US Chem­i­cal Board says con­flicts tar­nish BP probe

The Pak Banker - - Company& -

NEW YORK: A fed­eral panel in­ves­ti­gat­ing the Deep­wa­ter Hori­zon oil-rig dis­as­ter said the ex­am­i­na­tion of a key safety de­vice that failed to halt the fa­tal blowout has been com­pro­mised by con­flicts of in­ter­est.

The U.S. Chem­i­cal Safety and Haz­ard In­ves­ti­ga­tion Board said in a let­ter to­day it can't par­tic­i­pate "in a mean­ing­ful man­ner" in the ex­am­i­na­tion of the blowout pre­ven­ter re­trieved from the ocean floor af­ter the dis­as­ter at BP Plc's Ma­condo well in the Gulf of Mex­ico.

The board wants to ban em­ploy­ees of Cameron In­ter­na­tional Corp., the maker of the blowout pre­ven­ter, and rig owner Transocean Ltd. from par­tic­i­pat­ing in the ex­am­i­na­tion, ac­cord­ing to the let­ter sent to the In­te­rior Depart­ment's Bureau of Ocean En­ergy Man­age­ment, Reg­u­la­tion and En­force­ment

Cameron and Transocean em­ploy­ees have been per­mit­ted to en­gage in "hands-on ma­nip­u­la­tion" of the de­vice, known as a BOP, at the Na­tional Aero­nau­tics and Space Ad­min­is­tra­tion base near New Or­leans, where test­ing be­gan last month, Rafael Moure-Eraso, chair­man of the Chem­i­cal Safety Board, said in the let­ter to Michael Bromwich, who over­sees the bureau for­merly known as the Min­er­als Man­age­ment Ser­vice.

"That ap­proach di­min­ishes the cred­i­bil­ity of the en­tire process and jeop­ar­dizes the pub­lic's trust in the ex­am­i­na­tion re­sults," Moure-Eraso wrote. "Given the well-pub­li­cized his­tory of im­proper re­la­tion­ships be­tween the for­mer Min­er­als Man­age­ment Ser­vice and mem­bers of the oil in­dus­try, one would have ex­pected that ex­tra­or­di­nary care would be taken to con­duct the BOP test­ing above re­proach."

Cameron and Transocean "are ob­servers only and are not in­volved in the ex­am­i­na­tion" of the blowout pre­ven­ter, David Smith, a spokesman for the Bureau of Ocean En­ergy Man­age­ment, said in an emailed state­ment. They are there to "pro­vide tech­ni­cal ex­per­tise."

The chem­i­cal board is one of sev­eral fed­eral agen­cies try­ing to de­ter­mine what went wrong on April 20 when a surge of ex­plo­sive gas erupted from London-based BP's well about 40 miles (65 kilo­me­ters) from the Louisiana shore. The catas­tro­phe killed 11 rig work­ers, sank the $365 mil­lion rig and caused the leak of an es­ti­mated 4.9 mil­lion bar­rels of crude.

The blowout pre­ven­ter was sup­posed to cut off the flow of gas from the well be­fore it grew out of con­trol. Metal blades in­side the stack failed to slice and crimp the pipe con­nect­ing the well to the rig when work­ers re­al­ized a blowout was oc­cur­ring, ac­cord­ing to tes­ti­mony be­fore a joint U.S. Coast GuardIn­te­rior Depart­ment in­ves­tiga­tive panel.

The Coast Guard-In­te­rior Depart­ment in Oc­to­ber hired Det Norske Ver­i­tas, the Os­lobased mar­itime risk-man­age­ment as­so­ci­a­tion that rep­re­sents 130 na­tions, to over­see test­ing of the BOP, a 50-foot (15-me­ter) stack of valves. Det Norske hired Cameron and Transocean em­ploy­ees as con­sul­tants for the job, MoureEraso said in to­day's let­ter.

The chem­i­cal board de­manded that the In­te­rior Depart­ment re­move all Cameron and Transocean work­ers from the BOP ex­am­i­na­tion; ter­mi­nate the con­tract with Det Norske, or mod­ify it to al­low for over­sight by a neu­tral, third-party; and give the agency ac­cess to all pho­to­graphic and video doc­u­men­ta­tion of the tests.

"With­out these changes to the cur­rent BOP ex­am­i­na­tion process, the Amer­i­can peo­ple will have rea­son to doubt the in­tegrity of the in­ves­ti­ga­tion," Moure-Eraso wrote.

In a sep­a­rate news item, Oil sup­plies may come back to the U.S. Gulf Coast in Jan­uary, sap­ping crude's drive to­ward $100 a bar­rel, af­ter stock­piles tum­bled the most in 30 years this month as re­fin­ers sought to avoid year-end tax li­a­bil­i­ties.

Sup­plies in states along the Gulf of Mex­ico, home to more than half of U.S. stock­piles, have fallen 9.2 per­cent this month to 167.3 mil­lion bar­rels, data from the En­ergy Depart­ment in Washington show. Oil set­tled at a two-year high of $91.51 a bar­rel on Dec. 23, bring­ing this year's gain to 15 per­cent.

"I wouldn't sus­pect plus$90 is sus­tain­able past the mid­dle of Jan­uary, be­cause I think we're go­ing to see some stock builds" from Jan. 1, said Ken Med­lock, an en­ergy fel­low at the James A. Baker III In­sti­tute for Pub­lic Pol­icy at Rice Uni­ver­sity in Hous­ton.

Ac­count­ing rules al­low re­fin­ers to take a big­ger 2010 tax de­duc­tion by cut­ting stock­piles that have jumped this year as prices in­creased. Gulf Coast sup­plies fell in 27 of the past 29 De­cem­bers. They have risen in four of the past five Jan­uar­ies.

Gulf Coast in­ven­to­ries were 4.1 per­cent above the Jan. 1 level in the week ended Dec. 17, down from 15 per­cent at the end of Novem­ber. The de­cline so far this month is al­most dou­ble the 4.8 per­cent av­er­age drop in the past five De­cem­bers.

"I would ex­pect to see more and con­tin­ued draws into early Jan­uary and then see those bar­rels re­placed later in Jan­uary and into Fe­bru­ary," said Stephen Schork, pres­i­dent of Schork Group Inc. in Vil­lanova, Penn­syl­va­nia.

Oil traded above $90 a bar­rel for three straight days last week as signs the U.S. eco­nomic re­cov­ery is gain­ing pace fanned op­ti­mism fuel de­mand will rise in 2011. Crude for Fe­bru­ary de­liv­ery climbed $1.03, or 1.1 per­cent on the New York Mer­can­tile Ex­change on Dec. 23. Oil last traded above $100 a bar­rel on Oct. 2, 2008.

Com­pa­nies typ­i­cally ex­pense the cost of items they have sold from their tax­able in­come. Many re­fin­ers use an ac­count­ing method known as "last in, first out," or LIFO, which al­lows them to deduct the cost of the more-ex­pen­sive crude they have pur­chased most re­cently and as­sert for tax pur­poses that the oil in their tanks was bought be­fore at cheaper prices. -Bloomberg

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