US Chemical Board says conflicts tarnish BP probe
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