Summary

GULF OIL SPILL The Oversight and Investigations Subcommittee of House Energy and Commerce holds a hearing with Lamar Mckay, President and Chair of BP America Inc., Steve Newman, President and CEO, Transocean ltd., Timothy Probert, of Halliburton and others this part not on disc for the record and speak extemporaneously. This hearing shows what happens when political chants of drill, baby, drill evolve into the tragic reality of spill, baby, spill. And for all of my colleagues on the other side who wish that there were representatives of the administration here today, I would remind them that there was a joint congressional briefing held on May 4th where representatives from Interior, Homeland Security, Coast Guard, Commerce, EPA, Minerals Management Services, NOAA and the National Oceans Services did appear, gave us extensive briefings and were there 11:01:46 to answer questions to every member of Congress who chose to show up at that hearing. Well, probably one of the most profound statements made at that briefing was by Commandant Admiral Thad Allan from the Coast Guard, who gave a tremendous overview of what was going on as part of the federal government's response. And he made this statement in describing what's happening. "This is closer to Apollo 13 than to the Exxon Valdez." And, Mr. Chairman, I think that the fundamental issue of this hearing should be to try to figure out why that's the case because Apollo 13 happened 40 years ago, 240,000 miles away from the Earth with limited resources to try to solve the disaster that was occurring on that mission. That was 10 years into the manned space program. And, Mr. Chairman Waxman, the first submerged oil wells in salt water were drilled under the Santa Barbara channel in California in 1896. So why is this more like Apollo 13 than the Exxon Valdez? Why were we not better prepared to deal with the enormous environmental and safety risks caused by this massive explosion? Secretary Salazar said at that briefing, "This was supposed to be a fail-safe system." Obviously, it was not. And the question for all of us is why not. So as we listen to the witnesses and hear the latest information they have to share with us, these are the questions I want answers to: How did this happen? Why did this happen? Who is responsible? Most importantly, what have we learned? What are we, Congress, going to do and what are we prepared to do to ensure this never happens again? And finally, who will bear the cost? Because despite the assurances we received at that briefing from Secretary Salazar and others that B.P. has made repeated assurances to stand the full cost of this recovery, some of the actions that are taking place in response to this catastrophe would give us the indication otherwise. And that's why as we look at these serious issues, I look forward to the testimony of our witnesses and answering those questions. And I yield back the balance of my time. STUPAK: Thank you, Mr. Braley. Mr. Griffith for an opening statement, please? 11:04:21 GRIFFITH: I'd like to thank the chairman and ranking member for calling this important hearing today and the witnesses for taking time to come before our subcommittee to discuss the deep water Horizon oil spill. Before I begin, I would like to take a moment and offer my sincere condolences to the family and friends of those who lost their lives on the deep water Horizon. Please know that my thoughts and prayers are with you. We cannot achieve energy independence without assuming some risk. Whether it's nuclear, coal, oil or natural gas, the process of harnessing energy is inherently risky. Having said this, it is the role of the federal government and good corporate citizens to minimize this risk while working toward United States energy independence. Blocking future production will not protect America. It will simply cause us to be much more dependent on unfriendly sources of oil. The oil and gas industry employs hundreds of thousands of Americans, many in my home state of Alabama. We must continue to drill and avoid knee-jerk reactions to this accident. The oil and gas industry has a safety record that has been steadily improving over the years. And I have no doubt that what is learned from this incident will be incorporated into the future increase in safety. That being said, we must allow this investigation to go forward and ensure that Congress provide appropriate oversight. It is important to focus on not assuming -- assigning blame based on theories, but to allow the time to pass that is necessary for a thorough investigation. Once investigations are complete, it is vital that we learn lessons from this incident so that we can keep our workers and environment safe while continuing to produce our valuable oil and gas resources. Again, thank you for coming today. And I look forward to your testimony. I yield back the balance of my time, Mr. Chairman. STUPAK: Thank you, Mr. Griffith. Ms. DeGette for an opening statement, please? 11:06:14 DEGETTE: Thank you, Mr. Chairman. As Congress debates the role of a forward-looking energy plan, we're going to need to see what -- what part drilling expansion plays in development of that plan. And we're going to need to see what the causes of this tragic accident were because given the scope of this disaster, we cannot afford to vastly expand offshore drilling in the future if this type of disaster can be expected to occur, even as some on the other side say, on a rare basis. The damage in terms of environment and loss of human life is simply too great. Accidents on this scale raise innumerable questions about what went wrong. And usually, and probably in this case, there's no single answer or single point of blame. But as we attempt to determine the cause in order to prevent such tragedies in the future, two issues stand out in my mind. And the chairman raised both of them. The first one is what role did the cementing job play in the accident. The timing of the accident indicates that the cementing was likely a culprit as the accident occurred soon after the cement was injected into the well. This would not be the first time that cementing has caused problems in the Gulf of Mexico. According to a 2007 study by the Minerals Management Service, nearly half of all blowouts in the Gulf over the last 14 years are due to faulty cementing. In addition, poor cementing has been identified as the cause of the recent 2009 blowout at an offshore oil platform in Australia. Cementing has been a cause for concern in onshore drilling as well with ground water contamination incidents tied to improper cementing in my home state of Colorado and elsewhere. The second issue that this committee needs to probe further is the failure of the blowout preventer. This device is designed to be the fail-safe mechanism that will prevent tragedies such as this spill. Its failure is extremely troubling as it calls into question whether these devices can be trusted to function properly at offshore drilling locations. I know that we won't be able to identify the root cause of the accident today and that the investigation is still in its early stages. But fingerpointing will not solve this problem. It's in the interest of all of the witnesses to get to the bottom of this issue if they want to assure the American people that offshore drilling is a safe practice that we should actually expand farther. Frankly, I watched part of the hearing yesterday as well. And I was dismayed at the parsing of words by all parties yesterday in terms of liability and in terms of willingness to pay for these -- these tremendous costs. And so, I think that those responsible need to step up. They need to bear the costs. And they need to fix this technology because if they don't, we will not have expansion of offshore drilling until this committee and the U.S. Congress can be assured that it can be done in a safe and an environmentally and -- and human -- and in a way to save human life way. Otherwise, it simply won't be part of our plan. And -- and many of us don't object to offshore drilling. We support it where appropriate, but not if it cannot be done safely. Thank you, Mr. Chairman. STUPAK: Thank you, Ms. DeGette. Mr. Latta for an opening statement, please -- three minutes? 11:09:44 LATTA: Thank you, Mr. Chairman, Ranking Member Burgess. First and foremost, I also want to extend my heartfelt condolences to the families of those who have lost loved ones and those who have been injured. I'm also deeply saddened by the destruction caused by the recent oil spill in the Gulf. I want to commend the thousands of dedicated workers, the volunteers, military personnel who are currently in the Gulf responding to the spill to protect the shoreline and wildlife. The cleanup process from this spill will take months, if not years. As the marine board of investigation made up of the Mineral Management Service, MMS, and the Coast Guard convened yesterday to identify the factors leading to the explosion, loss of life, sinking and subsequent oil spill of the deep water Horizon, I look forward to what the investigation will render and what facts and recommendations will come forth. It's my understanding, Mr. Chairman, that over 42,000 wells have been drilled in the Gulf of Mexico since 1979 when the first deep water well was first drilled in the Gulf. Sixty percent of all the wells drilled in the Gulf are now deep water wells. And over 2,200 deep water wells have been drilled. As members of Congress, we must ensure that the United States continues its domestic energy production while also maintaining stringent environmental and safety regulations. We cannot become complacent when it comes to American lives and our natural resources. We need to ensure that the investigation into the deep water Horizon oil spill is thorough and those responsible -- those individuals responsible for this disaster are held accountable. We cannot afford to have a repeat of this kind of a disaster. As has already been noted, it is important to note that the oil and natural gas industry in America plays a vital role to our economy and supplies this country with millions of jobs. Most recent data, according to the American Petroleum Institute study, shows that this industry contributes more than a trillion dollars to the U.S. economy over a year. Industry (ph) now contributes over 229,000 jobs through oil and natural gas industry. And it is also important to note that we maintain these jobs, but we also need to maintain the safety of our hard-working Americans who are employed in this industry. As the ranking member has stated, I, too, would like to have witnesses from the Department of Interior, particularly the MMS and the United States Coast Guard. I hope that any future hearings in this committee on this subject will include government agencies that are at the forefront working on this issue. Finally, Mr. Chairman, I look forward to hearing from today's four witnesses, each of whom represents the company who will play a pivotal role in this investigation. And with that, Mr. Chairman, I yield back. Thank you. STUPAK: Thank you, Mr. Latta. Mr. Doyle for an opening statement, please? 11:12:29 DOYLE: Mr. Chairman, thank you for convening this hearing today. First, let me offer my condolences and prayers to the families and friends of the 11 people on the deep water Horizon rig that tragically lost their lives in the catastrophe three weeks ago. It's -- it's a sad, grave reminder of the level of risk and danger involved in deep water drilling. Economic and environmental concerns aside, we owe it to these families to fully and responsibly investigate what went wrong. After reading the testimony that you've all supplied, one thing seems quite clear. None of you before us today is prepared to accept full responsibility for what happened on April 20th. And though I'm very interested in learning whom is responsible, I don't believe it's the most pressing issue at hand today. Today what is most critical are the health, environmental and economic effects of this oil leak that continues to grow as this well gushes nearly 5,000 barrels of oil into the Gulf each day. And that is a conservative estimate. The unified command has quickly been activated to arrest and mitigate the effects of this oil spill on surrounding communities. Workers and volunteers are setting hundreds of thousands of feet of boom to protect coastlines, releasing massive volumes of disbursants (ph) to break up the oil and even skimming the water's surface to collect the oil. This vast response has been swift by most standards. And I commend each of your companies for its willingness to devote all the necessary resources to this effort. It is troubling, though, that in your eagerness to drill you told the Mineral Management Service in February of 2009 that you could handle a worst-case scenario of 162,000 barrels of oil from an uncontrolled blowout. Now you're dealing with 5,000 barrels a day, and the containment zone hasn't worked. A relief well is far from complete. The blowout preventers can't be activated. And you may need to resort to a jump shot. What I have a hard time understanding is how three weeks after the initial explosion there are not better solutions. By any standard, I think it's safe to say that each of your companies have done quite well over the last year. In fact, a quick review of your profits show that Transocean netted $677 million in profits, Halliburton, $206 million and B.P. rounded out with $6.1 billion in profits. And that's just for the first quarter of this year. DOYLE: With the success of this industry, both financially and in technological developments that allow us to drill 30,000 feet underground, how is it not possible that we haven't developed better technologies to plug a well? I mean, recent news reports explain a maneuver called a jump shot that involves shooting golf balls and rubber tires into a well to try and stop the leak. I had to ask my staff if that was really true or a misprint. I mean, surely with profits of $6.1 billion we can devote greater resources to more advanced technologies than golf balls and tires. I hope our examination here today and in the future months will help us understand how we can allow such high-risk drilling to go on without any sure-fire means for addressing a blowout. I hope that in response to this horrendous accident that you will all devote sizable resources to developing safer technologies and better regulations to protect your workers, our environment, our wildlife, and our domestic energy portfolio. Mr. Chairman, I yield back. STUPAK: Thank you, Mr. Doyle. Mr. Blackburn for an opening statement, please? 11:15:54 BLACKBURN: Thank you, Mr. Chairman. And I do want to welcome our witnesses. And thank you for the preparation you've put into planning to be here with us today. There is no doubt this is a terrible event, and it is one that concerns us. And I represent middle and west Tennessee, but I grew up in the Mississippi coastal plains. And I know very, very well the impact of the oil production industry on those communities and on the livelihood of those citizens. And also, I know how dependent they are on the gulf, also for wetlands and for seafood. And so this is a tragedy, and it does have so many tentacles, and, of course, the loss of life is very sad, and I know that it reaches deep within those families across the gulf. I think that what we -- my focus today -- what I would seek to do is to understand what happened and the cause, and to understand that without any bias. I think that while going on a search for villains can make for compelling TV, it is not going to put us on the path forward that we need, and that needs to be a pathway to sustainable and responsible drilling in the gulf. And we need to look at this, have an honest investigation so that we find opportunities for avoidance that may have been missed both by Washington and by the industry. I think that we also need to focus our attention on cleaning up the current spill, securing other wells until a long-term solution can be found. In this type business, risk cannot be 100 percent managed, and I understand that. And realizing that, I think it is maybe necessary to review contingency plans and to require operators to have prepositioned containment equipment to limit the impacts. Maybe that's something we need to talk about and look at today. This hearing is a first step to address these issues. Members of this panel are going to have questions for the witnesses on the protocols that are followed, the equipment that was used, and on what a proper course of action should be. So, Mr. Chairman, thank you. And to our witnesses, thank you for being here today. STUPAK: Thank you, Ms. Blackburn. Ms. Christensen for an opening statement, please? 11:18:35 CHRISTENSEN: Thank you, Mr. Chairman. And thank you, Chairman Stupak and Ranking Member Burgess, for holding this important hearing to examine the Gulf Coast oil spill disaster situation of grave and far-reaching magnitude which is likely to eclipse the Exxon Valdez spill of 20 years ago. It has been approximately three weeks since the explosion that caused the Gulf Coast oil spill, and many questions remain unanswered. What caused the explosion? Why did several safety mechanisms fail to prove successful? And the billion-dollar question: How can we stop the oil from spewing into the ocean and towards the shore, and how can we do it as soon as possible? I look forward to the testimony this morning, and I thank everyone for coming to yet another hearing. What I'm not anxious to hear is a blame game. There are investigations underway that will answer the questions of what went wrong and who and what was at fault. Someone speaks of collaborative efforts in their testimony, and to my mind, this is a tragic accident, which all companies, operator and contractors, probably share some responsibility, just as they all have a role in the response, clean-up and recovery, as well as and importantly making sure this does not happen again. We need to clarify what we do know, but the important issue now is how to stop the thousands of gallons of oil from continuing to poor out and how best we can work with all federal and private partners in the unified command to do just that. Despite the fact that we can never know anything because of the settlement, there are reports of severe health consequences in those who worked on the Exxon Valdez spill and others. And so I have grave concerns about the health and safety issues for the responders in this one and want to have the assurance that every precaution is being taken to prevent illness and disability in these workers. I'm also concerned about the hundred of other -- hundreds of other oil rigs that are functioning now, some in deep waters. Are we better prepared today to respond to an accident in these than we were on April 20th? What is being done to ensure that we are? And does BP meet what I understand are the higher permitting standards of the U.K. in their operations here in the United States? Of course, like my colleagues, I'm also concerned about the protection and preservation of the fisheries and other shoreline wildlife and the economic impact of those who depend on these resources for our livelihood and, of course, the loss of life. It's my hope that we'll leave this hearing better informed than we came in. I would also like to take this opportunity to express my sincere condolences to the families who lost loved ones in the April 20th tragedy and wish Godspeed to them, the survivors and their families, as they go through their recovery process. Thank you, Mr. Chairman. I yield back the balance of my time. STUPAK: Thank you. Mr. Welch for an opening statement, please, three minutes? 11:21:18 WELCH: Thank you very much, Mr. Chairman. I thank the witnesses for coming. And I, along with my colleagues, want to acknowledge the extraordinary loss of love and lives, of brave and hard-working people who died and perished in this accident. A couple of things. I took the trip to the Gulf Coast with the chairman and ranking member, Mr. Barton, some of my colleagues, Mr. Scalise and Mr. Melancon most significant among them, because they live with the folks whose livelihoods and whose sense of self depends on oil and on fishing. And the heartache that we saw was very powerful. When we flew out over the oil spill, the journey was in a Coast Guard plane that flew low and slow. And traveling out over that magnificent Mississippi Delta and looking down at all the wildlife that we could see, seeing the boats that wanted to be out fishing but couldn't be, going over the Chandeleur Islands, with that pristine white sand, knowing how much that landscape and how that economic livelihood is so cherished by Mr. Scalise's people, Mr. Melancon's people, and then seeing that first ribbon of an oil slick, that metallic blue, ominous sight that we saw a few miles off the Chandeleur Island, and then to see this magnificent blue sea become ink black, and then to get out over the oil site -- or the rig site where those 11 men perished, and to see this cancerous flame-orange glow on the sea that is the combination of the emulsifiers and the oil is just heartbreaking. And, gentlemen, you obviously share the concern about this, but you do have the responsibility. You've been well paid. You know, the head of BP, I think, made about $6 million last year, Mr. Newman, about $5.4 million, Mr. Probert, about $3 million, Mr. Cameron, about $8 million. The folks who are now cleaning up this oil spill -- we've got a picture. Mr. Burgess and I spoke to them. There a couple of women from New Orleans who come out and work for $12 bucks an hour. It's not just golf balls and the other things that people mentioned. It's hard-working people who are coming out, standing in the hot sun, and they'd like a bit of a raise, to tell you the truth. But the other thing that we saw that was so heartbreaking to me is fishermen, and their boats are not filled with fish. They're filled with these booms. And that's what these two women in the earlier picture, they load these boats with booms. And these fishermen are proud. They work incredibly hard. However hard you work, they work harder. And right now, they are in peril. The only thing that's keeping them going is that you're paying them to put booms out to try to keep the oil from the shore and the seabed. But at the end of the day, we know harm is going to be done. And the one question I want conclusively answered is whether BP, who has the ultimate responsibility here, is going to acknowledge specifically and categorically that it will not limit its liability to those fishermen and women in those tourist industries in that Gulf Coast, those people who've protected the environment that you will not stop your obligation at the $75 million limit that was established after Exxon Valdez. If they've been harmed by conduct that you're responsible for, then I want -- and I think all of us want -- an assurance that those fishermen and women, those folks in the tourist industry, and Steve Scalise's, Charlie Melancon's district will be made whole. Thank you, Mr. Chairman. I yield back. STUPAK: Thank you, Mr. Welch. Mr. Green, do you have an opening statement? You can be recognized for three minutes then. Take your time. 11:25:10 GREEN: (OFF-MIKE) Mr. Chairman, for holding the hearing today, and I'd like to welcome our panel. It's certainly under tragic circumstances that we convene here today, and my condolences out to the family who lost their lives in this accident, and also those who are injured. As a member of Congress from East Harris County in Houston, Texas, I have just literally hundreds of people who work offshore, offshore Texas, offshore literally all over the world. And along with our infrastructure, we produce -- still produce oil and natural gas in a very urban-suburban area, but we also have refineries and chemical plants who need that product that's being produced. This hearing today will be the first of many of the subject, and ultimately we'll determine what went wrong on the Deepwater Horizon rig and apply those lessons to reduce the chance of this ever happening again. However, we should continue to focus on stopping the spill and cleaning it up as soon as possible. And I look forward to hearing from our panel about the latest efforts on this front. In the wake of the tragic accident, many people are understandably concerned about the safety and environmental risk associated with offshore drilling, and drilling is certainly not risk- free. Neither is anything else. However, we should be careful not to rush to judgment on the issue on offshore drillings until we learned what went wrong in this particular case. In fact, this is the first major accident in the Gulf of Mexico since 1979. And that's almost 31 years. And we've used a lot of that product that's come out of the Gulf of Mexico to move our country for many years. Like after the Exxon Valdez incident, I anticipate Congress will respond in ways aimed at mitigating a similar accident from ever reoccurring, and I agree that we must take every possible precaution to guard against that happening again. The Energy Information Administration maintains that oil, natural gas, and coal will continue to make up the large majority of U.S. energy use in 2030 and beyond. If we reduce our dependence on foreign oil, we must safely and responsibly explore and produce more domestically and -- which is a very important issue, because unless we want to continue to import, I heard the other day we still import 55 percent of our oil right now from overseas. Canada, Mexico, but they're producing as much as they can. If we don't produce it in the Gulf of Mexico or offshore, then we're going to get it from Venezuela, we're going to get it from parts of the world that we may not have the best relationships with. So that's why we need to get it right and produce it domestically. I look forward to the testimony today. And, again, Mr. Chairman, I thank you for holding a hearing. I yield back my time. STUPAK: Thank you, Mr. Green. Mr. Ross for an opening statement? 11:27:52 ROSS: Thank you, Chairman Stupak, for holding today's hearing to examine the causes of the recent explosion of the Deepwater Horizon rig and the effects of this oil spill on both the Gulf Coast region and our nation's domestic energy policy. We all recognize this tragic event was an accident, and my thoughts and prayers go out to those who lost loved ones in the explosion and to the people along the Gulf Coast who have been adversely affected by this incident in an already tough economy. This accident is a wake-up call for our domestic oil and gas production, and we must take this opportunity to carefully examine our safety standards and protocols in deepwater drilling. America has led the world in technological innovation by putting a man on the moon, sending a robot to Mars, and decoding the human genome. Given all the knowledge and technology at our disposal, it amazes me that we could have an accident of this magnitude in 2010. What's even more concerning is that the companies responsible did not have the foresight to anticipate this accident or have an action plan ready or procedures in place that would have immediately remedied this situation and reduced the harmful consequences before it got out of control. After three weeks of oil still leaking into the gulf, it is clear these procedures were either not in place or did not work effectively. And I am pleased that we are now addressing this issue today in this hearing. However, I want to make it clear that this event does not diminish our need to continue domestic drilling as part of our overall diverse energy policy, but it does remind us of the risk associated and the safety standards that must be adhered to and improved to ensure this never happens again. I believe that now more than ever we should be investing in the most advanced 21st century technologies that will allow us to recover domestic oil and natural gas safely instead -- instead of sending half-a-trillion dollars a year overseas, much of which is ending up in the hands of those who want to harm us. I am hopeful that this tragic event and this hearing can be a learning experience to help us to examine our current policies for drilling offshore and, in the end, help secure America's domestic energy supply for future generations. And with that, Mr. Chairman, I yield back the balance of my time. 11:30:27 STUPAK: Thank you, Mr. Ross. We'll next hear from Ms. Sutton of Ohio for an opening statement. 11:30:38 SUTTON: Thank you, Chairman Stupak. And thank you for holding this very important hearing on the Gulf Coast oil spill. It's been three weeks since the first explosion on the Deepwater Horizon drilling rig -- three weeks, and we're still looking for answers. What caused the explosion? When will the oil leaks be closed? And what long-term impacts will this tragedy have on our families, small businesses, the environment, and local and state governments? The one thing we do know is that the companies involved in this oil well operation have failed. And these companies are pointing the finger at each other. These companies failed to have a plan to deal with this type of incident. The companies failed to implement adequate safety measures, and the companies have failed to find sufficient solutions to contain and mitigate this disaster. And while America waits for a resolution to this disastrous spill, 5,000 barrels of oil, over 200,000 gallons a day continue to pour out of the seabed into the Gulf. The wake of this oil spill is broad and sweeping. Eleven workers died. Seventeen were injured. The Gulf Coast states' economies are crippled. The livelihoods of workers, their families, and the small businesses that rely on the Gulf remain in question. And there is a great possibility that the Gulf Stream could carry this bill around the tip of Florida and to the Atlantic Coast. The ramifications of this disaster pose great questions about safety measures in deep water drilling and the priorities of BP, Halliburton and others. BP has stated that they would do whatever it takes to stop these leaks. But did BP and Transocean do whatever it took to prevent these leaks, this disaster, from occurring? BP and Transocean have been careful to say that the measures they are taking to end the leaks have never really been used before, and one example being the failure of the cofferdam placement over one of the leaks this past weekend, something that had never been attempted at such depths. BP and Transocean have proven that they did not have a response plan sufficient to meet the need in place for a Deepwater well spill. The technology for deepwater drilling has continued to advance through significant investment by oil companies, enabling them to access oil in places once thought impossible. But it is now apparent that the necessary investment to develop safety measures and contingencies for deepwater drilling were not adequately advanced. Safety must be put first, and investment in it must match, if the search for oil and drilling in our waters off of the shore are to continue. I remain troubled by the continuation of hazardous safety practices at BP's facilities, including fines imposed on their refinery in Toledo, Ohio. And while we wait for BP to stop these leaks, which could possibly take months, the future of our families, workers, small businesses and the environment remain at the mercy of the winds of the Gulf, and that is not how it should be. So I look forward to hearing the testimony today. 11:34:00 STUPAK: Thank you, Ms. Sutton. That concludes the opening statement of members of the subcommittee. I would note that members of the full committee who have been here -- Mr. Scalise, Mr. Melancon, Ms. Castor, Mr. Inslee was here, Ms. Capps -- I expect they'll probably stay and -- or come back during questions. I know members will be in and out today. It should also be noted that Congresswoman Sheila Jackson Lee is here from Houston, who's sitting in on today's proceedings. She's welcome to do so. And -- and welcome to the committee. That concludes the opening statement by members of the subcommittee. We have our first panel of witness before us. On our panel we have Mr. Steve Newman, who is president and CEO of Transocean Limited, which owned and operated Deepwater Horizon oil rig and the blowout preventer; Mr. Lamar McKay, who is the chairman and president of BP America, who is a responsible in the Gulf leak; Mr. Tim Probert, who is the president, Global Business Lines, chief health, safety, environmental officer at Halliburton, which did the cementing of the well; and Mr. Jack Moore, who is the director, president and CEO of Cameron International, which manufactured the blowout preventer used by Transocean with the Deepwater Horizon rig. It is the policy of this subcommittee to take all testimony under oath. Please be advised that you have the right under the rules of the House to be advised by counsel during your testimony. Do any of you wish to be represented by counsel? Mr. Newman? Mr. McKay? Mr. Probert? Mr. Moore? The witnesses indicate they do not. So therefore I'm going to ask you to please rise and raise your right hand to take the oath. 11:35:37 ALL EXECUTIVES RISE AND TAKE THE OATH Do you swear or affirm the testimony you're about to give is the truth, the whole truth, and nothing but the truth in the matter pending before this committee? Let the record reflect the witnesses applied in the affirmative. You're each now under oath. We will hear your five-minute opening statement. You may submit a longer statement for the record, and it would be included in the hearing record. Mr. Newman, if you don't mind, we'll start with you, please, if you'd start your opening statement? And thank you for being here. 11:36:06 NEWMAN: Chairman Waxman, Subcommittee Chairman Stupak, Chairman Emeritus, Ranking Members Barton and Burgess, other members of the committee, I want to thank you for the opportunity to speak with you this morning. My name is Stephen Newman, and I am the chief executive officer of Transocean Limited. Transocean is the leading offshore drilling contractor with more than 18,000 employees worldwide. I am a petroleum engineer by training, and I have spent years working with and on drilling rigs. I have been with 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. Today, however, I said before you 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 Transocean and to me than the safety of our crewmembers, and our hearts ache for the widows, parents and children of the 11 crewmembers, including nine Transocean employees, who died in the Deepwater Horizon explosion. These were exceptional man, and we are committed to doing everything we can to help their families as they 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 crewmembers who were rescued from the Deepwater Horizon and were as concerned about the safety of their colleagues as they were about themselves. It was embodied by the brave men and women of the U.S. Coast Guard, who conducted on-site operation search and rescue operations, and by the medical profession received the injured crewmembers 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 the men were lost. This has been a very emotional period for all of us at Transocean, and it has also been a period of intense activity and effort. 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 personnel have been working BP to identify and pursue options for stopping the flow as soon as possible. Our drilling rig, the Development Driller 3, is involved in drilling the relief well at the site, and our drill ship, the Discoverer Enterprise, is on location, participating in the crude oil recovery operations. A third Transocean drilling rig, the Development Driller 2, will be on location and the next day or two to also participate in those on-site operations. We will continue to support BP and the unified command in all of these efforts. At the same time we have also been working to get to the bottom of the question to which this committee, Congress and the American public desperately want 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 the 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 about the cause of the disaster. The most significant clue is that the events occurred after the well construction process 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 we do know is that on the evening of April 20th, there was a sudden catastrophic failure of the cement, that 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 explosions were almost simultaneous. 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 damaged by the surge that emanated from the well beneath? Did the surge low degree into the BOP that prevented them from squeezing, crushing or shearing the pipe? These are some of the questions that need to be answered in the coming weeks and months. 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 uncover, 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. And before I close, let me respond to Representative Burgess' specific question that arose during yesterday's Senate testimony. The modification referred to was the result of an agreement between representatives of BP and Transocean approximately five years ago. It was done at BP's request and at BP's expense. Thank you for the opportunity to speak here today. And I am happy to answer any questions. STUPAK: Thank you, Mr. Newman. Mr. McKay, your opening statement, please? 11:42:48 MCKAY: Chairman Waxman, Chairman Emeritus Dingell... STUPAK: You may want to pull that a little closer. MCKAY: Closer. Chairman Stupak, Ranking Member Burgess, members of the committee, my name is Lamar McKay, and I am president of BP America. We have experienced a tragic series of events. Three weeks ago tonight 11 people were lost in an explosion and fire aboard the Transocean Deepwater Horizon rig, and 17 others were injured. My deepest sympathies go out to the families and friends who have suffered. This is a terrible loss, and there is a huge, enormous issue in the Gulf Coast. Those communities, lives and livelihoods are being affected. Over the last few days, I've seen the response firsthand. I've seen the men -- men and women on the front line. There is absolutely a deep and steadfast resolve to do all we humanly can to stop the leak, contain the spill, clean up the damage, and deal with the -- the impact, economic and environmental. As a responsible party under the Oil Pollution Act, we will carry out our responsibilities to mitigate the environmental and economic impact. And to be very clear, that -- just to be very clear, the 75 million is irrelevant, and we can talk about that later. Our efforts are part of a unified command that was established within hours of the accident, and it provides a structure, a structure for our work with the Department of Homeland Security, Department of 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, direction and resources they've provided. We're also grateful to the governors, congressional members, state agencies, local agencies, local communities of Mississippi, Alabama, Louisiana, Florida and Texas. 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. MCKAY: Before I -- before I describe our around-the-clock efforts to respond to this series of events, I want to reiterate our commitment to find out what happened. Understanding -- 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, B.P. has commissioned an internal investigation whose results we plan to share so we can all learn from these terrible events. I want to be clear, it's 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's important to give you and the American public an idea of the questions we're asking. There are really two key sets of questions here, and we're actively exploring both of those. First, what caused the explosion and fire onboard 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're examining is how hydrocarbons could have entered the wellbore. B.P., as a leaseholder and 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 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 and a cement plug is -- is placed and the well 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 absolutely fully engaged 24 hours a day, every second of the day, in efforts to respond to these events. Our subsea efforts to stop the flow of oil and secure the well involve four concurrent strategies. Activating the blowout preventer would be the preferred course, since it stops or diminishes the flow at the source. Unfortunately, this has proved unsuccessful so far. We are working on a containment system which will place enclosures or containment chambers atop the leak and conduct flow to a ship at the surface. There have been technical challenges, obviously. Engineers are now working to overcome these challenges. We've 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 drilling the second relief well at the end of this week. This operation could take approximately three 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 technique that's been used industry-wide across the world, but never in 5,000 feet of water. On the open water, we've got 300 response vessels mobilized, 1 million feet of boom placed, 2.4 million feet sourced, and the supply chain geared up to sustainable boom what areas are necessary. We're also attacking this spill with biodegradable dispersants that were pre-approved by the Coast Guard and the EPA. Those are being applied by planes and boats. We've also developed and tested a technique to apply dispersant at the leak point on the seabed. We've done a 24-hour -- done three tests of that, and we're waiting on the EPA to decide if we can permanently -- or continuously use that dispersant, which we hope we can. To protect the shoreline, we're implementing what the U.S. Coast Guard has called the most massive shoreline protection effort ever mounted in history. Thirteen staging areas are in place, and over 4,000 volunteers have already been trained. We recognize there are both environmental and economic impacts. B.P. will pay all necessary clean-up costs and is committed to paying legitimate claims for other loss and damages caused by the spill. Tragic and unforeseen as the accident was, we must not lose sight of why B.P. and other companies are operating in the offshore, including the Gulf of Mexico. The Gulf provides one in three barrels of oil produced in the United States, a resource our economy requires. B.P. and the entire energy industry are under no illusions about the challenge we face. We know that we will be judged -- 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 oil and gas industry will learn from this terrible event. We will emerge from it stronger, smarter and safer. Thank you for the opportunity to appear before you today. I'd be happy to answer your questions. In addition, as you requested, I brought a technical expert with me, Mike Zanghi, vice president of drilling. And on the modifications, Congressman Burgess, I was referring to yesterday, I need to know if the modifications that we encountered on interventions while this response is going on, were those the only modifications that were made in 2005? STUPAK: Thank you, Mr. McKay. We should note that Ms. Myrick, a member of the full committee, is with us. I'm sure she'll have some questions when we get to the question period. Thanks for joining us. Mr. Probert, your opening statement, please, sir? 11:51:47 PROBERT: Chairman Stupak, Ranking Member Burgess, and members of the subcommittee, thank you for inviting Halliburton to testify. We'll 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 for everyone. On behalf of the entire Halliburton family, we extend our heartfelt sympathy to the families, the friends, and colleagues of the 11 people who lost their lives and those workers who were injured in the tragedy. As we hope you could 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 the 20th. In the absence of that information, no one should rush to judgment. However, there are three things that could be said with certainty: one, that the casing shoe was cemented 20 hours prior to the tragic accident; two, it's premature to say that the root cause of the event was a catastrophic failure of the casing or cement; and, three, had the BOP functioned as expected, this catastrophe would not have happened. With respect to the Mississippi Canyon 252 well, Halliburton and many other companies were contracted by the well-owner to provide products and services. Halliburton provided cementing, mud logging, directional drilling, and real-time data acquisition and data delivery services for key personnel onboard the rig and onshore. However, contrary to press reports, Halliburton did not provide casing, wellheads, or seal assemblies. 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 two relief wells. At the outset, I need to emphasize that Halliburton as 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 all work-related activities. The construction of a deepwater 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, and these include the variability of the whole 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 use of this well were implemented as directed by the well-owner. By design, no continuous cement column was installed throughout the entire wellbore. 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, which would have been approved by the MMS. Following the placement of the cement slurry, the casing seal assembly was set in the casing hanger. As required by the 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 tests were reviewed by the well- owner, and the decision was made to proceed with the well program. The next step was the performance of a negative pressure test, conducted by the drilling contractor at the direction of the well- owner and in accordance with MMS requirements. This tests the integrity of the casing seal assembly. We understand that Halliburton was instructed to record drill pipe pressure during this test. After being advised by the drilling contractor that the negative tests had been completed, Halliburton's cementing personnel were placed on standby. We understand that the drilling contractor then replaced the dense drilling fluid in the riser with lighter seawater prior to the planned placement in the final cement plug. The drilling fluid was transferred directly to a workboat. The final cement plug would have been installed inside the production string and enabled the planned temporary abandonment of the well, but prior to reaching that point in the well -- in the well construction plan that Halliburton personnel would have been directed to set the plug, the catastrophic incident occurred. Halliburton's 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. To amplify -- and before closing -- and to amplify respectfully to a comment made earlier by Representative DeGette, the MMS did, indeed, conduct a survey which indicated that cementing was a factor in 18 or 39 well-controlled incidents over an approximately 10-year period in the Gulf of Mexico. I should point out that only one of these incidents occurred in water depths over 400 feet. Thank you for the opportunity to share Halliburton's views. I look forward to answering your questions. STUPAK: Thank you. Mr. Moore, your opening statement, please, sir. 11:57:40 MOORE: Chairman Stupak, Ranking Member Burgess, Chairman Waxman, Chairman Emeritus Dingell, Ranking Member Barton, members of the committee, good morning. I'm Jack Moore, president and CEO of Cameron International Corporation, and I appreciate the opportunity to be here for this hearing on what is truly a tragic event. One word about our company, 18,000 employees in more than 300 locations worldwide. We have worked with our customers for over 120 years to design, manufacture and service products that help them safely find, develop, produce and transport oil and gas. The Cameron product used by the Deepwater Horizon is called a blowout preventer, or a BOP, a product that Cameron actually invented in the 1920s. A BOP allows our customers to control the pressure in a well while being drilled. We have over 400 BOP stacks operating offshore, and over 130 are operating in deep water. Each individual BOP stack is made up of components specified by our customers and is configured to their specific operating specifications and is manufactured and tested in accordance with industry standards. Our BOPs have a very long history of reliable performance, including performance in some of the harshest operating conditions in the world. The BOP stack on the Deepwater Horizon was operating in 5,000 feet of water. As soon as Cameron was notified of the Deepwater Horizon incident, we mobilized a team of our best drilling system specialists to work with B.P. and Transocean to assist in shutting this well in. Since that time, we have been working around the clock to assist in this effort, and we will continue to provide all of the necessary resources at our disposal until this well is shut in. It is far too early to draw conclusions about how the incident occurred, but every one of us at Cameron, myself, and I think this industry is mindful of the tragic loss of life that occurred and likewise the impact to the environment and to the commercial impact that it will have. Cameron and I understand the need to discover the facts relating to what went wrong and to do all that is possible to prevent the occurrence of such an incident in the future. I'm accompanied today by my colleague, David McWhorter, who is our vice president of engineering and quality for our drilling systems group, to be at your disposal for -- for answers. Thank you for letting us be here today. 12:00:29 STUPAK: Thank you, Mr. Moore. It should be noted for -- for members that we asked each of our witnesses to have a technical expert with them to help in answering any technical questions.