Food for thought, anyway.
The sky was a slate gray and the clouds hung low on the morning of April 19, 2010, as one of ExxonMobil’s nine corporate jets, Rex Tillerson aboard, made its gentle descent into Houston. The runway was still wet with overnight rain when the Gulfstream touched down and the CEO of the single most profitable corporation in the world settled into a car to be whisked to the Hilton Americas-Houston, where he was to be feted by nearly a thousand banqueters. The annual Jones Award from the World Affairs Council of Greater Houston honored “an individual who—in the spirit of Jesse H. and Mary Gibbs Jones—has contributed to the international life of our city.” This was a hometown award all the way through, almost always given to a Houston business titan, never mind the caveats or asterisks. Its 2000 honoree, the criminally indicted and glut-shamed Kenneth Lay, of Enron, has never been struck from the council’s list of past recipients.
The temperature was still down in the sixties, unusually cool for April in east Texas, as Tillerson rode into downtown. By the time the Cornish game hens were plated, though, the sun had begun to peek through in the sky. The world was brightening. This happy uptick in weather matched the general disposition of Rex Tillerson and his ExxonMobil team that spring. There were plenty of dark clouds still out there—the eighteen-month recession was still a rolling threat of foreclosure, job loss, and drained retirement accounts for a sizable portion of the American population—but the sun was beginning to pop through. West Texas Intermediate crude was a long way from its $145-a-barrel high before the financial meltdown, but it had climbed from all the way down near $30 in the last week of 2008 to $81.52 on that cool April Monday. ExxonMobil was about to report a net profit of more than $6 billion in the first quarter of 2010, up 38 percent over the previous year.
The U.S. Securities and Exchange Commission and its international equivalent, the Netherlands Competition Authority, had also both given the green light to Tillerson’s proposed merger with XTO, which would soon make ExxonMobil not just one of the great oil companies on earth but America’s largest producer of natural gas. And XTO’s technology could travel anywhere. The company had plans to exploit shale deposits in central Europe and Canada and the Middle East.
Tillerson was, in fact, using ExxonMobil’s extraordinary cash reserves to fine effect all over the world. He was kick-starting multibillion-dollar projects in Ghana and Papua New Guinea (within reach of the giant Asia markets), expanding his already enormous drilling operations in Nigeria and Equatorial Guinea, putting on line a fourth liquefied natural gas plant in Qatar (the nation of Qatar being the current world leader in LNG production/exports, but watch out!). Team Tillerson had also just outbid Russia’s Lukoil and the China National Petroleum Corporation to win a foothold in an Iraqi oil field believed to hold nearly ten billion barrels.
Sure, a corporation the size of ExxonMobil, with hundreds of far-flung subsidiaries, was going to have a few headaches and publicity hiccups, as well as a few nicks and cuts to its shareholders: a guilty plea and $600,000 in fines and fees for violating the Migratory Bird Treaty Act by whacking a total of eighty-five feathered beings (members all of protected species); a $32.2 million payout to settle allegations it had cheated the federal government and Indian tribes out of royalty payments; $17.5 million to avoid defending against a claim that it had, as the Justice Department alleged in a press release three days before Tillerson’s trip to Houston, “illegally discharged hundreds of tons of volatile organic compounds into the air each year from the bulk gasoline terminals on Cabras Island in Guam and in the Lower Base area of Saipan.” But that was just the cost of doing business in an industry locked in a violent daily battle with Mother Nature. To Exxon, those were minor setbacks, easily dwarfed by all the great news the company was fixing to report to its shareholders. After nearly two decades of frustrating and profitless effort, Rex Tillerson believed he was about to land his White Whale. He was nearing unprecedented new agreements in Russia, the country that held tens of billions of barrels of proven oil reserves, along with more gas reserves than any in the world, and a country that badly needed the expertise and technology (XTO!) that ExxonMobil could provide.
So Tillerson, sporting a surprisingly unconservative royal blue shantung suit, and a soft yellow silk tie, was feeling mighty okay when he stepped to the podium in the Lanier Grand Ballroom at the Hilton Americas-Houston. The title of his speech was “The Future of Energy,” but this being a civic award, Tillerson, who was known at corporate headquarters as the Eagle Scout, took some time to expound on the idea of citizenship. “We have a long record of going beyond our primary responsibility of delivering the energy that benefits our consumers, shareholders and business partners,” said Tillerson. “As a company and as individuals, the men and women of ExxonMobil are dedicated to being good corporate citizens wherever we operate. We believe this ideal is so integral to our long-term success that we have built it into our business model and our corporate governance. In other words, we believe our commitment to citizenship is fundamental to our year-to-year success as a company.”
Rex’s team had all its oars in the water, he wanted it known that day, and ExxonMobil was pulling hard to get the country out of the hideous recession. “Leaders in government and in business agree that we face an urgent need to revitalize our economy and spur job creation,” he told the upscale Hilton crowd, whose needs were rather less urgent than those of the great unwashed. “To achieve these goals, we must unleash the extraordinary power of private citizens to seize new opportunities in free markets….If the private sector knows that government will stay the course and resist the temptation to over-regulate, it can invest with confidence.” He cautioned a few times that day about the perils of overregulation: “Often the policy changes that are most damaging to entrepreneurs and innovation flow from a fundamental mistrust in the private sector.”
Despite the unmistakable don’t tread on me theme of his remarks, Tillerson “was willing to throw the Democratic president a bone,” wrote The Houston Chronicle. “When it comes to energy policy, which Tillerson said is still lacking, ‘[President Obama] is about as good as anybody else has been.’ ” A reporter from Offshore Engineer quoted him saying, “The president is trying to understand [energy], and he is trying to make some steps which, in his view, are very well intended.” Aww, nice president, he’s trying.
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Tillerson’s signature composure and button-down élan—the Tao of Rex—were sorely tested in the weeks that followed that happy Houston gala. Less than forty-eight hours after the luncheon, Tillerson woke to the news that a drilling rig in the Gulf of Mexico, forty miles offshore—not far from Representative Steve Scalise’s excellent rig-side fishing waters—had suffered what a Coast Guard spokesman termed a “catastrophic” explosion. The pictures that day were ugly and compelling. They showed emergency boats surrounding the Deepwater Horizon and waging what looked like an unwinnable battle against the fire raging from the deck of the rig. Black smoke billowed up hundreds of yards above the water and took flight on the wind.
The casualty news was grim. Seventeen of the 126 workers had been medevacked off the rig with injuries, a few in critical condition. Eleven workers were still missing and assumed (correctly, it would transpire) to have been killed in the explosion. “We are deeply saddened by this event,” was the first statement from a spokesman for the company that owned the drilling rig. “Our thoughts and prayers are with the crew members of the Deepwater Horizon and their families.” It was the sort of boilerplate statement Tillerson would recognize from his own corporation’s releases. When workers died in explosions or flash fires or security breaches at ExxonMobil drilling rigs or refineries or pipeline facilities—from Beaumont, Texas, to Southampton, England, to Singapore to Papua New Guinea—the corporation, according to its spokesperson, was always and inevitably “deeply saddened.” That phrase, along with others such as “this was clear
ly an accident and we are working to respond to the immediate needs” and “we comply with all applicable laws and regulations,” was right there in the preferred pre-drafted press release language available for quick deployment by the ExxonMobil public relations team.
At least Deepwater Horizon was operated not by ExxonMobil but by one of its chief rivals, British Petroleum, or BP. The other silver lining for Tillerson—as well as for the industry at large—was that the damage appeared, in the first few days anyway, to be contained. There was a theoretical possibility that the rig itself would eventually sink to the bottom of the seabed, 5,000 feet below, dumping into the Gulf of Mexico its own 700,000 gallons of diesel fuel. But that didn’t seem to be the way this was going. And, also, the integrity of the 18,360 feet of cement-encased well pipes, which extended more than 13,000 feet beneath the seabed, did not appear to have been breached. “We are only seeing minor sheening on the water,” the Coast Guard commander on scene said that first day. “We do not see a major spill emanating from this incident.” A BP vice president seconded that assessment: “If there is any pollution, we believe it is minor pollution because most of the oil and gas is burning.” The director of an industry-friendly petroleum institute at the University of Texas sought to allay any (likely irrational) public fear. “They’ve built safety into the operations,” he said, “because they know that if you have a fire on an isolated rig that’s out in the Gulf, you have a real issue.”
But as the Deepwater Horizon continued to burn and then listed dangerously out over the Gulf of Mexico, BP and the rig’s owner, Transocean, and the drilling services company Halliburton started to seem flummoxed. The whole truth of the matter would only rise to the surface slowly, over the next few weeks and months and even years. Although Transocean asserted that the company had simply been carrying out the routine final steps of putting the well on line, with “no indication of any problem” right up to the moment of the explosion, the truth was that warning signs had been blaring for days before the explosion, and BP, Transocean, and Halliburton had all been cavalier and sloppy. The piping from the Deepwater Horizon ran down 5,067 feet to the seafloor, and then 13,300 feet through hard rock to the pay zone. There are enormous pressures at that depth, which must be carefully monitored and controlled in order to avoid a “kick,” which is the unwanted and uncontrolled flow of oil and gas into the well. A serious kick, if not contained, can shoot flammable oil and gas back up toward the rig. Worst case, such a blowout leads to an explosion. Drillers take pains to build in multiple fail-safes to guard against this sort of disaster. The last and most important is the blowout preventer, which in the case of Deepwater Horizon sat on the seafloor, between the 13,300 feet of subterranean piping and the 5,000 feet of riser leading up through seawater to the rig. The blowout preventer, which is operated by electrical and hydraulic power, is designed with a couple of nifty safety features. It can seal up the pipes with rams or rubber devices, like a stopper, or, as a last resort, it is equipped with a pair of sharp metal blades that cut the drill pipe and shut the well.
But, according to the federal investigators, most everything that could have gone wrong on the Deepwater Horizon did go wrong. Halliburton had used crappy cement to seal the well bore. The crew was a bit blasé about monitoring and controlling the pressure in the days leading up to the blowout. And once oil and gas kicked all the way up to the rig itself, the blowout preventer’s stoppers and pipe cutters failed. Differentials in pressures caused the piping (also crappy) to buckle, and the flammable oil and gas just kept racing up into the rig until it exploded. The first explosion on the rig shut off all electrical and hydraulic power to the blowout preventer. Fortunately, those last-resort blades have two separate backup battery systems that will trigger the cutting of the pipes. Unfortunately, both were mis-wired. Fortunately, one was so ham-handedly mis-wired that it actually made a cut. Unfortunately, the crappy piping was already so buckled that it was only partially cut.
The U.S. government’s final assessment of the cause of the blowout was damning to all involved. BP, Transocean, and Halliburton had cut corners to save both time and money, increasing the chance of catastrophe. “It is an inherently risky business given the enormous pressures and geologic uncertainties present in the formations where oil and gas are found,” the National Commission on the BP Deepwater Horizon Oil Spill said in its final report. “Notwithstanding those inherent risks, the accident of April 20 was avoidable. It resulted from clear mistakes made in the first instance by BP, Halliburton, and Transocean, and by government officials who, relying too much on industry’s assertions of the safety of their operations, failed to create and apply a program of regulatory oversight that would have properly minimized the risks of deepwater drilling.” In other words, it takes a village to make a disaster this big. This wasn’t one screwup by one bad employee or even one bad company; this was a whole industry screwup, and—maybe worse than that—a government that screwed up by deferring to that industry.
Here’s the crux of the matter. Oil and gas companies do the kind of risky, capital-intensive work that the average Joe, the average mom-and-pop business, even the average country, doesn’t do for itself. In so doing, they can make a spectacular pile of money, but they can also make a tremendous amount of mess. And ruin. And even catastrophic, polluting apocalypse, when they really put their shoulder into it. But they are also big enough and hold enough sway that even big powerful governments tend to defer to them when it comes to how to best police their behavior. What could you, in Congress, possibly know about oil that Rex Tillerson doesn’t? How could you, with your lily-livered environmental worry beads, think to weigh in on what might go wrong when pumping oil up through five thousand feet of one of the richest fisheries on earth? The oil industry is fairly capable when it comes to extracting resources; it’s very capable when it comes to lobbying against any and all bothersome rules that might constrain it; but it’s not that capable of anything else. It’s ridiculously incapable of cleaning up after itself, for example.
Had the damage done by the initial Deepwater Horizon explosion been capped at eleven dead, seventeen wounded, and an unwanted but “minor sheening on the water,” that damning report—and a few cursory updates to offshore drilling regulations—would likely have been the last anybody ever heard of the event. But it didn’t work out that way. By the time the Deepwater Horizon rig did disappear below the surface of the Gulf, about thirty-six hours after the first explosion, aerial photography revealed an oil slick five miles long. Two days later, the Coast Guard commander admitted that the last line of defense, the blowout preventer, had failed and was probably useless, that as much as a thousand barrels of oil per day were leaking from the well, and that nobody was entirely sure how to make it stop. BP began preparations to drill a relief well to connect to the blown-out well, plug it, and stop that thousand-barrel-a-day spew, but admitted it would take months to complete. A few days later, a National Oceanic and Atmospheric Administration scientist raised the estimate of the spill from a thousand barrels a day to five thousand. Residents of the Gulf Coast states braced for impact as the oil slick on the surface continued to spread toward marshes and wetlands. The Coast Guard, for the first time in history, trotted out the designation of a “Spill of National Significance” to describe the seriousness of the unfolding catastrophe.
The intensity of the concern was not matched by the intensity of the cleanup effort. BP simply didn’t have the tools to do much. No oil company did; that’s not what they do. BP did have a bang-up 580-page response plan prepared by an outside consultant that asserted its ability to tackle a spill of maximum magnitude, like 250,000 barrels per day. The BP plan claimed the company had access to equipment and means to capture 491,721 barrels per day and storage equipment for 299,066 barrels (such specificity!). Problem was, in the actual event, it couldn’t even handle the estimated 5,000. It tried everything in its ridiculously meager arsenal. The company paid for controlled b
urns on the ever-widening oil slick, then began pouring dispersants onto the surface water. By the middle of May, BP had applied more than 300,000 gallons of dispersant, compared with the 5,500 gallons Exxon had applied following its horrifying national-record spill in Alaska in 1989.
Cleanup workers in the Gulf began complaining of nausea and other side effects from prolonged exposure to the dispersants, but they were reassured the fluids were not toxic, even while BP refused to divulge the chemical recipe. The dispersants “are actually less toxic than detergent soap which you would flush down your sink every day,” Rex Tillerson would later explain. Which was not necessarily true, but was much more helpful to the industry cause than statements from BP’s CEO, Tony Hayward, who was just beginning a short career as his company’s one-man public relations wrecking crew. “The Gulf of Mexico is a very big ocean,” Hayward explained in his Etonian British accent. “The amount of volume of oil and dispersant we are putting into it is tiny in relation to the total water volume.”
Bad enough that these dispersants might possibly be adding to the environmental damage as opposed to subtracting from it. Worse than that, the dispersants didn’t work. In fact, nothing seemed to work. And nobody had any real answers to either of the vital questions: How do we stop the oil leak? How do we clean up what has leaked?
The five Minerals Management Service employees stationed at the command center in Houston were not equipped to provide any real guidance or assistance to the BP engineers trying to find answers to these two central questions. It was, said one MMS factotum in a burst of honesty, like “standing in a hurricane.” Oil executives from other companies, like Rex Tillerson, kept their distance from the entire affair, even when the Obama administration first started making noise about a moratorium on offshore drilling. The governor of Texas, praise be, came out swinging in defense of oil and gas. “I hope we don’t see a knee-jerk reaction across this country that says we’re going to shut down drilling in the Gulf of Mexico, because the cost to this country will be staggering,” Rick Perry said as the oil slick spread and made its first landfall. “From time to time there are going to be things that occur that are acts of God that cannot be prevented.” God didn’t fail to properly cement that drill pipe, it should be noted, but alas, God would be blamed.
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