IE 11 is not supported. For an optimal experience visit our site on another browser.

Evasive BP CEO leaves Congress flummoxed

“I can’t answer that question.” That was a common refrain in Capitol Hill testimony from BP CEO Tony Hayward, who shed little light on the company’s disastrous Gulf oil spill.
Image:BP CEO Tony Hayward
BP CEO Tony Hayward, left, faces photographers as he takes his seat to testify before a House panel Thursday. Hayward was grilled for more than seven hours. Michael Reynolds / EPA

“I can’t answer that question.”

That was the gist of much of Thursday's Capitol Hill testimony from BP CEO Tony Hayward, who faced a severe grilling but shed little light on the company’s disastrous Gulf oil spill.

Despite major developments surrounding the catastrophe in the past few days that helped bring some legal certainty to Gulf Coast residents and BP investors, the most fundamental question faced by the company, lawmakers and the nation remains unanswered: When will BP's runaway well stop spewing oil and gas into the Gulf of Mexico?

The past four days have brought major advances, including Wednesday's agreement by BP to establish an independently run $20 billion fund to pay claims arising from the spill.

The agreement was a victory for President Barack Obama who summoned Hayward and other BP officials to a White House meeting after high-profile, two-day visit to the affected region and a Tuesday night televised address, his first from the Oval Office.

But for all that there are still more questions than answers about the worst oil spill in U.S. history. When will BP stop the flow of oil that is killing wildlife and destroying livelihoods in the Gulf region? How much oil is actually leaking from the 59-day-old gusher? What will it ultimately cost to clean it up? How much damage has it done to the region’s economy?

A grim-faced Hayward, facing withering questions from lawmakers in an all-day hearing, was not able to shed much light.  “I can’t answer that question,” “I can’t recall, ” “That’s a decision I was not party to” and “I don’t know,” he replied calmly, sticking to his script.

“I’m not stonewalling,” he told Rep. Henry Waxman, D-Calif., at the hearing of the House Energy and Commerce subcommittee on oversight and investigations. “I simply was not involved in the decision-making process.”

The committee’s anger and frustration with Hayward was palpable.

"We are not small people, but we wish to get our lives back," Rep. Bart Stupak, D-Mich., the subcommittee chairman, told Hayward, referring to a comment Wednesday from BP Chairman Carl-Henric Svanberg about how BP sympathized with the "small people" of the Gulf and Hayward's earlier remark that he wanted his "life back."

Some panel members did little to hide their disdain for the Hayward’s assurance that the company was devoted to following the industry’s best safety practices.

“I had no prior knowledge of the drilling of this well, none whatsoever. With respect, sir, we drill hundreds of wells a year around the world,” Hayward said.

“That’s what’s scaring me now,” retorted Rep. Michael Burgess, R-Texas.

Members of the panel grilling Hayward repeated previous testimony from several hearings outlining the company’s multiple failures that lead up to the spill, including testimony from the heads of some of BP’s main rivals, who faulted various decisions that were apparently made to save time and money.

There was also little new information on another major question: How much oil is flowing from the well? That’s one of the most pressing issues since the spill began April 20 after an explosion that killed 11 workers and sank the Deepwater Horizon drilling rig.

Based on the government’s latest estimates, as of Thursday morning the BP well has gushed between 66 million and 120 million gallons of oil. Newly disclosed documents obtained by The Associated Press show that after the rig sank, BP made a worst-case estimate of 2.5 million gallons a day flowing into the Gulf of Mexico, far more than the company had said publicly until this week.

The undated estimate by BP was apparently made sometime last month, and it reflected the situation as it was understood by BP at the time, said Sen. Chuck Grassley, R-Iowa, the senior Republican on the Senate Finance Committee, which is also probing the spill.

"Certainly Americans have a right to know that BP made these estimates, the date these estimates were determined and why they were not disclosed at that time," Grassley said.

BP apparently still has some friends in Congress, however. While hearings have been peppered by harsh criticism, Rep. Joe Barton, R-Texas, apologized to BP at Thursday’s hearing, describing the compensation fund demanded by the White House as a "$20 billion shakedown."

"I'm ashamed of what happened in the White House,” said Barton, who has received at least $100,470 in political contributions from oil and gas interests since the beginning of 2009, the second-highest amount among all the committee members.

White House press secretary Robert Gibbs fired back that it was “shameful” that Barton “seems to have more concern for big corporations that caused this disaster than the fishermen, small business owners and communities whose lives have been devastated by the destruction."

The $20 billion fund BP has set up could be just a down payment on the cost of cleaning up the Gulf spill and paying damage claims. But BP has plenty of cash to draw from, including an average of $20 billion in profits annually, $6 billion in cash and some some 18 billion barrels of proven oil reserves worth $1.2 trillion at current prices.

Though the total cost won’t be known until the well is capped, Wall Street is already combing through the company's financial statements and working on spreadsheet scenarios. At Oppenheimer & Co, oil industry analyst Fadel Gheit starts with a worst-case scenario of $6 billion in cleanup costs and $6 billion in damage claims every year for 10 years. That works out to $120 billion.

Even if the payout reaches that level, Gheit said, the company would generate some $14 billion a year of "free cash flow" and still have enough cash to pay shareholders half the $2.6 billion quarterly dividend BP recently suspended.

That assumes the company stands by its promise not to try to limit its liability. Some analysts have observed the company could make a legal case that its liability should be limited to the assets of its North American subsidiary, which has assets of about $50 billion. But given the backlash it would face, it's not likely to pursue that strategy any time soon.

This week’s hearings have also highlighted a partisan fault line in Congress over who else is to blame.

The White House and many Democrats have blasted the “cozy” relationship between the oil industry and the Minerals Management Service, the Interior Department regulator that oversaw Gulf drilling. Some blame a Bush administration energy policy designed to promote more deepwater drilling.

But Republicans counter that Obama has had more than a year to fix longstanding and well-documented mismanagement at the agency. That was the subject of another hearing Thursday at the House Natural Resources Committee.

The acting inspector general at the Interior Department, which oversees MMS, told that panel that the agency is going about the probe of the BP spill all wrong and that the agency needs a complete overhaul. New regulations aren’t enough, she testified. The entire culture of the place needs to change.

Not only are MMS inspectors underpaid and inadequately trained, they also have too many rigs to monitor, said Kendall. She noted that just 60 MMS inspectors are responsible for 4,000 rigs in the Gulf of Mexico, while the Pacific Coast has 10 inspectors for 23 facilities.