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Halliburton Admits Destroying Evidence in ‘Grim Sorting Out’ of Gulf Spill Blame

July 26, 2013 at 12:00 AM EST
Who's to blame for the disaster caused by the 2010 Deepwater Horizon rig explosion? The battle over liability continues to play out in court. Bloomberg Businessweek's Paul Barrett sits down with Hari Sreenivasan to discuss contractor Halliburton's guilty plea for destroying evidence.
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JEFFREY BROWN: And now another corporate guilty plea in the Gulf oil spill, one that may have important implications for a multibillion-dollar civil trial in Louisiana.

Hari Sreenivasan has the story.

HARI SREENIVASAN: Soon after the Deepwater Horizon rig exploded, three companies began a blame game over whose mistakes were most responsible for the environmental disaster. That battle, which continues to play out in court, involved BP, Transocean and Halliburton.

BP leased the Deepwater Horizon from Transocean. It also owned much of the Macondo well that erupted and spilled millions of barrels of oil into the Gulf. Halliburton was contracted to design and build the well.

One of the key arguments has been about whether Halliburton’s work on the well may have led to the blowout that killed 11 people. Yesterday, Halliburton pleaded guilty to destroying evidence in 2010 about test simulations it did with cement in the wake of the accident.

Paul Barrett has been following this story for Bloomberg Businessweek and fills us in.

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So, Paul, what were the test results that Halliburton allegedly destroyed?

PAUL BARRETT, Bloomberg Businessweek: Halliburton after the disaster did computer simulations designed to see whether its cement work had been adequate and whether certain further steps that it had suggested to BP, but which BP had rejected, might have made a difference.

What Halliburton discovered when it did these tests was basically bad news, that its work had not been up to snuff and that these additional steps that might have been taken actually wouldn’t have made a difference. That reinforced BP’s version of what happened, and so Halliburton has now admitted that it simply destroyed the evidence.

HARI SREENIVASAN: All right, let’s talk a little bit about this cement. How crucial of a role does the cement play in this and what does Halliburton have to do with it?

PAUL BARRETT: Well, cementing in one of these complex deepwater oil operations is absolutely vital. It’s central to the safe operation of the well.

And you have got cement that secures the entire well apparatus and seals the well on the ocean floor. And without the consistency of the cement being proper and without it being centralized and fixed in the right way, you open yourself up to the danger of disaster. And it now appears, in retrospect, that Halliburton’s work was lacking, and that that was at least one of the major contributors to why this particular well, the Macondo well, blew, leading to the explosion of the rig up on the surface and also to the many millions of barrels that flowed from the ocean floor.

HARI SREENIVASAN: All right. So are BP and Transocean somewhat happier today because there’s more blame to go around?

PAUL BARRETT: Well, in the grim sorting out of liability, certainly the other parties are going to be pleased by the fact that Halliburton has to admit that it was behaving in this obviously unsavory way in the wake of the accident.

Secondly, they have got to be happy that, in the continuing attempt to parcel out civil liability, that this is not good news for Halliburton and this can support an argument that Halliburton was grossly negligent and can support the argument that we, say, BP or Transocean, we may have made mistakes, which certainly BP has admitted, but our mistakes were not the central, proximate cause for the disaster.

HARI SREENIVASAN: So, let’s talk a little bit about this $200,000 fine. It seems like a pretty small amount for Halliburton and, not by coincidence, a $55 million contribution to the National Fish and Wildlife Foundation.

PAUL BARRETT: Right. Yes, well, $200,000 to a company that has annual revenues of $29 billion is obviously pocket change.

Even $55 million as a so-called voluntary contribution to an organization which will help clean up and secure the Gulf environmentally in the future is not a terrible blow at all. The reason this is significant is because it is admission on Halliburton’s part that it was trying to cover something up.

And that will play out in the continuing civil trial in which the federal government is suing all three companies, and a federal judge in New Orleans is in the extraordinary position of on his own without a jury and without anyone else telling him what to do to apportion the blame among the three companies.

And if he determines, for example, that BP is merely negligent in an ordinary sense, you will get a small number of billions of dollars that BP will owe. If BP is determined to be grossly negligent, you’re talking about $17 billion or more at the high end. And now BP has a stronger argument today than it did a few days ago that, Judge, point the finger of blame at our colleagues over here Halliburton.

HARI SREENIVASAN: So, what about, finally, in brief, the civil actions, the families of those rig workers that were killed?

PAUL BARRETT: Most of the civil — the individual actions in terms of the wrongful death actions for the 11 men who were killed and the dozens of other people who were injured, most have been resolved, and those are never the big-dollar issues. BP has already paid out $25 billion in combination of cleanup and damage claims and faces, as we said a moment ago, perhaps $17 billion or more additional liability.

Those are the big-dollar numbers, the economic damages and the cleanup costs.

HARI SREENIVASAN: All right, Paul Barrett, Bloomberg Businessweek, thanks so much.

PAUL BARRETT: My pleasure.