BP’s Partners in Well Try to Distance Themselves


BP’s partners in the blown-out Macondo well in the Gulf of Mexico distanced themselves from the oil giant in a Senate subcommittee hearing on Thursday, though their arguments encountered a skeptical audience.

“Our view is that this accident was preventable,” said James T. Hackett, chief executive of the Anadarko Petroleum Corporation, a part owner in the well.

The well is owned jointly by BP and its investment partners, Anadarko and a subsidiary of the Mitsui Oil Exploration Corporation known as MOEX Offshore 2007.

BP, listed in the contracts as the operator of the well, owns 65 percent; Anadarko owns 25 percent; MOEX, 10 percent. By the terms of the companies’ joint operating agreement, their legal liability for the well corresponds to their share of ownership.

The joint ownership is distinct from the legal relationships with the contractors involved in the drilling, like Transocean, the owner of the rig. Transocean and the other contractors argue that under their own operating agreements, BP has broadly shielded them from liability.

BP has already billed the partners more than $1 billion for their share of expenses so far, but the companies have declined to pay.

Anadarko has said that publicly available information suggests that BP may have been grossly negligent or engaged in willful misconduct, which could release Anadarko from any obligation to contribute. MOEX has said that it is awaiting the results of investigations before making decisions about payments.

In Thursday’s hearing of the Senate subcommittee on federal financial management, the chief executives of Anadarko and MOEX said they were ready to pay if obligated.

But they said the common procedure in such cases calls for the operating partner to pay for cleanup and other costs up front and then seek contributions from the non-operating partners.

“BP is paying the federal government,” and so taxpayers are not being harmed, Mr. Hackett of Anadarko told the subcommittee.

Naoki Ishii, the president of MOEX, said: “There is a contract in place among the partners. It says BP, as the operator, would make payments in the first instance.”

Such comments did not sit well with members of the subcommittee, who said that Anadarko and MOEX should at least create escrow funds to prove they are ready and able to contribute.

Senator John McCain, Republican of Arizona, noted that the federal government had named Anadarko and MOEX as being among the “responsible parties” for the spill under the Oil Pollution Act.

“Right now my understanding of the law is, responsible parties have got to pay,” he said. “But you’re not paying. Is that right?”

Mr. Hackett began a response, but Mr. McCain cut him off.

“Are you paying, or are you not paying?” he asked, testily.

“We are not paying,” Mr. Hackett said.

“And you have not set any money aside?” the senator asked.

“We have not set any money aside,” Mr. Hackett acknowledged, but added that “we have substantial assets” and would be able to pay.

Mr. Hackett said that the company, in fact, had “a strong balance sheet,” with $5 billion in annual cash flow, $3 billion in cash on hand and enormous credit resources that it could tap.

Senator Claire McCaskill, Democrat of Missouri, said the decision to defer payment made the companies look bad.

“Obviously, the lawyer department won out over the P.R. department,” she said.

The executives said that as non-operating partners, they were not involved in the day-to-day operations of the well.

In response to questions from Senator Thomas R. Carper, Democrat of Delaware and chairman of the subcommittee, Mr. Hackett said his company did not receive enough detailed information about the drilling in the weeks before the disaster to recognize that a crisis was imminent.

There was nothing in BP’s reports, he said, “that would have been a red flag for us.”

Drilling had already started and the government had approved the billing plan before MOEX bought in, Mr. Ishii said. “We were not involved in any direct decision making,” he said.

Add comment

Stuart H. Smith is an attorney based in New Orleans fighting major oil companies and other polluters.
Cooper Law Firm

Follow Us

© Stuart H Smith, LLC
Share This