said and done, and why companies should have limits on their
economic damages, and what are the--in the context of the sort
of dollars at stake here--microscopically small levels of
liability.
Finally, we were told that drill, baby, drill was the
solution to our energy problems. I think that anybody who
really believes that should go tell that to the tourist economy
of Florida. I see Senator LeMieux here. Go tell that to the
fishing community of Louisiana. Senator Landrieu is here.
Clearly we need, as Senator Cardin said, a review of our
energy strategy. And as Senator Specter said, let us use this
as a time to move forward and protect ourselves against this
kind of disaster, enhance our national security, and improve
our economy, our jobs and our environment.
Senator Boxer. Senator Udall followed by Senator Merkley,
and Senator Baucus should be back.
We are going to start with Senator Shelby because we got a
note that he is needed on the floor at 10 after, and he is the
most senior here. But we have to go through quickly, and
Senator, we have three more, and then you will be on.
Senator Udall.
OPENING STATEMENT OF HON. TOM UDALL,
U.S. SENATOR FROM THE STATE OF NEW MEXICO
Senator Udall. Thank you, Madam Chair.
I also join in the condolences to the families.
Following this disaster, many industry observers have
expressed shock and surprise that such a catastrophic failure
could occur. Just last year, however, a major blowout and
serious oil spill occurred off the coast of Australia. That
blowout and explosion occurred just after the well was capped,
eerily similar to what happened in the Gulf. In that case, the
blowout preventer did not work.
I also understand that there is a 1999 report by the MMS
that shows that blowout preventers failed over 100 times in the
late 1990s in more minor accidents.
Information is also coming forward that unusual procedures
were used in cementing this well, and I think the regulators
need to focus on that aspect, and we should be able to hear
from them.
But the big question it seems to me for the industry is, in
the future, will the industry support strong, mandatory
regulatory standards for cementing and capping wells rather
than relying on the blowout preventers which clearly are not a
reliable failsafe solution?
Secretary Salazar has come forward with suggestions for
reform within the Department of Interior. One of his ideas is
to try to build a firewall between leasing and safety, and I
welcome that suggestion. Most of the countries in the world
that have this kind of activity going on within their
government rely on a separation between leasing and safety. And
so, I think it is very important that this Administration move
forward with that.
I am pleased that the Administration is moving forward with
this reform. But industry must also change its deregulatory and
self-regulatory attitude. Regulations impose modest costs, but
these highly profitable companies can easily afford them.
Compared to an oil spill, regulation is a bargain.
Thank you, Madam Chair.
Senator Boxer. Thank you, Senator.
Senator Merkley.
OPENING STATEMENT OF HON. JEFF MERKLEY,
U.S. SENATOR FROM THE STATE OF OREGON
Senator Merkley. Thank you, Madam Chair.
I, too, like my colleagues, express my thoughts for the
families who have lost loved ones in this tragedy and the
thousands of families who have had their livelihood affected by
this tragedy.
I will be brief so we can get to our panel. And just note
that I will be very interested in understanding the types of
rigorous examination and testing of blowout preventers that
occurred or did not occur preceding this particular accident,
and all that we can learn to avoid a disaster like this in the
future, and whether there is, in fact, any real set of
technology that can make deep water drilling safe.
I know the citizens of Oregon have their doubts because of
the fact that, even in an unlikely event, an event could have
such an impact upon our salmon, upon our shellfish industry,
upon our coasts, upon the entire ecosystem off the coast of
Oregon. I have had those reservations for a long time, and I
will be looking to learn a great deal through this afternoon's
hearing.
Thank you.
Senator Boxer. Thank you so much.
Since Senator Baucus is not back yet, when he comes, we
will hear from him. This is the order of seniority: Shelby,
Landrieu, Nelson, Menendez and LeMieux.
Senator Shelby.
OPENING STATEMENT OF HON. RICHARD C. SHELBY,
U.S. SENATOR FROM THE STATE OF ALABAMA
Senator Shelby. Madam Chairman, Ranking Member Inhofe,
thank you for allowing me to testify before the Committee
today.
I traveled to Alabama last week and witnessed firsthand the
destruction caused by the oil rig explosion. What I saw was
disturbing. Even today the oil continues to flow at a rate of
5,000 barrels, as a lot of you have pointed out. Tar balls have
washed up on the shores of Dolphin Island, Alabama. As long as
this oil continues to pour into the Gulf, we have a real--and
an unprecedented--disaster.
As we continue to respond to this disaster, our main
objective must be to stop the flow of oil. Until this leak is
stopped, we cannot adequately protect our Gulf. Second, clean
up should be rapid and with as little environmental impact as
possible once that happens.
As the responsible party, BP must be held accountable, and
the Federal Government should ensure that BP upholds its
financial obligations. I do not believe that BP--or any company
for that matter--should solicit hazard mitigation solutions
after an accident.
Third, this oil spill could become our Nation's worst
environmental disaster in decades. It already threatens
hundreds of species of fish, marine life, birds and other
wildlife along the Gulf Coast. We need to ensure that
techniques utilized in recovery efforts are safe and that we
protect our environmentally sensitive areas.
Finally, we should make every effort to help our coastal
communities get back on their feet with minimal disruption and
financial harm.
How will the fishing industry weather the potential
economic disaster? Good question. What will happen if Gulf
seafood is contaminated and unable to be sold? We need to plan
for the long-term impact that this accident will have on the
Gulf Coast.
In the wake of this accident, many are understandably
concerned about the safety and environmental risk associated
with offshore drilling, and with good reason. Simply halting
all offshore development, I believe, will not address our
energy needs and would immediately increase our dependence on
foreign oil. This accident should not be used, in my judgment,
as an excuse to halt the gains the U.S. has made in developing
domestic energy resources.
Instead, Madam Chairman, we should proceed in a measured
manner to fully understand the true cause of this accident and
review procedures and protocols currently in place that oversee
this industry. We need to ask several questions, in my
judgment.
First, why did this happen? We need to examine the role the
Minerals Management Service, the agency responsible for both
environmental enforcement and financial administration of
offshore drilling leases, played in this accident. In 2008 the
Minerals Management Service was exposed, and I quote, as ``a
cesspool of corruption and conflicts of interest'' with
regulators routinely accepting gifts from oil and gas
companies. Is this why regulators did not mandate the use of a
remote control device to shut down the well? I do not know. But
it is a good question.
Second, what role did BP play in this explosion? Were cost
cutting measures implemented at the detriment of safety?
Finally, is the Oil Spill Liability Trust adequate to deal
with such disasters? Since the Fund's inception in 1986, the
cost of clean up for such severe environmental disasters has
kept pace with inflation while the cap on individual claims has
not.
This accident, I believe, Madam Chairman, serves as a
reminder that there are risks involved in meeting our energy
needs as a country.
Madam Chairman, I speak today to remind the Committee of
the importance of proactive rather than reactionary measures,
foresight rather than hindsight. I ask you to continue to
consider the needs of our Gulf Coast as we move forward with
our cleanup and restoration efforts.
And Madam Chairman, thank you for your courtesy here today.
[The prepared statement of Senator Shelby follows:]
Statement of Hon. Richard C. Shelby,
U.S. Senator from the State of Alabama
Madam Chairman and Ranking Member Inhofe, thank you for
allowing me testify before the Committee today.
On April 20, 2010, the Transocean-owned Deepwater Horizon
drilling rig exploded, sending hundreds of thousands of gallons
of oil toward our coastal shores, estuaries, and beaches.
Alabama is bracing for the environmental and economic impact to
our coastline. At this point we do not know how severe the
impact will be, nor can we estimate the long-term effects.
However, we have already seen evidence that this spill may
devastate our Gulf Coast region--an area that has continually
suffered one disaster after another.
Madam Chairman, I traveled to Alabama and witnessed
firsthand the destruction caused by this catastrophe. What I
saw was disturbing. Even today, the oil continues to flow at a
rate of 5,000 barrels a day. Tar balls have washed up on the
shores of Dauphin Island, Alabama. As long as this oil
continues to pour into the Gulf we have a real and
unprecedented disaster.
As we continue to respond to this disaster, our main
objective must be to stop the flow of oil. I am concerned that
initial reports of the complexity and volume of the spill were
underestimated. It seems as if the amount of oil leaking from
the wells more than tripled overnight. At this rate, the spill
could easily eclipse the 1989 Exxon Valdez accident--the worst
oil spill in U.S. history.
Second, clean up should be rapid and with as little
environmental impact as possible. As the responsible party, BP
must be held accountable, and the Federal Government should
ensure that BP upholds its financial obligations. I do not
believe that BP, or any company for that matter, should solicit
hazard mitigation solutions after an incident. Just as we would
never send our warfighters into combat without a contingency
plan, we should consider strengthening regulations on
industries that engage in high risk operations that affect our
citizens and our environment.
BP's most promising solution for stopping the oil flow
involved a 100-ton concrete and metal box designed to cover and
capture the oil that's now flowing into the Gulf. It failed
over the weekend. Other suggestions as to how to clean up this
mess have ranged from the entrepreneurial to the MacGyver-
esque. Portions of the Florida coast will use bales of hay,
while human hair clippings are being stuffed into casings to
augment boom reserves, and pounds of peat moss are being
considered to help soak up surface oil. This is not what we
should expect from the world's fourth most profitable company.
Third, this oil spill could become our Nation's worst
environmental disaster in decades. It already threatens
hundreds of species of fish, marine life, birds, and other
wildlife along the Gulf Coast. We need to ensure that
techniques utilized in recovery efforts are safe and that we
continue to do everything possible to protect our
environmentally sensitive areas.
We should address the recovery techniques used to clean up
the oil slick. While dispersants may be the best action to
mitigate the oil spill, we must understand what the long-term
effects will be on the ecosystem. It is my understanding that
dispersants have never been used at this concentration, and
thus far it is publicly unknown what chemicals even make up the
dispersants being used in the Gulf. All the facts must be
provided to the public so we can have a full and complete
picture about the environmental impacts dispersants may cause.
Finally, we should make every effort to help our coastal
communities get back on their feet with minimal disruption and
financial harm. Fishermen are now placing booms in the Gulf
instead of hooks. But Madam Chairwoman, these jobs are only
temporary. How will the fishing industry weather the potential
economic disaster? And what will happen if Gulf seafood is
contaminated and unable to be sold? During the beginning of the
tourist season, the Alabama coast has already begun to deal
with smaller beach crowds and rental cancellations. We need to
plan for the long-term impacts this accident will have on the
Gulf Coast.
In the wake of this accident, many are understandably
concerned about the safety and environmental risks associated
with offshore drilling. We are often quick to turn to
reactionary and overly stringent public policy as a stopgap
measure. Although my home State is affected, I caution against
hasty reform. Simply halting all offshore development will not
address our energy needs and would immediately increase our
dependence on foreign oil. We cannot forget that our Nation is
still dependent on millions of barrels of oil every day from
overseas. This accident should not be used as an excuse to halt
the gains the United States has made in developing domestic
energy sources. We must let the investigation into this
accident move forward and be careful to avoid rash or
precipitous actions.
Instead, we should proceed in a measured manner to fully
understand the true cause of this accident and review
procedures and protocols currently in place that oversee this
industry. We need to ask several questions.
First, why did this happen?
We need to examine the role the Minerals Management
Service, the agency responsible for both environmental
enforcement and financial administration of offshore drilling
leases, played in this accident. In 2008 the Minerals
Management Service was exposed as ``a cesspool of corruption
and conflicts of interest,'' with regulators routinely
accepting gifts from oil and gas companies.
U.S. regulators did not mandate the use of a remote
controlled device to shut down the well should the oil rig
become damaged or require evacuation. Yet these devices are
required by Norway and Brazil. While the efficacy of the device
is unclear, the Minerals Management Service did consider
requiring its use only to decide ``acoustic systems are not
recommended because they tend to be very costly.'' No one can
state, unequivocally, that a remote control device would have
prevented this disaster. But it is also unknown whether it
would have provided a last resort protection against underwater
spills. Madam Chairman, it does not appear that the Minerals
Management Service's oversight is sufficiently protecting our
Nation from environmental disasters.
Second, what role did BP play in this explosion?
In 2007 Congress investigated one of the worst workplace
accidents in the U.S., a massive explosion at BP's Texas City
Refinery in March 2005 that killed 15 people and injured 180.
The U.S. Chemical Safety Board, an independent Federal agency,
investigated the accident and stated, ``The Texas City disaster
was caused by organizational and safety deficiencies at all
levels of the BP corporation. The combination of cost cutting,
production pressures and failure to invest caused a progressive
deterioration of safety at the refinery.'' Was this lack of
concern for safety part of BP's corporate culture that
translated to potential questionable standards on the rig? The
Justice Department must continue their investigation to
determine whether malfeasance occurred.
Finally, is the Oil Spill Liability Trust fund adequate to
deal with such disasters?
Since the fund's inception in 1986, the cost of clean up
for such severe environmental disasters has kept pace with
inflation, while the cap on individual claims has not. While we
should not be reactionary in our energy policy, our job as
lawmakers is to examine where there are breaks in the chain and
to make sensible repairs.
This accident serves as a reminder that there are risks
involved in meeting our energy needs as a country. But even
with this tragedy, the United States still has the most
rigorous and robust environmental standards of any oil
producing country in the world.
Madam Chairman, I speak today to remind the Committee of
the importance of proactive rather than reactionary measures;
foresight rather than hindsight. I ask you to continue to
consider the needs of our coast as we move forward with our
cleanup and restoration efforts.
Senator Boxer. Senator Shelby, thank you so much, and we
really appreciate your being here.
Senator Landrieu.
OPENING STATEMENT OF HON. MARY L. LANDRIEU,
U.S. SENATOR FROM THE STATE OF LOUISIANA
Senator Landrieu. Thank you. Madam Chair, thank you for
taking the initiative to hold this hearing today. And I thank
all the members of this Committee for your very thoughtful
remarks, particularly in regards to the men that were lost in
the incident and their families. Many of them came from the
Gulf Coast.
Madam Chair, you are aware of the ongoing and urgent needs
of Louisiana's coast. I have brought this to your attention, as
well as other members of our delegation, for some time now. But
as we begin to understand this tragedy and to put it in
perspective, I think a few facts are important. And I gave the
same testimony to the Energy Committee this morning as I am
giving to the Environmental Committee because I think it is
important to be consistent and balanced in our message.
There are over 300,000 men and women that work in the oil
industry in Louisiana. There are 1.8 million that work
nationally. And many people that work in this industry are
proud of the contributions that this industry makes to our
country every day. We owe the workers of this industry a debt
of gratitude for what they do. It is dangerous, hard work,
sometimes separated from their families. And the members of the
Gulf Coast delegation have a resolution before the Senate that
I hope we will pass today.
There is some other perspective that is important. From
1947 until today there have been 42,645 wells drilled in State
and Federal waters in the Gulf of Mexico alone. The first deep
well was not drilled yesterday. It was drilled 31 years ago in
1979. That well was drilled in 1,000 feet of water.
We have 2,250 deep water wells drilled since then. In fact,
as I questioned the executives this morning from BP and
Transocean, Madam Chair, there are 120 deep water wells
operating worldwide today. The record will show that from 1947
until 2009, 175,813 barrels have been spilled out of 16 billion
produced. That is 1,000th of 1 percent of total production.
Madam Chair, I know that this Committee has its eyes on the
environment. We in Louisiana live in that environment. We do
not only have our eyes in it, we have our hearts invested in
it. And we are making a living on that delta. But we need the
oil that comes from offshore to keep this economy moving. We
must examine what went wrong, weigh the risk and rewards, and
fix what is broken and move on to get this country more
independent of foreign oil.
If we could do without this oil, we would. But we simply
cannot. Not today, not in the near future, maybe some time in
the distant future. But we use 20 million barrels of oil a day.
We are only producing 9 here at home. If we just transport this
off of our shore, we transport the environmental risk and we
transport jobs.
We must find out what went wrong, hold BP accountable, and
on the record they said they will be accountable, under oath,
for all economic damage.
And finally, and thank you for your patience; our
delegation has repeatedly come to this Congress for the last 25
years saying yes, these resources belong to the Federal
Government. But the Gulf Coast States, including Florida, that
do not drill, and I will say this on their behalf, are
absorbing 100 percent of this risk. And so revenue sharing is
very important from the billions of dollars generated from this
industry to make sure it is safe, that we have the appropriate
response, and this country gets the energy it needs.
I agree with Senator Alexander about nuclear power and its
promise. But for right now let us focus on holding those
responsible for the damage, let us focus on moving this
industry forward in a more safe way, and hold people
responsible so all economic damages to anyone affected are met.
Thank you again for your initiative.
[The prepared statement of Senator Landrieu follows:]
Statement of Hon. Mary L. Landrieu,
U.S. Senator from the State of Louisiana
Thank you, Chairman Boxer, for holding this important hearing
today. And thank you for your determined commitment to the Gulf Coast
recovery efforts and for your understanding of the urgent needs of
Louisiana's coastline and wetlands.
Our Nation lost 11 men in this unprecedented accident. Our thoughts
and prayers are with their families as well with those injured.
As my colleagues and I outline our differing views on energy policy
today, I believe it is important that we do not lose sight of this key
point: the men and women that were on board the Deepwater Horizon on
that fateful day were and are hardworking Americans.
what lessons should we learn?
Some suggest that we put a halt to all new offshore drilling. I
don't believe that we can retreat from domestic energy production.
Banning offshore drilling will not keep our workers safe, and it won't
prevent our shores from getting stained with oil.
If we stop drilling here, then we will simply import more than we
already do from Saudi Arabia, Nigeria, Venezuela and elsewhere.
Even if we simply import our oil, our beaches are very much at
risk. That's because we need to get it from overseas and into our gas
tanks in massive oil tankers. And periodically those tankers spill. In
fact, according to the National Academy of Sciences, oil tankers spill
about 4 times as much oil as offshore drilling does, on average.
It is simply not right to export our energy production overseas to
countries who care nothing for the environment and who have few
resources to mitigate the impacts.
America must reduce its oil consumption for national security and
for the environment. But we need to be realistic. Today America
consumes about 20 million barrels of oil each day. We produce about 5
million barrels of oil here. We produce another 3 million barrels worth
of biofuels. That means we would need to reduce our consumption by 60
percent just to become energy secure. Message: Oil is here for the
foreseeable future. Drilling for it here is the environmental choice.
we need to make our coasts more resilient
Louisiana is just beginning to see the damage wreaked by this oil
spill. Unfortunately, this oil is spilling on a coast that is already
in a desperately fragile condition.
When the oil reaches the wetlands, it can coat, suffocate and kill
the grasses whose web of roots holds the marshes in place. Then all
that will be left is mud, which will simply sink into the seawater.
Those wetlands buffer the region from storm surges--unless the
marsh grasses are so depleted that they wash away. Normally, the
wetlands would naturally replenish themselves with sediment that washes
down the Mississippi River--except that sediment has been channeled
away by levees, pipeline cuts, and other energy-related development
done decades before we understood its impacts.
Louisiana's wetlands are sinking and disappearing into the
Mississippi River Delta at a terrifying rate: nearly a football field
every 30 minutes. An area half the size of Washington, DC, disappears
every year.
Louisiana's wetlands are nature's levee system--they diminish the
destructive force of hurricanes destructive power by reducing storm
surge and absorbing wave energy.
Scientists estimate that for every 2.4 square miles of wetlands,
deadly storm surges are lowered by about 1 foot. A recent study
indicates that if some of Louisiana's barrier islands are washed away,
wave height could increase by 700 percent.
Those same barrier islands--the Chandeleur Islands--have oil
washing ashore today. That oil threatens their vegetation, and if the
vegetation dies, the island will soon wash away.
If those islands wash away, one LSU researcher estimates that the
barrier coast can expect increases in storm surge and wave height of
greater than 6 feet.
America needs oil from the Gulf of Mexico. Revenue sharing helps us
do it sustainably.
The Gulf of Mexico accounts for one out of every four barrels of
oil produced in the United States.
The Gulf Coast is home to 40 percent of America's refining
capacity, where crude oil is converted into gasoline for our cars,
heating oil for our homes, jet fuel, diesel and other oil products.
Those are critical assets, and we can't simply wish away the fact
that we need them.
That is why this incident only bolsters the case for revenue
sharing as an appropriate policy to compensate the States that accept
oil and gas production off their coasts.
In the Domenici-Landrieu Gulf of Mexico Energy Security Act, the
linkage between production and impact was strongly reflected in the
provisions that dedicate OCS royalties to the coastal protection and
restoration fund.
Revenue sharing won't prevent these accidents, nor will it erase
their environmental impact, but it is equally unrealistic to expect oil
and gas production to come to a halt in the United States.
The compromise is this: revenue sharing serves as compensation for
the risk associated with energy production.
That money should be invested in coastal sustainability and
resiliency. That way, our coast is at least in a better position to
respond to/recover from these incidents as opposed to the current
scenario where we see the potential for a significant impact on an
already deteriorated coast with no ongoing compensation to mitigate
both direct and indirect impacts of energy production.
Healthy wetlands help mitigate the impacts to further inland
estuaries, and healthy barrier islands can serve as a blockade,
stopping the oil from passing inward.
That is why it is so important that States with oil and gas
production off their shores get a portion of those revenues to ensure
their coastal areas are healthy and thriving, providing the best
protection against any disaster.
conclusion
Today I hope that we can begin to understand what went wrong on
April 20th when 11 men lost their lives. And I hope that we can take
steps to reduce the chances that it will ever happen again.
But I also hope that we learn the right lessons.
Senator Boxer. Senator, thank you so much. And we know that
you are deeply involved in this recovery effort and recovering
these industries that potentially could be very badly damaged.
Senator Baucus, I promised you when you came back, so
please proceed.
Senator Baucus. OK.
Senator Boxer. And then we will go to, just to make it
clear, Senators Nelson, Menendez and LeMieux.
OPENING STATEMENT OF HON. MAX BAUCUS,
U.S. SENATOR FROM THE STATE OF MONTANA
Senator Baucus. Thank you, Madam Chairman. I will be very
brief. And I thank the indulgence of my colleagues both on the
Committee and the panel for letting me proceed here. I am not
going to be long. We all have the same views.
For me, it is important that we protect all our natural
resources, wherever they may be. The Gulf is clearly one. We
have heard from the Senator from Maryland about the Chesapeake
Bay. In my State of Montana, it is Glacier Park, it is
Yellowstone Park, the natural resources there. And by the way,
today is the 100th anniversary of Glacier Park.
BP has owned gas leases up on the North Fork of the
Flathead which adjoins Glacier Park. I spent some time talking
to British Petroleum, and just recently--I take my hat off to
them--they have withdrawn those leases, about 168,000 acres
worth. Excuse me.
[Remarks off microphone.]
Senator Baucus. Excuse me, the wrong company.
ConocoPhillips has run those leases. But I have talked to BP
many times about whether they should proceed or not. BP has
coal bed methane interests in that very same area, and they,
too, have announced that they are not going to proceed with
their coal bed methane.
My main point here is that the Gulf is an extremely
environmentally sensitive area. I am not convinced, based upon
the press reports I have read, that sufficient precautions were
taken either by the relevant agency or by the company.
I read--I do not know if this is true or not--that of the
15 or 16 preventers that are used in situations like this, the
vast majority of them have failed in the past. And I think
those were at depths not nearly as deep as 1 mile.
The whole thing is life is, if you can do it right, do it
right the first time. And it just seems that BP and the agency,
Deepwater Horizon, all the relevant parties here, did not do it
right the first time. And by the first time I mean make sure
that all the protections are first in place, make sure there is
sufficient redundancy, and make sure there is an adequate
response plan if something does go awry.
It just seems like a lot of mistakes were made. I do not
know to what degree it is human error or technical error or
what combination, but we are going to find out more in the next
several weeks and months as this unfolds, and that will enable
us to more appropriately take the proper action.
I just say at this time that I am quite distressed. I
support oil and gas, offshore oil and gas development. But not
like this. I saw a map, it was in the New York Times about 4 or
5 days ago, and it showed hypoxia is growing in the Gulf, near
Louisiana especially. But a lot of that is runoff. It is not
just oil and gas. It is agriculture runoff. But we are going in
the wrong direction here, folks. We need oil and gas, but we
are going in the wrong direction and not taking sufficient
protection.
I believe, frankly, that all of us have a moral obligation
when we leave this place to leave it in as good a shape, or
better shape, than we found it. We are not here forever. That
pertains to economic opportunities for our people. It also
pertains to the environment. I just feel here that we have kind
of dropped the ball here. The large ``we.'' And I hope we do
not let that happen again.
Thank you, Madam Chairman.
Senator Boxer. Thank you very much, Senator.
Senator Nelson.
OPENING STATEMENT OF HON. BILL NELSON,
U.S. SENATOR FROM THE STATE OF FLORIDA
Senator Nelson. Madam Chairman, one of my worst nightmares
might be coming true. Because if this thing is not stopped, and
it does not get stopped until the relief well is done in 3
months, then it is going to cover up the Gulf Coast.
The wind is eventually going to keep it going south, and it
is going to get into the Loop Current. And the Loop Current
comes south and comes right around the Florida Keys where 85
percent of all the live coral reefs are in the entire country.
And it becomes the Gulf Stream, and it hugs the east coast
of Florida, and I mean literally hugs the coast. It is less
than a mile off of the beach, the Gulf Stream, and it continues
on up halfway up the peninsula of Florida before going a little
bit out into the ocean.
Then it continues right up, paralleling the coast all the
way to Cape Hatteras, North Carolina, before it goes across the
ocean past Bermuda and on to Scotland.
So, if this thing is not stopped, we are looking at a major
economic and environmental disaster affecting our State and the
rest of the Gulf and the Eastern Seaboard of the United States.
Now, first of all, I think it is clear that there sure
should not be any more exploratory drilling until the
investigation is completed between the Department of the
Interior and the Department of Homeland Security. And I would
argue that there clearly should not be any new drilling in new
areas that have not been approved for lease, especially since
almost 38 million acres are under lease in the Gulf of Mexico
alone that have not been drilled.
Since there has been such a push to put this off of
Florida, I want to point out, remember the old saying, when
Willie Sutton was asked why does he rob banks he said because
that is where the money is. The oil is not off of Florida.
[Chart shown.]
Senator Nelson. This is, you cannot see it, but this is a
fancy chart that tells you, from the Department of the
Interior, that 90 percent of the oil, the undiscovered oil in
the Gulf of Mexico, is in the central Gulf and the western Gulf
and only 10 percent of the undiscovered oil is in the eastern
Gulf.
And my question is, and I have raised this for years, is it
worth the tradeoff to our economy in Florida, not only beaches,
and we have more beaches, obviously, than any other State, but
the economy to our fisheries, our fisherman, our oysters. Is it
worth it, that tradeoff? Is it worth the tradeoff to national
security in the largest testing and training area for the
United States military in the world, which is basically the
Gulf of Mexico off of Florida, for 10 percent of the
undiscovered oil in the Gulf of Mexico? And I think the answer
is clearly no.
But what have we heard the last several years? We want to
drill in the eastern Gulf. Well, in front of this Committee,
you are going to have to face two things. You are going to have
to face Minerals Management Service reform, and there is a
sorry record, a record of incestuous relationships. You have
seen the news stories of the sex parties and the pot parties.
MMS needs to clearly be cleaned up.
Second, you have jurisdiction in this Committee on the
question of the liability. And there was an artificially low
liability limit of $75 million. BP says it is going to exceed
that, and the question is, how much? I think it is very
reasonable to expect that you ought to consider raising that
liability for economic damage to at least $10 billion.
So, Madam Chairman, those are my heartfelt remarks.
Senator Boxer. Thank you, Senator. They certainly were.
Senator Menendez.
OPENING STATEMENT OF HON. ROBERT MENENDEZ,
U.S. SENATOR FROM THE STATE OF NEW JERSEY
Senator Menendez. Thank you, Madam Chairman and Ranking
Member Inhofe, for the opportunity and the invitation to
testify about my bill, joined by many of my colleagues here and
on this Committee, the Big Oil Bailout Prevention Act.
The bill would increase the cap on economic damages
resulting from an oil spill from the current $75 million to $10
billion. Companion legislation would eliminate the $1 billion
per incident cap on the Oil Spill Liability Trust Fund, and
together they accomplish three things.
First and foremost, the bill will make sure that people in
communities injured by an oil spill would get compensated for
their loss. Right now, fisherman, hotel owners and other people
dependent on clean water and clean shorelines for their
livelihood are collectively holding their breath, hoping this
spill does not destroy fisheries or make landfall again,
destroy beaches or estuaries. At the very least, they should
feel confident that if economic damages do hurt them, they will
be made whole.
The second thing this bill does is to ensure that claimants
will be made whole quickly. It is possible that other Federal
laws or even State law will allow some claimants to be
compensated for their losses even if a $75 million cap is hit.
But we do not want another situation like that after the Exxon
Valdez where it literally took two decades for some to get paid
and some were never compensated because they gave up.
Under the subsequent Oil Pollution Act, claimants can now
quickly and efficiently have their claims processed up to $75
million. By raising the cap, we can ensure all victims can be
compensated on time.
Finally, the legislation will ensure that polluters are the
ones compensating spill victims, not Federal taxpayers. We all
know that when a crisis unfolds and the responsible parties
cannot be made to pay for their damages, people will look to
the Federal Government for help. Taxpayers should not have to
pay for the misdeeds of oil companies or those who drill,
period.
Madam Chairman, as the investigation into this matter goes
forward, we will see blame cast far and wide for the accident.
There is no doubt that mistakes will be found, that industry
and regulators alike will be criticized for their arrogance in
thinking a spill simply could not happen.
But viewed from an economic perspective, the cause of the
accident is quite clear. When you have an industry that does
not have to pay the full costs of the damages they cause, they
will automatically not invest enough in safety. If they know
that they are on the hook for the first $75 million in economic
damages, perhaps they will not invest millions in a new valve
or even a few hundred thousand for an acoustic switch.
For a business, decisions are simple. How will each
decision maximize their profits? It is time for us to pass the
Big Oil Bailout Prevention Act to force companies to bear the
full costs of their damages and therefore give them the
economic incentive to be as safe as possible.
Now, some have suggested that despite the potentially
astronomical damages in the Gulf the bill sets the cap too
high. Well, given the fact that BP has earned $5.6 billion in
profits--not proceeds, profits--in the first 3 months of the
year, I think somehow they and others in that category will be
OK.
Our legislation has received wide support from both the
House and Senate leadership, the White House, and many members
of this Committee.
Let me close and make one final point. Just because the
crisis will undoubtedly result in new legislation, more safety
regulations and new safety technologies does not mean that oil
drilling will become completely safe. There is no such thing as
too safe not to spill. We were told that. We have learned a
different lesson.
It is a lesson that certainly, for my home State of New
Jersey, a $50 billion tourism industry that Senator Lautenberg
and I represent, a major coastal fishing, fourth largest in the
Nation, we cannot afford that type of drilling, that type of
spill, on the beaches of New Jersey and the consequences that
it will produce for a generation.
That is what is at stake in the long run. But in the short
run, Madam Chair, we should make sure that people, ultimately,
will be compensated and not just simply rely on a company
saying we will pay all legitimate claims, whatever that means.
Senator Boxer. Senator, thank you.
And finally, Senator LeMieux.
OPENING STATEMENT OF HON. GEORGE S. LEMIEUX,
U.S. SENATOR FROM THE STATE OF FLORIDA
Senator LeMieux. Thank you, Madam Chair, and thank you,
Ranking Member Inhofe, for allowing us to testify at this
hearing today.
I want to echo upon the comments of my senior Senator from
Florida about the potential environmental and economic damage
that this oil spill could cause to our home State.
Florida is a State with 1,800 miles of coastline, 1,200
miles of sandy beaches. We have a $65 billion tourist industry.
Last year, we welcomed 80 million visitors. Our salt water
fishing industry has a $5 billion impact on our economy, and
there are 50,000 Floridians who are employed by that industry.
Recreational boating has an $8 billion impact to our economy.
It provides 222,000 jobs.
I, like other folks who have testified here today, had the
opportunity to fly out over the spill last week, last Monday.
And you see the devastation that this oil spill is going to
cause. And while we have all been hopeful that British
Petroleum was going to be able to stop this spill, we are now 3
weeks after the spill started. The attempts to stop it have not
worked.
And I think if I could leave this Committee with a thought
and one point to remember, it would be this. Everything must
continue to be done to stop the oil spill, but right now the
States in the Gulf need money to be able to put together
mitigation teams, teams to prevent the oil from washing ashore.
And they need substantial dollars to do so.
We can have hearings, and you will have hearings, I am
sure, to find out what went wrong and why it went wrong. You
will have hearings to talk about what Federal agencies should
have done better and should have worked better.
What we need right now, for Florida, for Mississippi, for
Alabama, for Louisiana and for Texas, because, as my colleague
said, if this spill continues until the relief valves are
drilled, we are going to have oil in the entire Gulf of Mexico
which potentially cannot only get in the Florida Keys and into
our reefs, but go all the way up the Atlantic side, is we need
an evergreen fund of money that is put forth by British
Petroleum right now, say put $1 billion in there.
Let those dollars go to the States, let the States put
emergency response teams up, just like we do during hurricanes.
And we know how to do this. We are going to have local
governments, business, volunteers, State government and county
government all working together to mitigate that oil coming
upon shore. We need to do this for our fisheries, we need to do
this for our tourism, we need to do this for our environment,
and we need to do it for our economy.
So, there are a lot of good things that have been said here
today. Madam Chair, that is the point that I really want to
leave this Committee with is we do not need to just be worrying
about all the reasons why this happened. We certainly need to
continue to work to stop the oil from spilling. But we need
dollars right now in the Gulf States to mitigate and prevent
this oil from doing tremendous environmental and economic harm.
Thank you, Madam Chair.
Senator Boxer. Thank you very much.
Thank you all, Senators, and I would ask at this time for
the three panelists for Panel One. Actually, this was a prelude
to Panel One. Lamar McKay is the Chairman and President of
British Petroleum America. BP owns the lease from the Mineral
Management Service to drill for minerals at the site of the
ongoing spill. Steven L. Newman is the President and CEO of
Transocean, which owns the oil drilling rig associated with the
oil spill named the Deepwater Horizon. That rig was leased to
BP. And Tim Probert, President of Global Business Lines and
Chief Health, Safety and Environmental Officer for Halliburton.
Halliburton led the cementing efforts to temporarily cap the
exploratory well involved in the ongoing spill.
And gentlemen, as you did in the Energy Committee, I am
going to administer the oath to you. So, if the witnesses would
all rise and raise your right hand. Do you swear and affirm
that the testimony you will give before this Committee will be
the truth, the whole truth and nothing but the truth?
[Witnesses reply in the affirmative.]
Senator Boxer. Let the record show that the witnesses
answered in the affirmative.
We welcome you here, and we are going to go into your
testimony. So, we are going to start with Mr. McKay of BP
America.
Welcome.
STATEMENT OF LAMAR MCKAY, CHAIRMAN AND PRESIDENT, BP AMERICA
Mr. McKay. Thank you, Chairman. Chairman Boxer, Ranking
Member Inhofe, members of the Committee, my name is Lamar
McKay, and I am Chairman and President of BP America.
It is obvious we have experienced a tragic set of events.
Three weeks ago tonight, 11 people lost their lives and 17 were
seriously injured. My deepest sympathies go out to the
families.
They have suffered much along the Gulf Coast. This disaster
is impacting everyone along the Gulf Coast. It is
understandable to me. I grew up in Mississippi. I lived in
Louisiana most of my working career. And I know what people are
going through.
Over the last few days, I have seen the response firsthand,
and I have talked with men and women on the front line. There
is a deep and steadfast resolve to do all we humanly can to
stop this leak, contain this spill, and to minimize the damage
suffered by the environment and the people of the Gulf Coast.
As a responsible party under the Oil Pollution Act, we will
carry out our responsibilities to mitigate the environment, to
mitigate the environmental and economic impacts of the
incident. Our efforts are part of a Unified Command that has
established, that was established within hours of the accident
and provides a structure for our work with the Departments of
Homeland Security and Interior, as well as Defense, Energy,
OSHA and other Federal agencies, as well as affected State and
local governments and Transocean.
We are grateful for the involvement of President Obama and
members of his Cabinet and for the leadership and direction and
resources they have provided. We are also grateful to the
Governors, congressional Members, State agencies and local
communities of Mississippi, Alabama, Louisiana, Texas and
Florida.
I want to underscore that the global resources of BP are
committed to this effort and have been from the outset. Nothing
is being spared. Everyone understands the enormity of what lies
ahead and is working to deliver an effective response at the
wellhead, on the water, and on the shoreline.
Before I describe our round-the-clock efforts to respond to
this series of events, I want to reiterate our commitment to
find out what happened. Understanding what happened and why it
happened is a complex process. We are cooperating with the
joint investigation by the Departments of Homeland Security and
Interior and investigations by Congress.
In addition, BP has commissioned an internal investigation
whose results we plan to share so that we can all learn from
these terrible events.
I want to be clear. It is inappropriate to draw any
conclusions before all the facts are known. As we speak, our
investigation team is locating and analyzing data, interviewing
available witnesses, and reviewing and assessing evidence. And
today I think it is important to give you and the American
public an idea of the questions we are asking.
There are really two key sets of questions here, and we are
actively exploring both of them. First, what caused the
explosion and fire on board Transocean's Deepwater Horizon?
Second, why did Transocean's blowout preventer, the key
failsafe mechanism, fail to shut in the well and release the
rig?
With respect to the first question, the key issue we are
examining is how hydrocarbons could have entered the well bore.
BP, as a leaseholder and the operator of the well, hired
Transocean to drill the well and fulfill their safety
responsibilities. We do not know yet precisely what happened on
the night of April 20th. But what we do know is that there were
anomalous pressure test readings prior to the explosion. These
could have raised concerns about well control prior to the
operation to replace mud with seawater in the well in
preparation for setting of the cement plug.
Through our investigation we hope to learn more about what
happened and what was done in the hours before the explosion.
Apart from looking at the causes of the explosion, we are
also examining why the blowout preventer, the BOP as it is
called, did not work as the ultimate failsafe to seal the well
and prevent an oil spill. Clearly, the BOP remains a critical
piece of equipment throughout all operations to ensure well
control up until the time the well is sealed with a cement plug
and is temporarily abandoned.
We will continue full speed ahead with our investigation,
keeping all lines of inquiry open until we find out what
happened and why. At the same time, we are fully engaged in
efforts to respond to these events. Our subsea efforts to stop
the flow of oil and secure the well involve four concurrent and
parallel strategies.
Activating the BOP would be the preferred course since it
would stop or diminish the flow at the source. Unfortunately,
this has proved unsuccessful so far. We are working on a
containment system which will place large enclosures, or
containment chambers, on top of the leaks and conduct flow to a
ship at the surface. There have been technical challenges.
Engineers are now working to see if these challenges can be
overcome.
We have begun to drill the first of two relief wells
designed to intercept and permanently secure the original well.
We began drilling the first relief well on May 2nd and expect
to begin the second relief well later this week. This operation
could take approximately 3 months.
A fourth effort, known as a top kill, uses a tube to inject
a mixture of multi-sized particles directly into the blowout
preventer to cap the well. It is a proven industry technique
and has been used worldwide, but never in 5,000 feet of water.
Now, on the open water, a fleet of about 300 response
vessels has been mobilized, and about 1 million feet of boom
are now in place with more than a million more feet available.
We are also attacking the spill area with Coast Guard approved
biodegradable dispersants which are being applied from planes
and boats. We have also developed and tested a technique to
apply dispersant at the leak point on the sea bed. The EPA is
carefully analyzing options for this technique's further use.
To protect the shoreline, we are implementing what the U.S.
Coast Guard has called the most massive shoreline protection
effort ever mounted. Thirteen staging areas are in place, and
over 4,000 volunteers have already been trained.
We recognize that there are both environmental and economic
impacts. BP will pay all necessary cleanup costs and is
committed to paying legitimate claims for other loss and
damages caused by the spill.
Tragic and unforeseen as this accident was, we must not
lose sight of why BP and other energy companies are operating
in the offshore, including the Gulf of Mexico. The Gulf
provides 1 in 4 barrels of oil produced in the United States, a
resource our economy requires.
Now, BP and the entire energy industry are under no
illusions about the challenge we face. We know that we will be
judged by our response to this crisis. We intend to do
everything in our power to bring this well under control, to
mitigate the environmental impact of the spill, and to address
economic claims in a responsible manner.
No resource available to this company will be spared. I can
assure you that we and the entire industry will learn from this
terrible event and emerge from it stronger, smarter and safer.
Thank you very much for the opportunity to appear before
you today. I would be happy to answer your questions.
[The prepared statement of Mr. McKay follows:]
[Editor's note: Mr. McKay's responses to questions for the
record printed here are incomplete because some of his
responses contain confidential business information. This
material is available in the Committee's files.]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Senator Boxer. Thank you very much, Mr. McKay.
Mr. Newman, President and CEO of Transocean, who owned the
drilling rig associated with the spill, the Deepwater Horizon,
and leased it to BP.
STATEMENT OF STEVEN NEWMAN, PRESIDENT AND CHIEF EXECUTIVE
OFFICER, TRANSOCEAN, LTD.
Mr. Newman. Thank you.
Madam Chairman Boxer, Ranking Member Inhofe and other
members of the Committee, I want to thank you for the
opportunity to speak with you today.
My name is Steven Newman. I am the President and Chief
Executive Officer of Transocean, Ltd. Transocean is a leading
offshore drilling contractor with more than 18,000 employees
worldwide.
I am a petroleum engineer by training, and I have spent
years working on and with drilling rigs. I have worked at
Transocean for more than 15 years, and I am incredibly proud of
the contributions our company has made to the energy industry
during that time. I sit before you today, however, with a heavy
heart.
The last few weeks have been a time of great sadness and
reflection for our company and for me personally. Nothing is
more important to me--and to Transocean--than the safety of our
crew members. And my heart aches for the widows, parents and
children of the 11 crew members, including 9 Transocean
employees, who died in the Deepwater Horizon explosion. These
were exceptional men, and we are committed to doing everything
we can to support their families as they struggle to cope with
this tragedy.
Over the last few weeks we have also seen great acts of
courage and kindness in our colleagues and in our communities.
That courage and kindness was embodied by the 115 crew members
who were evacuated from the Deepwater Horizon and who were as
focused on the safety of their colleagues as they were on
themselves. It was embodied by the brave men and women of the
U.S. Coast Guard who provided onsite response and search and
rescue efforts, and the medical professionals and the families
and friends of the crew members who were waiting for them when
they arrived on shore. And it is embodied by our friends and
colleagues at Transocean and across the industry who have
rallied to help the families of those who were lost in this
accident.
This has been a very emotional period for all of us at
Transocean. It has also been a period of intense activity and
efforts. Immediately after the explosion, Transocean began
working with BP and the Unified Command in the effort to stop
the flow of hydrocarbons from the well. Our finest engineers
and operational people have been working with BP to identify
and pursue options for stopping the flow as soon as possible.
Our drilling rig, the Development Driller III, is involved
in drilling the relief well at the site, and our drill ship,
the Discoverer Enterprise, is standing by on location to carry
out unique oil recovery operations in the Gulf. We will
continue to support BP and the Unified Command in all of these
efforts.
At the same time, we have also been working hard to get to
the bottom of the question to which this Committee and the
American public want and deserve an answer. What happened on
the night of April 20th? And how do we assure the American
public that it will not happen again?
Transocean has assembled an independent investigative team
to determine the cause of these tragic events, a team that
includes dedicated Transocean and industry experts. They will
be interviewing people who have potentially helpful information
and studying the operations and equipment involved.
Because the drilling process is a collaborative effort
among many different companies, contractors and subcontractors,
the process of understanding what led to the April 20th
explosion and how to prevent such an accident in the future
must also be collaborative. Our team is working side by side
with others, including BP and governmental agencies, and these
investigative efforts will continue until we have satisfactory
answers.
While it is still too early to know exactly what happened
on April 20th, we do have some clues as to the cause of the
disaster. The most significant clue is that the events occurred
after the well construction was essentially finished. Drilling
had been completed on April 17th, and the well had been sealed
with casing and cement.
For that reason, the one thing that we do know is that on
the evening of April 20th there was a sudden catastrophic
failure of the cement, the casing, or both. Without a failure
of one of those elements, the explosion could not have
occurred.
It is also clear that the drill crew had very little, if
any, time to react. The initial indications of trouble and the
subsequent explosion were almost instantaneous.
What caused that sudden violent failure? Was the well
properly designed? Were there problems with the casing or the
seal assembly? Was the casing properly cemented and the well
effectively sealed? Were all appropriate tests run on the
cement and the casing? Were the blowout preventers, the BOPs,
damaged by the surge that emanated from the well beneath? Did
the surge blow debris into the BOPs, preventing them from
squeezing, shearing or closing the pipe? These are some of the
critical questions that need to be answered in the weeks and
months ahead.
Until we know exactly what happened on April 20th, we
cannot determine how best to prevent such tragedies in the
future. But regardless of what the investigations undercover,
ours is an industry that must put safety first. We must do so
for the sake of our employees, for the sake of their families,
and for the sake of people all over the world who use, enjoy
and rely on our oceans and waterways for their sustenance.
Thank you again for the opportunity to speak here today,
and I am happy to answer any questions.
[The prepared statement of Mr. Newman follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Senator Boxer. Thank you, Mr. Newman. I thought your
questions were very much on point, those that you posed.
Next, we will hear from Tim Probert, President of Global
Business Lines and Chief Health, Safety and Environmental
Officer for Halliburton. Halliburton led the cementing efforts
to temporarily cap the exploratory well involved in the ongoing
oil spill.
STATEMENT OF TIM PROBERT, PRESIDENT, GLOBAL BUSINESS LINES,
CHIEF HEALTH, SAFETY AND ENVIRONMENTAL OFFICER, HALLIBURTON
Mr. Probert. Chairwoman Boxer, Ranking Member Inhofe and
members of the Committee, thanks for inviting Halliburton to
testify. We will continue to work with you and your staff to
collect factual data that will enable an understanding of what
took place and what we collectively can do to ensure that
domestic oil and gas production is undertaken in the safest,
most environmentally responsible manner possible.
The catastrophic blowout and the spread of oil in the Gulf
of Mexico are tragic events to everyone. On behalf of the
entire Halliburton family, we extend our heartfelt sympathy to
the families, the friends, the colleagues of the 11 people who
lost their lives and those workers who were injured in the
tragedy.
As we hope you can appreciate, neither Halliburton nor any
other party can make a judgment or offer any credible theories
about what happened until, at a minimum, the well owner has
interviewed everyone on the Deepwater Horizon to recreate the
daily log of activities for April 20th. In the absence of that
information, no one should rush to judgment.
However, two things can be said with some certainty. The
casing shoe was cemented 20 hours prior to the tragic incident,
and had the BOP functioned as expected, this catastrophe would
not have taken place.
For more than 90 years, Halliburton has provided a variety
of products and services to well owners throughout the life
cycle of their reservoirs in the oil and gas industry. With
respect to the Mississippi Canyon 252 Well, Halliburton was
contracted by the well owner to perform a variety of services.
These included cementing, mud logging, directional drilling,
and real time data acquisition and data delivery services for
key personnel on board the rig and on shore.
Since the blowout, Halliburton has been working, at the
direction of the well owner, to assist in the efforts to bring
the well under control. This includes intervention support to
help secure the damaged well and assistance in drilling one or
more relief wells.
At the outset I need to emphasize that Halliburton is a
service provider to the well owner, is contractually bound to
comply with the well owner's instructions on all matters
relating to the performance of work-related activities.
The construction of a deepwater well is a complex operation
involving the performance of many tasks by many parties. While
the well owner's representative has ultimate authority for
planning and approving activities on the rig, the drilling
contractor performs and directs much of the daily activity.
Cement can be used to isolate formation fluids, to prevent
movement of these fluids between formations and to bond and
support the steel casing. There are many external factors which
affect the design and execution of a cement job. These include
the variability of the hole geometry, the relative location of
hydrocarbon zones, and the hydrocarbon content of associated
drilling fluids.
The centralizer placement on the production casing, the
drilling fluid conditioning program prior to cementing, and the
cement slurry and placement design used for this well were
implemented as directed by the well owner. By design, there was
no continuous cement column installed throughout the entire
well bore.
Approximately 20 hours prior to the catastrophic loss of
well control, Halliburton had completed the cementing of the
ninth and final production casing string in accordance with the
well program. Following the placement of the cement slurry, the
casing seal assembly was set in the casing hanger. In
accordance with accepted industry practice, as required by MMS
and as directed by the well owner, a positive pressure test was
then conducted to demonstrate the integrity of the production
casing string. The results of the positive test were reviewed
by the well owner, and the decision was made to proceed with
the well program.
The next step included the performance of a negative
pressure test which tests the integrity of the casing seal
assembly and is conducted by the drilling contractor at the
direction of the well owner and in accordance with MMS
requirements. We understand that Halliburton was instructed to
record drill pipe pressure during this test. After being
advised by the drilling contractor that the negative test had
been completed, Halliburton cementing personnel were placed on
standby.
We understand that the drilling contractor displaced the
dense drilling fluid in the riser with lighter seawater prior
to the planned placement of the final cement plug, the drilling
fluid being transferred directly to a work boat alongside the
drilling rig. The final cement plug would have been installed
inside the production string and enabled the planned temporary
abandonment of the well. But prior to the point in the well
construction plan that the Halliburton personnel would have set
the final cement plug, the catastrophic incident occurred. As a
result, the final cement plug was not set.
Halliburton is confident that the cementing work on the
Mississippi Canyon 252 Well was completed in accordance with
the requirements of the well owner's well construction plan.
Before closing, though, I would really like to respectfully
address an issue Senators Lautenberg and Udall raised about the
spill in Australia.
A commission of inquiry is still underway. But I can tell
you that Halliburton performed the cement job according to the
well owner's direction. And public testimony tells us that the
well control event occurred some 5 months after the well
completed cementing operations. We understand that neither the
drilling contractor nor the well owner performed integrity
testing on that cement job, and a subsequent event caused that
incident.
Thanks for the opportunity to share Halliburton's views,
and I look forward to answering your questions.
[The prepared statement of Mr. Probert follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Senator Boxer. Thank you very much.
Mr. McKay, we have heard from the media that there is a lot
of BP video of the spill, and there have been requests to see
it to look at the spill volume because it seems we cannot get a
true picture. But we have heard 4 million gallons. Is that your
estimate of what we have spilled so far?
Mr. McKay. I think the estimate is 5,000 barrels a day for
the last 20 days. So, if that, doing the math, if that is
right, 42 gallons per barrel, so I would have to do the math.
But as far as videos, there are some videos and pictures that
are on the United, the Unified Area Command site. I believe
they are actually trying to add to that in terms of a----
Senator Boxer. I understand it is far more than has been
released. Would you get back to this Committee? We would be
interested in viewing those and making those public. Would you
get back to us on how many of the videos have still not been
shown to the public? I mean, get back to us on how much footage
that has not been shown to the public.
Mr. McKay. OK.
Senator Boxer. And make that available to us.
Mr. McKay. Yes. Everything goes through Unified Area
Command. Yes.
Senator Boxer. All right.
Mr. Probert, I was taken by your testimony. It seems to me
that you are blaming the well owner in all the cases here. And
in other words, you do not do any testing unless they ask you?
You do not test the cement; you do not, if they do not ask you,
you do not do it? You take no responsibility?
Mr. Probert. I think that I certainly, I certainly was not
intending to suggest that in any way. I was simply trying to
clarify the roles of the parties.
There are two tests which are undertaken on the integrity
of the well itself. One is called a positive pressure test,
which tests the integrity of the production string of casing
itself. The second is called a negative pressure test and that
tests the integrity of the seal assembly, which is the top of
the casing string where it sits in the wellhead.
With respect to the cement itself, it is obviously an
engineered product and that it can, subsequently, be tested
when it has been pumped into the well bore using a variety of
techniques.
Senator Boxer. And do you recommend that test be done?
Mr. Probert. That testing is done at the discretion of the
well owner.
Senator Boxer. That is the point I am getting at. So, let
us just say the well owner does not do it. Do you feel you have
any responsibility to urge them to do it given what did happen
in Australia?
Mr. Probert. The MMS is fairly clear on this point. If it
is felt, for example, that the integrity of the cement is in
question, such as there is an event called loss returns and
that means that during the pumping on a cement job no returns
are received at the surface, that would mean----
Senator Boxer. Sir, I am sorry. I have so little time. So,
I guess my question is, if you felt that the well owner was not
testing the cement, would you feel any obligation to request
that they do so?
Mr. Probert. We would feel an obligation if we felt that
the integrity of the cement was in question, yes.
Senator Boxer. That was my question. Thank you.
Mr. McKay, prior to the incident on the Deepwater Horizon
rig, BP was quite confident in its ability to deal with an oil
spill there. In February of this year BP submitted to MMS an
initial exploration plan for the area where the Deepwater
Horizon incident occurred. And in that plan BP said, due to the
distance to shore, 48 miles, and the response capabilities that
would be implemented, no adverse impacts are expected for
beaches, for wetlands, for shore birds and coastal nesting
birds, for coastal wildlife refuges, and for fisheries. Your
words then.
However, BP's certainty in its ability to deal with a spill
is in sharp contrast to what is being said now that an actual
spill has occurred. Yesterday, BP released a statement
regarding its effort to control the leak that said, ``All of
the techniques being attempted or evaluated to contain the flow
of oil on the seabed involve significant uncertainties,'' and
these are your words again, ``because they have not been tested
in these conditions before.''
Well, I will tell you that just putting those two
statements side by side, it is a stark difference in what you
said before and what you are saying now. How do you reconcile
the stark difference in what you said in trying to get this
project going without a big, long environmental impact
statement, which you got, and what you are saying now, that
these conditions have never occurred before?
Mr. McKay. We obviously did not expect a situation like
this. The conditions that we are working in are very unique. It
is in 5,000 feet of water. It is the first time something like
this has happened. This is an unprecedented accident.
Obviously, when that document you are quoting was turned in, we
were not expecting this.
I think the spill response plan has actually been a good
foundation to deal with this. It is, if we look at what we are
doing, fighting this thing as aggressively as we can offshore
with dispersants, in-situ burning, skimming resources, those
resources have come to bear and the booming to protect
shoreline have come to bear the costs of a spill response plan
that was in place, and enacted and approved in 2009 of last
year.
The subsea interventions that we are doing are the first of
its kind----
Senator Boxer. Well, I know, I know that you are working
very hard now. I am not questioning that at all. I am just
saying, when you look back to the documents that you filled
out, when you were asking for no long environmental impact
statement, you wanted to be exempt from it all, and you got all
of that, you got all of that, you said then, it is unlikely
that we are going to have an impact because we are using proven
equipment and proven technology.
My time has run out. But I want to say that we cannot have
a world where people say one thing before they get a permit and
then just act like they never said it. You said we will not
have a problem. And then we have a tragedy like this. And I am
just saying we need to do better.
That is why I am supporting separating out the oversight of
moving forward with these drilling projects from the safety
oversight. We need to have it done in two separate places and
have an independent agency because this is just unacceptable to
say two starkly different things about the same project.
It is just--it does not build our confidence in the future
right now, and frankly I do not see how we could possibly
approve anything like this until we figure this thing out. We
cannot have companies saying one thing to just get fast
approval and then acting like they never said it.
Senator Inhofe.
Senator Inhofe. Thank you, Madam Chairman. Let me just
refer to my opening statement. I implied, and I really believe
that you guys, your time would be better spent right now down
there trying to contain this mess than it is up here at
hearings.
However, when I said that, I would compliment our Committee
and the Chairman because they had already decided to have
Committee hearings over in the House Energy, in Congress,
Committee and then the Senate Energy and Natural Resources
Committee. I think that kind of forced us to do it, or we would
not be doing our jobs.
So, anyway, I still stand by the statement that I would
rather you go ahead and get that done. Then the blame game can
take place later.
The Senator from Pennsylvania implied that a lot of the
technologies and the things that were being done have not
really changed over the years. And it is my understanding,
because we are trying to really get into this thing and learn
what it is all about, Mr. McKay, the use of dispersants, I
understand that the type of dispersants that you are using is
this biodegradable, it is a technology that is, something that
is newer than the dispersants that have been used before.
Would you comment on this technology, and has this improved
over the past period of time?
Mr. McKay. The dispersants were are using were pre-approved
by the EPA for over-flight and they are----
Senator Inhofe. The dispersants that are used now are not
the same ones that were used like----
Mr. McKay. These are the very latest versions of
dispersants. They are biodegradable. When we talk about
technology, it is partly the dispersants, it is partly the
method by which you are deploying them and what scale and how
they are being deployed. And on the surface, as you know, I
will not go into detail, we have got an air force flying with
dispersants.
The other thing we are doing with subsea dispersant, which
is a new technology and has not been done before and the EPA is
monitoring very closely, is to inject dispersants at the
source, effectively. We do believe that will allow less
dispersant to be used per unit of effected oil. So, this is
being done in trials now. We hope to go to----
Senator Inhofe. And with the EPA and the Coast Guard----
Mr. McKay. And the Coast Guard.
Senator Inhofe. They are involved in this thing, too.
Well, the MMS has been beat up pretty bad. I think one of
the reasons for that is that they have come out and said we
have done something, you know, right in terms of trying to
monitor these things.
I remembered, and I asked the staff to get this for me, it
is dated January 29, 2009, when we made a big issue of the
problems that exist with the MMS. And Secretary Salazar, he
launched this reform, and he put Tom Strickland in charge of
it. Frankly, I thought that that pretty much had worked.
And Mr. Newman, the safety record, I thought it was pretty
impressive that the MMS has conducted 26 inspections on
Deepwater Horizon in the past 5 years. Is that unusual? Is that
what has been happening in the past? And then also, what is the
story on the SWAT teams referred to by Salazar? I am not sure
if that is an inconsistency, if perhaps that is saying we are
doing something now that we should have done before. Would you
try to explain that?
Mr. Newman. I think there are two parts to your question,
Senator. One has to do with the relationship, in this case,
between Transocean, the drilling contractor, and the MMS. And
the way I would characterize our relationship with the MMS is
they show up on our drilling rigs regularly, unannounced, they
conduct thorough inspections of the drilling rigs, they know
what to look for, and they are thorough and rigorous about
looking for that.
Senator Inhofe. All right. But when you say they come up
unannounced and they--what is the kind of frequency we are
looking at?
Mr. Newman. I think the frequency you cited was 26 times on
the Deepwater Horizon in the last 5 years. They are out there
once a month, every other month. They are out there routinely.
Senator Inhofe. And they, apparently you were the recipient
of an award that was for ``Outstanding Drilling Operations and
Perfect Performance.'' Anyway, these efforts were out there,
and you have been, does that imply, that would imply to me that
you have been complying with the recommendations that the MMS
had?
Mr. Newman. Yes, Senator.
Senator Inhofe. OK.
Mr. McKay, it is confusing to a lot of us. We look at the
BOP stats here, and I know you cannot see that but you know
what it is. You live with this on a daily basis. When we are
dealing with this, they apparently have different rams that
were on the BOP stacks. Do you want to just briefly, briefly,
discuss the different purposes of each one. Why do you have
more? Is this redundancy? How many are on there? And how does
it work?
Mr. McKay. Yes, let me walk through that a bit, and then
perhaps Mr. Newman can help me since it is their BOP. They have
different sets of rams, or valves, in a sense valves that can
close around different sizes of pipe, also different types of
rams that can sheer pipe and seal, also different types of rams
that can actually just cut pipe to get it out of the way. So,
there are various types of rams in BOPs, and this one had each
one of those types of rams.
Senator Inhofe. OK.
Mr. Newman, do you want to make any comment about that?
Mr. Newman. I would be happy to tell you about the BOP on
the Deepwater Horizon, Senator. The BOP on the Deepwater
Horizon, there are two basic closing mechanisms. One is a
mechanism the industry refers to as a ram-type preventer. That
closes large blocks. The other one is an annular-type preventer
which squeezes a doughnut around any pipe that would be in the
well bore.
The Deepwater Horizon was fitted out with five ram-type
preventers, and these ram blocks can have openings in the
center. So, that would facilitate the rams closing around pipe.
Sometimes the rams have sharp edges.
Senator Inhofe. So, it is a redundancy. I appreciate that
very much.
My time has expired, but I do want to ask a question for
the record, and you can respond to it later concerning the
cementing, for Mr. Probert.
Thank you, Madam Chair.
Senator Boxer. Thank you, Senator.
Senator Lautenberg.
Senator Lautenberg. Thank you, Madam Chairman. And thank
all of you for your testimony. One thing is certain, that each
one of you must feel terrible torment about what is going on.
And I know that you do.
But the fact of the matter is you had the responsibility to
make sure that everything was just right in the processing
here. You all know that you are in an industry that can produce
wonderful things, but also within the orbit in which you are
working you can also be witness to terrible, terrible
situations, as we have seen here, the Deepwater Horizon.
I would ask each one of you, and I know there are parts to
the puzzle that each one of you puts together, and I would ask
you first, Ms. McKay, is BP the party responsible for the leak?
Mr. McKay. We do not know who is responsible for what yet.
The investigations will look at the processes, the equipment
and the decisions that were made----
Senator Lautenberg. OK. I do not want to cut you off, but I
want to try to move along.
Mr. Newman, is your company responsible for the eruption
that occurred from the rig?
Mr. Newman. Senator, until we understand the root cause of
the event, I do not think it is appropriate to speculate on who
or what might be responsible.
Senator Lautenberg. Yes, well, I know that everybody, there
is a bit of, if you will forgive me, a bit of a handoff that I
think is taking place.
Mr. Probert, do you----
Mr. Probert. I think everyone is working very hard
together, collectively, to pull the facts together so we can
really diagnose exactly what did take place.
Senator Lautenberg. I will tell you what I draw. The
conclusion that I draw is that nobody assumes the
responsibility, whether it is yet or because of the time. The
fact is that what it says to me is that these projects, as
valuable as they are, bring with them a level of danger that is
terrific, a very heavy risk to the nearby seashores,
communities, States, et cetera.
And that is what concerns me about this willingness or
intention to continue new drilling. We do need to have an oil
supply. We do need to have it available to the public. But we
also need, just as intensely as we do investing in these
drilling programs, we, just as intensely, do we have to find
alternative, renewable sources that are sustainable. And I do
not see it.
I come out of the business world. I spent 30 years in the
corporate world at a company that today has 40,000 employees,
and I was one of the founders of that company. And I know how
to--what I recognize on a balance sheet or P&L statement. And I
just mention for interest here that BP in the quarter just
ended at the end of March had a 133 percent gain, for a
quarter, profits of $3.2 billion. Is there any challenge to
that, Mr. McKay, at all?
Mr. McKay. No.
Senator Lautenberg. And I heard the Secretary of the
Interior declare publicly that BP was going to be responsible
for the clean up there and for whatever resources it took. So
do it.
I then heard, and I do not remember whether it was you,
sir, or someone else in the company who said reasonable claims,
that is what you are doing. Is that correct?
Mr. McKay. Legitimate claims.
Senator Lautenberg. Legitimate claims. So, that is already
an area of protection that you are putting around this thing.
But we will go, we will make the judgment about the claims that
are legitimate and those you are willing to pay. But it says
also that there are a lot of claims that might not be
legitimate, and you are going to reserve the opportunity to
make your decisions when the situation occurs.
Mr. McKay. Can I clarify the intent?
Senator Lautenberg. Please do.
Mr. McKay. The intent is to be fair, responsive and
expeditious and to address all claims. It is-- we are not using
legal words. This is what we mean. We are a responsible party
as a leaseholder, and we are going to live up to every single
responsibility under that and we have publicly said----
Senator Lautenberg. Well, at some point, one or more, well,
all of you will be involved in anything that occurs by way of
expense.
Mr. Newman, I think I read correctly when----
Senator Boxer. Last question, Senator, please.
Senator Lautenberg. When you said that you had completed
your task before the explosion occurred. Am I right?
Mr. Newman. Senator, I indicated that drilling operations,
the process of actually deepening the well, had completed on
April 17th.
Senator Lautenberg. OK.
Madam Chairman, I ask unanimous consent that my full
statement be inserted in the record, and I ask you whether we
are going to have a chance to ask further questions. I know
that you have another panel coming.
Senator Boxer. Well, here is the situation, colleagues, so
we can make a decision, all of us together. We have four votes
scheduled, and pretty soon, too. We expect them to start around
4:30. So, we are going to have to recess at that point. My hope
was, because we have a whole other panel, to try and complete
this round and have everybody do some written questions. And I
am sure, gentlemen, you would be very pleased to answer those,
correct? And that would be very helpful. But we can probably go
until about 4:45, so why do we not keep moving on.
Senator Vitter.
[The prepared statement of Senator Lautenberg was not
received at time of print.]
Senator Vitter. Thank you, Madam Chair. Thank you all for
testifying.
As I said in my opening statement, between the task of
stopping the flow and cleaning up the oil, there is a critical
challenge that I am very focused on with folks in Louisiana
which is blocking the oil as much as possible before it hits
land, in particular before it gets into marshland. A barrier
island's beach is one thing--not that I am trivializing that
impact, but once it gets behind them into Louisiana marshland,
it is a very delicate and specific ecosystem. It is a lot more
complicated.
In that effort, boom and related supply is critical. That
is the currency, as you know, of the entire effort. I have two
questions, Mr. McKay, related to that. First is this. On Friday
I sent Admiral Allen a letter, I copied Tony Hayward, among
others. It pointed out that, according to the latest Unified
Command statistics, there was an enormous inequity in terms of
boom going to States.
Mississippi was getting about 1 mile for every 1.32 miles
of vulnerable coastline, just taking a 200-mile radius from the
event. That covers all of their coastline. Alabama was 1 mile
to every 1.76 miles of coastline. Louisiana was 1 mile of boom
for every 13.5 miles of coastline. And that is counting all of
Mississippi and Alabama's coastline as vulnerable, and just
about half or less of Louisiana's. It is an order of magnitude
difference.
What is being done to correct that?
Mr. McKay. Two pieces to your questions. One is the supply
chain for boom is being enlarged, effectively, so that we can
sustain boom. I do not have a foot number, but it is going to
be a sustainable amount of boom that we think that we can
continue to do this for quite a period of time. Second, there
is several billion feet of boom being flown in.
Third, I spoke to Unified Area Command yesterday, I think
it was, about shifting and redeploying as we need to to protect
as the sheen and things move around. So, I believe Commandant
Allen and the others in Unified Area Command are looking at
this. And then we are working, as you may know, with your
parish presidents and the area contingency plans to kind of
effectively shift and get that over there.
Senator Vitter. OK. If your team could get, I am going to
submit this letter for the record about the inequity, and if
your team could get an up-to-the-minute response about what
shift is going on, that would be great.
With regard to the overall supply line of boom and related
materials, let me just say that the experience on the ground,
on the front line, if you will, is still very frustrating and
very uncertain in terms of that actually showing up. So, I just
commend that to you as well.
Mr. McKay, a related point. As you know, there has been a
major proposal to do emergency dredging to build up and extend
barrier islands off Louisiana, to close smaller gaps between
sections of barrier islands, as part of this protection. It is
basically a lot more effective than boom, which is in limited
supply anyway. Does BP have a specific response to that?
Because obviously all of these efforts are very time sensitive.
Mr. McKay. Again, I believe that proposal and that plan are
being reviewed, as we speak, in Unified Area Command. So, that
is the mechanism, the structure, that we are operating under,
and I believe, as I understand it, over the last couple of days
they have been reviewing. So, I do not have the latest up to
date information today, but they are reviewing it.
Senator Vitter. Well, that is certainly true. As I
understand it, the Federal agencies, including the Corps, which
has to issue a permit, including EPA, are fine with this and
are essentially awaiting a decision on movement from BP. So, I
think that is a broad but accurate statement of where it is.
So, when can we expect a clear reaction decision from BP?
Mr. McKay. I will take that back for immediate
understanding.
Senator Vitter. OK. And again, if you all can respond
directly to me and others about that, that would be great.
Another very important, if I could just wrap up quickly----
Senator Boxer. Yes.
Senator Vitter. Another big concern, Mr. McKay, as you can
imagine, is using as much local labor and assets in the
response as possible because these are the people hurting from
the spill. And BP has made a commitment to that.
The problem is in practice we are seeing a lot of cases
where it is not happening. And it is eerily reminiscent for us,
quite frankly, to a lot of the response after Katrina and Rita
where all these enormous mega-companies came in from out of
State and did an enormous amount of the work and occasionally
hired locals five levels down the chain as subcontractors.
Let me just give you one concrete example. Grand----
Senator Boxer. Senator, we have a vote that started and
Senator Cardin and others are waiting. So, you can come back
and talk on----
Senator Vitter. Well, can I wrap up this question?
Senator Boxer. Well, I thought you were wrapping up.
Senator Lautenberg. [Off microphone.] You need to get
regular order, Madam Chairman.
Senator Boxer. I am trying to get regular order, if I can.
Senator Vitter. What is BP doing to prevent what has been
happening in the last few days of local labor and resources not
being exhausted before being brought in from elsewhere?
Mr. McKay. We recognize the issue and have been working on
it and will continue.
[The referenced letter follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Senator Boxer. All right. If Senator could have it in
writing, then we are all interested in that as well.
Senator Cardin.
Senator Cardin. Well, let me again thank the three of you
for being here.
Mr. McKay, I want to talk a little bit about BP's initial
exploration plan. I say that because we understand the risks
that are involved in any type of operation. But it is important
that accurate information is made available about the potential
risk, about the potential environmental damages, and the
capacity to respond to that.
The plan that you submitted in part is used by the agency
to determine whether the environmental waiver should be granted
or not. So, Chairman Boxer read part of what was included in
BP's initial exploration plan as related to our beaches. But
let me just say, and we will relate it to water quality, and I
am quoting from your report, it is unlikely that an accidental
oil spill release would occur from the proposed activities. In
the event of such accidental release, water quality would be
temporarily affected by dissolved components and small
droplets.
You then go on to talk about the fish habitat. In the event
of an unanticipated blowout resulting in an oil spill, it is
unlikely to have an impact based on the industry-wide standards
for use of proven equipment and technology for such responses.
My question to you is, would you say that the risk
assumptions regarding the impacts, I am not talking about the
likelihood of the event but the impacts of such events, were
accurate?
Mr. McKay. Obviously, in hindsight, it--we did not expect
something of this magnitude and this impact, and the permit is
what it said. It was unlikely. And I believe it was unlikely.
But we have an unprecedented----
Senator Cardin. There are two questions here. One is the
likelihood of this event occurring, the second is the impact of
such an event. And what I am trying to focus on, in the event
this were to occur, do you believe that you accurately
portrayed the impact to the environment of such an episode?
Mr. McKay. I am saying, based on the available data going
into that, that was an accurate representation.
Senator Cardin. And that is based upon, as I understand it,
proven equipment and technology to deal with an episode.
Mr. McKay. Yes. That was predicated on spill response
technology.
Senator Cardin. And the proven equipment and technology, as
I understand it, includes the blowout preventers. And it is
because of blowout preventers being repeatedly described, the
blowout of any oil spill as unlikely. And is it not accurate
that industry touted these blowout preventers as failsafe?
Mr. McKay. We do consider the blowout preventers to be one
of the last, you now, there are multiple barriers and the
blowout preventer is an important and----
Senator Cardin. Are they failsafe?
Mr. McKay. They are fail-closed is how they are supposed to
operate.
Senator Cardin. Yet MMS accident reports state that blowout
preventers have failed or otherwise played a role in at least
14 accidents. Is that not correct? Most of them have occurred
since 2005. A 2003 report by Transocean noted that poor BOP
reliability as a common and very costly issue.
My question to you is, was it accurate to portray that the
proven equipment would prevent this type of an environmental
disaster? Was that accurate?
Mr. McKay. I believe given the data at the time it was
accurate. Obviously, obviously, this is an unprecedented event,
accident, and it is going to be reviewed in every way it can
possibly be reviewed to understand what----
Senator Cardin. I am losing your response here. I
understand the risk issue. I am talking about the environmental
damage. You rely upon the blowout issue that has been proven in
the past not to work. I do not know how you could accurately
portray to the regulatory agency the minimal risks in the event
of a blowout.
Mr. McKay. All I can say is there have been 43,000 wells
drilled in the Gulf of Mexico in the last 50 years. The data
that goes into that recognizes some of the history in the Gulf
of Mexico.
Senator Cardin. One last question in my 42 seconds that
remain. Was the report Friday accurate that MMS has granted
another environmental exception for a Deepwater Horizon that
will be 4,000 feet deep? That you are being given another
environmental waiver?
Mr. McKay. You may be referring to the relief well for our
crisis response here. I do not know. The Horizon is sunk, so
I----
Senator Cardin. Are you seeking further environmental
waivers at this point?
Mr. McKay. The environmental--the way the environmental
waivers work or the exclusions work, is that when the lease-
sell was done, there was an EIS done, an environmental impact
statement done at the lease-sale----
Senator Cardin. My question was simple. Are you seeking
further environmental waivers at this point?
Mr. McKay. We are seeking what would be an industry
standard exclusion because that work has been done through the
lease-sale and the grid environmental assessments prior.
Senator Cardin. Thank you.
Senator Boxer. Here is where we are. There is a lot of
interest, so I am going to have to ask you to stay, gentlemen,
until we come back.
But we will have time for Senator Alexander, and then we
will go vote, and then we will return with Senator Merkley,
Senator Barrasso and Senator Carper. OK.
Senator Alexander. Thanks, Madam Chair.
Mr. McKay, I heard an interview a few days ago by the Chief
Executive of BP, and I believe he described the intricacy of
this drilling as similar to open heart surgery at 5,000 feet.
Is that correct? Is that an apt description?
Mr. McKay. The description was about using remote operated
vehicles at 5,000 feet and doing connections and cutting
hydraulic lines and rethreading things, yes.
Senator Alexander. But that is a pretty good way to think
about it? I mean, it is an intricate operation, and it would be
like open heart surgery at 5,000 feet?
Mr. McKay. It is not a bad analogy for the work that was--
--
Senator Alexander. If you had open heart surgery, would you
want your doctor 5,000 feet away? I would not, either. I am
wondering, even the most skilled physician, or the most skilled
operator, would have to be very skilled to be always successful
at 5,000 feet. Would there not be substantially less risk of an
incident like this with drilling that was not in such deep
water?
Mr. McKay. Let me just mention what we were doing. We were
working on a piece of equipment that had failed. And we were
working on a piece of equipment that had hoses that were
leaking, and we were refurbishing and reworking those hoses.
That was in response to trying to get that blowout preventer
closed. So, that is not normal operation.
Senator Alexander. Well, someone was drilling at 5,000
feet. Was that Mr. Newman?
Mr. McKay. We are the lease operator. Transocean drills the
well, owns the blowout preventers----
Senator Alexander. So, you were in--I mean, I think it is
an apt description, the idea of being a mile away and drilling
at 5,000 feet and being able then to deal with the intricate
things that would have to be done that deep. It is quite a
remarkable achievement.
But I wonder, as a matter of policy, if we would not be
wise to consider whether, just as we might in medical policy,
that we would ask doctors to get a little closer to their
patients if they were going to perform such an intricate
operation, should we not ask explorers for oil to get a little
closer to the oil before they try to do these intricate
operations? Would it not be better--is it a good idea to drill
at these, 5,000 feet?
Mr. McKay. I think there have been over 3,000 wells drilled
in deep water, and this is the first accident of this kind. So,
we have got to--the really important thing here is to
understand what happened so that it cannot happen again. I have
confidence that we will understand that. I really do.
Senator Alexander. How many wells are there in the Gulf of
Mexico?
Mr. McKay. There have been over 42,000 wells drilled in the
last 50 years in the Gulf of Mexico.
Senator Alexander. And what percent of the United States'
production of oil comes from the Gulf of Mexico today?
Mr. McKay. Between 25 and 30 percent.
Senator Alexander. So, nearly one-third of all the oil that
the United States produces today comes from the Gulf of Mexico.
What would happen if we suddenly closed all that down? What
would happen? What would the price of gasoline be in the United
States?
Mr. McKay. I cannot predict what the price would be. It
would----
Senator Alexander. Would it not be much higher?
Mr. McKay. Less supply is not good for price.
Senator Alexander. Yes. The Oil Pollution Act, I believe
you said this, BP is the responsible party by legal definition.
Correct?
Mr. McKay. We are a responsible party, yes.
Senator Alexander. And that means that you pay all response
costs associated with the accident, and that includes costs
borne by the Federal Government, the State and local
governments and those of any contractors that are legitimate.
Is that correct?
Mr. McKay. That is correct.
Senator Alexander. And in addition, liabilities, you might
have another liability of up to $75 million on top of that.
Mr. McKay. We have said, in regards to the $75 million, we
expect to exceed that, and that is effectively irrelevant.
Senator Alexander. Yes. There is something called the Oil
Spill Liability Trust Fund. What costs would the Oil Spill
Liability, what is that, and what costs would the Oil Spill
Liability Trust Fund pay in addition to the ones you just
described?
Mr. McKay. That would be--I think that is in place for
folks who cannot pay. So, we would not be accessing that.
Senator Alexander. Thank you, Madam Chair.
Senator Boxer. Thank you, Senator.
So, we appreciate your patience. We are going to vote and
come back and do another round of questioning, starting with,
let me say it again, Senator Merkley, Barrasso and Carper will
be the first three.
We stand adjourned until after the votes, and thank you
very much.
[Recess.]
Senator Boxer. We are going to resume.
And I appreciate the opinions of the people in the
audience. We have a policy in here of no signs, but I do
appreciate your being here, and I welcome you to this hearing.
So, here is where we are. We are going to continue this,
and start off with Senator Klobuchar.
Senator Klobuchar. Thank you very much, Chairman Boxer.
Mr. McKay, after going to the site, and again, I
appreciated the hard work that all of your employees are doing
to try to stop this, but I was just struck as to why there was
not a back up of any kind. And I know that in certain
countries, like Norway and Brazil, they require precautions to
avert a catastrophe. And this rig lacked a remote control shut
off switch, a back-up system that could close the well.
Why was there not any kind of redundancy or back-up system
beyond the blowout preventer?
Mr. McKay. There are multiple barriers--safety barriers--in
a well. There are drilling fluids that will withstand and hold
back the hydrostatic pressure. There are casing and cement jobs
that are put in place to secure the well. There are well
controlled procedures on a rig to deal with a kick, if it
happens. Then there is a blowout preventer which is intended to
be a fail-close device.
You mention Norway and Brazil, and I think you are
referring to acoustic remote control, effectively. On this
particular well--and perhaps Mr. Newman can help me if I say it
wrong--we had the shut-down systems on the rig, there were
three of them, three buttons to hit, let us say. And then there
was something called a dead man's switch, so that, if it loses
connectivity of the rig, it should shut in and fail-close. And
then there is manual intervention with the ROVs that were
accessed and that did not work.
So, obviously we will need to look back at all this after
we get through it. But I do not think the acoustic switch would
have done--we had three switches on the blowout burner.
Senator Klobuchar. And how many times have these, whatever,
supposedly fail-safe blowout preventers proven effective? And
what confidence do you have that a similar failure will not
happen on another rig that is currently in operation?
Mr. McKay. They are used around the world, on every well,
essentially, and they are very effective, and they are--it is
very rare that anything goes wrong with them.
I would say what we are doing is--I really do believe that
we are going to get to the bottom of what happened here. And
the really important thing for us is to share with the MMS, any
other Government agencies, and the rest of industry to try to
understand what has happened here as quickly as we can, because
what we are doing is some incremental testing.
And I know the--Secretary Salazar will be looking at what
type of incremental testing or other procedures need to be put
in place. But the learnings here are going to be really
important in terms of what to do going forward.
Senator Klobuchar. Well, that is for certain. And you know,
one of the issues here is that we now learn from this. But the
people from that area, and hopefully it will be limited to a
certain area, are going to learn a lot more, and that is that
they are going to have huge damage to their economy, huge
damage to their livelihoods, to their environment.
And I know that you indicated that BP will absolutely be
paying for the cleanup operation. How do you compensate the
American people for lost tourism, lost tax revenue, lost
fishing trips, lost endangered species, wildlife, critical
habitat? Are you going to be able to compensate them?
Mr. McKay. Our statement and intent have been very clear
from our CEO. We are going to pay all legitimate claims. I am
as frustrated as anybody that we have got this happening. As I
said, I am from the Gulf Coast. I understand the hardship that
people are going through. We are going to be fair, responsive,
expeditious, and do the right thing here. And we have been
clear about that from the outset. And we can put blame and
fault and everything off to the side. We are a responsible
party, and we are acting that way. We intend to continue doing
that.
Senator Klobuchar. Well, we are going to hold you to this,
clearly. And my concern, Minnesota is a long way away from the
Gulf, but it is where the Mississippi River starts, and my
concern--and I hope to God that this gets stemmed and one of
these things you are trying out works. But we are very
concerned about the damages.
Yesterday, USA Today reported that oil executives,
including BP, argued against having the Mineral Management
Agency adopt regulations that would require drillers to perform
independent audits and hazard assessments designed to reduce
accidents caused by human errors. One of the reasons for BP's
opposition was that the new rules would have been too costly.
A week after this disaster in the Gulf, you announce record
quarter profits of more than $6 billion. And I know that
Senator Menendez mentioned the last year profits of what was
$16 billion. Do you still think that stronger safety
regulations, given the amount of damage we are facing, are too
costly?
Mr. McKay. I am not familiar with us saying the regulations
would be too costly. But what I do really believe is that, as
we get through this incident, there will be a need to look at
the regulations and how they work going forward. We have to--we
must learn from this. This resource is so important to develop
safely. We will learn from it. And I am confident we will
figure out what has happened here and be safer for it.
Senator Klobuchar. OK.
And again, just so you know, for the record, Chairman
Boxer, I would like to put this USA Today article in the record
because it does say they also said the new rules would have
been too costly. That is from the newspaper article. I am sure
there is some back up source for it. But if I could put this in
the record?
Senator Boxer. Without objection. So ordered.
Senator Klobuchar. OK, just to summarize. My time is up
here. You are committed to paying for this. And again, I know
that we will have--there will be disputes going forward about
what that means, but it is a--that is a very important
commitment. And second, that we are going to discuss stronger
safety regulations obviously going forward and you are
supportive of doing that.
Thank you very much.
[The referenced article follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Senator Boxer. Thank you.
Senator Barrasso.
Senator Barrasso. Thank you very much, Madam Chairman. I
wanted to continue some of the questioning, Madam Chairman.
Specifically, Mr. McKay, when the explosion occurred, I am
just trying to get into the response the plans. When the
explosion occurred, did you have a plan in place, a specific
plan in place to respond to this massive oil spill? And then
specifically, was this a specific plan for this platform?
Because the press seems to indicate that there was not such a
plan.
Mr. McKay. We had a very specific plan that was authorized
in terms of the Gulf of Mexico Spill Plan, June of last year,
by the MMS. That plan was activated immediately. The first
spill response portions of that were called in 2 hours after
the explosion.
That has been the foundation for the response plan. And it
has actually worked. And Admiral Allen would be the person to
speak about it best, I think. But yes, we had a very detailed
plan. And that is still continuing.
Senator Barrasso. I think what I just heard you say is it
has actually worked. And I do not--maybe you could be a little
more explicit in that because I think most people looking at
this do not think it worked. So, what you think of as a plan
for response versus what really happened and where we are
today.
Mr. McKay. Well, any sort of response plan is a model. You
cannot--there is no way to predict the individual incident that
may occur. The model worked in the sense that resources were
known where they were, organizations were known how to react,
the resources were put together, boom disbursements, skimmers,
in-situ burning, pre-approved priorities, pre-approved
dispersants, area contingency plans in the States were
activated.
You know, the plan is about a document this thick, and the
plan has been exercised. Of course, it is being flexed and
moved and made more robust in certain areas, but the foundation
of this was in place.
Senator Barrasso. Looking at the Financial Times, it says a
spreading stain, BP oil spill, the impact of the fatal Gulf of
Mexico explosion will go beyond the damage to the environment.
And I am trying to get an assessment of what we knew about the
spill and at what point.
It says the first estimate was still deceptively
reassuring, suggesting that the leak was just 1,000 barrels a
day. And that was the date. And then 8 days later, April 28th,
more than a week after the accident, the U.S. Coast Guard said
it believed that the flow was five times greater than
previously thought, now at 5,000 barrels per day.
At what point did you realize that a massive spill was
occurring, at that level?
Mr. McKay. Well, the volume estimates are based on,
effectively, surface expression because you cannot measure what
is coming out at the seabed. So, this is based on NOAA models
and Coast Guard, NOAA and BP estimates, effectively from
surface information, over-flights and things like that, and
then backed into in terms of the volume. So, there is no
certainty around that number. There is a large uncertainty band
at 1,000, there is an uncertainty band around a 5,000. It is
the best estimate currently.
Senator Barrasso. I want to ask the three of you about
chemical dispersants, if you have experience in that area of
expertise. I believe they are effective tools in containing oil
spills. They are being used now, I think, intermittently, at
the source of the leak.
There have been some concerns that using them at this depth
has not been tested. Has this worked well? Should we continue
to use dispersants aggressively? And I will ask all three of
you, if you feel comfortable addressing it.
Mr. McKay. Dispersants have been very effective on this
particular oil. It is a very light oil and they have been
effective. The subsea dispersant, there have been three tests.
They have looked promising. We had a 24-hour test, it ended at
4:40 this morning, or yesterday morning, I cannot remember. We
would like to continue injection.
I believe the EPA--I do not know the status, but I believe
the EPA is looking to extend that injection status and allow us
to continue. We think there are two benefits. One, we get it on
the oil immediately. Second, we think that it has the ability
to utilize less dispersant per effected volume of oil.
Senator Barrasso. Mr. Newman, any experience with that?
Mr. Newman. We do not have any relevant experience or
expertise with respect to dispersants.
Senator Barrasso. OK.
Mr. Probert.
Mr. Probert. No relevant information regarding dispersants
either.
Senator Barrasso. Thank you, Madam Chairman.
Senator Boxer. Thank you.
Just so everybody knows, I am making sure everybody gets a
first round, and then we are going to do a second round. So, it
will be Senator Udall, and if no Republican shows up, it will
be Senator Carper, and then we will go to, I guess, me, and
then Senator Lautenberg. Is that all right? Or I can give my
time to you, Senator, if you need.
Senator Lautenberg. [Off microphone.]
Senator Boxer. If you need my time, I am happy to yield it
to you because I can be here. It is fine. OK?
Senator Lautenberg. OK.
Senator Boxer. OK. So let us go, Senator.
Senator Udall. Thank you. Thank you, Madam Chair.
I would like to focus in on the, what I call the cementing
dispute. Mr. Newman's testimony states that ``the one thing we
know with certainty is that on the evening of April 20th there
was a sudden catastrophic failure of the cement, the casing, or
both.'' And then Mr. Probert's testimony states, ``Prior to
that point, when Halliburton personnel would have set the final
cement plug, the catastrophic incident occurred. As a result,
the final cement plug was never set.''
Mr. McKay, the Wall Street Journal reported today that BP
asked permission from the MMS to remove the mud before finally
plugging the well, and after the mud was taken out, the blowout
occurred. The article quotes petroleum engineering experts that
this procedure was unusual. So, the Wall Street covered this.
They checked with petroleum engineers. A very simple question.
Is this procedure unusual?
Mr. McKay. I have not read the cementing procedures, so I
cannot answer whether that particular procedure is unusual. It
is not unusual to displace certain weight fluids with other
fluids. I do not know in this case. It will, obviously, be a
part of the investigation that is live right now, to see if
that procedure is valid and whether decisions made around that
procedure were valid.
Senator Udall. But I still want to try to get you to answer
the very, very simple question because you set the final cement
plug, and then you take the mud out. And the understanding is,
and what they are saying is unusual, is that it happened the
other way around. You asked permission to take it out before
the final cement plug was set. Is that unusual? You have
petroleum engineering experts. You probably have the best ones
in the world. Is it unusual?
Mr. McKay. I am actually a petroleum engineer. I cannot say
in this case whether it is unusual or not. I have not reviewed
that procedure.
Senator Udall. You do not, there is not a standard in the
practice for doing it this way?
Mr. McKay. There are various ways to do cementing
procedures in terms of setting plugs before you leave a well.
So, I have not had a review of that.
Senator Udall. And you would not call it unusual to take
the mud out first before you put the final cement plug in?
Mr. McKay. I do not know enough right now to call it usual
or unusual in this situation.
Senator Udall. Mr. Newman, do you have an answer to the
question, you know, is this an unusual procedure?
Mr. Newman. Senator, as part of the well abandonment
process, two things have to happen. A cement plug has to be
placed into the casing, and the mud has to be displaced from
the riser. I do not have any basis on which to characterize the
particular order of those two steps as either usual or unusual.
They both have to happen.
Senator Udall. And what order does it normally happen in?
Normally, you do put the plug in place, and then the mud is
removed. Is that not the case?
Mr. Newman. As I said, I do not have any basis for
characterizing it as normal or abnormal. Both things have to
happen and----
Senator Udall. They do not happen in any order, in any
particular order?
Mr. Newman. I am not aware of any drivers that would
dictate in which particular order those two operations were,
are performed in. Both of them have to happen as part of the
abandonment process.
Senator Udall. And there is no standard in the industry for
this, for this kind of procedure and this kind of cementing?
How you would normally do it.
Mr. Newman. I do not believe that there is a dictated
standard for the order in which those two steps are performed.
Senator Udall. Mr. Probert, do you have an answer to the
question? The very simple question is, is this an unusual
procedure?
Mr. Probert. I do not believe that it was an unusual
procedure. It, the well----
Senator Udall. You do not believe it was an unusual
procedure?
Mr. Probert. I do not believe that it was an unusual
procedure.
Senator Udall. OK.
Mr. Probert. The process that was undertaken was consistent
with the well plan, which was established. And to the best of
our knowledge at least, this process and this order has been
performed previously in the Gulf of Mexico.
Senator Udall. The same order that occurred on the well
that blew out?
Mr. Probert. Correct.
Senator Udall. Yes. And without any problem?
Mr. Probert. To the best of my knowledge, that would be
correct, yes.
Senator Udall. Now, the MMS and the industry have been
developing standards for well cementing for several years, but
they have not become final. Do these standards allow for
removing the mud before the final cement plug?
Mr. Probert. There are two sets of recommended practices
which were developed by the MMS and API. The first set was
released, in fact, about 2 years ago. The second set is still
under discussion with industry experts, the API and the MMS.
But I am afraid I cannot comment specifically on what the
content of those may be.
Senator Udall. OK, I will come back on the second round.
Thank you, Madam Chairman.
Senator Boxer. Yes, you certainly can.
Senator Carper followed by Senator Lautenberg.
Senator Carper. Good. Gentlemen, thank you for joining us
today and your responses to our questions. I have a short
comment and then a question, if I could, and this would be for,
again for you, Mr. McKay.
One of the concerns that I have is that the American people
might somehow be left at the inn paying for this disaster. We
talked a little bit about that already today. But I think in
your testimony you said that BP is committed to paying
legitimate claims.
Last week your colleague, the CEO of BP, is it Tony
Hayward? Yes. Mr. Hayward was asked whether the company
expected to pay, to spend money beyond the $75 million
liability limit that is set by a law. Mr. Hayward said, I
believe, that the cap was largely irrelevant and that all
legitimate claims would be honored.
It is my understanding, however, that under current law
that any amount that BP spends over that $75 million is
eligible for reimbursement from the Federal Government's Oil
Spill Liability Trust Fund, and if we exhaust the Trust Fund,
then any additional funds will have to come from the U.S.
Treasury. Some would say, in effect, you have every incentive
to pay over your liability cap because under current law you
will not have to bear any of that additional cost. However, you
could receive a fair amount of credit even without paying that
cost.
If citizens are receiving checks in letters from BP, they
will have, they may have no idea that the Federal Government
actually will be footing the bill at the end of the day. The
American people, I do not think, should be left subsidizing
that kind of effort, if there is such an effort.
Today I am asking the General Accountability Office to
examine how the Federal Government is protecting against
fraudulent claims to the Oil Spill Liability Trust Fund. In
addition, I am asking them to analyze BP's claims review
process to try to make sure that it is rigorous enough to
protect the Trust Fund and the American people.
That leads me to a question. And the question is this. And
again, this is for you, Mr. McKay. Could you just comment on
how stringent BP's claims process actually is? And finally, can
the Federal Government expect an invoice from BP sometime,
maybe next year, if you do actually exceed that $75 million
liability cap?
So, two parts. Can you talk to us about the rigor of the
evaluation process for going over claims, and second, if the
cost runs over the $75 million liability cap, can the Federal
Government expect a request for picking that up, picking up the
tab?
Mr. McKay. The claims process is designed to be very
responsive and expeditious. The claims that are happening right
now are mostly fisherman and folks who are impacted directly by
loss of work right now. And those are being paid as fast as we
can possibly pay them, on the spot, effectively, if they have
got some substantiation for, you know, this amount of work over
this amount of time.
Senator Carper. You said some substantiation. Will you just
drill down on that for just a minute, please?
Mr. McKay. I'm sorry?
Senator Carper. Could we just drill down on that term some
substantiation, please?
Mr. McKay. What I am saying is, we are paying people that
say they are working, they cannot work because of this impact,
and they can say, here is where I work or here is what I do.
And we are being very, very aggressive and responsive about
this.
The--we have been very clear, and you are exactly right.
Tony Hayward has said, we are going to pay all claims that are
legitimate. We are, just so you know, just to be exceptionally
clear, we have said the $75 million is irrelevant. And we have
said we are not going to access the $1.6 billion Fund.
So, the bill to the Federal Government, no. And we are a
responsible party in this. We plan on living up to that. And
that means paying for the clean up and all the operations that
are occurring as well as the legitimate claims that are,
because of the impact of this. And we have been very clear
about that.
The claims process is, right now, at the very front line of
people being directly affected right now. It could affect
tourism, it could affect hotels, those kinds of things. And the
claims process is set up to evaluate those as quickly as
possible. You know, income statements from last year, occupancy
rates, those kinds of things, to help understand the
quantification of the damages.
There is also the Natural Resource Damage Assessment Study
that is going on with NOAA, that we are paying for, which will
help to understand the injuries to resources, natural resources
in the area, the restoration of those and the costs to do that.
Senator Carper. All right. Those are the questions I had.
Those are the answers I was hoping for. Thank you.
[The prepared statement of Senator Carper follows:]
Statement of Hon. Thomas R. Carper,
U.S. Senator from the State of Delaware
I want to thank the Chairman for holding this hearing. My
heart goes out to the folks impacted by this accident in the
Gulf--to the families of the workers that were injured or died
and to the fishermen that may lose everything.
Before the accident in the Gulf, I had been open to limited
expansion of offshore drilling as part of comprehensive energy
and climate legislation as long as:
One--drilling could be done in an environmentally
sensitive manner, and
Two--States and neighboring States had a say if drilling
occurred near their shores.
Unfortunately, the devastating spill in the Gulf has raised
serious questions in my mind about our ability to safely drill
offshore.
I support the Administration's decision to pause any new
offshore drilling efforts until the Administration and Congress
can investigate this incident fully.
I am also interested in hearing more about President
Obama's proposal to split the agency that oversees offshore oil
drilling into two agencies--one that enforces safety, and one
that oversees leases.
We need to put a stop to the leak, clean up the spill, find
out what happened, and decide what new safeguards need to be
put into place to prevent this type of disaster before we move
forward.
From today's hearing, I want to know why more layers of
safety procedures were not in place to protect from failure.
I want to know what incentives are needed to change the oil
industry's culture into a safety culture.
I also want to ensure any claims made out of the Oil Spill
Liability Trust Fund aren't fraudulent or abusive--and if this
Committee needs to revisit the liability caps we put into place
20 years ago.
The accident in the Gulf has shown me that our dependence
on fossil fuels is much more costly than we ever anticipated.
Senator Boxer. Thank you.
Senator Lautenberg.
Senator Lautenberg. Madam Chairman, thank you very much.
I wanted to just get a couple of things squared away. And I
ask whether or not, can anyone, all three of you, can you
separately guarantee that a spill like this will never happen
again in U.S. waters on your watch?
Mr. McKay.
Mr. McKay. I cannot guarantee that.
Senator Lautenberg. Mr. Newman.
Mr. Newman. Senator, we will work very hard to understand
what happened this time around, and we will implement whatever
recommendations come out of that analysis such that this does
not happen again.
Senator Lautenberg. So, that you, you cannot guarantee it
now, that it will not happen again?
Mr. Newman. I cannot guarantee it.
Senator Lautenberg. Mr. Probert.
Mr. Probert. I think, as others have said, we will work
very, very hard. We will learn from this incident. We will
continue to improve our processes and practices. But I am
afraid that, with the best will in the world, I do not think
any individual could guarantee that we will not see another oil
spill as a result of drilling activity.
Senator Lautenberg. This, in all fairness, confirms our
concerns about deep water drilling off the coasts. Because with
it comes an automatic understanding. Pay attention. We are
going to do our best to get a product that can be used by the
American people, but there is significant risk associated with
it. We cannot guarantee, we will not guarantee, the fact that
we cannot see something like this happen again.
Mr. McKay, in the plan you filed with the Federal
Government for Deepwater Horizon, you outlined a worse case
scenario for a blow out of 162,000 gallons of oil spilling a
day. But the spill now exceeds 200,000 gallons each day
according to the Government and the Wall Street Journal. It has
reported estimates higher than possibly 1 million gallons a
day.
Now, did you deliberately moderate the worse case scenario,
or is it just impossible to predict the consequences of a rig
blow out?
Mr. McKay. I believe that permit was 162,000 barrels a day
was the worse case scenario, and I believe that was the
application.
Senator Lautenberg. Is that true? I am asking you. That, I
am asking myself, because if that is the case, then I apologize
for that error.
Mr. Probert, this is the second time in the past year that
there has been a major blow out and a spill on an oil rig where
Halliburton was responsible for the cementing. You, in your
testimony, repeatedly pointed to the well owner and said
Halliburton did everything according to their specifications.
Now, that suggests that BP's specifications called for
cementing to be done that would cause its half-billion dollar
rig to explode and collapse. And you had no choice but to
follow those specifications, is that correct?
Mr. Probert. Oil rigs do not explode as a result of a
failure of a cement job. What I said in my testimony I will
stand by, which is that Halliburton executed its cement job
consistent with the design which was agreed with the well
owner. And I think we are still struggling to understand, as we
have told you several times, that we still have data to collect
to really be able, to be in a position to assess exactly what
did take place on April 20th so that, collectively, the
industry can put the steps in place to make sure that it never
happens again.
Senator Lautenberg. Mr. McKay, your company says that BP
stands for Beyond Petroleum. Yet, BP's investments in clean
energy have recently declined, and they are dwarfed by its
investments in fossil fuels. And I have mentioned before the
good fortune that you have had, or the good skills that your
company has had, to increase your earnings by over $3 billion
in a quarter. It is shocking and wonderful, I say with some
envy.
But I look at what the American public is paying for those
profits. This spill has shown the true costs of depending on
oil to meet our transportation needs. Does this spill not show
a more urgent need for big investments in clean alternatives to
oil?
Mr. McKay. We are investing quite a bit in alternative
energy. We have committed to do $8 billion over 10 years, and
we are on track to do that. We have concentrated, in the last
year and a half, on investments in the United States on wind,
solar and biofuels and carbon capture. And those businesses are
growing.
Senator Lautenberg. How about the--has there been any
decline in investments in other sources of energy besides oil?
Mr. McKay. Our investments in alternative energy probably
declined a little bit last year but the economy dropped so
horrifically that a lot of our partners could not fund, so the
projects were delayed. But the intent has not changed.
Senator Lautenberg. OK, it was wonderful that your company
was able to grow by $3 billion in a quarter. That is quite
fantastic when things are in the kind of condition that they
are in our economy and in our world.
Thank you.
Senator Boxer. Thank you, Senator.
Since the relief well cannot be built for 90 days; is it 90
days you figure? Or more? How much oil do you estimate will
spill between now and 90 days if, God forbid, we have not
figured out another way to go to cap this well?
Mr. McKay. Well, assuming that the rate is 5,000 barrels a
day, that would be----
Senator Boxer. Give me a number please, if you could do the
math for me.
Mr. McKay. That would be 450,000 barrels.
Senator Boxer. 450,000 barrels would spill before you do
the relief well?
Mr. McKay. We, we are drilling, we are drilling two relief
wells.
Senator Boxer. Right.
Mr. McKay. It will take--it will take about 90 days to get
to the 18,000-foot level to be able to kill this well.
Senator Boxer. Well, I just want to go back to Senator
Lautenberg's question. It was a pretty clear question. What can
you say about other spills like this? He did not just say other
spills. He said like this. And all of you said, it was almost
the most discouraging thing I ever heard, we cannot promise
anything.
How much are you spending, Mr. McKay, on finding new ways
to respond to oil spills? In other words, you said you are
spending $8 billion over 10 years for clean energy. By the way,
that does not rack up very well with the fact that you, that
your profit was $5 billion in the quarter, just in one quarter.
And you are spending $8 billion over 10 years. That is
obviously your decision. But I am asking you, how much are you
spending on new ways to respond to oil spills?
Mr. McKay. Well, we are spending a lot of money right now
understanding how to handle this and----
Senator Boxer. Yes, I know. But what are you spending to
try to come up with new ways to handle oil spills?
Mr. McKay. Other than what we are doing right now, I cannot
give you a number.
Senator Boxer. OK. Well, how would you describe your safety
record as a company, BP?
Mr. McKay. In 2005 we had an accident at Texas City which
was horrific. To give you a little background, I know we need
to go quickly, that changed the foundation of the company.
Leadership has been changed up and down the chain. Tony Hayward
has come in. The company has been--in effect the core of the
company is being re-founded on safety and operational
excellence. I think a lot of progress has been made. Our safety
record in the Gulf of Mexico has been very, very good prior to
this incident.
Senator Boxer. So, how would you describe your safety
record as a whole?
Mr. McKay. In terms of statistics, it is according to what
measure you want to use. But it is within the bandwidth of all
the super majors.
Senator Boxer. OK. I am going to put in the record this
article from May 8, 2010, for BP a history of spills and safety
lapses.
[The referenced information was not received at time of
print.]
Senator Boxer. And I am going to ask you a few questions
about this and how you could say that, you seem satisfied. You
are not satisfied?
Mr. McKay. I am never satisfied.
Senator Boxer. So, you are not satisfied with the safety
record even though you say it is no worse than your
counterparts?
Mr. McKay. I thought you were asking me to try to quantify
in some ways.
Senator Boxer. I was just asking a human question, you
know, in other words, how do you feel? Well, I feel pretty good
today, you know.
Mr. McKay. No, I do not feel good at all today.
Senator Boxer. No, I do not mean that. I am saying, I am
asking you a conversational question.
Mr. McKay. No----
Senator Boxer. I am not in a court of law. I am just asking
you to describe your safety record. Well, let me be specific
because I am going to ask you about a few things.
In February 2010, 19 members of the House sent a letter to
the Mineral Management Service questioning BP's safety
practices on its Atlantis platform in the Gulf of Mexico. The
letter asks MMS to describe actions it will take in response to
allegations by an oil industry whistle blower and a Houston-
based oil industry safety expert that BP has skipped necessary
engineering inspections and provided inaccurate engineering
documents to the rig operator. These documents are critical to
the safe operation of the oil rig. And that is a letter,
February 2010.
In October 2007, BP pled guilty to a criminal violation of
the Clean Water Act, paid $12 million in fines as well as $8
million to address natural resources damages for oil spills
that occurred in the North Slope of Alaska due to poor
maintenance of a severely corroded pipeline. Also in October
2007, BP pled guilty to a felony and paid $50 million in fines
for its actions in a 2005 Texas refinery explosion that killed
15 people and injured 170 more.
In October 2009 the U.S. Department of Labor's Occupational
Safety and Health Administration, OSHA, issued $87 million in
proposed penalties to BP for the company's failure to correct
potential hazards faced by employees as outlined in a
settlement agreement BP entered with OSHA following the 2005
Texas refinery incident that you referred to. The fine is the
largest in OSHA's history. The prior largest total penalty, $21
million, was issued in 2005. And then are other reports that
there were multiple smaller fines.
Here is what is very concerning to me. None of you can give
us assurances that something like this cannot happen again.
Your statements to the MMS when you were making the case for
quick approval of this particular project stated, very clearly,
that even if there was a blowout, you use those words, there
would be no problem because of the technology, the cleanup
technology that you have.
All of this, I have to tell you, is falling like a house of
cards. There is just nothing there underneath your statements.
If you look at your record, and you look at your statements,
and you look at what is happening, it is very, very disturbing.
Do you feel that we ought to now have a reform where we
separate out the safety inspections from the permitting
process? In other words, right now the permits are issued, and
the safety inspections and everything, the EIRs, are all being
done by MMS. Do you think we should separate out the functions
so MMS deals with the mineral extraction and works with you on
that, but there is an independent body that looks at your
safety record and what you would do in the case of a spill?
Would you support that type of reform?
Mr. McKay. I would support working with any Government
agency to make sure that this business gets safer based on what
we learn here.
Senator Boxer. So, you would not oppose that proposal?
Mr. McKay. I would not oppose anything that comes out of
this and makes this operation safer than before.
Senator Boxer. Good.
Do you feel the same way, Mr. Newman?
Mr. Newman. I would be supportive of continuing to work
with the Administration and Congress, understanding what may
come out of this investigation, and implementing any
recommendations that will improve the safety of our business.
Senator Boxer. And you, Mr. Probert?
Mr. Probert. I think the industry has worked very hard on
its safety over the course of the last decade or so, which is
one of the reasons that it makes this incident such a tragic
and be disappointing. But certainly, our company would
definitely support anything that we can do to create a safer
environment to operate in in the exploitation of oil and gas.
Senator Boxer. All right.
Senator Udall, do you have another round?
Senator Udall. Yes.
Senator Boxer. Go ahead.
Senator Udall. Thank you, Madam Chair.
I am having a hard time on this cementing issue with the
answers that are out there. Can you all tell me, did you, each
of you, just answer yes or no, did you read this Wall Street
Journal article that I am reading here?
Mr. McKay. No.
Senator Udall. The one from today, right? It is a front
page story in the Wall Street Journal, and I think the headline
is something along the line of two oil firms tie rig blast to
plug. Front page 1 of the Wall Street Journal, in today's Wall
Street Journal. Did you read it, Mr. McKay?
Mr. McKay. No.
Senator Udall. Mr. Newman.
Mr. Newman. Yes, Senator, I did read the article.
Senator Udall. OK.
And Mr. Probert.
Mr. Probert. Yes.
Senator Udall. Yes. So, two of you read it. Can you tell
me, is there anything in that article that you disagree with
strongly, that is just flat wrong?
Mr. Probert. I would need to go back and read that article
again to make sure that I assessed all the facts or non-facts
in it, as the case may be, to give you an accurate response.
Senator Udall. But there is nothing that hits you right now
in terms of that, you read it sometime today----
Mr. Probert. I think there were certainly some things in
that article which would need to be questioned, yes.
Senator Udall. Well, I would like you, in your supplement
to the questioning to the Committee to, we will submit question
along that line.
Mr. Probert. I would be very happy to provide a response.
Senator Udall. Yes. Thank you.
Mr. Newman.
Mr. Newman. Our understanding----
Senator Udall. Same question about disagreeing.
Mr. Newman. Our understanding--it has been a busy day,
Senator, I do not recall, when I read the article, I do not
recall reacting strongly negatively to anything that was
written in the article. But I would like to go back and reread
the article and refresh my memory.
Senator Udall. OK. Well, then I will submit additional
questions and we will make that a part of the record.
Mr. McKay, did your well plan call for removing the mud
before capping the well?
Mr. McKay. As I said earlier, I have not had a chance to
review the well plan or the procedure of that particular well.
Senator Udall. And Mr. Newman, do you know what was
provided in the well plan as far as removing the mud before
capping the well?
Mr. Newman. Senator, I have not seen BP's well plan for
this well.
Senator Udall. And Mr. McKay, did you have to ask MMS for
permission to follow this procedure that we are talking about,
and if you did, why did you do that?
Mr. McKay. I am sorry, I have not read that procedure, and
I do not know what we filed, or if it is a procedure, I would
imagine that MMS has looked at it. But I am not sure.
Senator Udall. But you do know whether or not you asked
permission to do it in the way that you did?
Mr. McKay. I am sorry; I do not know.
Senator Udall. OK. OK.
Mr. Probert, I am asking now about Halliburton's cement job
in the Australian blowout. In what sequence did your company
remove the mud in the Australian accident? Before or after the
final cement plug?
Mr. Probert. A final cement plug, in this particular case,
was never installed by the well owner.
Senator Udall. It was never installed?
Mr. Probert. No.
Senator Udall. And so the blowout took place before the
final cement plug?
Mr. Probert. The blowout actually took place some 5 months
after the well had been left without either blowout preventer
or without well cap, at least according to the testimony which
I have been able to read from the inquiry.
Senator Udall. Now, Mr. McKay, I have heard that standards
for well cementing are still under discussion by the American
Petroleum Institute and the MMS. Who does most of the technical
work? The America Petroleum Institute or the MMS?
Mr. McKay. I am not familiar with the way standards are set
between the--in terms of the division of work and the technical
work.
Senator Udall. And my understanding at this point, the
reason we are not able to ask about what is in the standard is
the process is not public at this point. There is not a public
vetting of these standards that are out there right now. At
some point it will be public, but there has been a lot of work
between MMS, your industry, and the American Petroleum
Institute in coming up with standards that deal with the
cementing. Is that correct?
Mr. McKay. I am sorry, I am just not familiar with the
cement standards that are being set by API or MMS or the
industry, to be honest.
Senator Udall. OK. OK.
Mr. Probert. Senator, if I could just add something to
that.
Senator Udall. Yes, please, please, Mr. Probert.
Mr. Probert. These proposals are not standards. They are
recommended practices.
Senator Udall. Recommended practices.
Mr. Probert. There is a set which was issued approximately
2 years ago. There is another set which is under development
right now and seeking input from appropriate parties which
would be API, MMS and industry experts to continue to improve
those processes through time.
Senator Udall. Mr. Probert, in the ones that were set a
couple of years ago, in those standards, and speaking
specifically, I am asking specifically about the plug and the
order of removing the mud, and this I have talked about
earlier, is there a consistent standard in the industry for
doing it a particular way?
Mr. Probert. I am afraid that I would have to probably
defer to one of our cementing experts to review that data,
which we would be very happy to do for you based on the
recommended practices. But I am afraid I do not personally have
knowledge of that directly.
Senator Udall. Yes. But it sounds like there is a standard
out there that deals with this particular issue.
Mr. Probert. I am afraid that I am not sure of that. But we
can certainly respond to the recommended practices. RP65-1 is
the document which we would refer to.
Senator Udall. And can you answer the question that I
asked, Mr. McKay? Is the bulk of the work that is done at this
point on a new standard, you are saying there was a set 2 years
ago, we are going through a new standard, is the bulk of the
work between API and MMS and not a public process at this
point?
Mr. Probert. I am sorry. I did not quite understand your
question. Did you say it is a public process?
Senator Udall. It is not a public process at this point. It
is not. It is not.
Mr. Probert. It is, I mean, at the well, we describe the
recommended practices that have been circulated for comment
amongst industry experts from a variety of agencies and
interests.
Senator Udall. OK.
Thank you for your courtesies, Madam Chair. Thank you.
Senator Boxer. Senator, you will be happy to know I am
going to ask a round of questions about the cementing, picking
up on your interest on this.
I will do the last questioning, you will be happy to know.
And I know it has been a long and exhausting day for you, and I
appreciate your sticking with this.
What I think my colleague is trying to do, as best we can,
is, he is asking if there could be a connection between the
lack of the plug and the explosion.
Mr. Probert, do you have any opinion on that?
Mr. Probert. Well, we have discussed the concept of
barriers, and clearly it is always good, it is always required
to have multiple barriers in place to protect the integrity of
the well bore. And the final cement plug would have been the
final barrier that would have been placed in the production
casing prior to disconnecting the BOP which was, of course, in
itself a barrier.
Senator Boxer. The blowout preventer?
Mr. Probert. The BOP or blowout preventer, yes.
Senator Boxer. Well, let me just say this, Senator. In
2007, an MMS study examined 39 blowouts over 14 years. They
found that cementing was a contributing factor in 18 of those
incidents. In addition, cementing has been suggested as a
contributing element to the Montara spill in the Timor Sea off
of Australia's coast which, as I understand it, Halliburton was
also involved in.
Mr. Probert, what did you learn from the Halliburton, from
the Australian disaster in terms of safety and effectiveness of
cementing jobs on offshore oil rigs? What did you learn from
that?
Mr. Probert. Well, first of all, if I could just comment to
the MMS study. Of the 18 blowouts which were, of the 39, which
had cementing as a factor in the blowout process, only one of
those occurred in water depths greater than 400 feet. And
therefore, by definition, the majority of those, all except one
in fact, occurred in shallow water and primarily as a result of
shallow gas and salt water flows, which has long been an issue
in the Gulf of Mexico shelf operations.
Senator Boxer. So, are you suggesting from that, by drawing
this distinction, that it is more dangerous to do this in
deeper water?
Mr. Probert. No, I am saying the opposite. That in fact the
record of the industry in deeper water is significantly
improved over shallow water operations which are subject to
shallow water gases----
Senator Boxer. But you agree that in 18 of 39 blowouts over
14 years, cement was a factor? You have agreed on that. So,
what have you learned from the Australian disaster?
Mr. Probert. Well, first let me comment. We have certainly
learned from the experience from the MMS study which was
focused, obviously, on the Gulf of Mexico. And though cement
was a factor, there were a variety of activities that----
Senator Boxer. Well, I am asking about Australia, if I
might get you back to that.
Mr. Probert. OK. All right. With respect to Australia, I
really think we are going to have to wait until the Commission
provides its findings on that particular----
Senator Boxer. And when do you expect they will be
finished?
Mr. Probert. To the best of my knowledge, I think the
testimony was collected in the last week or so, and some of
that information is public, and the findings will be released,
one would hope----
Senator Boxer. And this is a commission in Australia? Is
this a commission in Australia?
Mr. Probert. This is a commission in Australia, yes.
Senator Boxer. OK. Well, we will follow that.
Mr. McKay, residents across the Gulf Coast will be
significantly impacted by this spill. And we know this. All of
us agree. Commercial and recreational fisherman could be out of
work for months, be forced to deal with fisheries for years.
Hotel and restaurant owners and others dependent on tourism
could see dramatic losses. We are hoping to mitigate that. We
all agree that that is our prime intent.
We have already heard concerns from local residents that
the process for responding to claims and providing information
to effected entities has left local business owners with lots
of unanswered questions.
Given the severe economic impacts that this may bring
about, what is BP doing to ensure that information is provided
in a timely and accurate way and that claims are processed as
expeditiously as possible? And will you commit to immediately
monitor the effectiveness of the claims process and take
corrective action when problems arise?
Mr. McKay. We are very intent on being responsive and
expeditious with this. We are expanding the claims centers
across the Gulf Coast. I think we have got, I think it is eight
right now. We have got 21 community outreach centers by this
weekend.
So, we are expanding the network, so to speak. The process
is getting smoother. You know, it started in Louisiana, and it
has been moving across over to Florida. So, I think there are
some growing pains, to be honest, but we are working those out.
Senator Boxer. OK. So, this is my last question. It seems
to us that the oil industry is truly in uncharted territory as
it pushes the limits of drilling technology. When I asked you
the question, what do you spend on finding better ways to react
to a spill, you basically shrugged your shoulders and really
did not have an answer for me.
So, it does not appear that the safety and response
technology has caught up with your zeal, the industry's zeal,
to move forward in these new leases, even when they have not
drilled the leases they have owned for a long time.
It is really leaving great uncertainty with all of us. And
it is a reason why a lot of us do feel, not all of us, that we
have got to move to clean energy here. I mean, we have got to
move to clean energy. I do not want my grandkids, when they are
adults, dealing with the effects of people dying on a rig like
this or in a mining accident. We have got to transition away
from this.
And it seems to me very important that we immediately put
into place more oversight over what you are doing. And I was
glad that you said that, at least I took from what you said,
you are a little lawyer-like in answering it, but I took from
what you said that you would support efforts for stronger
safety oversight.
So, I am going to be a little more specific in my question.
In light of the recent oil spill and the rapidly changing
drilling technologies, I know we believe we have to do anything
we can to avoid another catastrophe. Right now, you cannot
promise us that. You said that. You cannot promise us that.
So, given that you cannot promise us this, and I am sitting
here from California that has a $20 billion-plus recreation,
tourism and fishing industry and a magnificent coastline that
needs to be preserved because of its beauty but also because of
its economic contribution that it makes and its beauty to our
State, I would be derelict in my responsibility if I did not
work to increase Federal oversight and give more opportunity
for the public to come out and express themselves through laws
like the National Environmental Policy Act to help ensure that
all aspects of a project receive the evaluation that is
necessary.
I cannot rest. When I look back, Mr. McKay, and you are a
very nice man, but I look back to what your company said to the
MMS, no problem, just give us an expedited answer here even if
a blowout occurs we can handle it, it is all going to be fine,
and then this. When this happens, you say, my goodness, we are
not prepared.
So, I am going to ask unanimous consent that the statement
of the U.S. Travel Association, which represents a broad range
of travel industry companies, such as local visitor bureaus and
members of the hospitality industry, be made part of the
record. They are keenly interested in the impact of this spill
on tourism, and I want their views to be included here.
And it gets to my final question, which is, would you
support, in your future endeavors as you move forward with more
of these requests, going through the NEPA process, the entire
NEPA process, and allowing the public comment, and no longer
asking for expedited process when so much is at stake?
Mr. McKay, would you reform the way you have done this? You
do not have a good safety record. I hate to tell you this. I
read a lot of it out loud. You promised nothing like this would
ever happen. You honestly did. And it has happened now.
And I am asking you, would you support making sure that
when you come to, frankly, the U.S. Government, and you want to
lease taxpayer owned leases, that you will allow, not only
allow but support, the full NEPA process to take place?
Mr. McKay. We will support and conform to any regulations
that we need to. The NEPA process I believe you are talking
about, the way it works now is that an environmental impact
statement is done with the lease-sale, and then environmental
assessments are done by grid within that, and the well sits
within those. So, in effect what we are doing is utilizing the
environmental assessments that have already been done. And if
there needs to be another regulation or do it differently,
obviously we will do that.
Senator Boxer. Well, my understanding is, but we will get
back to you on this, that it is not automatic that a full-blown
environmental impact statement is made and that you asked not
to have that done and you asked for exemptions.
And what I am trying to get at is this. Given what has
occurred here, I will not ask you this question today, I will
ask you to think about it tonight, and given your safety
record, which is not good, that you consider a whole new
approach here, which is when you want to go into an area like
this that has all of these fragile ecosystems and all this
tourism and travel and recreation industry that depends on a
beautiful area, that you will not ask to be exempted, that you
will not make these promises which you made and now you cannot
make anymore.
Will you consider the full-blown environmental process when
you come back and ask for another well like this?
Mr. McKay. We will consider anything that would make this
safer----
Senator Boxer. Good.
Mr. McKay. And we will utilize the environmental processes
that we need to make sure it meets what we need to do. I know
you do not want to go into it, but I think these environmental
processes are in place and done by the MMS when the lease-sale
is done and after that by grid, that we then tap into and
utilize those environmental assessments.
Senator Boxer. Well, I think if you go back to what you
did, you essentially did not address the actual threat at all.
And you glossed over it, and that was very, very damaging.
We are now going to move to our next panel.
[The referenced statement follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Senator Udall. Madam Chair, can I just put this Wall Street
Journal article into the record that I referred to? Thank you.
Senator Boxer. Yes, you can put that Wall Street Journal
article into the record.
[The referenced article follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Senator Boxer. I just want to say to the three of you, you
gave us your whole day since 2:30. I know you had given prior
testimony, is that correct, to the Energy Committee? I know it
has been a long and difficult day for you.
I appreciate your being with us, and I hope we can work
together so that we do not have to have any more of these
moments in time where we say, oh, my God, what have we done,
and how do we fix it, and what if we cannot? We just have to
not have a repeat of this. And that is my goal, and you said it
was your goal. So, let us hope we can find common ground.
Thank you very much. And we will call the next panel
forward. The next panel.
We have Dr. Steve Bortone, Director of the Gulf of Mexico
Fishery Management Council. Keith Overton, who is Chairman of
the Board of the Florida Restaurant and Lodging Association.
Dr. Eric May--who Senator Cardin really wanted to introduce,
but he had leave--is a distinguished research scientist with
the Living Marine Resources Cooperative Science Center at the
University of Maryland.
Meg Caldwell, a member of the Stanford Law School faculty
where she directs the Environmental and Natural Resources Law
and Policy Program. And Lieutenant General Thomas G. McInerney,
who is a retired member of the United States Air Force, the
Department of Defense Coordinator during the response to the
Exxon Valdez spill from March 24 to September 15, 1989. He will
testify today regarding lessons DOD learned in responding to
the Valdez spill.
I want to say to all of you, I know this has been a very
long and difficult day, and I so appreciate your staying here
with us. So, we will get right into your testimony.
Dr. Bortone, Executive Director of the Gulf of Mexico
Fishery Management Council.
STATEMENT OF STEPHEN A. BORTONE, PH.D., EXECUTIVE DIRECTOR,
GULF OF MEXICO FISHERY MANAGEMENT COUNCIL
Mr. Bortone. Thank you very much, Madam Chairman.
I represent the Gulf of Mexico Fishery Management Council
as its Executive Director. The Councils were established, eight
of them, in 1976 as part of the Fishery Management Council
Conservation and Management Act.
It is the Council's responsibility to submit fishery
management plans designed to manage fishery resources from
State waters out to the 200-mile limit. The Gulf Council has 17
voting members from each State in the Gulf, and it is composed
of State fishery agency representatives and individuals from
the commercial, recreational and scientific sectors.
Since reauthorization of the Act in 1996, the Gulf Council
has successfully improved fish stocks, many of them so that
they are no longer categorized as over-fished, and has improved
the status of the stocks of many other important species, such
as red snapper. Current fishery management plans are in place
to rebuild several stocks so that they are no longer over-
fished. We were on our way to achieving this goal.
The recent and continuing uncontrolled release of unrefined
oil into the northern Gulf of Mexico off Louisiana causes the
Gulf Council members and me some concern. There are a number of
short-term effects that are likely to cause harm to several
fisheries and the ecosystem in which they occur.
During the spring and early summer months many commercial
and recreationally important reef fish species, such as
groupers and red snapper, spawn in the area currently subjected
to oil release. Eggs are released into the water column where
there they are fertilized and float at or near the surface for
20 to 40 hours, depending upon the species.
These newly hatched fish live as larvae at or near the
surface for another 20 to 50 days. Subsequent to their larval
stage, they settle out of the water column and become
inhabitants of sea grass beds, coral reefs and other hard
bottoms. Released oil floats to the surface and thus affects
the life and condition of early life stages of these and other
species, including the forage fish upon which they depend.
Of additional concern is that many of the dispersants being
used can also affect the health and condition of these species.
Dispersants can make oil easier to ingest as the oil is often
formed into smaller, bite-sized particles. Additionally, some
dispersants can make oil more biologically available, and that
oil is more easily taken up by fish when emulsified.
The short-term impacts of the oil release will likely have
immediate effects on the number of eggs and larvae of numerous
fish species, not only those that are important to our
fisheries.
An extensive red tide event that occurred in the year 2005
in the Gulf of Mexico. Only now are we seeing the results and
impacts of that. In other words, the 2005 year class has been
affected. This indicates to me that a major event like this in
the Gulf of Mexico is going to have long-term effects on our
fisheries.
Gulf fisheries is composed of a diverse range of fish
species for both commercial and recreational sectors. As an
industry the commercial industry annually produces 1.3 million
pounds of fish a year, and shellfish, in the Gulf, with a
dockside value of about $660 million. Over 3.2 million
individuals annually participate in its recreational fisheries.
Around the Gulf Coast the economic well-being of many
communities is related to providing services to these fishing-
related sectors.
The uncontrolled release of oil in the waters of the
northern Gulf has already had an impact on the fishery-based
economy of the region. Emergency fishing closures already
implemented by the Fisheries Service was purposeful and done to
protect lives and increase the safety of marine products. Lost
revenues from the immediate closure are obvious. More
significant are the long-term effects on fishing and fishing-
related activities when a continued closure of a significant
part of the Gulf of Mexico occurs.
For example, charter boat operators suffer from immediate
cancellations of reservations by participants throughout the
Gulf of Mexico. Just as significant is the long-term impact of
giving negative impression to the public. It may take a long
time for the public to get over some of those impressions and
return to that industry.
The charter boat fishery will likely suffer a bad year. It
is also probable it will suffer a bad decade as a result of
this.
Commercial fishers will have to move to other areas. The
impact of the oil release on their livelihoods will be
potentially devastating in the long-term. If what occurs is
projected on the larvae and eggs of many of the species, we are
going to have to impart some more restrictive management
measures in order to assure that these fisheries are rebuilt
properly.
We anticipate that in the short-term there will be an
effect on eggs and larvae in the Gulf. This will result in
long-term negative effects on abundance and health of the
fisheries. The event will have long lasting impacts on the
economic station of a host of sectors and communities that
currently participate in and directly assist the fishing-based
industries of the Gulf of Mexico.
Thank you.
[The prepared statement of Mr. Bortone follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Senator Boxer. Thank you very much for that important
testimony.
Keith Overton is Chairman of the Board of the Florida
Restaurant and Lodging Association and Senior Vice President
and Chief Operating Officer of TradeWinds Island Resorts, the
largest resort on the West Coast of Florida.
Welcome, sir.
STATEMENT OF KEITH OVERTON, CHAIRMAN OF THE BOARD, FLORIDA
RESTAURANT AND LODGING ASSOCIATION; SENIOR VICE PRESIDENT AND
CHIEF OPERATING OFFICER, TRADEWINDS ISLAND RESORTS
Mr. Overton. I appreciate the opportunity to express the
views of Florida's hospitality industry related to the recent
oil spill which has occurred in the Gulf of Mexico. I am
humbled to be here today representing our great industry.
And I very much appreciate Mr. McKay's comments earlier
that he is going to pay for all of the impacts done to the Gulf
of Mexico neighboring States. That makes the content of my
testimony today critically important.
My name is Keith Overton. I am the Chief Operating Officer
for TradeWinds Island Resorts. Our company is anchored by two
privately owned world class resorts with a total of 796 guest
rooms. We are on 25 acres situated on the Gulf of Mexico and
St. Pete Beach, Florida. We employ about 750 people.
We are all about entrepreneurialism through tourism.
TradeWinds has become a brand name within Florida, and we have
done this through our own sales and marketing efforts because
we do operate independently. We have a precise understanding,
as a result of that, of where our business comes from, and most
importantly what influences tourism in Florida as well as to
our destination.
I can tell you that, as Chairman of the Board for the
Florida Restaurant and Lodging Association, I am going to
provide you with a perspective that our over 10,000 members
share regarding this threat to their stake in Florida's largest
economic driver.
Hospitality in Florida today represents a $57 billion
industry, 20 percent of Florida's economy, $3.4 billion in
sales tax revenue, and more than 900,000 employees are employed
there, clearly the largest employer in the State of Florida.
Tourism in Florida is clearly more important to Florida
than the benefits of any offshore oil drilling near its shores.
This is an unequivocal statement, and I want to make that
clear. We need to have a voice in this. We need to be a part of
the consideration. And I appreciate your comments, Senator
Boxer, as it relates to what are measures that are going to be
put into place. And I would like to address a couple of
concerns here as we go.
Visions of a vacation to Florida for most travelers have
been consistent and attractive for nearly a century, and the
unique experiences which can be found all around our State
create fond memories of sugary white sand beaches, warm
sunshine, blue waters, beautiful natural resources, fresh
seafood and many fun attractions and theme parks for everybody
visiting.
The mere thought of oil rigs in the nearby waters off of
Florida's shores and beaches changes that fantastic imagery
instantly and permanently. Still yet many legislators in
Tallahassee and right here in Washington, DC, have continued to
push to exploit Florida's natural resources at the risk of
devastating its largest economic driver. It is unfortunate that
today that risk has become a reality.
I have included a page in the insert that you have from a
study conducted by the Visit St. Pete/Clearwater Convention and
Visitors Bureau in 2008. And basically the results of that, I
think, are very indicative of all beachfront destinations when
it comes to the desirability to come to Florida and visit the
beach.
We have over almost 2,300 miles of coastline and the top
five most influential factors in choosing a beachfront
destination are safe destination, beautiful beaches, a nice
environment, they want to be able to relax, and they want to be
able to suntan. Clearly, those things are at risk here today.
The to-be-released 2010 Portrait of American Travelers by Y
Partnership indicates that beautiful scenery and a beach
experience are also both in the top five as important to
American travelers who are interested in visiting Florida.
Clearly, Florida stands to have many of its vital attributes
tarnished as oil continues to pour into the Gulf of Mexico.
Florida's tourism continues to suffer due to a struggling
economy which has resulted in cuts in spending on travel
throughout all market segments. Add other factors, such as
unseasonably cold winter and now the disaster in our Gulf
waters that we see today, Florida's hospitality for 2010 looks
to endure another decline in revenues.
Even further, a 10 percent or even smaller reduction in
Florida tourism dollars could force many of our tourism-based
businesses out of business. Profit margins are already thin,
and the bank debt service coverage ratios are regularly at risk
for many of our hotels and restaurants.
Recognizing just how fragile Florida's tourism has become,
I fear the effects of this oil spill will be devastating and
similar to those of the hurricanes that we saw in 2004. And
what you saw then was that there were certainly parts of our
State that were devastated. But there were many parts, most
parts of our State, where Florida was open for business and in
great health. We had a few tree limbs fall in our place, for
example. But when you watched the national media and you read
the newspapers, Florida was under water.
And we are very concerned that this effect is already
starting to happen. We are seeing cancellations in abundance. I
have a colleague who is in the Destin area who operates a hotel
there, and he told me that all reservations have just stopped
completely. So, we are at risk.
Imagine for a minute----
Senator Boxer. I am going to have to ask you to sum up. You
are so eloquent, but I am going to have to ask you to sum up
just given the time and the fact that I have a 7 that I have to
be at.
Mr. Overton. OK. I will do that. I apologize.
Senator Boxer. You can just sum up because I think we are
getting your message loud and clear, and it is a very good
message. So, sum it up for us.
Mr. Overton. Let me just sum up by saying this. When those
hurricanes occurred in 2004, Governor Bush at the time
instituted an additional $25 million to Visit Florida, which is
our marketing firm, and we had a total of $50 million to offset
some of the concerns. It was not enough, frankly. Today, even
in August and September 5 or 6 years later, we still cannot get
the hotel occupancies that we need.
And I would suggest that $100 million is probably not
enough even to market this devastation throughout the country
and the international markets. So, in summary, I will wrap up
there. And thank you very much for allowing me to speak.
[The prepared statement of Mr. Overton follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Senator Boxer. Thank you so much.
Eric May, he joins us from the University of Maryland,
Eastern Shore. I am going to put into the record this eloquent
introduction that Senator Cardin wants to make sure appears in
the record. And we are looking forward to your comments.
Dr. May.
[The referenced document was not received at time of
print.]
STATEMENT OF ERIC B. MAY, DISTINGUISHED RESEARCH SCIENTIST,
LIVING MARINE RESOURCES COOPERATIVE SCIENCE CENTER, DEPARTMENT
OF NATURAL SCIENCES, UNIVERSITY OF MARYLAND EASTERN SHORE
Mr. May. I thank you, Madam Chairman. I appreciate the
opportunity to provide you with what is hopefully information
that you can use in your deliberations.
I am Eric May. I am one of thousands of scientists who are
directly involved in, research on, or have working knowledge
about the potential effects of oil spills on marine ecosystems
and the long-term consequences of such events.
I do not think any of us could give you an exact accounting
of all the effects or consequences that could happen as a
consequence of the Gulf oil, Gulf of Mexico spill. It is safe
to say that there are going to be effects; there are going to
be consequences.
The current level of discharge is 200,000 gallons of crude
every day. Basically, 1 million gallons every 5 days. You can
do the math. It will begin to approach, if you will, the Exxon
Valdez at 10 million gallons, the Prestige at 20 million
gallons. The thought is staggering. And basically, all of
these, in aftermath, have had significant effect, not just
short-term, but long-term.
I went to off the coast of Brittany 4 years post the event
of the Amoco Cadiz. Flat fish on the bottom were still having
ulcers, sole was tumors, liver tumors. A litany of health
problems. So, these are not short-term effects. These are
protracted effects.
Oil is still seeping out of some of the sand in Alaska.
After 10 years, it seeped. So, it is not--what I am concerned
about is not just short-term, long-term. We can project costs
of clean up, but it is not going to be immediate.
This spill is unique. It started in April. There is only
case before that a major spill occurred in April. By all counts
this is the perfect environmental storm. It is an uncontrolled
leak near sensitive coastal waters, initially started out in
unfavorable weather conditions, and at a time when everything
is maximum biological activity, spawning, larvae. A litany of
events is going on now which are the most sensitive time for
fisheries. It is awesome.
I attempted, in my written testimony, to give you some of
the biological processes that will come into play. All of these
will occur to some degree. The full extent of how they will
occur will depend on how much more oil leaks into the system.
Consequence are going to be loss of species diversity, loss
of keystone species upon which other species depend,
bioaccumulation of toxic compounds such as metals and organics,
reduction in year classes for commercially and recreationally
important species, near-term economic impacts on individuals
and communities that depend on the fisheries, long-term
economic impacts at the local and national, and I think even
the global levels are going to see this.
The price of your shrimp cocktails is about to go up. The
cost of getting to the restaurant to eat it is going to go up,
too. We are all going to be impacted. We are all going to feel
the effects.
And if you do not believe it, we can look back at some of
the things that happened with the Exxon Valdez. Thousands of
papers and hundreds of books have been written on the subject.
In the 1980s, the oil companies held a forum on oil spill fate
impacts on the marine environment.
The scientific body collective has been telling you, will
tell you, that placing oil wells near sensitive coastlines
represents a serious significant environment risk. And it is a
socioeconomic risk. I tell my students in Environmental Science
101, zero risk does not exist. No matter how much, how many
safeguards you put, there will always be an accident, and it
will always come with a consequence.
The Gulf of Mexico is a tragedy in every sense of the word.
If you go forward from this point, science can give you an idea
of what will ensue, but is far from perfect in its ability to
predict and provide a clear understanding.
Let us make sure that ecological impacts are closely
watched. Develop better protective tools such that the risks to
our natural resources, so that we can better understand what
will be the consequences.
We benefit from oil. No doubt. But let us be sure that the
benefits that may be derived from expansion of oil exploration
are in keeping with the environmental and socioeconomic risks
that are going to be faced.
I thank you for your time.
[The prepared statement of Mr. May follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Senator Boxer. I think that last sentence summed it up
pretty well.
I am very proud of our next panelist. Meg Caldwell is a
member of the Stanford Law School faculty where she directs the
Environmental and Natural Resources Law and Policy Program. She
also serves as the Executive Director of the Center for Ocean
Solutions, and she served on the California Coastal Commission.
And you know, I would say to you, when I heard--when I
first heard about the spill, they started to talk about Venice
because there is a little town called Venice, Louisiana. Well,
we have a Venice, California, and I will tell you just hearing
Venice just brought to mind the beachfront there, and it gave
me the shivers just to think that, you know, this could happen
to our State. It is a frightening thought.
So, we welcome you here.
STATEMENT OF MARGARET R. CALDWELL, DIRECTOR, ENVIRONMENTAL AND
NATURAL RESOURCES LAW AND POLICY PROGRAM, SENIOR LECTURER IN
LAW, STANFORD LAW SCHOOL; EXECUTIVE DIRECTOR, CENTER FOR OCEAN
SOLUTIONS, STANFORD UNIVERSITY
Ms. Caldwell. Thank you.
Chairman Boxer, Senator Whitehouse and dedicated staff,
thank you for the opportunity to testify on the critical
connection between healthy oceans and thriving ocean and
coastal economies and how oil spills affect these linked human
and natural systems.
Our Nation's ocean economy employs about 2.3 million people
and pumps about $138 billion into our GDP. Two major biological
and economic hot spots fueling this economy are the Gulf of
Mexico and the Pacific waters off our western States.
These two remarkably productive, locally valuable and
globally significant ecosystems account for about 90 percent of
this Nation's wild commercial fisheries. In 2004 the total
value of the Gulf States' ocean economies was estimated at $29
billion, while California's was valued at about $43 billion.
Tourism and recreation are the largest portion of our
Nation's ocean economy, both in terms of jobs and dollar value.
This industry, like fisheries, depends on clean, healthy and
safe coastal and ocean environments.
The Gulf contains the greatest expanse of wetlands in the
Lower 48, over 5 million acres. Its wetlands and oyster reefs
provide vital shoreline protection, water filtration, nursery
habitats for fisheries, as well as foraging and nesting
habitats for scores of sea birds. Approximately 85 to 90
percent of fish and shellfish caught in the Gulf and 75 percent
of the migrating water fowl that traverse the U.S. depend on
the Gulf's habitats, these wetlands. The true value of these
Gulf wetlands has been estimated by Professor Robert Costanza
on the order of $26 trillion per year. That is $5,200 per
wetland acre.
The Gulf is also home to 21 species of marine mammals and
is the only known breeding ground in the Western Hemisphere for
the endangered Western Atlantic bluefin tuna. My colleague, Dr.
Barbara Block from Hopkins Marine Station, tracks these animals
with electronic tags and knows that they reliably spawn at this
time of year in the area of the spill. And current tracking
bears this out.
The Gulf also serves as the world's only nesting population
for the most endangered sea turtle, the Kemp's ridley. These
turtles are now in the peak of their nesting season and have
been observed foraging near the Deepwater Horizon oil slick.
The inshore Gulf possesses a substantial shallow shelf
supporting an abundance of benthic species, such as shrimp and
crabs. They are particularly vulnerable to the effects of
submerged oil which can persist in sediments at toxic levels
for decades, as we have learned from the Exxon Valdez.
As Senators Cardin and Nelson pointed out, the outer Gulf
is dominated by the Loop Current, a precursor to the Gulf
Stream that baths the Atlantic seaboard. Economically important
species such as tuna, snapper and grouper begin their life
cycle as larvae in this conveyor belt, migrating from spawning
grounds to coastal and oceanic areas where they reside as
adults.
Drift seaweed, called Sargassum, also forms these mats,
these vast mats on the current, providing a mobile nursery for
the young stages of numerous fish and sea turtle species and
providing a foundation for economically important fisheries.
Containing the Deepwater Horizon spill before it reaches
the Loop Current is not only a priority for the Gulf species
that I just mentioned but also for the highly biologically
vulnerable and economically valuable Florida Keys shallow reef
habitat. And this is exactly where the current passes through
on its way to the Atlantic.
The history of oil exploration, production and
transportation in the U.S. includes a number of notable,
serious accidents and significant consequences. As Dr. Eric May
pointed out, overall, hydrocarbons have been shown to affect
marine organism survival, growth, physiology, behavior, and
disease resistance.
The true economic impact of just the $11 million Valdez
spill is still unknown. But recreational fishing revenues
dropped by $580 million, and tourism revenues fell by $19
million just in the year of the spill alone. Many key species
and human services still have not recovered. Recent spills in
California, the Cosco Busan and the American Trader, were both
much smaller but resulted in millions of dollars of resource
and economic damage.
We still will not know, we still do not know, the full
volume, duration or extent of this current spill. But what we
do know is that, because the Gulf functions as a major economic
and ecological engine of national importance, we should
anticipate the true direct and indirect impacts of the spill to
be substantial.
In short, the Deepwater Horizon spill will leave a legacy
in economic and ecological terms that may endure for decades
and in ways that cannot be simply reduced to dollars.
Thank you very much.
[The prepared statement of Ms. Caldwell follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Senator Boxer. Thank you very much.
Lieutenant General Thomas G. McInerney is a retired member
of the United States Air Force. He was the Department of
Defense Coordinator during the response to the Exxon Valdez oil
spill from March 24 to September 15, 1989, and will testify
regarding the lessons DOD learned in responding to the Valdez
spill.
Thank you so much.
STATEMENT OF THOMAS G. MCINERNEY, LIEUTENANT GENERAL, U.S. AIR
FORCE (RETIRED)
Mr. McInerney. Thank you, Madam Chairman, Senator
Whitehouse.
It is a privilege to appear before you and testify about
DOD lessons learned as the DOD Coordinator during the Exxon
Valdez oil spill from 24 March to 15 September, 1989, in Prince
William Sound while I was the Commander of Alaskan Command.
The U.S. Government has reorganized significantly with the
creation of the Department of Homeland Security and the
creation of Northern Command within DOD. And these changes are
all positive with respect to my comments today.
A quick refresh for the Committee on the DOD assets
provided may be useful. Our initial support was an improvised
command and control system called OASIS that provided the on
scene Coast Guard Coordinator, Vice Admiral Clyde Robbins, and
the Exxon coordinator with a visual digital map display of the
oil spill location, beaches and other oil covered areas,
sensitive environment and wildlife areas.
In addition, the U.S. Navy provided two amphibious ships,
Juneau and McHenry, for use as boatels to house the 11,000
workers who eventually worked in the area until Exxon could
provide specially constructed barges to house them.
I will now outline what I think were the most important
lessons learned for military support to the oil cleanup
operations based on this experience.
Northern Command should be part of any initial task force
established by DHS and the oil company responsible. Rapid
formation is critical to ensure success.
A joint force commander should be assigned to support the
on scene Coast Guard Coordinator immediately. He and his staff
should have the knowledge to provide systems and technology
appropriate to support him, such as imagery from satellites or
Unmanned Aerial Vehicles, or manned aerial reconnaissance
surveillance such as the U-2 with its unique spectral imagery.
These new technologies should be immediately deployed to
give the national command authorities and all appropriate
agencies involved the situational awareness that will enable
swift identification of common cleanup objectives. I cannot
emphasize this enough.
The dominant responsibility of the oil company versus the
U.S. Government was established for clean up, I believe, after
the Exxon Valdez disaster. Therefore, I feel it is paramount
that soldiers not be used for these manual operations.
I do not object if specifically equipped Navy ships are
used, as we did in Prince William Sound, or if the Navy has
specific, specially equipped skimmers to assist. I feel that
these disasters impact the local community so severely that the
local population should benefit from the temporary jobs
creation and for protection of their local environment.
I mentioned earlier the OASIS command system that was
immediately established as a command and control system for
cleanup operations. This was of great value for all, especially
the Exxon on scene coordinator along with his Coast Guard
Commander. However, once the Exxon lawyers discovered that
Exxon was funding this near real time information tool, they
terminated this valuable tool for fear that the U.S. Government
would have too much information for later legal battles.
We should not have let this happen. But this advance
command and control capability was not well understood at the
time, and frankly there were too many other windmills to fight.
With reference to the current oil spill in the Gulf and the
relevancy of the Exxon Valdez experience, I would only say that
the laws and protocols were changed and are in force today,
which has enabled Secretary Napolitano and Admiral Allen to
work very effectively with BP.
There is no question that this oil spill is far more
challenging with respect to the source from a surging well
5,000 feet below sea level. At the same time, the Gulf is not
nearly as remote, and support assets are far more readily
available to support the Oil Spill Task Force. This is an
important plus.
I would suggest that we have not used all of our latest
imagery assets such as UAVs like Global Hawk or reapers and U-2
aircraft. I would do a test immediately to demonstrate the
value of continuous digital radar, infrared and electro optical
displays that will show the coordinators the exact positioning
of the oil slicks, location of the over 300 ships to date
supporting the coordinators, fouled beaches, and sensitive
areas. This real time digital picture will be of immense value,
I believe, and should be considered for use by DHS in all
future disaster areas.
We must develop the procedures to keep the national
leadership and Governors' situational awareness. Today, we give
our battlefield commanders this capability, but not our
leadership in CONUS. Satellites are helpful but not
continuously real time.
In summary, Madam Chairman, I believe most of the lessons
learned from DOD's experience in the Exxon Valdez disaster have
been incorporated in the Gulf today with the exception of near
real time imagery for command and control for modern UAVs.
Thank you.
[The prepared statement of Mr. McInerney follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Senator Boxer. Thank you so much, Lt. General.
And I want to say that you all were fantastic witnesses
because you took a little slice of each of the issues that you
are facing.
And I wanted to say that if there is some way that Senator
Inhofe and I could with you, Lt. General, because maybe it
would be good to sit down with, for example, Janet Napolitano,
and give her some of your information. Would you be willing to
do that?
Mr. McInerney. Absolutely, Madam Chairman.
Senator Boxer. Are you in the area?
Mr. McInerney. Yes.
Senator Boxer. Good. Excellent. We will work with that.
Mr. McInerney. And I am readily available for any
assistance you need.
Senator Boxer. I mean, some of the things you said were
just so right on target.
I have asked Senator Whitehouse to ask a few questions, if
he has some, and close down the hearing.
I just want to say, again, thank you for your patience.
What a day. I mean, I did not anticipate we would take so long,
but I think we really had to.
And I think, Mr. Overton, your point that you heard what BP
said about paying the full costs. And so I think it would be
great to write him a letter and say you sat through this, and
on behalf on your tourism board you look forward to sitting
down with him in the near future.
Because when you said that already there are cancellations,
my heart stopped because that is just--as we try to get out of
this recession, this is not what we want. It was not what we
need. So, we need to stop the oil from getting over there, and
we need to make sure people know that they should still go to
Florida.
Thank you.
And so I turn it over to Senator Whitehouse.
Senator Whitehouse [presiding]. Thank you, Madam Chair, and
I will not be long. I know it has been a very long day for the
witnesses. I am very grateful for your testimony and for your
travel here and for your participation in our hearings as we
begin to look into this really extraordinary occurrence.
I just had a few questions that I would like to go through.
The first, Dr. May, has to do with dispersants. You talked
about the effect of dispersants in your testimony. Could you
describe for me a little bit more clearly, if you would, how it
is that a dispersant works and what the environmental advantage
is of adding dispersants to an oil spill, particularly an oil
spill of this magnitude?
Mr. May. A dispersant really is a chemical that--much like
oils in the stomach, it surrounds small droplets of oil, makes
them repulse one another and also sink to the bottom of the
ocean. The application of dispersants is considered
controversial. I have read papers that essentially said this is
a great idea, and I have read others that come with the feeling
that there is a biological risk associated with dispersants.
They break apart, then fall to the bottom. Prevailing
currents on the bottom can bring the oil back up on shore. The
dispersants themselves will more readily bio-degrade because
there is bio-degradation that does occur. But nonetheless, it
does go to the bottom and can affect bottom dwelling organisms,
benthic organisms, organisms that live--the upper benthics,
that live a little bit off the bottom.
Senator Whitehouse. If you were to take the water column
and divide it into tranches, is it possible that the use of
dispersants can minimize the effect or the harm at the surface
of the water column but increase the harm at the bottom of the
water column by accelerating the transit of oil to the benthic
layer?
Mr. May. It is going to go, as it goes down through the
water column, larvae, the zooplankton, the larvae will be
exposed to the oil. As it hits the bottom, it will spread out,
and that is where it will be exposed to too many of the benthic
organisms and our young larvae that have just settled.
Senator Whitehouse. In the water column from the surface
top of the water down through to the benthic layer, at this
time of year, which is the most productive part of the water
column; at this point is there more larval activity and so
forth going on at the benthic layer than on the surface?
Mr. May. Depending on how close you are to the shore. If
you are at 5,000 feet, 1 mile, it is within the Photic Zone,
which is approximately maybe 100 feet, you have zooplankton,
you have a very biologically active area, you have floating
larvae; the fish larvae are feeding off of some of the
phytoplankton. It is pretty much a very dynamic system, and as
that oil moves through it will go ahead and be exposed to that.
I think the argument is, is the alternative of having the
floating oil stay and move in shore, is it worse than the risk
of having it dispersed and sank? I have mixed emotions about
that.
Senator Whitehouse. Is that argument to be made that the
dispersants have more of a cosmetic effect by making it no
longer visible on the surface than an actual benefit
environmentally in the long run?
Mr. May. I am not qualified at this point to say that. I do
not think we really fully understand the risks associated with
dispersants, particularly since the literature is at odds with
itself.
Senator Whitehouse. But in your view there is some value in
accelerating the bio-degrading of the oil on a net basis? You
know, if you set aside the question of where it takes place and
what the most productive areas are that the oil may or may not
go to, all other things being equal, there would some enhanced
bio-degrading effect of the use of dispersants?
Mr. May. Yes. And I think you also have to kind of consider
the consequence of the other side of it, too, which is if this
oil slick gets to some of those marshlands, some of the
wetlands, those are like sponges, they are going to absorb that
oil, and so as it floats on the surface it is going to pose--
when it gets on shore, it is going to pose a significant risk.
Senator Whitehouse. And those are exceedingly rich and
productive areas, the marshlands?
Mr. May. Yes. Very rich. And so this is one where you are
going to have run some, you know, you are going to have to look
at the risks versus the benefits. And I think in this case you
may be finding that the benefits outweigh the risks.
Senator Whitehouse. Yes.
Dr. Bortone, you talked about the various fisheries
impacts. I do not know if you are an expert in this area, but I
found it a little bit difficult in your testimony to, in my
mind, sort out which of those fisheries impacts would be
recoverable as natural damages, natural restoration versus what
would count as economic damages and potentially be subject to
the $75 million limitation on economic damages. Have you looked
at the fisheries damages that you talked about through that
perspective?
Mr. Bortone. We have not because, as you pointed out, it is
difficult to weigh that. What is the economic versus the
ecological damage that we see? There is--right now we talked
about cancellations of hotels. But people are canceling fishing
trips already. So, that kind of thing is already occurring, and
that will be calculable, but at some time in the future.
Senator Whitehouse. But it is not a natural resource
damage.
Mr. Bortone. No. The natural resource damage that we are
concerned about in the fisheries management side is we have
plans in place to restore fisheries. We are going to be taking
several steps back, maybe many steps back, still trying to
recover these already damaged fisheries. And so it is time lag,
but that time lag involves economics as well.
Senator Whitehouse. Ms. Caldwell, first of all,
congratulations on your service on the California Coastal
Council. My wife was, for years, the Chairman of Rhode Island's
Coastal Council, and I am familiar with the good work of the CC
agencies around the country.
California has dealt with offshore drilling. You see what
is happening in the Gulf. You are an experienced regulator as
well as a teacher in this area. What conclusions do you draw
about the risks that offshore drilling presents based on this,
and what policy would you recommend with respect to further
drilling or exploration?
Ms. Caldwell. Thank you for that question. It is not an
easy one to answer. But let me just share with you my
experience on the California Coastal Commission when I served
as Chair.
Thirty-six oil leases under MMS just actually came up
before the Coastal Commission for consistency review under
CZMA. And so, that gave the Commission an opportunity to look
at the kinds of risks, not all perfectly analogous, but the
nature of the risks associated with offshore oil exploration
and ultimately production.
And in that case we actually found that there was
insufficient information provided to us by MMS to actually
fully characterize the risks. And on that basis we actually
denied consistency review.
I think this goes to the very heart of the problem that we
have before us here, which is, were the risks appropriately
characterized before Deepwater Horizon was put into place?
Could we have done a better job of evaluation? Based on my
review of the environmental documents, I would say yes. So, I
think attention really needs to be paid to better
characterization of the risks and the degree of harm that is
possible, especially in vulnerable areas like the Gulf that we
know are highly sensitive to this kind of incident.
Senator Whitehouse. General McInerney, we have had oil
spills in Rhode Island. We had the North Cape Scandia oil
spill. Before that we had the, I think it was called the Royal
Prodigy oil spill.
In both of those cases, like the Exxon Valdez oil spill
which you were in charge of responding to, there was a vessel
with a limited amount of oil in it and you knew from the
beginning, at least in one dimension, the amount of oil, what
your worse case scenario was going to be. And you had the
ability to plan a timing horizon around the result, knowing
what your exposure was.
This is a different problem because without successful
efforts to cap or close off the leak it could be going on, as
far as we know, indefinitely. And that creates an entirely
different set of questions and concerns for somebody in charge
of responding.
Could you specifically address how you see the continuing
nature of this threat that is creating differences from Exxon
Valdez, or other type spills, that we should be attentive to
here in Congress?
Mr. McInerney. When we responded, Senator, we knew exactly
what we had almost immediately, 11 million gallons. What we do
not know here is how long this will go, and clearly it is far
more technologically difficult than any oil spill, I think, in
history.
When we went into Iraq in Desert Storm and Saddam Hussein
torched those wells, we were able to have a finite handle on
them and cap them in a certain timeframe. This, because of the
5,000-foot depth, is going to be, I believe, enormously
difficult, and it could go on, as some of the previous speakers
mentioned, it could exceed Exxon Valdez.
Now, the heart of this is you have a continuous source, and
you have got to be able to minimize the impact of the spill and
the damage. There is no question that the outrage really has
not come yet until you see it on the beaches like we saw it on
the beaches in Prince William Sound, which we saw relatively
quickly. And so, frankly, it has been rather muted.
But once it starts rolling up on those beaches, in Panama
City and those white beaches, in Alabama and Mississippi and
New Orleans, then the outrage is going to go into political
pressure to get something done.
And that is why I feel that having a much better visibility
on exactly where that oil is going. The dispersants we found up
there, and the scientists that we worked with, you tended to
break up the larger areas and some goes down. It mitigates the
problem instead of having this huge blob hit the beaches. So,
it helps mitigate it. But there are still problems without it,
no question.
But the scientists up there, and I think that we ought to
research what they found because now it is 20 years, and
discover the impact of the dispersants. In any case, it is
better than having a huge blob hit the shore.
In addition to what skimming can do, the water temperature
is warmer so they can burn it off there. So, there are a lot of
good, or more positive factors, to mitigate this impact. But
again, you hit it. This source is continuing to gush out at
5,000 barrels a day. And that impact, none of us will really
know, can fully understand. We just hope to get it terminated.
And so you have the two problems, the continuing source and
then, as it moves closer to the shores, on how much they are
able to contain burn off, disperse, skim, all the different
techniques. Finally, when it gets up to the beach, how they are
able to clean this up. And this is going to be a very, very
demanding, I believe, situation for months and months, perhaps
years to come.
Senator Whitehouse. Of course, there is a storm season in
the Gulf when the hurricanes generated across the Caribbean
tend to sweep through, and that would, obviously, severely
compromise any kind of activities outside on the water or
nearby.
Mr. McInerney. Another complication. The intense wave
action tends to break it up also, and it drops down, but
eventually it can come up. So, they do have that problem that
they will be facing very shortly, the hurricane season. So,
they have a lot of challenges out there.
This is going to be very demanding. But that is why I
believe there ought to be a digital picture so that those
coordinators can see, using the new technology, of where this
oil spill is going so to get in front of the problem. And when
it is coming to sensitive areas, what they can do.
Right now, they may be doing that, but I do not think they
have nearly the tools with a satellite to get an electro
optical, it is a LEO, low Earth orbital, and so it comes back
every 4 to 6 hours or whatever it is, not the same place.
Whereas I think they need a continuous picture of what is going
on. So, that is why I believe certainly test to see what the
new technology can do to help us.
Senator Whitehouse. I appreciate that, General.
Last question, Mr. Overton, is the $75 million cap on
economic damages under the prevailing law, how does the Florida
Restaurant and Lodging Association feel about the adequacy of
$75 million to make whole the businesses in Florida that may be
struck by this, assuming that all $75 million were to go to
Florida, which is kind of a hypothetical?
Mr. Overton. I will echo Mr. McKay's comments in that that
$75 million cap does not exist anymore because he just took it
away. So, we are looking to them to fund whatever it takes to
get tourism back on track. And as I said earlier, it is already
struggling and this is just, you know, the nail in the coffin
for us, so to speak, if we do not get this under control, and
we do not get the word out that Florida is healthy and its
beaches are beautiful.
Senator Whitehouse. Well, let us assume that we can take
Mr. McKay's word for that. But in the spirit of--I think it was
President Reagan who said trust but verify, it may be better to
get that in writing before you rely on it too much. And in the
event that, by the time the lawyers are done with it, that
promise gets a little spongier than it might seem right now.
Does $75 million take a very big bite out of the consequential
damages that you foresee?
Mr. Overton. No. It does not touch it, honestly. And we
know that from historical data in 2005 when we spent, you know,
$50 million on the promotion of tourism.
But I will compliment you, Senator Whitehouse. The
legislation that you put forth today for an independent
commission will help us along the way in that regard. And I
appreciate your championing that initiative. We think that is
very important, and it is going to help in that regard.
Senator Whitehouse. Well, we, I appreciate you mentioning
that. We also, that was sponsored by Chairman Boxer and by
Senator Menendez, so I am delighted that the two of them joined
in that.
We also put forth a bill co-sponsored by Chairman Leahy of
the Judiciary Committee to reverse the limitation on punitive
damages that the U.S. Supreme Court chose to protect Exxon
with, and also to improve civil and criminal penalties under
the Outer Continental Shelf Lands Act, which supervises
offshore drilling. So, I hope that trio of bills will help be
responsive to this.
It is just about a minute before 7. You have all been here
much longer than you expected to be. I just want to close by
reiterating Chairman Boxer's appreciation to all of you for
weathering through the long day that you have had here, sharing
with us your experience and your expertise. It has been very
valuable.
The hearing will stay open for an additional week if
anybody chooses to add anything to the record of the hearing.
But this particular hearing is now adjourned. Thank you.
Two weeks. Change it to 2 weeks.
[Whereupon, at 6:58 p.m., the full Committee was
adjourned.]
[all]