HOUSE COMMITTEE ON TRANSPORTATION AND INFRASTRUCTURE
HEARING ON THE DEEPWATER HORIZON OIL SPILL
MAY 19, 2010
PANEL 1 WITNESSES:
LAMAR MCKAY, PRESIDENT, BRITISH PETROLEUM, P.L.C.
STEVEN NEWMAN, PRESIDENT AND CEO, TRANSOCEAN LTD
*** GENE TAYLOR EXCERPT ***
TAYLOR: Mr. Newman, was the -- where was the Deepwater Horizon built?
NEWMAN: The Deepwater Horizon was built in a shipyard in Korea.
TAYLOR: And under what flag did that vessel operate?
NEWMAN: The vessel operates under the flag of the Marshall Islands.
TAYLOR: How many drilling rigs or ships does Transocean have?
NEWMAN: 139.
TAYLOR: How many of those are flagged in the United States of America?
NEWMAN: I don’t know the answer to that question.
TAYLOR: Are any of the sister ships of the Deepwater Horizon flagged under the American flag?
NEWMAN: There is one sister ship to the Deepwater Horizon, which is the Nautilus. I don’t know what flag the Nautilus operates under.
TAYLOR: Mr. Newman, you obviously are aware, as Mr. Cao pointed out, of the enormous amount of suffering the people of the Gulf Coast have gone through, first with the loss of 11 lives. But the enormous amount of suffering that continues as a result of this mishap. The loss of income; the uncertainty whether the shrimp crop will ever come back; the long term effects of the seafood industry. People immediately lost a paycheck. My way, just devastated the tourism industry, the seafood industry. Seafood processors being told “Don’t send me any American-processed shrimp. We don’t know if it’s got oil on it. I want nothing but imports.” You guys have really messed things up.
So my question is – given the harm this accident has caused – how much taxes did Transocean pay the United States of America last year, because you have obviously cost our nation a great deal of money? So I’m just curious what was the contribution of Transocean to our nation taxwise?
NEWMAN: I don’t have that number available with me today.
TAYLOR: Well, let me ask you another question. There has been a tendency for some foreign flag operators to create a separate entity for the work they do in the Gulf of Mexico. It's called a corporate inversion. And they see to it that the costs that they pay to the parent company, either through the mortgage on the vessels or the -- the overhead costs that the parent company charges them, they see to it that that exceeds their revenues or is very close to their revenues, so they end up paying no U.S. taxes, even though they're operating in the Gulf of Mexico.
So my question to you is, is that part of your company that operates in the Gulf of Mexico an inverted corporation?
NEWMAN: The company that operates in the Gulf of Mexico is a U.S. company. It's a Delaware corporation.
TAYLOR: OK. But is it owned by a parent corporation?
NEWMAN: Yes, it is owned by a parent company.
TAYLOR: And where is the headquarters of the parent corporation?
NEWMAN: The ultimate parent company, Transocean Limited, is a Swiss corporation.
TAYLOR: OK. Mr. Chairman, the reason I ask these questions is, you know, since the earliest days of our republic, we've reserved the right of coast-wide commerce for American-made, American-crewed, and American-built vessels. Now, somebody somewhere along the line has given these folks an exemption from that law.
And when we go to recover the funds, that the enormous amount of money that the Air Force, the Coast Guard, all the state governments, city governments hiring extra policemen, extra firemen, the call-up of the National Guard, when we go to recover those funds, I've got to believe it would be a heck of a lot easier to recover those funds from an American company that's got some assets here in the United States than someone in Switzerland.
Tell me again where the ship was actually flagged, in the Marshall Islands?
NEWMAN: The ship was operating under a Marshall Islands flag.
TAYLOR: Marshall Islands. And, again, given what the people of Mississippi went through just trying to get the insurance industry in America to pay claims in Mississippi after Katrina, I have a very strong suspicion we're going to have a heck of a time getting someone out of the Marshall Islands or Switzerland to pay these bills.
So, Mr. Chairman, I would hope that you would give -- and, again, they're pulling American minerals out of the ground on an American sea bottom with a foreign flag vessel and, quite possibly, a foreign crew.
Mr. Chairman, with all respect, I would certainly hope that, when we go forward from this, that you would give every consideration to extending the Jones Act to cover this sort of vessel in this sort of circumstance.
I thank you very much.
CHAIRMAN JAMES OBERSTAR: The gentleman and I have had conversation about the application of Jones Act to this situation, and I have asked staff to prepare a guidance memorandum on the applicable law and the problems of dealing with the WTO requirements.
And there are some legal obstacles that we have to overcome on some aspects of that issue, so this is something that the gentleman and I and others of interest in the committee will work our way through. But I appreciate the gentleman raising that issue; it's of vital importance.
PANEL 2 WITNESSES:
ENVIRONMENTAL PROTECTION AGENCY ADMINISTRATOR LISA JACKSON
JANE LUBCHENCO, ADMINISTRATOR, NATIONAL OCEANIC AND ATMOSPHERIC ADMINISTRATION
REAR ADMIRAL BRIAN M. SALERNO, ASSISTANT COMMANDANT FOR MARINE SAFETY, SECURITY, AND STEWARDSHIP, U.S. COAST GUARD
REAR ADMIRAL PETER NEFFENGER, U.S. COAST GUARD
S. ELIZABETH BIRNBAUM, DIRECTOR, MINERALS MANAGEMENT SERVICE
SYLVIA EARLE, PH.D., EXPLORER-IN-RESIDENCE, NATIONAL GEOGRAPHIC SOCIETY
*** GENE TAYLOR EXCERPT ***
TAYLOR: Thank you, Mr. Chairman.
And thank you, gentlemen, for sticking around. We've had the Armed Services markup today.
Admiral, it really struck me -- number one, let me commend Captain Ed -- Captain Ed Stanton for the work that he has done in trying to make the best of a terrible situation. Between the booms, the dispersants, he was handed a really bad situation and has tried to make something that's really terrible less bad.
But one of the things that the average citizen would really be surprised at, and has been surprised at, is they thought of booms, both the containment boom, the absorbent booms and even the collection booms, it took a while for it to sink in to the general public that they're only good to about one knot of current and about three foot seas.
Going back to 1971, that technology really hasn't changed much in 40 years. I think those were the same numbers 40 years ago, when you ran me through Yorktown.
So my question is - I realize that the Oil Pollution Act of 1990 was passed and a lot of things that were in place then, a lot of the technologies that were in place then are still being used. What I think is missing -- and I understand that there would always be those who said if we forced to you upgrade the booms in the absence of a spill, somebody would scream foul, that why are you making them spend money in the absence of a spill.
But now that it has happened, has the coast guard looked around to NOAA, or the Navy, or anyone in the private sector and identified a better boom? Because, again, you can't collect unless it's less than one knot of current with three-foot seas. You can't collect it and burn it unless you have less than one knot of current and three-foot seas. Those have both been -- and you can't contain it unless it's one knot of current in three-foot seas. And all of those things are not the norm in the Gulf of Mexico, nor would they be the norm off the Atlantic or Pacific coast.
So have there been advances in boom technology that we have not taken advantage of or mandated to those companies that are in the business of responding to a spill?
SALERNO: Sir, I'm not aware of any technology that hasn't been taken advantage of. I would agree with you that the technology really hasn't changed all that much. There is, as Ms. Birnbaum indicated, a test facility in Leonardo, New Jersey, that looks at new capabilities. I think there have been -- maybe been some minor incremental changes, but nothing of an order of magnitude that we would all like to see.
TAYLOR: Ms. Birnbaum, at the hearing in New Orleans, Captain Nguyen has a really profound statement when he said, referring to the blowout preventer, it was designed to industry standard, manufactured by the industry, and installed by the industry with no government witnessing or oversight of the construction or installation.
I don't mind the private sector designing it. I have no problem with the private sector building it. I have no problem with the private sector installing it.
What I do have a problem with, if that is true, is that no one from your agency really has the expertise to see if it's going to work.
Is that true? Because Captain Nguyen sure implied that in his statement.
BIRNBAUM: I do not believe that that is correct. We have more than...
TAYLOR: OK. Why don't you -- why don't you correct it for the record?
BIRNBAUM: We have more than five pages of regulations actually covering what a blowout preventer must do. In addition, we do inspect them. We don't inspect them at every time that the operator tests them. We require them to test them every 14 days when they're in operation. But we do inspect them when they're visible on the rig deck and we do have people with the capacity to inspect them and determine whether they're in working order. Our inspectors also review the logs of the tests that go on in between their visits to the rigs.
TAYLOR: The questions that were raised by Congressman Stupak as far as either the dead or missing battery, the leaking hydraulics, would you address those at this time? Because it doesn't sound to me, if that is true, that you folks were doing your job.
BIRNBAUM: I really cannot speak to those matters, because those matters that are subject to the current investigation. There are a lot of rumors going on. There's that information. There's the information that everybody saw on "60 Minutes" or I read the transcript of.
All of that information is part of the ongoing investigation and we don't yet know what happened, we don't yet know exactly what was wrong with the blowout preventer.
And I have to say that I have personally stayed away from the details of the outcome of the investigation because it's required to be an independent investigation. So I can't tell what you has been discovered and what is determined to be true or false. We won't really know until that stack is pulled and is basically reverse engineered, is examined to determine what's going on with it.
TAYLOR: Ma'am, for the record, if you can't do it now, how do you check a battery being there or being alive or dead when it's 5,000 feet down? How do you check to see if -- and I appreciate that all hydraulics leak a little bit. So it's the degree of the leak and how much it affected the ram. How do you test that 5,000 feet down?
BIRNBAUM: We do require testing, as I said, every 14 days while it's on the sea floor, and they are required to pressure it up. That should indicate if it's operational.
However, we are also looking at the question of whether there ought to be additional test procedures that we would require, and we are examining all of that, as I said, in addition to safety precautions that we will consider, and the secretary may recommend further testing as part of his recommendations to the president. We are looking at all of that.
TAYLOR: Do any countries require two blowout preventers?
BIRNBAUM: Not...
TAYLOR: Do any mandate a redundancy?
BIRNBAUM: Not that I know of. There has actually been some information about what other countries require, and just to clarify, we don't know of any nation that actually requires an acoustic trigger, which a lot of people have suggested that Norway or Brazil or Canada requires.
We've inquired with their regulatory bodies, because we didn't think that they did, and their regulatory bodies have informed us that their policies are very similar to ours, that they do require a secondary backup mechanism. That may be an acoustic trigger, that may be a backup trigger using an ROV, as was tried in this case, which was the backup mechanism for this blowout preventer.
But we are looking at everything that might serve as more safety measures to require on blowout preventers. I don't know of anybody who requires two.
TAYLOR: Mr. Chairman, you've been generous.
Admiral, for the record, because I know Mr. Cummings deserves his turn, for the record, I would like you side by side to compare what sort of inspections you had on that foreign flag drill ship as opposed to had that been an American flag vessel.
SALERNO: Sir, this is a foreign flag. It is flagged in Marshall Islands. And so what we do essentially is a port-state control type inspection, although it's very extensive. We seek to -- just as a general statement, we look for parity. We want to make sure that that rig when it's operating on our outer continental shelf meets a level of safety and equipment standards and environmental protection equivalent to a U.S. flag rig of the same type.
For a U.S. flag rig, of course, it's Coast Guard inspected. We go through it from the design phase all the way through its life cycle. There are periodic inspections that are required. Coast Guard people go out and visit it.
We visit the rig to perform structural examinations as well, or dry dock surveys. Typically, they're done while the rig is floating. We make sure that they're adequately manned. All of the safety systems are checks on a regular basis, including drills for firefighting, lifesaving. We pay very close attention to hazardous conditions.
On a foreign rig, we look at all of that same equipment, but we also -- there are some differences because on a foreign rig, a lot of the work, for example, the hull structural surveys, would be performed by a recognized organization authorized by the flag state. Typically, it's a classification society.
We would make sure that they are current, in compliance with all international requirements, and with our requirements for operations on the outer continental shelf. We also take a first-hand look at all of their firefighting, lifesaving, hazardous conditions on a rig, just as we would on a U.S. rig to make sure that there are no obviously safety hazards for that ship operating.
So we approach it somewhat differently between U.S. and foreign, but we make sure that all of the same types of checks have been performed either directly by us or by a recognized authority for a foreign flag vessel so that there is parity for the safety level, whether it is U.S. or foreign.
I hope that answers your question.
