Exxon, Chevron Chiefs Faulted for ‘Carbon-Copy’ Safety Plans

By Jim Efstathiou Jr. and Joe Carroll

June 15 (Bloomberg) — Exxon Mobil Corp., ConocoPhillips, Chevron Corp. and Royal Dutch Shell Plc executives told Congress deepwater oil wells can be drilled safely after a BP Plc well blew out, as lawmakers criticized their disaster plans as inadequate “carbon copies.”

Eight weeks after a drilling rig leased by BP exploded, Chevron Chief Executive Officer John Watson said the disaster is “humbling” for the industry, according to testimony prepared for a House Energy and Commerce Committee panel today. Exxon CEO Rex Tillerson said investigators must determine if BP took risks “beyond industry norms” that led to the worst U.S. oil spill.

The oil-industry executives used their first appearance before Congress since the spill to distance themselves from BP drilling practices that lawmakers said put profits before safety. Representative Edward Markey told the executives their spill plans are virtually identical to BP’s.

“The oil companies may think it’s fine to produce carbon copies of their safety plans, but the American people expect and deserve more,” said Markey, a Massachusetts Democrat who leads the energy and environment subcommittee conducting today’s hearing.

The CEOs testified a day after the committee released internal BP documents that lawmakers said showed the company put cost concerns ahead of safety in the days leading up to the April 20 explosion that killed 11 workers. BP Chief Executive Officer Tony Hayward is to appear before a subcommittee June 17, his first congressional testimony since the well exploded.

Chevron’s ‘Safe’

“Our internal review immediately following the Deepwater Horizon accident confirmed what our systematic ongoing reviews tell us: Chevron’s drilling and control practices for deepwater wells are safe and environmentally sound,” Watson said in prepared testimony. “We must act to quickly implement new standards and safeguards so that we can reinstate drilling in the deepwater Gulf of Mexico.”

President Barack Obama plans to speak to the nation tonight on the spill, and the administration is demanding that BP set up an escrow account for damage claims. BP Chairman Carl-Henric Svanberg has been called to the White House tomorrow.

The oil-industry executives said a six-month ban on deepwater drilling imposed by the administration while the disaster is investigated would lead to job losses and greater dependence on foreign oil.

Industry groups have opposed the six-month ban, which Obama put in place to give a presidential commission time to probe the spill. Pressed by Louisiana Democratic Senator Mary Landrieu, who said her state could lose 330,000 jobs from the moratorium, Interior Secretary Ken Salazar last week said the ban may be shortened.

Jobs Lost

“We acknowledge the reasons for the president’s decision to pause deepwater drilling,” Odum said in his prepared remarks. “But it is not without consequence: thousands of lost jobs, and billions in lost wages and spending. And not only on the Gulf Coast, but also in places like Alaska.”

Shell adheres to well-drilling safety standards that lawmakers have said were sidestepped by BP, Odum wrote in a May 14 letter to Elizabeth Birnbaum, former director of the Minerals Management Service, which oversees offshore drilling. Shell’s plans to explore for oil and natural gas off Alaska’s coast face increased scrutiny following the Gulf spill.

BP, the biggest Gulf of Mexico oil producer, made five “questionable decisions” aimed at cutting costs and speeding completion of an overdue project before the disaster, Democratic Representatives Henry Waxman of California and Bart Stupak of Michigan wrote in a letter to Hayward released yesterday.

Industry Norms

“We need to know if the levels of risk taken went beyond industry norms,” said Tillerson, whose company pumps more oil than every nation in the 12-member Organization of Petroleum Exporting Countries except Saudi Arabia, Iran and Iraq.

Exxon, based in Irving, Texas, has drilled 262 deep-water wells in the past decade, 35 of which were in the Gulf, he said. Proper well design, workforce training, redundant safety systems and regular maintenance help mitigate risks involved in drilling wells miles below the surface, Tillerson said in the remarks.

More than 30 deepwater rigs have been ordered to stop drilling in the Gulf of Mexico while federal officials conduct a review of offshore safety practices. The moratorium has forced Exxon, Shell and major oil companies to suspend deepwater exploration plans for the Gulf.

Few Rigs Available

When the moratorium is lifted and federal regulators allow deepwater drilling to resume, there may be few rigs available for the work, said Gianna Bern, president of Brookshire Advisory & Research Inc. in Flossmoor, Illinois, which advises oil companies on strategy and risk management.

Drilling vessels are steaming out of the Gulf for assignments in the South China Sea and off the Indonesia coast, said Bern, a former BP crude trader. Those vessels won’t be able to return to U.S. waters for a year or longer, she said.

“The moratorium will likely draw drilling rigs away from the Gulf of Mexico to overseas basins, further delaying development and negatively affecting crucial U.S. jobs that support these operations,” Watson said. “Any extension of the moratorium will only exacerbate the economic consequences.”

BP America Inc. Chairman Lamar McKay said in prepared testimony that a “failure of processes, systems and/or equipment must be and can be addressed to restore America’s confidence in the industry’s ability to continue providing the resources consumers need.”

–Editors: Steve Geimann, Larry Liebert

To contact the reporters on this story: Jim Efstathiou Jr. in Washington at [email protected]; Joe Carroll in Washington at [email protected].

To contact the editors responsible for this story: Larry Liebert at [email protected]; Susan Warren at [email protected].

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