[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




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               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

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                              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:]
    
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    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:]
    
    
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    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:]
    
    
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    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:]
    
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    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.
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    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:]
    
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    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:]
    
    
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    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:]
    
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    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:]
    
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    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:]
    
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    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:]
    
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    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.]

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