Deepwater Horizon -- Halliburton's Plea Deal

The FBI has announced that Halliburton has "...agreed to plead guilty to destroying evidence in connection with the Deepwater Horizon disaster..." The terms of the agreement have got John McCain in an uproar as he complains about the "paltry fine" of $200,000. If Sen. McCain really wanted to conduct a tough investigation, he ought to consider how it came to be that both the FBI and Halliburton now agree that there was "little difference between using six or 21 centralizers".

The FBI press release states

According to court documents, on April 20, 2010, while stationed at the Macondo well site in the Gulf of Mexico, the Deepwater Horizon rig experienced an uncontrolled blowout and related explosions and fire, which resulted in the deaths of 11 rig workers and the largest oil spill in U.S. history. Following the blowout, Halliburton conducted its own review of various technical aspects of the well's design and construction. On or about May 3, 2010, Halliburton established an internal working group to examine the Macondo well blowout, including whether the number of centralizers used on the final production casing could have contributed to the blowout. A production casing is a long, heavy metal pipe set across the area of the oil and natural gas reservoir. Centralizers are protruding metal collars affixed at various intervals on the outside of the casing. Use of centralizers can help keep the casing centered in the wellbore away from the surrounding walls as it is lowered and placed in the well. Centralization can be significant to the quality of subsequent cementing around the bottom of the casing. Prior to the blowout, Halliburton had recommended to BP the use of 21 centralizers in the Macondo well. BP opted to use six centralizers instead.

As detailed in the information, in connection with its own internal post-incident examination of the well, in or about May 2010, Halliburton, through its cementing technology director, directed a senior program manager for the cement product line (program manager) to run two computer simulations of the Macondo well final cementing job using Halliburton's Displace 3D simulation program to compare the impact of using six versus 21 centralizers. Displace 3D was a next-generation simulation program that was being developed to model fluid interfaces and their movement through the wellbore and annulus of a well. These simulations indicated that there was little difference between using six and 21 centralizers. The program manager was directed to, and did, destroy these results.

In or about June 2010, similar evidence was also destroyed in a later incident. Halliburton's Cementing Technology Director asked another more experienced employee (employee 1) to run simulations again comparing six versus 21 centralizers. Employee 1 reached the same conclusion and, like the program manager before him, was then directed to "get rid of" the simulations.

Efforts to forensically recover the original destroyed Displace 3D computer simulations during ensuing civil litigation and federal criminal investigation by the Deepwater Horizon Task Force were unsuccessful.

In agreeing to plead guilty, Halliburton has accepted criminal responsibility for destroying the aforementioned evidence.

So three years after the fact, the two parties most adamant on blaming the blowout on BP's decision to use only six centralizers, now admit as fact that six were enough. And that Halliburton destroyed the evidence to the contrary in May and June 2010 while the well was leaking oil into the Gulf of Mexico. The FBI, having already entered into plea agreements with both BP and Transocean, now seems to be trying to cut a deal to preclude the civil trial from advancing to the second phase regarding source control efforts. So far, the government has had it easy because all the fingers have been pointing at the companies that created the circumstances that led to the blowout. But once BP had been overwhelmed by the complexity of dealing with the blowout and the event was deemed a Spill off National Significance with the appointment of Admiral Thad Allen as National Incident Commander, all eyes turned to the government to save the day and the government blew it. Everything that BP did in the source control effort needed government approval, and the effort dragged on interminably.

The question Sen. McCain ought to be asking is how soon should the flow of oil into the Gulf have been stopped? In the event, the flow of oil ceased on July 15, 2010, with the shutting in of the capping stack. Yet on July 19, 2010, my post "Steven Chu's Snake Oil" appeared on AT warning readers:

You probably have been hearing a lot of nonsense lately about the integrity of BP's Macondo well casing.

That was because with the shutting in of the well four days earlier, BP and the National Incident Command (NIC) started what came to be known as the "well integrity test". Yet soon both the NIC and even the president were still blithering about the "rupture disks" in the well that were supposed to be a huge threat of causing a catastrophic underground blowout. Let's refer again to the well schematic posted that day. Down at the bottom you will see reference to the 7" shoe at a Measured Depth (MD) of 18,360 ft and above it the 9-7/8" Liner at a MD of 17,168 ft. The Halliburton nitrogen foamed cement used to seal the well is shown in light gray both inside the 7" shoe and between it and the 9-7/8" diameter open bore hole. The top of Cement (TOC) in that space, called the annulus, is shown as being at 17,300 ft. MD and the top of the cement inside the 7" shoe is shown as being at the Top Float Collar at 18,114.93 ft.

The oil and gas in the formation could have two plausible flow paths to the surface, downward to the bottom of the hole and back upward inside the shoe track or straight up through the annulus. Halliburton's defense was that there would be channeling in the cement in the annulus up to the Top of Cement at 17,300 ft. due to an insufficient number of centralizers to center the show inside the bore hole. It was all BP's fault for not complying with Halliburton's recommendation. The government, particularly the then Democrat-controlled Congress, jumped on that theory and endlessly berated BP paying particular attention to an email by one of its engineers would wrote, "'Who cares, it's done, end of story, will probably be fine." That meme served as the basis for the government's claim that BP was grossly negligent and therefore liable to the higher $4,300 per barrel fine under the Oil Pollution Act for gross negligence, rather than the $1,100 per barrel fine for ordinary negligence. With Halliburton hiding behind an indemnity clause in its contract with BP, the narratives of the government and Halliburton merged with BP as the sole villain. Politics does indeed make strange bedfellows. But now those bedfellows have been forced by the forensic investigation of the well to acknowledge their illicit affair. Halliburton has not been the only Party in Interest to have been hiding relevant facts from public view. The Chief Counsel of the President's Oil Spill Commission wrote a report that was not proffered to the House Committee investigation the oil spill when its two co-chairmen testified before the committee. They simply noted that such a report would be forthcoming later, without detailing its explosive contents regarding the findings of the forensic investigation about the flow path.

Let us revisit the post on my blog dated January 20, 2012:

When we last discussed the Deepwater Horizon on The American Thinker, Halliburton Under the Microscope, there were some comments about how the blowout could not be Halliburton's fault because BP used only 6 centralizers instead of the recommended 21 centralizers. I can understand the confusion because the Obama administration blocked the Interior Department lead investigator, who did have subpoena power, from testifying before Congress on the results of their investigation so the word did not get out. So let me quote from page 49 (pg 53 of the PDF file) of the investigative report itself.

The Panel found no evidence that BP's decision to use 6 centralizers rather than the 21 recommended by Halliburton was a cause of the blowout.

Once again we find an instance of the Obama Administration interfering with the work of an Inspector General. That is becoming an extremely familiar refrain.

The FBI has announced that Halliburton has "...agreed to plead guilty to destroying evidence in connection with the Deepwater Horizon disaster..." The terms of the agreement have got John McCain in an uproar as he complains about the "paltry fine" of $200,000. If Sen. McCain really wanted to conduct a tough investigation, he ought to consider how it came to be that both the FBI and Halliburton now agree that there was "little difference between using six or 21 centralizers".

The FBI press release states

According to court documents, on April 20, 2010, while stationed at the Macondo well site in the Gulf of Mexico, the Deepwater Horizon rig experienced an uncontrolled blowout and related explosions and fire, which resulted in the deaths of 11 rig workers and the largest oil spill in U.S. history. Following the blowout, Halliburton conducted its own review of various technical aspects of the well's design and construction. On or about May 3, 2010, Halliburton established an internal working group to examine the Macondo well blowout, including whether the number of centralizers used on the final production casing could have contributed to the blowout. A production casing is a long, heavy metal pipe set across the area of the oil and natural gas reservoir. Centralizers are protruding metal collars affixed at various intervals on the outside of the casing. Use of centralizers can help keep the casing centered in the wellbore away from the surrounding walls as it is lowered and placed in the well. Centralization can be significant to the quality of subsequent cementing around the bottom of the casing. Prior to the blowout, Halliburton had recommended to BP the use of 21 centralizers in the Macondo well. BP opted to use six centralizers instead.

As detailed in the information, in connection with its own internal post-incident examination of the well, in or about May 2010, Halliburton, through its cementing technology director, directed a senior program manager for the cement product line (program manager) to run two computer simulations of the Macondo well final cementing job using Halliburton's Displace 3D simulation program to compare the impact of using six versus 21 centralizers. Displace 3D was a next-generation simulation program that was being developed to model fluid interfaces and their movement through the wellbore and annulus of a well. These simulations indicated that there was little difference between using six and 21 centralizers. The program manager was directed to, and did, destroy these results.

In or about June 2010, similar evidence was also destroyed in a later incident. Halliburton's Cementing Technology Director asked another more experienced employee (employee 1) to run simulations again comparing six versus 21 centralizers. Employee 1 reached the same conclusion and, like the program manager before him, was then directed to "get rid of" the simulations.

Efforts to forensically recover the original destroyed Displace 3D computer simulations during ensuing civil litigation and federal criminal investigation by the Deepwater Horizon Task Force were unsuccessful.

In agreeing to plead guilty, Halliburton has accepted criminal responsibility for destroying the aforementioned evidence.

So three years after the fact, the two parties most adamant on blaming the blowout on BP's decision to use only six centralizers, now admit as fact that six were enough. And that Halliburton destroyed the evidence to the contrary in May and June 2010 while the well was leaking oil into the Gulf of Mexico. The FBI, having already entered into plea agreements with both BP and Transocean, now seems to be trying to cut a deal to preclude the civil trial from advancing to the second phase regarding source control efforts. So far, the government has had it easy because all the fingers have been pointing at the companies that created the circumstances that led to the blowout. But once BP had been overwhelmed by the complexity of dealing with the blowout and the event was deemed a Spill off National Significance with the appointment of Admiral Thad Allen as National Incident Commander, all eyes turned to the government to save the day and the government blew it. Everything that BP did in the source control effort needed government approval, and the effort dragged on interminably.

The question Sen. McCain ought to be asking is how soon should the flow of oil into the Gulf have been stopped? In the event, the flow of oil ceased on July 15, 2010, with the shutting in of the capping stack. Yet on July 19, 2010, my post "Steven Chu's Snake Oil" appeared on AT warning readers:

You probably have been hearing a lot of nonsense lately about the integrity of BP's Macondo well casing.

That was because with the shutting in of the well four days earlier, BP and the National Incident Command (NIC) started what came to be known as the "well integrity test". Yet soon both the NIC and even the president were still blithering about the "rupture disks" in the well that were supposed to be a huge threat of causing a catastrophic underground blowout. Let's refer again to the well schematic posted that day. Down at the bottom you will see reference to the 7" shoe at a Measured Depth (MD) of 18,360 ft and above it the 9-7/8" Liner at a MD of 17,168 ft. The Halliburton nitrogen foamed cement used to seal the well is shown in light gray both inside the 7" shoe and between it and the 9-7/8" diameter open bore hole. The top of Cement (TOC) in that space, called the annulus, is shown as being at 17,300 ft. MD and the top of the cement inside the 7" shoe is shown as being at the Top Float Collar at 18,114.93 ft.

The oil and gas in the formation could have two plausible flow paths to the surface, downward to the bottom of the hole and back upward inside the shoe track or straight up through the annulus. Halliburton's defense was that there would be channeling in the cement in the annulus up to the Top of Cement at 17,300 ft. due to an insufficient number of centralizers to center the show inside the bore hole. It was all BP's fault for not complying with Halliburton's recommendation. The government, particularly the then Democrat-controlled Congress, jumped on that theory and endlessly berated BP paying particular attention to an email by one of its engineers would wrote, "'Who cares, it's done, end of story, will probably be fine." That meme served as the basis for the government's claim that BP was grossly negligent and therefore liable to the higher $4,300 per barrel fine under the Oil Pollution Act for gross negligence, rather than the $1,100 per barrel fine for ordinary negligence. With Halliburton hiding behind an indemnity clause in its contract with BP, the narratives of the government and Halliburton merged with BP as the sole villain. Politics does indeed make strange bedfellows. But now those bedfellows have been forced by the forensic investigation of the well to acknowledge their illicit affair. Halliburton has not been the only Party in Interest to have been hiding relevant facts from public view. The Chief Counsel of the President's Oil Spill Commission wrote a report that was not proffered to the House Committee investigation the oil spill when its two co-chairmen testified before the committee. They simply noted that such a report would be forthcoming later, without detailing its explosive contents regarding the findings of the forensic investigation about the flow path.

Let us revisit the post on my blog dated January 20, 2012:

When we last discussed the Deepwater Horizon on The American Thinker, Halliburton Under the Microscope, there were some comments about how the blowout could not be Halliburton's fault because BP used only 6 centralizers instead of the recommended 21 centralizers. I can understand the confusion because the Obama administration blocked the Interior Department lead investigator, who did have subpoena power, from testifying before Congress on the results of their investigation so the word did not get out. So let me quote from page 49 (pg 53 of the PDF file) of the investigative report itself.

The Panel found no evidence that BP's decision to use 6 centralizers rather than the 21 recommended by Halliburton was a cause of the blowout.

Once again we find an instance of the Obama Administration interfering with the work of an Inspector General. That is becoming an extremely familiar refrain.

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