Posted on Sat, Jun. 26, 2010
last updated: March 15, 2013 11:58:34 AM
ANCHORAGE, Alaska — When two Alaska state agencies received complaints in 2005 that a BP drilling contractor routinely cheated on tests of blowout preventers and that BP knew it, the agencies let the very companies accused of wrongdoing join the investigation.
Records show that attorneys and officials of BP and its contractor, Nabors Alaska, sat in with, or even in place of, state investigators when witnesses were interviewed. In at least three instances, after witnesses confirmed allegations, company lawyers took them aside for private conversations. One Nabors employee recanted his statement immediately after emerging from his private meeting with a Nabors attorney, state records show.
The Alaska Oil and Gas Conservation Commission ultimately ruled there was no widespread pattern of wrongdoing and declined to levy penalties.
But a review of the investigation now, in light of the Deepwater Horizon catastrophe in the Gulf of Mexico, raises new questions about BP's role in a probe that focused on blowout preventers, the 500,000-pound piece of equipment whose failure was critical to the catastrophe now unfolding in the Gulf.
In reports and e-mails written at the time, BP representatives referred to the inquiry as a "joint investigation" by the "team" of BP, Nabors, the commission and the Alaska Department of Environmental Conservation.
In recent interviews, Commissioner John Norman and investigator Jim Regg of the state conservation commission said BP's characterization was wrong. But Norman and Regg could point to no document in the five volumes of their investigative file where a state official objected to BP's use of the term.
On the contrary, the files show that nearly all 34 named witnesses were interviewed with at least one company official or attorney present. At other times, there were at least as many company officials on hand as state investigators.
Norman and Regg said the presence of the company officials during the interviews was for the convenience of the workers, who all worked shifts on the North Slope. The scheduling practice meant the workers only had to appear once for both the internal company inquiries and the state investigations. Norman said his agency's final report was completely independent of the one produced by the companies.
Critics suggest, however, that the presence of the BP and Nabors attorneys show a desire by all parties to prevent a thorough investigation of what whistleblowers alleged was common practice.
Long-time Alaska oil industry critic Chuck Hamel, who made the 2005 allegations public in complaints to Congress and the commission, says there are parallels to the Gulf blowout, including accusations that BP took shortcuts to save money and that regulators were too close to industry.
The commission's case file, which contains even the handwritten notes taken by three commission investigators, includes a Feb. 10, 2005, e-mail to Norman, then chairman of the commission, from BP's manager of health, safety and environment in Alaska, Len Seymour. Attached to the e-mail were the company's "talking points," setting forth what BP planned to say if a reporter asked about the investigation.
The first "key message" in those talking points: "An ongoing investigation is being conducted by a multi-disciplinary team comprised of ADEC (Alaska Department of Environmental Conservation), AOGCC (Alaska Oil and Gas Conservation Commission), BP and Nabors."
Norman's only response was an e-mail he sent to a commission assistant when he forwarded the talking points. "For incident investigation file," Norman wrote.
According to documents in the file, at least seven Nabors employees appeared to confirm the initial allegations, reporting they saw incidents of falsified blowout prevention tests on company rigs in the previous couple of years.
At least five employees provided the names of Nabors operators and supervisors whom they saw cheating or who appeared to condone it, the records show. One Nabors driller admitted falsifying two tests himself.
But when the commission issued its decision and order on the matter on June 2, 2005, it said it could not validate "anecdotal reports" of widespread cheating and cited only the two admissions by the single driller, who lost his job.
The commission found the violations "were isolated, not condoned or authorized by Nabors, and not harmful to personnel, the environment or the recovery of hydrocarbons," and decided against levying a civil fine against Nabors. Instead, the commission assessed Nabors $10,000 to partially recover the costs of the investigation. Nabors paid up without an argument.
The roots of the 2005 investigation go back to 2001, when a portable, self-propelled rig that cost Nabors about $25 million in 1998 caught fire and burned while crawling from one drilling pad to another. Nabors and its insurers sued Firestone, manufacturer of the rig's eight huge tires, alleging a tire rupture was responsible.
Firestone countered that Nabors knowingly overloaded the tire.
As the lawsuit progressed through state court, Nabors employees were called to provide deposition testimony in advance of a trial. During one, the Firestone attorney asked Nabors employee Mike Mason and co-worker Tony Escobar if Nabors ever falsified records.
Both men said daily logs were routinely falsified, such as reporting that safety drills took place when they hadn't. More seriously, they testified that tests of blowout prevention devices were often falsified on Nabors rigs if state inspectors weren't present to watch.
The blowout prevention system consists of a series of valves and other controls designed to shut down a well if subsurface pressures become unmanageable. They prevent gushers like BP's erupting Gulf well. Under commission rules, the complete system had to be tested at least every other week. Drilling must stop for the tests
In the test, pressure is applied to each valve, first at low pressure, then high - up to 5,000 pounds per square inch. To pass, the valve must hold the pressure for at least five minutes.
The test is automatically recorded on a circular chart. A mechanical pen records the pressure as the chart slowly rotates on a clock motor, turning about an inch every five minutes.
Cheating was so common, the men said, that it had a name: "chart spinning."
If a valve was leaking, Escobar testified, a driller would quickly spin the chart with his hands so the pressure loss wouldn't be documented and the time and expense required to replace a valve would be saved. Mason said the charts were spun even when the valves held pressure so that a five-minute test could be done in a minute or less.
A full test of all the valves normally took four or five hours. Mason said chart spinning could reduce the rig's idle time by several hours.
Regg and Norman said that from the onset, they considered it possible that the case involved criminal conduct. Among possible charges: falsification of business records, a misdemeanor, Norman said.
Despite the possibility of criminal charges and the fact that BP was already on probation from a federal criminal charge related to hazardous waste dumping by another drilling contractor, BP and Nabors were part of the state investigation from the beginning.
BP brought in an official from its Houston office, Gregory Mattson, BP America's head of discipline on well drilling and completion. Mattson, now based in Baku, Azerbaijan, was in Anchorage recently, but didn't respond to e-mails or telephone messages seeking comment for this story.
BP also assigned its outside attorney, Amy Menard, and Seymour, the health, safety and environment operations manager in Anchorage, to the case. Seymour, too, didn't respond to call. Menard referred questions to a BP lawyer, who also didn't respond.
Nabors brought in its then-associate counsel in Houston, James Lank, along with its Anchorage human resources manager, Belinda Wilson, and its Anchorage health, safety and environment manager, James Haynes.
Current Nabors spokesman Denny Smith didn't return several calls seeking comment. Lank, now general counsel for a Houston company that manufactures drilling rig components, didn't return a call left at his office.
Regg said the main reason for involving the companies was logistics; they helped solve the difficulty of scheduling interviews with workers who spent two weeks on the Slope, then two weeks off.
Despite the participation of BP and Nabors, commission investigators didn't always get the companies' cooperation. In a handwritten note in the file, commission inspector Jeff Jones said he'd asked Haynes of Nabors to delay two interviews of Nabors employees for an hour so he could finish monitoring a test on another rig. Haynes refused, Jones said.
"I asked him to take good notes and give me a copy," Jones said.
Curiously, one question in a standard set of questions posed by commission investigators asked workers to describe their relationship to Hamel, the industry watchdog. Regg said he wasn't trying to uncover Hamel's sources — something the oil industry in Alaska had tried over the years, including once setting up a sting using private investigators.
"Nothing nefarious there at all," Regg said. "We're just trying to establish what they knew about the allegations."
Many of the witnesses said that while they had witnessed cheating in the past, they hadn't seen it recently.
But five employees in addition to Mason and Escobar said they had seen chart spinning on Nabors rigs within the previous few years.
Notes indicate that the direct participation of BP and Nabors in the interviews affected the statement of at least one witness.
A Nabors "floor man," someone who works on the rig floor, said he had seen cheating twice within the last year. "I've seen them spin the charts," he said.
At that moment, according to the notes of both Jones and Regg, BP attorney Menard interrupted the testimony.
"Amy Menard called a break and (the Nabors floor man) went and talked in private w/James Lank," the Nabors attorney, according to Jones' notes.
When the floor man and Lank emerged 12 minutes later, the witness' account had changed. The floor man said that perhaps what he had observed was the driller somehow adjusting the chart pen — with both hands on the paper chart.
Jones noted that the floor man had his hands over his face and looked "very uncomfortable."
Lank called two of the other Nabors employees, an operator and a motorman, into private sessions beyond the earshot of state investigators after they too said they saw test cheating, according to the notes.
In the end, Regg said, none of the witnesses reporting the chart spinning was credible except for the driller who admitted doing it himself. The driller, who now works on a rig overseas, declined to comment for fear of losing his current job.
The problem with proving a pattern of falsification, Regg said, was that no one who claimed to have seen cheating could tie it to a specific test on a specific day. Without that evidence, there could be no case, he said.
The commission's final report was issued June 2, 2005. Commission records show it considered fining Nabors $25,000, but settled on the $10,000 assessment.
In addition to paying the penalty, Nabors agreed to more stringent test procedures to prevent chart spinning in the future, and BP vowed to supervise its contractors more closely.
"I have zero tolerance for anybody falsifying," Norman said. "If something is being falsified, that to me is the highest form of crime. The flip side to that, we have people who come in and self-report. If they do, we take that into consideration."
Norman also cited the agency's big fines levied against BP around the same time - $1.2 million for a fire at a well that severely injured an employee, $102,500 for failing to report a high pressure event on a well, among others - as evidence it wasn't afraid of Alaska's largest oil company, and the company that pays for most of the commission's $5.6 million annual budget through regulatory fees.
(Mauer reports for the Anchorage Daily News)
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