Thursday, April 21, 2011

One Year after the Environmental Disaster: Seeing BP’s Law suit against the trio from a unique prism?

Keywords or Terms: Strategy; Lawsuits; Halliburton; Transocean; Cameron International; Civil Penalty

Could BP’s strategy really work? It is plausible, anticipatory, and probably a long shot from being certain. In case you are asking what exactly he is driving at, here is the news: BP launches a gigantic lawsuit against Halliburton, Transocean and Cameron, suing for the total cost of the spill. How much you ask? Since the accidental explosion a year ago, it is public record that British Petroleum has set aside about $40.9 billion. The suit against the three defendants is for at least the same amount: about 41 Billion moolas! Who is Cameron? Well, Cameron International provided the blow out preventer that failed. Halliburton poured the cement for the Macondo well and Transocean was the operator of the rig. Could BP’s strategy still work? This is the question contemplated on the blog today.

The four corporations involved in the law suit are oil and gas explorers, contractors or manufacturer of equipment used on the ill-fated well. BP alleges in its suit, failure to act and failure to provide functional equipment, meanwhile the case against BP as surmised by include, the choice of using cheap and risky well casing option; ignoring Halliburton's advice to use more casing centralizers; skipping cement bond log test; circulating mud through the well to test for flaws; and failure to use a casing hanger lock down sleeve to secure the one remaining barrier to a blowout. The summation of the case against BP somewhat throws a huge wretch in the puzzle of what went wrong on the night of April 20, 2010 on the Deepwater Horizon rig. BP’s strategy here is to ask contractors and equipment manufacturers to pay for its failure to act; and appropriately determine if any of its chosen equipment or processes unmet industry or BP's standard of drilling at a horrendous depth; and, if the contractors employed on the project were up to snuff in executing the requirement of boring a well, cementing it and setting up the drilling process, to harvest black gold from the Macondo well. Many people would have imagined that these requirements were given and that BP had done its homework before commencing on that project.

For a host of reasons, this lawsuit is presumptive of so many things, parts of which are: 1) the universe of exploring and extracting oil from the Macondo well, including BP’s blue prints are available and appropriately discussed with all the contractors and equipment manufacturer; 2) BP did all that was possible, including adopting bidding and leasing a perfect oil reservoir or block from the federal government or its agency to explore for oil; 3) BP met all safety requiremtns of government regulatory agencies and explored different approaches, side by side, on the best drilling and extraction strategies, including testing all equipment on the rig for functionality; 4) BP alerted Cameron International of the potential failure of the blow out preventer, and the company failed to act; 5) BP offered an “ophan” casing centralizer much superior to Halliburton’s, and its skipping of the cement bond log, is an acceptable practice in the industry. Such presumptions could show that BP took all possible restraints to ensure that there is not going to be any failure and the process of drilling and extracting oil from the Macondo well, will go as planned.

The most ambitious plan in drilling for oil and gas from a leased block can go aerie, even when all equipment and processes are followed to a tee, because of the challenging nature of moving fluids in a constraint space. The typical oil well that has been drilled and extraction of the black goal commenced, can still fail because of human errors of imperfect gauges or equipment. Experienced oil and gas drilling engineers and technologists can tell you, that carbon-based energy source, especially crude oil, when trapped underneath or below water in narrow spaces, can misbehave, even if all steps are taken to prevent it. That is why, oil and gas companies in prospective explorations business, buy operations insurance, before commencing on a huge project as the one to be completed by British Petroleum at Macondo well. Even when oil and gas trapped in a narrow space or well does not misbehave during extraction, the possibility of dithering on some steps in the process of extraction, could lead to similar accident as the one at the Deep-water Horizon rig. The possibility of avoiding all the possible risks of drilling and extraction requires active supervision, attentive listening and corporation by all parties involved in harvesting the black gold.

The lesson from the accident at the Deep water Horizon rig is that more than one event led to the insistent oil leaks during the drilling and casing the well. The companies involved in the drilling and construction efforts had noble intentions; however, those intentions gave way to dastardly error(s) that consummated in accidental explosion of the Macondo well because of failure to follow safety instructions and regulations. A more proactive stance on safety management from British Petroleum could have allowed it pre-test and test the functionality of the blow out preventer, after Cameron International supplied it, and before its use on the Deepwater Horizon rig. While a proactive effort on the part of BP could have been helpful, it does not negate the possibility of an accidental explosion, prior and during the process of funneling the oil from the well.

Consider an oil well that was perfectly drilled and from which harvesting had commenced, would the manufacturer of a failed thermometer used in gauging the temperature in the well, be sued for the failure of its functionality? The maintenance record on the blowout preventer is probably suspect at this time; and, the operation of other equipment antecedent to its activation during an emergency, could be out of control and no one would have known except proper and conscientious records of maintenance were logged and made available to all engineers and technicians on the rig. Various oil and gas companies have established safety standards and federal regulatory agencies enacted safety codes on rigs and platforms. But negligent oversight, lack of deliberate effort to follow codes and the choice of management of oil and gas companies to cut corners, could have been additional factors that contributed to the accidental explosion on the Deepwater Horizon rig.

Judging from BP’s past accidental explosions, Waco and Macondo, a possible failure to articulate all risks associated with drilling in the Gulf of Mexico, when waves and currents are unstable, may have been part of the reason for this accident. For BP to win its case against all three, a portion of the cause of the accident must be attributable to cautious and erroneous negligence on the part(s) of the contractor(s) or equipment manufacture. Second, BP’s complaints on equipment failure and contractors' negligence must attract enough weights before a jury for their case or strategy to hold and for a substantial award to go to it, substantial enough to cover the majority of the costs of the spill. The fault(s) on the part of the contractors and equipment manufacturer must be noticeable, not generally inconsequential and BP must have made an initial effort to call the attention of these companies to the potential failures and the companies failed to do something about them. Further, the assoicated failure must be negotiable and fault found distributable in a fair fashio, for BP to recoup enough penalty to defray the cost of the accident. In addition, the accidental explosions must also be attributable to poor performance of expected obligations from contractors on the project to an extent that a reasonable mind can adduce such failures as conscious negligence on the Macondo well project. Third, the negligence of the parties involved must be grand enough to draw the sympathies of technical and non-technical minds, reviewing the steps that led to the accident and the failures on the part of individuals with respect to their responsibilities on the rig that night, for it to provide justifiable civil penalties. Fourth, the failures in duty and equipment, should be transparent, both to the non-technical and technical mind, for there not to be the possibility of doubt or a negation of BP’s argument that the explosion at the rig is attributable to the failures of the contractors and or, equipment manufacturer.

If it is determined that the contractor(s) or their agent(s) on the rig were not receiving timely and accurate information about the equipment, blue print and processes on drilling and extracting oil from the rig, including the possibility of failure of equipment on the rig or platform, then the possibility of BP proving a good case that will lead to an appreciable civil penalty, is argueably remote. The safety codes from defunct Mineral Management Services, the government regulatory agency, require British Petroleum, or any exploring oil and gas company, to submit a plan that would address issues of accidental spills and associated steps to manage the aftermath. Once approved, which in this case one may imagine, the oil and gas company exploring, must make a good faith effort to carry out the plan as approved.

Drilling plans or blue prints approved by the defunct Mineral Management Services have some minimum requirements for notification of all contractors and employees on the project in case there is potential or, an emergency on the project site. BP or exploring company, must publicize this information on the project site and share the information with lead and managers on the project, whether they are contractors or sub-contractors. The exploring oil and gas company is expected to corporate with contractors on site to ameliorate the risks of accident or to manage the potential expansiveness of the impact of the accident. Appropriate level of support and aid is expected in an accident of the nature at Macondo well. Families of accident victims must not be invited to sign off their right to sue with a pittance some of money. BP was alleged to have invited family members of the dead oil workers into a hotel and asked them to sign off their rights just after the accident. This last allegation if true, automatically gets BP and its executives into problems, because the rights of the relatives of the victims may have been abridged in this process.

BP may not be completely liable for all the errors on the accident site, unless it had conducted itself in a grossly negligent way or constituted intentional misconduct; on the other hand, it might be, depending on who argues the case before the courts. Further, engaging in unsolicited communications with family members of victims of the accidental explosion is a potential action of claim for personal injury and wrongful deaths. Adjudicative facts are specific and unique, especially in a case where there has been deaths and associated negligent errors. For this reason, the fact that BP may be dinked for the deaths of all the ill-feted men on that rig a year ago, puts BP's management in a tight spot and may impact how adjudication of this and other cases, proceeds. There may be other employees on that rig that may want to sue for industrial hazards sufferage; a skillful attorney may make a careful case and present the facts in ways that completely put the blame on the doorsteps of British Petroleum. Because facts can be perceived and interpreted differently by different people on a jury, BP’s strategy to bring in Cameron International may backfire in the case against it; and, by other parties in this horrendous explosioin and experience.

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