National Commission on the

BP DEEPWATER HORIZON OIL SPILL AND OFFSHORE DRILLING

Attachment I
Agenda

National Commission on the BP Deepwater Horizon Oil Spill and Offshore Drilling

AGENDA
3rd Meeting Monday, September 27, 2010 and Tuesday, September 28, 2010 Washington Marriott Wardman Park 2660 Woodley Road, NW, Washington, DC 20008

8:00 am 9:00 am

On-Site Registration Call to Order Elena Melchert, U.S. Department of Energy, Designated Federal Officer (DFO) Opening Remarks by Commissioner Co-Chairs Senator Bob Graham and William K. Reilly

9:10am

Panel I (a): Decision-Making Within the Unified Command Admiral (ret.) Thad Allen, National Incident Commander for the Unified Command

9:45 am

Panel I (b): Decision-Making Within the Unified Command Captain Edwin Stanton, Sector Commander, New Orleans, U.S. Coast Guard Doug Suttles, Chief Operating Officer for Exploration and Production, BP Richard Harrell, Mississippi Department of Environmental Quality William "Billy" Nungesser, President of Plaquemines Parish, Louisiana

11:05 am 11:15 am

Break Panel H: The Amount and Fate of the Oil Dr. Bill Lehr, Senior Scientist, Office of Response and Restoration, NOAA Mark K. Sogge, Chief of Staff, U.S. Geological Survey, Western Region, Director’s Office Dr. Ian MacDonald, Professor of Oceanography, Department of Earth, Ocean and Atmospheric Science, Florida State University Dr. Richard Camilli, Assistant Scientist, Department of Applied Ocean Physics and Engineering, Woods Hole Oceanographic Institution Dr. Terry Hazen, Senior Scientist, Head of the Ecology Department and DOE Distinguished Scientist, Earth Sciences Division, Lawrence Berkeley National Laboratory

National Commission on the BP Deepwater Horizon Oil Spill aud Offshore Drilling

AGENDA
3rd Meeting 12:30 pm 1:30 pm Lunch Break

Panel HI (a): The Use of Dispersants The Honorable Lisa Jackson, EPA Administrator

2:00 pm

Panel HI (b): The Use of Dispersants Rear Admiral Mary Landry, Commander, Eighth Coast Guard District, U.S. Coast Guard Dr. Nancy Kinner, University of New Hampshire Co-Director, Coastal Response Research Center

2:35 pm

Panel IV: The Future of Offshore Drilling The Honorable Ken Salazar, Secretary of the Interior The Honorable David J. Hayes, Deputy Secretary of the Interior Michael R. Bromwich, Director, Bureau of Ocean Energy Management, Regulation, and Enforcement

3.35 pm

Panel V (a): Response in the Arctic The Honorable Mark Begich, U.S. Senator, Alaska

4:00 pm

Panel V (b): Response in the Arctic Pete Slaiby, Vice President for Exploration & Production, Shell Alaska Captain John CapEs, Chief, Office of Incident Management and Preparedness, U.S. Coast Guard Edward Itta, Mayor of North Slope Borough, Alaska Dr. Dennis Takahashi-Kelso, Executive Vice President, Ocean Conservancy

4:50 pm 5:00 pm 5:30 pm

Break Public Comment Adjourn

National Commission on the BP Deepwater Horizon Oil Spill and Offshore Drilling

AGENDA
3rd Meeting
Tuesday, September 28, 2010 Washington Marriott Wardman Park 2660 Woodley Road, NW, Washington, DC 20008

8:00 am 9:00 am

On-Site Registration Call to Order Christopher A. Smith, U.S. Department of Energy, Designated Federal Officer (DFO) Opening Remarks by Commissioner Co-Chairs Senator Bob Graham and William K. Reilly

9:10 am

Panel I: The Spill, Recovery and the Legacy of Mississippi Delta Management Chris Johns, Editor in Chief, National Geographic John Barry, Author, Rising Tide, member of the Louisiana Coastal Protection and Restoration Authority

9:40 am

Panel II: Impacts: Environmental and Economic Dr. John Farrington, Interim Dean, School of Marine Science and Technology, University of Massachusetts, Dartmouth Jane Lyder, Deputy Assistant Secretary, Fish and Wildlife and Parks, Department of the Interior Lt. Governor Scott Angelle, Louisiana

10:20 am 10:30 am

Break Panel HI: Elected Officials: The View from the Region The Honorable Mary Landrieu, U.S. Senator, Louisiana The Honorable Haley Barbour, Governor of Mississippi

11:30 am

Panel IV: Impacts: The Gulf and Seafood Safety Dr. Steven Murawski, Director of Scientific Programs and Chief Science Advisor, National Marine Fisheries Service, NOAA Dr. Bill Walker, Director of the Mississippi Department of Marine Resources Timothy Fitzgerald, Marine Scientist, Oceans Program, Environmental Defense Fund

National Commission on the BP Deepwater Horizon Oil Spill and Offshore Drilling

AGENDA
3rd Meeting 12:30 pm 1:30 pm Lunch Break Panel V: Legal Authorities for Funding and Restoration Management Richard Stewart, Professor of Law, New York University James Tripp, Senior Counsel, Environmental Defense Fund Stan Senner, Director of Conservation Science, Ocean Conservancy 2:45 pm 3:00 pm Break Panel VI: The States & The Federal Government: Defining a Shared Path for Gulf Restoration Garret Graves, Director, Louisiana Office of Coastal Activities Terrence "Rock" Salt, Principal Deputy Assistant Secretary of the Army for Civil Works The Honorable Tom Stricldand, Assistant Secretary for Fish and Wildlife and Parks, Department of the Interior Brian McPeek, North American Regional Director, The Nature Conservancy 4:15 pm 4:30 pm 5:30 pm Break Public Comment Adjourn

APPROVED: Ch}l~topher A. Smith, Designated Federal Officer Date

National Commission on the

BP DEEPWATER HORIZON OILSPILL AND OFFSHORE DRILLING

Attachment 2
Meeting Transcript

NATIONAL OIL SPILL COMMISSION MEETING CONDUCTED ON MONDAY, NOVEMBER 8, 2010
1 (Pages 1 to 4) 1 3
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

NATIONAL COMMISSION ON THE BP DEEPWATER HORIZON OIL SPILL AND OFFSHORE DRILLING ---------------------------x FIFTH MEETING, DAY ONE : Transcript of Proceedings : ---------------------------x Monday, November 8, 2010 Grand Hyatt Washington 1000 H Street, NW Washington, DC (202) 582-1234 9:00 a.m.

CONTENTS Call to Order 4 Opening Remarks by Co-Chair Graham 7 Opening Remarks by Co-Chair Reilly 9 Presentation by Chief Counsel Bartlit 13 Presentation by Mr. Sankar 75 Presentation by Mr. Grimsley 116 Presentation by Chief Counsel Bartlit 155 PANEL DISCUSSION 1 Panel Discussion with BP, Transocean and 184 Halliburton: Mark Bly, Executive Vice President of Safety and Operational Risk, BP Bill Ambrose, Director of Special Projects, Transocean John Gisclair, Insite Support Service Coordinator, Halliburton/Sperry Sun Drilling Service Richard F. Vargo, Jr., Gulf of Mexico Region Manager - Cementing, Halliburton

Job No.: 5957 Pages: 1 - 398 Reported by: John L. Harmonson, RPR
2

4
1 2 3 4

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

National oil spill commission meeting held before:

SENATOR BOB GRAHAM, CO-CHAIR WILLIAM K. REILLY, CO-CHAIR FRANCES G. BEINECKE, MEMBER DONALD BOESCH, MEMBER TERRY D. GARCIA, MEMBER CHERRY A. MURRAY, MEMBER FRANCES ULMER, MEMBER CHRIS SMITH, Designated Federal Official

5 6 7 8 9 10 11 12 13 14 15 16 17

Pursuant to Notice, before John L. Harmonson, Registered Professional Reporter in and for the District of Columbia.

18 19 20 21 22

PROCEEDINGS MR. SMITH: Good morning, everybody, and welcome to this the fifth meeting of the National Commission on the BP Deepwater Horizon Oil Spill and Offshore Drilling. I am hereby calling this meeting to order. My name is Chris Smith and I am the designated federal official for this Commission. I also serve as the Deputy Assistant Secretary for Oil and Natural Gas for the U.S. Department of Energy. I'll be helping to guide this group through two days of busy hearings today and tomorrow. Before we proceed, I would like to familiarize everybody with the safety procedures for this building. In case of fire or emergency, you'll see the main exits to my left, your right. Simply exit, turn left and go up the escalators and you will see the exits to the street. So that's in case of emergency. I'd also like everybody to turn your phones and BlackBerries to silent or vibrate. The President established this bipartisan

PLANET DEPOS 888.433.3767 | WWW.PLANETDEPOS.COM

NATIONAL OIL SPILL COMMISSION MEETING CONDUCTED ON MONDAY, NOVEMBER 8, 2010
2 (Pages 5 to 8) 5
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

7
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

commission to examine the root causes of the BP Deep Water Horizon oil disaster and provide recommendations on how we can prevent future accidents offshore and mitigate their impacts should they occur. The President appointed two co-chairs to lead the Commission, former Senator Bob Graham of the state of Florida, and the Honorable William Reilly, who led the Environmental Protection Agency under President George H.W. Bush. The President -- The Commission is rounded out with five other distinguished Americans who are selected because of their extensive scientific, legal and knowledge of offshore operations. They include Frances Beinecke, the president of the Natural Resources Defense Council; Dr. Donald Boesch, president of the University of Maryland, Center for Environmental Science; Terry Garcia, the executive vice president of the National Geographic Society; Dr. Cherry Murray, dean of the Harvard School of Engineering and Applied Sciences; and Fran Ulmer, chancellor of the University of Alaska at Anchorage.

via the website, which is www.oilspillcommission.gov. That, again, is www.oilspillcommission.gov. And at this point I would like to hand the floor over to our two co-chairmen, Senator Bob Graham and the Honorable William Reilly. CO-CHAIR GRAHAM: Thank you very much, Mr. Smith. We appreciate the service that you have provided throughout our hearings. As a commission, we've been charged by the President with helping the American people understand the root causes of the largest oil spill in American history, a disaster that claimed the lives of 11 workers on the Deepwater Horizon rig. We have held four public meetings thus far and numerous site visits. We have heard from the people of the Gulf, learned about regulation of offshore drilling, examined the important issues of response and Gulf restoration, and had our first occasion to deliberate on key findings. Today we turn to an important piece of the puzzle. Our chief counsel, Mr. Fred Bartlit, will give an overview of what he and his team have learned

6
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

8
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

This Commission is conducting its work in compliance with the Federal Advisory Committee Act which sets a high standard for openness and transparency. And as such, today's hearing are being broadcast via live video feed and are being held here in this public forum. Before I hand the event over to our two distinguished co-chairs, I would like to provide a quick summary of today's agenda. This morning we will be hearing a presentation by the Commission's chief counsel, Fred Bartlit. Mr. Bartlit will lead a discussion on the ongoing investigation on the causes of the accident and will present some preliminary findings for the Commissioners to consider and deliberate today and in future public sessions. We'll break for lunch at 12:30 and reconvene at 1:30 for a panel discussion with BP, Transocean and Halliburton. There will not be a public comment period today, but there will be one tomorrow afternoon at 5:00 p.m., and any member of the public who wishes to submit a written comment to the Commission may do so

to date about what happened on the rig. I believe this will be the clearest presentation the American people have received to date of what led to this tragedy. Fred Bartlit is the right man for this job. He is widely respected, a tenacious lawyer, has enormous credibility thanks to his unquestioned reputation as a straight-shooter. His experience with this issue is very deep. He led the influential investigation of the last major disaster on an offshore rig, the Piper Alpha explosion in 1988 in the North Sea. The commission that investigated the Columbia Shuttle disaster made a very important point. Complex systems fail in complex ways. There is a natural tendency to focus on one crucial decision or misstep as the cause of disaster. But as they observed, doing so gives a dangerously incomplete picture of what actually happened. We will learn for the next two days the many ways in which this complex system failed. We are not looking for scapegoats, but we do believe we have

PLANET DEPOS 888.433.3767 | WWW.PLANETDEPOS.COM

NATIONAL OIL SPILL COMMISSION MEETING CONDUCTED ON MONDAY, NOVEMBER 8, 2010
3 (Pages 9 to 12) 9
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

11
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

an obligation to uncover all relevant facts. Only by understanding what happened can we extract the important lessons from the Deepwater Horizon disaster. There is much that we know now. There are still areas of uncertainty and disagreement. These meetings will go a long way in clarifying where we stand. I want to personally thank, and on behalf of the Commission, Mr. Bartlit and his dedicated team for their work so far. I also would like to thank our witnesses today for their cooperation with the Commission. I would now turn the gavel over to co-chair, Mr. Bill Rielly. CO-CHAIR REILLY: Thank you, Bob. Good morning. The disaster in the Gulf undermined public faith in the energy industry, in government regulators, and even our ability as a nation to respond to crises. As a commission, it is our hope that a thorough and rigorous accounting, combined with

have an obligation to ensure that such a set of conditions offshore must be subject to a safety culture that is protective of lives, livelihoods and the environment. Extracting the energy resources to fuel our cars, heat our homes, power our industry and light our buildings can be dangerous. Our reliance as a nation on fossil fuels will continue for some time. And the bulk of new oil and gas discoveries lie not on land but under the water. The risks taken by the men and women working in energy exploration benefit all Americans. We owe it to those who manage and accept those risks to ensure that their working environment is as safe as possible. Over the next two days we will learn from Fred Bartlit and Sean Grimsley and Sam Sankar about what went wrong on the Deepwater Horizon. This detailed account of what led to the loss of 11 lives and the largest oil spill in American history will guide our thinking as we move to final deliberations on findings and recommendations.

10
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

12
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

constructive suggestions for reform, can help restore public trust. Our prior meetings have confirmed that investigations -- that investments in oversight, safety and response capabilities failed to keep pace with the rapid move into deep water. It appears that at least in some quarters that business and regulatory culture exhibited inattention and a false sense of security. Over these next two days we will be looking in detail at what happened on the rig. Our investigative staff has uncovered a wealth of specific information that greatly enhances our understanding of the factors that led to the blowout. One question I think we all have and have had from the beginning is to what extent this was just a unique set of circumstances unlikely to be repeated, or was it indicative of something larger. In other disasters, we find recurring themes of missed warning signals, information silos, and complacency. Without prejudging our findings, no one can dispute that industry and government together

So today we are fulfilling the first of the fundamental tasks that -- and most fundamental tasks that the President gave to us in the executive order establishing this Commission, and that is determine the cause, find out what happened. I will be most interested in the lessons we may learn today that help inform the Commission's recommendations for the future for how we create policies that prevent something like this from ever happening again. I want to remind all of you here that the information that you will be exposed to today that was gathered by our investigative team was achieved without the power to subpoena witnesses or evidence. I compliment the companies whose cooperation made this possible. I compliment Fred Bartlit whose reputation earned the kind of trust and cooperation that this displays. And to those few senators who blocked this Commission from receiving subpoena power, let me just say that I hope you are pleasantly surprised by what we have learned and not disappointed.

PLANET DEPOS 888.433.3767 | WWW.PLANETDEPOS.COM

NATIONAL OIL SPILL COMMISSION MEETING CONDUCTED ON MONDAY, NOVEMBER 8, 2010
4 (Pages 13 to 16) 13
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

15
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

With that, I will turn to our chief counsel, Fred Bartlit. MR. BARTLIT: Thank you, Bill. I want to start by setting the stage, what we are going to accomplish today and how we are going to go about it. But first it's very easy when you're enmeshed in these technical engineering and scientific details against a background of huge financial exposure, it's easy to forget why we're here. We're here because 11 men died. And I've asked prior to today, and I'm going to ask today for all of us -- we're all lawyers most of us -- to put aside our natural desire to be advocates and keep in mind these brave, hard-working men that died on the rig that day. And keep in mind that we will honor them if we can get to the root cause without a lot of bickering and self-serving statements. A hundred years from now we want the world to say, they changed the safety regime in the Gulf of Mexico offshore drilling. So what I would like to do is start by having a few moments of silence where we

talk for three hours, we'll split it up. I'll be taking part of it. My partner Sean Grimsley will be taking part of it. Sam Sankar will be taking part of it. It's just -- As a matter of human interest, it's quite interesting that these two young men clerked together for the legendary United States Supreme Court Justice Sandra Day O'Connor. And they were picked back as young men to be the best and the brightest. And working on this Commission, they've shown that she was smart in picking them. Then this afternoon we will have witnesses from Transocean, Halliburton and BP up here, and we will ask questions. This is not a cross-examination. It's not a trial. We'll be trying to find out what the areas of differences are and what the areas of agreement are. Because it will save us a lot of time in writing up our report if we can put to side issues where there is disagreement and we can let the Commission know what the areas of disagreement are that they might need to focus on, and we might then have to suggest

14
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

16
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

each reflect on these men that are gone now, and we each promise their families that we will honor them by getting to the root cause and being sure this never happens again. (A moment of silence.) MR. BARTLIT: Now, what are we going to accomplish? We very carefully hewed to the presidential mandate, which is examine the facts and circumstances surrounding the root cause of the blowout. We are not assigning blame. We are not making any legal judgments as to liability. We are not considering negligence or gross negligence or any legal issues at all. We're trying to walk a fine line between looking at root cause and not getting into the legal issues. It's a hard thing to do, and maybe we'll accidentally step across the line. But our goal is to look at cause, not liability. We'll first explain to the public what happened 18,360 feet down at the bottom of the Macondo well. Because nobody wants to hear one person talk for three hours, and maybe one person doesn't want to

other ways, perhaps, of resolving some of these issues. Then we will inform everyone at the end of the morning of our tentative views on root cause, and we -- the other -- the parties have these tentative conclusions. They are tentative. We want to be sure we get it right. They will be invited to comment on any of our tentative conclusions. Everybody will get a copy. And if any of them or any parties want to file written elaborations on these issues within five days, we invite that. The more information we can get, the better. Tomorrow there will be some panels of technical experts on deepwater drilling, Macondo, some regulators, and then we're privileged to have the CEOs of Shell and Exxon. Everywhere we went in the industry, people said to us informally, "Fred, Exxon is the gold standard of safety in offshore drilling." And Mr. Tillerson is going to come here and tell us how -how he achieved that position.

PLANET DEPOS 888.433.3767 | WWW.PLANETDEPOS.COM

NATIONAL OIL SPILL COMMISSION MEETING CONDUCTED ON MONDAY, NOVEMBER 8, 2010
5 (Pages 17 to 20) 17
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

19
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

I want to thank everybody for their cooperation here. As Bill observed, we don't have subpoena power. That means that to a certain extent BP, Halliburton, Transocean had to put aside the normal tendency of a trial lawyer to stonewall everything until the last -- until you finally have to go to court and cooperate with us. And I want to thank from BP John Hickey and Jamie Gorelick, their counsel. I want to thank Rachel Clingman for Transocean. And Don Godwin for Halliburton. They have given us an unprecedented degree of cooperation in situations where their clients had serious issues to face. It's a very unusual sacrifice they made, and we couldn't be where we are without it. I want to thank two other agencies. Sysco Corporation volunteered to send us one of their top litigators, Paul Ortiz, to work with us on our Commission gratis. Sysco is paying the cost of it. And I want to thank Trial Graphics, Megan O'Leary and Bill Lane. We don't have any money on this Commission. You're going to see today what is
18

chance to prepare, and a chance to respond." And throughout this thing our purpose has been to be totally transparent. This is what we're thinking. If we're wrong, tell us. There is no pride of authorship. We must get it right, and we must get it right to honor the men that died that night. And to a degree that surprised me, the parties and counsel have kept in mind that purpose and often, I believe, sublimated what might be the normal reaction of trial lawyers to an investigation like this. And I thank you guys again. It's not only the parties that have cooperated. The entire offshore drilling industry has cooperated. As you'll see, we've had cooperation from Chevron, from Exxon, from Shell, from Dril-Quip, from parties that make this equipment, from Schlumberger. Everybody has pitched in. They've been willing to meet with us. They've leveled with us and cooperated. I particularly want to thank BP for the report they did. The report they did, which some people in the newspaper said was self-serving, we agree with about 90 percent of it. There is a lot of

20
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

probably a half million dollars of graphics that basically were done for free by Megan and Bill. And I've worked with -- In 50 years as a trial lawyer, I've worked with the best graphics teams in America. They blew me away. They've been up all night. They're not getting paid. Megan unusually has a master's degree in engineering, and Bill is one of the top graphics artists in America. So their team was led by a real engineer, and the work product was done by one of the best graphics people, and we thank you guys very much. Finally, the presentation you will see today has been vetted as thoroughly as possible. We showed the presentation to some of the top deepwater drilling experts in major oil companies not involved in this litigation to be sure we got it right, to be sure that our observations were consistent with custom and practice in the deepwater drilling business. We also showed this presentation last week to Transocean, Halliburton and Sysco, told their counsel, "I don't believe in surprises. People ought to have a chance to know what is going to happen, a

extremely valuable work that was done there that cost BP a lot of money. We don't agree with everything, but it's a contribution to this hearing, and we're -we thank you for doing it. The last thing I want to say is that as we met with all the parties in the last week, as the people here will know and some of them will be smiling, every time we had a meeting, people said, "Fred, you're not getting it right. You're treating us harshly; you're being too nice to somebody else." Everybody said that when they -- during the meeting. And there were sometimes some hash words, because everybody was told in advance. So I told my guys, and I say to you guys, "We must be doing something right because everybody hates me." Okay. Now we'll start -- I'll -- I'll begin the run-through. And when we get to the cement issues, Sam Sankar will take over. When we get to the negative test and the temporary abandonment issues, Sean Grimsley will take over. So let's go. Now, we'll first talk about the rig itself. Just a -- We're all familiar with it, but so everybody

PLANET DEPOS 888.433.3767 | WWW.PLANETDEPOS.COM

NATIONAL OIL SPILL COMMISSION MEETING CONDUCTED ON MONDAY, NOVEMBER 8, 2010
6 (Pages 21 to 24) 21
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

23
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

is on the same page, they know where it was and what was unique about it. We'll then talk about what it's like to drill offshore wells generally, and then the Macondo timeline. Then we'll come to cement issues, some recent questions raised about cement, the temporary abandonment issues, kick detection. Kick means that -- We use the term "hydrocarbons." Hydrocarbons are gas and oil. Of course, you'll see gas expands rapidly as it comes to the surface. If gas comes to the surface and gets on the rig, that's bad. When gas gets in the well, in the riser, that's called a kick. So as we go through these terms that a lot of us have never heard before, I'll be sure to explain them. And then we'll talk about the blowout itself. Okay. Here is the Gulf of Mexico, here is Houston, here's Tampa, here's New Orleans. Here's the Macondo well. The Gulf last year -- The Gulf last year, there were $170 billion worth of oil and gas produced. Most people aren't aware there is a very dense network of wells, pipelines, subsea manifolds, a whole

established earlier by seismic work, the work of geologists and the like. What happened occurred right down here, the bottom of the well. This cement you see here -- and you'll see -- you'll see enough cement today you'll be sick of it -- but this cement down here is where the leak occurred, and we'll be spending -- we'll have big blowups and animations showing what happened down there. You will hear a lot of names. We all know BP. Transocean was the owner and operator of the rig. They have a lot of rigs all over the world. Halliburton, among other things, does cementing. M-I SWACO is a Schlumberger company that handled the drilling mud. You'll learn more about what drilling mud is and what the purpose of it is. Schlumberger was on the well the day of the explosion to do certain logging, and that -- we'll discuss that. A Halliburton unit called Sperry Sun captured data. The data that was on the rig that night went down with the rig, but Halliburton had a

22
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

24
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

community of helicopters, offshore vessels. A huge industry here. Generally speaking, deepwater, we're talking about here begins about a thousand feet. Water depths, 10,000 feet. The water depth here was 5,000 feet, a mile down, and then they went down 13,000 feet into the formation underneath the seabed, what we call the mudline. Okay. Now, here is the Deepwater Horizon. It's in the Mississippi Canyon. It's actually a canyon that was formed as the Mississippi River came out eons ago. Here is the 5,000 feet of water. Here is the rig. Here is the famous BOP, the blowout preventer. And now we go down from the seabed another 13,000 feet, and what we'll be talking about, this is where the pay sands are. Pay sands is where oil and gas is. In the oil business they call it pay because that's where the payoff for drilling the well is. So down here 18,360 feet are the hydrocarbons they were drilling for that had been

Sperry Sun unit that sent shoreside -- they call it the town or Houston or shoreside -- certain data which was saved. And there's some interesting issues about that. Cameron made the blowout preventer. Oceaneering -- The work down there at the bottom is done by these robots. Oceaneering did it. Dril-Quip made wellhead and casing hangers. You'll see pictures of Dril-Quip equipment. They've been very cooperative. They have top engineers, and they've helped us interpret what happened with that equipment. And finally, the famous centralizers you've heard about were made by Weatherford. Now, in 50 years of trying cases, I've learned when people hear names they lose track of them, they can't keep track of where they are and that kind of thing. So what we've done is this: We have a chart of the onshore -- sometimes you'll see people call that in town -- the onshore organizational chart. The BP people, Transocean and Halliburton. And then we have the -- who was on the rig

PLANET DEPOS 888.433.3767 | WWW.PLANETDEPOS.COM

NATIONAL OIL SPILL COMMISSION MEETING CONDUCTED ON MONDAY, NOVEMBER 8, 2010
7 (Pages 25 to 28) 25
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

27
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

that night. The BP well-site leaders, the Transocean team operating the rig, Halliburton personnel. To make it easier to keep track, we've put around the room these big charts with all these names on it. And as far as I'm concerned, it's okay, if you get confused what's going on, to walk up and take a look at this. It's important that everybody understands what's going on. At the breaks you can walk up and look at it and get a feel for it. We won't talk about all these people today, but we've done this so that everybody can follow the names and follow what's going on. Of course, as we go through this, we'll also explain who the players are and who they work for. All right. Now we're going to learn a little bit about this rig generally. This is the Deepwater Horizon rig. It's a drilling rig. A lot of people don't know there are production rigs that stay on station for a long time and have a lot of dry gas separators and things on board, and pipeline shoreside. This was a drilling rig that was going to

can, under some circumstances, divert oil and gas overboard so maybe it doesn't end up on the rig. And the mud-gas separator pipe, if you have gas, natural gas entrained, caught up in mud, you can separate it here, get rid of the gas up here and put the mud in the mud pits. Now, a lot of people look at this and they think that the -- this is the deck and then there's -there's not much else. This is one of the lower decks. The moon pool. This business has been around a long time and there are terms -- Years ago somebody looked down there at night and saw a reflection of the moon coming up, and it's been called the moon pool ever since. The mud pits are important because when the drilling mud is circulated it's stored in the mud pits, it's taken from the mud pits, it's moved around in the mud pits and that sort of thing. And we'll hear a lot more about drilling mud in a moment. This rig is more complicated than it initially looks. The first place, it's not anchored. There are some rigs in the world that are anchored by

26

28 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

drill down to 18 -- they originally were going to go down to 20,000 feet. They ended up going down to 18,360. It's easier to understand a rig when you do it in this sort of a cartoon fashion. High as a 40-story. Giant derricks on top that can handle 400 tons or more. Almost as long as a football field in two ways. Helicopter pad. Pipes stored. Now we're getting to where the action happened. Okay, this is the drill floor. Here is the rotary. This is where the well is drilled. And when you hear the mud came up, the gas came up and the explosion started, that's where it is. The drill shack where the drillers are is pretty close, and you'll see pictures from the inside of the drill shack of the people sitting there. It's like the captain of a 747. They've got all the controls and they sit in chairs, they work long shifts, 12-hour shifts, monitoring all this information. This is the mudlogger shack, which is Halliburton. You'll hear about the diverters which

tension legs, some by cables. The -- this rig is a ship. It floats. It's not anchored. It gets positioning signals from a satellite. It receives the positioning signals, and then there are computers onboard that operate these big thrusters underneath. And these thrusters keep the Deepwater Horizon over the well. This is the riser that goes down through the moon pool. When you're on it, you're not really conscious that you're being on a ship. It's a big thing and it's heavy. But the technology is amazing, because this thing is not towed around. It can actually sail away and go to the next location. It has a captain just like any ship has, and of course that's one of the reasons the Coast Guard has been involved in this. But you get an idea. It's kept on station by these thrusters. We tend to put the depth up here. Now we're going down the riser to the seabed. This is a mile down. When you're down there it is black dark. You can't see anything. It's 32 degrees. It's -We've had to artificially illuminate it here.

PLANET DEPOS 888.433.3767 | WWW.PLANETDEPOS.COM

NATIONAL OIL SPILL COMMISSION MEETING CONDUCTED ON MONDAY, NOVEMBER 8, 2010
8 (Pages 29 to 32) 29 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 31
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

The BOPs -- This is the seabed, sometimes called the mudline. This is the BOP, the blowout preventer, which is -- You'll hear more about it. It's a stack of valves designed to shut down the well in emergencies but also used for different tests and functions during the drilling of the well. It's not just an emergency device. The blowout preventer sits on the wellhead, and then the drilling goes down here through the sands through the formation. So we're already down a mile, and we're going down another 13,000 feet, another two and a half miles or so. Casing string. Now we'll go down. Now, down at 18,360 feet the temperatures are as high as 265 degrees Fahrenheit. The pressures are as high as 14,000 p.s.i. The -- When you get all the way down there, to pull up the drilling equipment takes 18 hours. So if you're going to -- if you want to do something down there, it takes 18 hours to pull up the drill string, put on the new tools, go down for many, many hours, do the work, another 18 hours up and, of
30

what happened down here. Now we're going to talk about drilling offshore wells, because there are a lot of unique technologies and truly brilliant engineering involved in these endeavors. Here is a BOP. We'll talk about it and explain some of these functions so when we get down towards the end -- It's 50 feet high. There is a six-foot man. It weighs about 400 tons. It costs about $25 million. The BOP travels with the rig. This is the Horizon's BOP. As we say, it's a stack of giant valves that can open and close on the drill pipe. You'll hear about the annular preventers. You'll see them operate in a moment. These are the control pods you read about in the papers. The pipe rams close on the pipe. The blind shear ram is the last resort in shutting down the well in an emergency. The blind shear ram, as you will see, actually slices through the pipe. These rams weigh maybe one -- one blind shear ram may weigh 1400 pounds, very hardened steel. And we'll show how they operate now.

32
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

course, then back down again. So when you do work down there, it takes a lot of time. The -- It won't surprise you to learn that the out-of-pocket all-in costs to somebody like BP of running one of these rigs is about a million and a half dollars a day. And, of course, if you're taking four or five days running drill strings up and down to do work, that -- that's a cost. Now, I'm going to say something now, I'll say it again at the end. To date we have not seen a single instance where a human being made a conscious decision to favor dollars over safety. I'll talk more about that later, but it's important you keep that in your mind as we go. There's been a lot said about it. Witnesses is one of the most important issues. We have not found a situation where we can say a man had a choice between safety and dollars and put his money on dollars. We haven't seen it. And if anybody has anything like that, we, of course, welcome it. Okay. Here is the pay sands. Again, this is where the action was. And you'll hear a lot about

Okay. And the blowout preventer sits at the wellhead on the sea bottom. The drill string comes down through it, the drill pipe. Now we'll show you -- we'll first show you how the annular preventer operates, because you'll hear a lot about it. Hydraulic pressure comes up here. When it comes up, this black deal here is like a giant 18-wheeler truck tire made out of the hardest rubber you've ever seen in your life. It's almost as hard as a Bakelite plastic. And when you want to close the annular preventer, you pressure up these deals. These arms go up and it squeezes this giant hard rubber tire into the annulus -- you'll hear more about the annulus -and keeps any hydrocarbons or pressure or anything from coming up the annulus outside the drill pipe. It does not close the drill pipe. It closes the area around the drill pipe. Okay. Let's look at the variable bore pipe ram. The variable bore ram, again, closes off the annulus and fits tightly around the drill pipe and closes it off. So this is what we'll call the annulus

PLANET DEPOS 888.433.3767 | WWW.PLANETDEPOS.COM

NATIONAL OIL SPILL COMMISSION MEETING CONDUCTED ON MONDAY, NOVEMBER 8, 2010
9 (Pages 33 to 36) 33
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

35
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

there. And here is the blind shear ram. This is the last resort. When you trigger it, it cuts through the drill pipe and no hydrocarbons, oil or gas or anything can come up the drill pipe. And you'll hear that the -- the drilling -the driller sits there at his chair. There is a big red button behind him. He can push that big red button and that energizes the blind shear ram, and about 40 seconds later it's cut through the drill pipe and the well is shut down in that regard. Now, although you've heard a lot about the BOP, you may be surprised to know that we're not going to talk much about the BOP. And the reason for that is this: The government has retained a Norwegian engineering company to analyze the BOP. And it's a 2- or 3-million-dollar contract, and they're going to analyze this thing from soup to nuts. It's not done yet. Some hoped it would be done by now, but it's not. And for us to speculate on what happened to

you can -- Here comes the drill. As you get into the pores here, you can start getting oil and gas out. I'll stop it. This is very important. The brown color here is drilling mud. Drilling mud is maybe 14 and a half pounds per gallon. You'll see that the weight can change. Drilling mud is used to take the cuttings from the drill bit and get them off the bottom. The mud comes to the top. It goes over a screen. The mud goes through and the cuttings stay so you don't get the bottom of the well just full of all these cuttings. The drilling mud also serves to keep the fluid, the gas and oil, under pressure in the reservoirs at bay, because the drilling mud is designed so that the weight of the drilling mud counterbalances the pressure of the fluid. The red arrows will always be the weight of the drilling mud, the green the pressure of the fluid. So when you come down to one of these layers of hydrocarbons, oil and gas, the drilling

34
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

36
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

the BOP, was it energized; did it work; if it didn't work, why, all of these issues, it would be very premature for us to speculate when in some reasonable period of time we will know, hopefully, what happened. So we're not going to talk about the BOP simply because it's not productive. We'll be talking about when it's to be triggered and who is supposed to do what, but we will not be talking about any failure modes in the BOP today. Now, what a lot of people don't understand is people -- people think that there's these pools of oil and gas down there, and you drill down and you stick a straw in it and you suck it up. It's nothing like that at all. Down here these pay zones are pores in rock, and it's pretty hard rock. It's like a hard sandstone that you could stand on, and the rock is full of pores, and the pores have oil and gas in them under extremely high pressure, as you'll see. So that as you're drilling down here, you're drilling down to get to the pay zones so that

mud -- People continually monitor these pressures, and they keep the drilling mud at a weight such that it's heavy enough to keep the green oil and gas under pressure from getting into the well bore. And one of the key issues we'll be talking about again and again is the tension between keeping the drill mud at exactly the right weight, getting it too heavy and getting -- or getting it too light. If it's too light, the green oil and gas comes into the well. If it's too heavy, it can actually fracture the sides of the well. It gets heavier than what's called the fractured gradient. And we'll see that. But it's important to understand that the pay sands, the pay area we're drilling for is rock, actual rock with pores in it that contain this fluid under pressure. Okay. Now we're talking generically about drilling a deepwater well. Here's the drill bit. Here's the previous casing. Here's the pressure in the formation. At this height it might be seawater pressure. We're going down. The cuttings are going

PLANET DEPOS 888.433.3767 | WWW.PLANETDEPOS.COM

NATIONAL OIL SPILL COMMISSION MEETING CONDUCTED ON MONDAY, NOVEMBER 8, 2010
10 (Pages 37 to 40) 37
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

39
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

up. The brown is the drilling mud. The pressure of the mud has to overbalance the pressure in the formation. So the weight, the heavier the mud is, the easier it is to keep the hydrocarbons from getting into the well. You do not want, obviously, to get oil and gas in the well at the wrong time. While you're drilling, it would be really bad to get oil and gas in the well. If it does get in the well, it's what is called a kick, and it can be sensed at the top because if -- if the pressure starts coming in here, it'll change everything all the way up to the top and 18,360 feet up they'll say, "Uh-oh, the pressure's changed, there's a kick." So what we do is we -- we continually increase the mud weight as the pressure gets bigger. The pressure is here. It gets bigger. The mud weight is bigger. It gets bigger. Mud weight is bigger. And there is a mud engineer at the surface. Here it was somebody called M-I SWACO, which was a Schlumberger sub. And the mud engineers continually change the weight of the mud as they go down and get

down. You'll see casing, cement, casing, cement, casing, cement. And as you will see in a minute, you're going to keep -- This isn't the bottom of the well. You're going to have to keep drilling this. So they're going to have to -- they have to drill this out when they -- when they get this casing set. Remember, to set one of these casings at the surface, it doesn't take so long. When you're setting casings in the bottom it can take 18 hours to bring up the drill pipe, put on a casing, bring up the casing tool, put the drill pipe back down. It can take a couple of days to do some of these things. Now, this is key. Here's the pore pressure. Remember that the hydrocarbons are in pores in the rock. They're under very high pressure. As you go deeper, the pore pressure gets higher and higher and higher. This is the fracture gradient. The fracture gradient is the amount of pressure it will take to put a hole in the formation. If you put a hole in the formation or crack it, bad things can

38
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

40
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

information on the formation. Okay. Now, this is important. You'll see the -- you'll notice when you look at these pictures of a well, it's like a telescope. It keeps getting smaller and smaller as we go down. The reason for that is that as you get down here and the pressure is higher, if the mud pressure keeps getting higher and higher and higher, the mud pressure which is needed -- the mud which is needed down here to counteract the pore pressure could be so high up here that it cracked the formation. So as you get deeper and the mud weight gets heavier and heavier, periodically you run a casing. Casing is just a circular piece of steel that comes down. And after you run the casing, which is here, then you run cement down the center. The cement goes to the then bottom of the well, turns the corner and goes up the side, so the casing is thoroughly cemented in. And you'll see -- every time you see a picture of a well, you'll see these from the top on

happen. You can lose some of your drilling mud, you can lose cement. So you don't want to break the formation unavoidably. And as they drill down here, you'll see they're continually changing the mud weight to stay in between the green line and the blue line. That is one of the secrets of deepwater drilling, keep the red mud in between these two lines as you go down, continually fine-tuning it. Up on the surface the mud engineer is doing this, and changing the mud, mixing the mud so it's exactly the right weight to stave it so it keeps out the green pressure and doesn't break through the blue formation. That's one of the keys. Here is a place where it's coming very close to the pore pressure but gets -- and when -when you get to a place where you're challenging these two, that's when you put in another casing. Up comes the drill string, down comes the casing, down comes the cement. It always turns the corner and goes up. Now, there is something I want to explain right now. This is hard for a lot of people to grasp

PLANET DEPOS 888.433.3767 | WWW.PLANETDEPOS.COM

NATIONAL OIL SPILL COMMISSION MEETING CONDUCTED ON MONDAY, NOVEMBER 8, 2010
11 (Pages 41 to 44) 41
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

43
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

right away. This area here is called the annulus. This is up the center of the casing. This is called the annulus. It looks pretty big. But we brought this out here, and Sean Grimsley will take this around and show people. But the annulus is very small. This is the casing in the center, this is the formation, and we have to pump cement, as you'll see, into this small area. At the bottom this might be a thousand feet of cement. That's as high as a hundred-story building. It is an art to be sure that all of this is filled with cement all the way around; there's no gaps. The gaps are called channels. We'll talk about that later. But this is pretty much to scale. And when you look at these, it looks like it's a big wide thing and it's just pumping up cement. But it's not easy to get cement all the way around here in this small little annulus over the height of a hundred-story building. Sean will just take this up and down the aisle so everybody can see it. The Commissioners are, of course, aware of this. We've gone -- We've shown
42

contain the mud. So if you can imagine this, the drill pipe is like this and then there is a big riser around it that goes 5,000 feet up from the BOP to the rig. And you'll hear if hydrocarbons get in the riser, that's bad, because that's above the BOP. It means somehow they've gotten past the blowout preventer, they're in the riser. And as we'll see, once they get in the riser they come up very fast and they're very dangerous. Stop it, please. So remember, I told you that in all these interim steps as you go down, you cement around. Well, then you have to drill out the cement you just laid. You want to keep the cement in the annulus, but you need to drill that out so you can continue drilling down through the formation. Always please remember, when you look at the annulus here, this is a half inch to an inch. It's a very small space. This is -- We have to distort this in order to make our points, but as Sean showed you, this -- the annulus is very small and
44

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

the Commissioners at length. Okay. Now we're going to talk a little more about drilling a deepwater well. The rig up here, coming down through the moon pool. These are called tool joints. It's interesting that when you first start at the surface drilling a well, the formation is not as hard as it is, it's not as rocky as it is. So when you start drilling down, you can just jet out. This is maybe 36 inches. You can just jet out the formation with water. You simply send water through the drill pipe and jet it out. Just as a matter of interest, you don't have to drill it all the way down. And then, of course, you have to vent the water out through here. Set the casing. Up we go. Now, we've heard the term "riser." It's an important term. Before you -- at the -- at the very top you don't need any drilling mud to balance the pressure because the pressures aren't that great. But later on you need some tube to go around the actual drilling pipe, the drill pipe, to

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

there's some skill involved and a mild -- a modicum of unpredictability in getting the cement and the annulus all around the well. But it has -- you have to get the cement in the annulus, as we'll see. Wellhead. Okay, now we've cemented in another casing. Now we're lowering this 400-ton BOP from the rig to put it on top of the wellhead. When you imagine somebody lowering from a mile up a 400-ton piece of equipment and putting it in place like that, you imagine the engineering talent that's involved in this deepwater drilling. Of course the drill string going through the well. Once the BOP is on, if it's operating properly, you can shut off -- you can close the annulus, as I pointed out, and you can -- you can actually cut -- cut through the drill string, completely shut the well down. It doesn't go this fast. I got tired of watching it go at the right speed so... (Laugher) Okay. Here's the riser. And once we get

PLANET DEPOS 888.433.3767 | WWW.PLANETDEPOS.COM

NATIONAL OIL SPILL COMMISSION MEETING CONDUCTED ON MONDAY, NOVEMBER 8, 2010
12 (Pages 45 to 48) 45
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

47
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

down a certain depth, the drill string is in the center of the riser, and the mud circulates on the outside of the -- down the center of the drill pipe and then comes up on the riser on the outside. Circulation of the mud is very important. You'll see more about it. But the mud will come down through here, they'll drill at the bottom, and the cuttings and the used mud will come up here, it will be cleaned, and then it will come back down and they just continue circulating it. I'll make a point that's very important. We'll make it again and again, but this is a closed system. And you ought to get as much mud up at the top as you put in the well. In other words, you put it in and it circulates. And if you begin losing mud, it means you've got a problem down there. That's called lost returns. And lost returns can be important. In other words, the mud is returned to the surface. If you're not getting up as much as you should be, you better stop and check it out. And there were lost returns here.

drilling, move it over, avoid the problem and start drilling again. That's called a bypass. Believe it or not, even after they bypass, the well is very straight. This is one of the most vertical wells people had seen. That means it's straight up and down; it wasn't at an angle or anything like that. And on April 3 they get severe lost returns. So we'll now learn what lost returns are. This, again, is very important. This is 17 days before the blowout. Now, we're back to where we started a little bit. We can now see the whole well. Remember, I told you the problem is at the bottom. Here's the cement work at the bottom. The formation that they were trying to produce oil and gas from was here. And this is the annulus. It's not big; it's tiny. And that the cement here has to isolate the hydrocarbon zone. It's called zonal isolation. And if the hydro -- if the cement here does not isolate the hydrocarbons in here, they can get into the well and come up to the surface. So the

46
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

48
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

Okay, here is the Macondo timeline. Now, we've -- we've talked about the rig generally. We've talked about the science of drilling offshore. And you've seen how generally cement is used, you've seen how the casing is laid and that sort of thing. Now we're going to talk about the timeline of Macondo. Originally, Macondo was being drilled by a different Transocean rig called the Marianas. It was about 9,000 feet and Hurricane Ida came along. Marianas was damaged and they had to take it off and bring in Deepwater Horizon. Deepwater Horizon drilling began February. Here they had a kick. We now know what a kick is. Hydrocarbons are somewhere down there and there's an indication at the surface that pressure shows you that there's gas getting in. What they had to do here is the kick caused a certain piece of equipment to actually get stuck in the pipe. So what they did is they're able to -believe it or not, they can come down and they can just go off on an angle and keep drilling. So they can change the angle of the

cement job -- as we call this the primary cement job at the bottom. The cement job has to keep the hydrocarbons in those pores cemented off from the well bores so they don't come up the well. There were difficult drilling conditions here. Now, we've talked to everybody we can find about the Gulf of Mexico, and many say that you frequently encounter difficult drilling conditions. Some say not this difficult. There are different points of view. My only -- What we're going to do now is to show you -- let's back up one, please -- at the time of the key cement job, what was known about the situation in that well. So we're going to go through a number of things that were known. They started the cement job in I think the evening or the afternoon of April 19th, the day before the blowout. They finished a little after midnight on the day of the blowout. When they started the -- at the time they started the cement job, what did they know? No. 1, difficult drilling conditions.

PLANET DEPOS 888.433.3767 | WWW.PLANETDEPOS.COM

NATIONAL OIL SPILL COMMISSION MEETING CONDUCTED ON MONDAY, NOVEMBER 8, 2010
13 (Pages 49 to 52) 49
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

51
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

None of these -- This is the actual Macondo pore pressure fracture gradiant. And as you can see, as we go down, every time you get the mud over in this -- into one of these areas, you put a casing in. The mud gets closer here, you put a casing in. And you keep going down. And this is why you get this typical kind of a telescope-looking deal. And you can see here the mud is getting very close to the pore pressure from time and time and time again. So, this is -- this is the fracture -pore pressure fracture gradient at Macondo. They were having somewhat of a hard time keeping the mud in between where it had to be. Now, the things I'm showing you, this is -this is not at all abnormal. Each one of the things I'm showing you, there's various degrees of frequency. But that's what these guys do. I mean, they're good at keeping the mud where it ought to be and doing these things. So don't assume when we say that the -that there was a narrow fracture gradient here, "Oh, my God, that's terrible." People drill that all the

You can't see the cement down there at all. You have to sense by secondary measures like pressures. And Sam will explain more where the cement is. You want to be sure, obviously, the cement is placed high enough to block off the zone, but not so high that it causes a problem calling -- closing up the annulus and causing a heating problem, which Sam will talk about. So people knew when they were doing this, Halliburton and BP, that they had a challenge in getting a good cement job because of this narrow fracture gradient. Again, people look at things and say, "Oh, my God, that's terrible." It's not terrible. It happens, and people deal with it all the time because of the engineering talent that they have. Now, we've heard a lot about the long string. The press has said again and again, and many experts have said that nobody in their right mind would use a long string. Here's the difference. This is the well -- the design they did use. You'll notice that there is a long string all the way from the bottom, all the way up here into the wellhead. That's

50
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

52
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

time, and they're supposed to drill it, and it works. Okay? Now, Transocean driller, Mr. Burgess, says it was a difficult well. Wouldn't say worse than others. It was difficult. This is the BP report. Considering the narrow pore pressure and fracture gradient in that well, planning the cement job to achieve effective placement and zonal isolation was a challenge. So there's no doubt here that the conditions they were facing created a challenge, two of them. They had to isolate the hydrocarbon zone. Remember, I told you, you've got to have the cement between the hydrocarbons and the well so it doesn't leak into the well. And Sam will talk more about this. But the cement placement is critical. And I'm going to say some things, and some of these things need to be said twice. Placing cement when you're up three and a half miles above, from here to the Iwo Jima Memorial or something like that, is not an easy thing to do.

called a long string. Here is another choice which is a liner. The liner would only go to here and would be tied back here. Some have said that the long string design does not have a barrier here. The annulus is open, so that a leak could go all the way up here into the wellhead. It doesn't have enough barriers. I will show you the proof I think all of us now believe, including I think BP and Transocean, that the leak did not come up the annulus. The leak came up the center through what's called the shoe. So that the -- the long string has implications. As Sam will explain, it has implications for cement placement. It has implications for whether the cement can get contaminated. But as we see it now, and again I'll say this as often as I can, we are ready to listen to anybody from any source that knows something we don't know. But talking to the designers of the equipment, looking at photographs of this equipment,

PLANET DEPOS 888.433.3767 | WWW.PLANETDEPOS.COM

NATIONAL OIL SPILL COMMISSION MEETING CONDUCTED ON MONDAY, NOVEMBER 8, 2010
14 (Pages 53 to 56) 53
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

55
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

which I will show you, our view is that the leak did not come up this annulus but came right up the center, right up through here into the riser. It's important you know the differences between these two. And Sam will explain the implications that the well design has for cement jobs. Okay. Now, we know there's difficult drilling conditions. We also know they had lost returns. What's a lost return? You're drilling. Here's our drilling mud circulating around up and down, taking away all the cuttings. And if the mud -if the drilling mud pressure gets too high, it can go into the formation. You're now losing drilling mud. If you're at the surface now, you're putting down more mud than is coming up. You want to get full returns. You want to have as much mud coming down -- coming up as is coming down. And this means if you -- if you lose returns, you're -- one thing that can happen is you've cracked the formation and the mud is going into the formation. If mud can go into the formation, then if you cement the job, cement could go in the formation,

18,360. So they saw conditions, caused probably by the formation, which caused them to stop short of where they planned to go. Now, I know I keep saying this. People look at this and say, "Oh, gosh, well integrity and safety." They stopped because they were interested in well integrity and safety. They didn't go as deep as they could have gone, and they might have reached more hydrocarbons because they wanted to stop so they didn't create safety problems. So you have to be aware of two things. You have to be aware that surprises in the reservoir can cause you to make changes. Surprises like that can affect what happens later. You have to keep it in the back of your mind. But it's good, not bad, to stop here for safety reasons. So BP, near as we can tell in talking to our experts, say, you know, they did the right thing here. Now, this next point is a complicated point but it's important. That's converting the float equipment. Let's put that up.

54
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

56 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

too. This was something like a 60-barrel cement job. And it was a relatively low volume cement job. And you have to keep in mind that if you can lose mud into the formation, you can lose cement in the formation. There were pretty serious lost returns here as they got down near the bottom. Now, originally they were going to drill this well down to about 20,000 feet. They drilled it only to 18,360 feet. And why was that? Because when they got down there, they faced a tough decision. They were getting lost returns into the formation. This is a BP employee that says drilling -- they were going to drill to 20. They were at 18,000, 2,000 feet short. Drilling any further would jeopardize the well bore. Having a 14.15, this is the pore pressure, exposed sand and taking losses in a nearby reservoir, that means that this is higher pressure, this is lower, so it's actually circulating from one reservoir to another, had forced our hand. We had run out of drilling margin. At this point, it became a well integrity and safety issue. Total depth was caused at

Now, you're going to hear the term "shoe track." That's another one of these oil business terms. My wife's family is in the oil business. They talk about oil business, West Texas where she comes from. "Shoe track" is an oil business term. Let's look at it. Here's the bottom of the well. The reamer shoe at the bottom that leads the long string down. And here is something called the float valves up in here. And let's focus in on the float valves at the top. It's in the float collar. The shoe track -everything is big down here. It's the height of a 19-story building. So when you -- when you put the long string down these float collars, these valves, one-way valves -- Pull on this. Oh, it's the wrong one. (Laughter) MR. BARTLIT: It's nice to have Sandra Day O'Connor clerks to correct you when you screw it up. (Laughter) MR. BARTLIT: So -- Thanks, Sean. So as we -- This is a valve that has to be

PLANET DEPOS 888.433.3767 | WWW.PLANETDEPOS.COM

NATIONAL OIL SPILL COMMISSION MEETING CONDUCTED ON MONDAY, NOVEMBER 8, 2010
15 (Pages 57 to 60) 57
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

59
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

open when it's going down. It has to be open when it's going down because if it was closed, you'd try to push it down against all that mud in there, and you would create high pressures, maybe fracture the formation. I'm always glad to see a guy nodding that actually knows this and the press get's it right. (Laughter) MR. BARTLIT: So what -- you want to have this open while the long -- while the long string is going down. So they've got a pretty ingenious way of doing it. They have it open and they put -- This tube is in here. As you can see that the valve is now open and it holds it open. Now, when you get to the bottom and the shoe is in place, you want close this valve, because now it's down in place and you want to be sure that hydrocarbons and things can't come back up through it. So how do you take this at the bottom and convert it? It's pretty ingenious, pretty simple and pretty ingenious. What they do is they drop this little ball

We've now got the valve the right way. This may seem like a small issue, but normally these things convert pretty readily at about 750 p.s.i. It didn't work out this way. They had to try nine separate times to get this float collar to convert. Now, again, I have to keep warning you, don't put too much import on any one event. We're now building up to all of the different events that were known in the minds of the men on the rig that night when they got ready to pour the cement job. And there were some anomalies, as we've seen. Not anomalies that are never encountered, not anomalies that were necessarily anybody's fault, but there were anomalies that people would be aware of. So now let's talk about the problems in converting the -- the normal float valve conversion. Very simple. Reamer shoe comes down to the bottom of the well. It's 190 feet. Circulate it. About 750 p.s.i. Float collar converts. Valves close. You're set. Now, what happened here? Reamer shoe comes down. Shoe track. You've got to remember they want

58 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

60
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

down in the center. It goes to the bottom. And we'll see these two little holes here. So the mud is coming out of the holes but the holes are smaller than the original deal was, so that you increase the mud flow and increase the mud flow, and pretty soon the pressure is such on the ball that this ball goes out, falls all the way down to the bottom. The valve is converted. It's closed. So 18,360 feet down, you turn a two-way valve into a one-way valve. Now, the problem is that these things are supposed to convert at about 750 p.s.i. We'll run through this again up here just so we get it. Here is the valve before it's converted. Pressure can come here, pressure can come here. It's a two-way valve. We'll run it. The ball falls. The ball sticks because there is a collar here. Then you pressure it and it goes all the way down to the bottom in the shoe track, 190 feet down, ends up in the reamer shoe. We'll talk more about the reamer shoe later. Now, this will give you an idea. Reamer shoe. Float collar. 190 feet. Here's the pay zone.

to get this out of there. They put it down. First attempt, 1800, it doesn't work. It's supposed to convert at 750 p.s.i. Second attempt, 1900, it doesn't work. Third attempt, 2000 p.s.i, it doesn't work. Fourth attempt, 2000 p.s.i, it doesn't work. Fifth attempt, 2000, doesn't work. Sixth, it doesn't work. Seventh, 2250, it doesn't work. Eight, 2500, it doesn't convert, it's still stuck there. Ninth, 2750. Finally at 3,000 it converts, maybe. Maybe. We don't really know if it ever converted or not because it's now cemented in down there, and there's a lot of different things that could have happened here. For example, what could have happened is that the ball was forced out of the tube on the ninth attempt but the tube stayed there so it's still a two-way valve and hydrocarbons or anything can go

PLANET DEPOS 888.433.3767 | WWW.PLANETDEPOS.COM

NATIONAL OIL SPILL COMMISSION MEETING CONDUCTED ON MONDAY, NOVEMBER 8, 2010
16 (Pages 61 to 64) 61 63
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

back up the valve. We don't know if that happened. These are the best judgments of possibilities and nobody will ever know what really happened. Secondly, if we could go back to No. 2. Okay, third. As Sam will explain, it's possible in a long string well that you can get debris, mud that's been scraped off the walls on that long trip down some 13,000 feet. On that long trip down it's possible that you can get debris in the bottom of the reamer shoe. It's possible that when they're pushing and pushing and pushing here that this was jammed with debris. Some debris went out, the pressure dropped, and they thought that the float collar converted. But it didn't; it was still wide open both ways. Now, secondarily here, it's not altogether certain that a failure to convert is a huge problem. Because most people in the industry do not consider the float collar as a barrier. You'll see the term "barriers." The cement is a barrier. Certain seals are a barrier. Some people will say this is a barrier,
62

And we'll see that the cement job is important because the way -- the way the rig was handled on the evening of the blowout, beginning at eight o'clock at night, meant that the cement job was the only barrier, the only barrier preventing hydrocarbons from getting into the well. So as we're getting ready to do the cement job, it's worthwhile looking at what people knew. Okay. Now we've had a problem converting float equipment. Now we see that after it's converted, we see another anomaly. We see pressure lower than was expected. Low circulating pressure. This is the pressure. It was expected to be about 570. It was only 340. Now, this may mean something or it may mean nothing. Did -- Was this ever resolved? It was not. The pressure of the mud circulating was, you know, almost a little less than half of what it was -- a little more than half of what it was supposed to be. So what did the rig -- what did the crew do when after they just had this problem with the conversion of the float valve, these pressures showed
64

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

some won't. When you look at this valve, even if -even if it converts under the kind of pressures we're dealing with, it would not be impossible to get leaks around it. Clearly, though, if it's wide open, it's easier to get leaks. One could -- some say -- I've learned how -- the way the newspapers report things these days. (Laughter) MR. BARTLIT: Some say that this whole thing is such that under the kind of pressures that were established when the reservoir -- hydrocarbons got into the well, this whole thing could come apart. So what do we know? We know there was an anomaly. We know they normally convert at 750. It took nine tries and it was over 3,000, and we don't know if it ever converted. And the people up on the rig know this. We're not saying good or bad or up or down, we're just trying to list the events that were in the men's minds during that night as we come closer and closer to pouring the cement job.

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

up wrong, not what was expected? Here's what they did. The company man -that's BP. Again, this is oil industry lore. The BP man on the rig, Messrs. Kaluza and Vidrine, the well-site leaders are always called the company man. That's always a BP guy. So BP was uncomfortable with the circulating pressure being so low. Spoke with Mr. Gagliano. That's the Halliburton cement engineer on the rig that night. And what did they do? Did they ever resolve this situation? Here's what happens next. I don't believe it ever got resolved. They felt the gauge was wrong. And they decided the rig stand point pressure gauge was incorrect. Maybe it was incorrect, maybe it wasn't. And you can debate about what was done to decide was it incorrect. Did they simply say "We think it's incorrect"? Did they test it? That's for further inquiry. But we know that they had a problem converting the low valve and after that the pressure was low. And apparently -- and I stand ready to be

PLANET DEPOS 888.433.3767 | WWW.PLANETDEPOS.COM

NATIONAL OIL SPILL COMMISSION MEETING CONDUCTED ON MONDAY, NOVEMBER 8, 2010
17 (Pages 65 to 68) 65
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

67
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

corrected -- apparently they assumed the gauge was wrong and that was the end of it. Now, would this make a difference? We're not saying that it did. We're listing things that happened and describing how the people on the rig reacted to it that night. No bottoms-up circulation. Here's bottoms-up circulation. Before you pour cement, they circulate the mud; it's coming down the center. Here's the indicator of the mud that was at the bottom. The bottoms-up marker goes all the way to the top, circulating, circulating, supposedly, hopefully, cleaning this out down here. Before you add cement, you wait for the bottoms-up marker to get to the surface. That is the normal way of proceeding. And there's reasons for doing it. The reasons are -- Now the cement is added. Sam will explain this when we get to the cement job. Why do you do bottoms up? Well, the mud is conditioned. Remember, you're changing the mud weights as we go. So when you circulate the whole thing, it makes sure you get uniform mud throughout

When you don't do full bottoms up, there can be consequences. We're not saying there are, but there can be consequences in that the shoe track cuttings might not have been cleared out, and maybe the hydrocarbons weren't tested before cementing. But again, no one of these things is the be all and end all. We see things happening and we see people having good reasons for it. One of the things that we'll talk about when we discuss this with the Commission is that it's important, maybe, not to put behind you events in the past and then start from scratch each time you do something new. Maybe there has to be a way where people keep in mind the other things they've been experiencing as they went down here when they make their final decision. And I'm not saying -- because we -- we'll never know for the reasons you've heard. We're not saying that people did forget all this. We're not saying they didn't either. But the fact is there were a lot of events, and it sort of looks like once another hurdle was over

66
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

68
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

the well. Secondly, it -- it circulates the cuttings, gets any cuttings out of here, out of the shoe. We now know what the shoe is. It allows the crew to look at the mud. It comes up from the bottom to see if there's any hydrocarbons in it. This is normal. BP did not do bottoms up before the cement job here. They had a reason for doing it. They didn't just decide to hurry up and here's -- here's what they did, and here's what their reason was. Here's what BP did. Here's the bottoms-up marker. Remember, over here you waited until you got to the top. BP sent the cement down when the bottoms up was only there. So when they did bottoms up, they had done about -- I don't know, maybe a fourth of the circulations normally done. They had a reason for doing it. Remember, we'd had these formation problems down here. They had had lost circulation. They didn't want to disturb the formation anymore. That's -- Those are valid reasons for not doing full bottoms up.

people -- some people might have said, "Well, that's solved," and sort of started from scratch, and maybe there has to be a way to keep track of everything that's gone before. At any rate, for -- BP didn't just say, "We want to save time." BP said, "We lost circulation. If we do full bottoms up, we might have more problems with the reservoir down there, and we can always -once we get this up to the wellhead, we can always circulate it to the surface and check it and look at the cuttings and look at things." We don't know if that was done. Presumably it was, but we don't -- that's something I don't know as I stand here today. Okay. Mr. Guide is the shoreside -shoreside well team leader. If you're drilling a well in the Gulf and you go to Houston and you go to BP or Shell or any of these companies and you go in their offices, there will be a room almost as big as the end of this room that's dedicated to the Macondo well. And the shoreside engineers and personnel will be in that room.

PLANET DEPOS 888.433.3767 | WWW.PLANETDEPOS.COM

NATIONAL OIL SPILL COMMISSION MEETING CONDUCTED ON MONDAY, NOVEMBER 8, 2010
18 (Pages 69 to 72) 69
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

71
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

And the data from the well will go to that room, and the shoreside people who are -- can look at the data and communicate with the well are frequently asked questions about the well. So all of the information is gathered, and that's why we have some of it today. Now, Mr. Guide said, he asked, "Why didn't they do complete bottoms up?" The biggest risk with this cement job was losing circulation. That was the No. 1 risk, losing circulation. Remember, we explained that if the mud or cement gets into the formation, you're getting less at the top than you put in and you're losing circulation. So Mr. Guide said, "We decided to get circulation established and we could always do full bottoms up later once the cement was in place." That's why they made the decision. Now, this is something that a lot of people are not aware of. We explained that during the final hours of the well, the cement job at the bottom was the sole barrier, the only barrier in the well between the hydrocarbons and the rig. That's because to do
70

centered in the well -- and as you'll see, it's pretty hard to center sometimes -- then maybe when you put the cement in around here, it doesn't get in here and leaves mud. Cement keeps hydrocarbons out of the well. Mud can't keep hydrocarbons out of the well at that -under those conditions. So you know there's a problem here, and you decide you want to replace that cement down there 18,360 feet, replace that mud there with cement. How in the world do you do that? Well, here's what you do. Send down this equipment. First comes a packer, a bridge plug. You're going to squeeze in here. This is the area. You set this down so the pressure is blocked off here. You still want to get cement in here. How are you going to do that? You set a packer here. So it's blocked off here and blocked off here and you want to get cement here. They put down basically a perforation gun. For those who have been in the military, these are like the shaped charges they use to

72
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

what they did, as Sean Grimsley will explain, they had to have the BOP open. There were no other mechanical barriers in place. So the cement job was it. Now, what's interesting is, it is known in the industry that these cement jobs are from time to time not perfect. It's not an awful thing. Nobody has screwed up. It's not an easy thing, as we explained, to fill a thousand feet of narrow annulus with cement. So sometimes you have spaces in the annulus. And you have to -- you have to remediate or fix a cement job. So let's look at this. Here is a cement job, and you can see it -- this is that skinny little annulus that Sean Grimsley showed you. And for one or another reason the annulus doesn't have cement in it here, and it should. Believe it or not, these engineers have developed ways of being down there 18,000 feet and fixing that. And here's what they do. It's called squeezing. The term "squeezing" is important because there is a critical e-mail that uses that term. Here's the situation. If the casing isn't

penetrate tank armor. They are very powerful bullets in effect, and they send an electrical charge through and they actually put a hole in the casing. And then they send cement down, pull up the tool 18,000 feet, and they put in cement. Can't go here. Can't go here, it's stuck. So it fills up, fills up, fills up, fills up, fills up. And when it's full, it starts to squeeze through these holes into the formation. And suddenly they've repaired this -- this can take two to five days to do this, but they have repaired the missing cement in the annulus from the top. And, of course, this wasn't -- this is done with some frequency and it had been done twice before on this very well. So we know that in October they had done a squeeze job. February, cement squeeze. And March 6, squeeze. So what do we know now? We take stock. We know that the cement at the bottom in the last hours was the only barrier. We know that sometimes these barriers are somewhat defective when they first go

PLANET DEPOS 888.433.3767 | WWW.PLANETDEPOS.COM

NATIONAL OIL SPILL COMMISSION MEETING CONDUCTED ON MONDAY, NOVEMBER 8, 2010
19 (Pages 73 to 76) 73
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

75
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

down. It's not a big deal; it happens. And there are books written this thick on how to fix these jobs. We know there are ways to fix these jobs. So the issue you want to think about, the possible potential vulnerability of the very critical cement job, the potential -- we're not saying it was vulnerable, but the potential vulnerability was known, because it's down there. It's the only barrier. These jobs -- Sometimes these jobs have to be fixed and remediated. This particular cement job was never remediated for reasons that Sam Sankar will explain. But the importance is you know that the cement jobs are from time to time not perfect. And there is nothing wrong with that. It happens. That's routine. And they've developed all kinds of ways of fixing it. Now, there is something called cement modeling. BP has a program called OptiCem, optimizing cement. And it's a software program that -- a proprietary software program BP owns that is used to figure out what is going on down there. Design centralizer placement, evaluate job results, predict

So Sam will take over and talk about the -the rest of the cement issues. MR. SANKAR: So what we see here now is that the crew on the rig is facing a number of known issues at the time that they're doing their cement job. The one that we should focus on right now is the serious lost returns in the zone to be cemented. Having serious lost returns, again, is not in and of itself a tremendous problem, but it complicates the cementing. When you're cementing a job where you know you're going to have lost returns or you have a threat of lost returns down in the formation, you have to be careful. So BP designed a cement job for this process that was somewhat complicated. I'm going to show it to you a couple of times. The first time I'm just going to show it to you in three dimensions, and we're going to go through the various fluids that BP pumped down the well. Now, the first fluid -- what happens is you send these materials down the well, is you have to send them in sequence. The mud is oil-based and the
76

74
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

pressures, that kind of thing. And it turns out that the well team leader, John Guide, shoreside, didn't put any faith in the BP model, thought it was wrong a lot. Now, I imagine there will be a dispute emerging about whether it's right or wrong. The only question is what was known that night. And we're not saying that it was right or wrong and that that caused any problems. We're just saying that -- that the -- they were running these, as you will see as Sam explains, they were running these cement models, these software models, and the BP man in charge didn't think they were worth much. Okay. At this point we've been setting the stage for all the things that are known in the industry generally, and things that were known on this rig. Now we're going to turn to this particular cement job. And Sam Sankar is our cement guy on our team. He's been involved in this from the beginning. He went down with Chevron when they did the test. And -- And it's nice to hear somebody else's voice.

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

cement is water-based. The two don't get along. So you have to send things between them to keep them separate. What you'll see here is an orange material called spacer, a purple material called base oil. I'll explain a little bit more what those were for. For now it's sufficient to recognize that these things went down in sequence, separated by separating fluids and by mechanical plugs. And at the end of the job you had cement in the shoe track between where -- between the location of the float valves and the reamer shoe. And you also have cement all the way up here in the annulus covering your pay zone. So we've been emphasizing a lot the importance of isolating the pay zone. You may be wondering how do you actually get the oil out after you do all this work to isolate the pay zone. I'm going to give you a little preview of something that Sean's going to explain a little more as well. When you come back to the well after you have finished drilling and cementing it, you produce

PLANET DEPOS 888.433.3767 | WWW.PLANETDEPOS.COM

NATIONAL OIL SPILL COMMISSION MEETING CONDUCTED ON MONDAY, NOVEMBER 8, 2010
20 (Pages 77 to 80) 77
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

79
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

it by doing something very similar to what you did when you squeezed it. You go back down to the bottom. You have that cement in the annular space, and you send a tool down, another perforating gun, much like the one used in the squeeze job, except now you're doing it in the pay zone. Now, this yellow area here is full of hydrocarbons, and you've got your cement currently isolating them from the annular space. To get them out, you send a perforating gun down, you poke holes in the casing and the cement. So now what you have is holes in the steel casing and in the cement that allow the oil to flow into the well. But that's later when you're getting the oil out of the well. For now we're first trying to get a good cement job that will allow us to isolate the hydrocarbons. So now I'm going to go back and explain again the cement job that BP used at the bottom of the well. And when I say BP here, I mean BP in conjunction with Halliburton. Halliburton was the cementing contractor for this job, and BP and

the cement from the mud. Now, you see some dark gray material and then some lighter gray material. The dark gray material is the cement, the base slurry that they were pumping down there. You've heard a lot probably about nitrogen foam cement recently. This is cement that hasn't yet had nitrogen added to it. The whiter stuff here is the cement that does have the nitrogen in it. So now we have a slug of unfoamed cement, followed by lighter cement, followed again by the heavier cement. Now, what's important to note here is that the first material that goes down the well is the first that comes up the annulus as well. So now what we have here is a stripe of the spacer and a stripe of the base oil. As these materials come up into the annular space, they're exerting pressure backwards. On the way down the well, gravity was helping you. On the way up here, it takes pressure to lift the cement up. And that pressure is something you feel in the formation. And remember that, again, they're very

78
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

80
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

Halliburton worked together to perform the process. So again what we see here, now in schematic view, is the float valves, the reamer shoe, the volume in the shoe track, and also again the skinny annular space that Fred has shown you. Remember again when we're doing this that we're talking about the annular space that Sean had showed you when he walked around. It's the small narrow area in there between the casing and the formation itself. So to begin the job, as always, you're circulating mud. The mud is going down through the float valves. The first thing that comes down, again, is that base oil. The purple here is showing the base oil. Base oil is a lightweight oil that they decided to use on this well in order to lighten the weight of the materials in the annular space. I'm going to show you a little more what that is. The orange material again is a spacer. It's a material that's compatible both with the mud and with the cement and helps keep them separate. You're going to see a plug land out very shortly there. That plug right there mechanically separates

worried about lost returns at this point. Lost returns are caused by, among other things, overpressuring the formation. So a lot of this cement job was designed to reduce the pressure on the formation. Final position of the cement job is you have a top wiper plug in place, a bottom wiper plug in place. The shoe track should be full of unfoamed cement, and the annular space should be filled with lighter foam cement, primarily with a thinner layer of unfoamed cement at the top. Now, that slide may have struck you as a little bit complicated. In fact, they're right, this was a complicated cement job. The number of different fluids that were being placed down the well and the threat of lost returns led everybody to understand that this was a complicated cement job. There's e-mails showing as early as April 1st that BP recognized that this was an important job, that it was not going to be an easy one. And in BP's report issued after the incident it is repeatedly recognized that cement placement was

PLANET DEPOS 888.433.3767 | WWW.PLANETDEPOS.COM

NATIONAL OIL SPILL COMMISSION MEETING CONDUCTED ON MONDAY, NOVEMBER 8, 2010
21 (Pages 81 to 84) 81
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

83
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

critical, that there was a complex design, and that the cement crew and the cementing engineers and the design team were focused primarily on achieving an acceptable equivalent circulating density during cement placement to prevent lost returns. Equivalent circulating density is a fancy phrase for pressure on the formation. They were trying to make sure that the pressure on the formation didn't get too high. This was, as BP has acknowledged in its report, this was a challenge. Another way of reducing the pressure on the formation is to pump the cement more slowly. If you pump it very fast, it takes more pressure. You've probably had experience with that. In order to make a liquid flow through a pipe faster, you need to increase the pressure on it. So the design team chose a low cement flow rate. Again, this is showing that same animation again only we're going to emphasize flow rate now. Again, the faster you pump, the more pressure you use. And so the cementing design here, in order to avoid problems with overpressuring the formation, use the

and of itself is not a problem and it's not uncommon, but it's something that the crew needed to be keeping in their mind as they were thinking about the long-term quality of the cement job and what they could expect out of it. Another factor, low cement volume. Again, driven by the very same concern about pressuring -about overpressuring the formation. Again, what -- what we've been explaining is that if you -- if you overpressure this formation, you risk losing the cement into the formation -losing cement into the formation. The cement doesn't do what you want to. It doesn't isolate the hydrocarbon zone. So one way, again, to reduce the pressure is to reduce the top cement, keep the cement lower in the annular zone than it would otherwise have been. BP had at least two reasons for reducing the height of the cement that it put in the annular space. One reason was about trapped annular pressure. As this animation shows, if you close off all of the area in the annular space over here, you

82
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

84 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

low cement flow rate. Now, a high cement flow rate is helpful generally when you're cementing because, among other things, it helps clean the formation and scour out any remaining gelled-up mud or debris from the annular space. Again, you have the experience that a fast jet of water will clean something better than a slow jet of water. And that's why a high flow rate in cementing is helpful. Here, however, we recognize that that would be preferrable but, because of that circulating density concern, because of the concern of overpressuring the formation, the team chose a lower rate. And again, as Fred has been saying, these were decisions that were made consciously. As the report acknowledges -- I'm sorry. As the cementing design acknowledged, they had consciously chosen a reduced rate of cementing in order to avoid -- again, there's that phrase, ECD -- ECD means pressure, in order to lower the pressure on the formation. Again, now, we have another issue that in

can increase the pressure on this -- on this casing. And that's because the oil in the bottom of the well is quite high. Fred explained it can be up to 260 degrees. When you take hot oil and run it up the inside of this production casing, it's going to make the things around it very hot. In particular, it will make this space right in here, this annular space in between the two casing strings, it will tend to make it expand. And when it expands, it creates pressure. That pressure can be very problematic. If it goes too high, it can collapse the inner casing string. That's a disaster for the well. So if that pressure in the annular space gets too high, you collapse the casing and you've lost your well. Again, a disaster that you want to avoid. So that's one reason BP was -- one thing BP was concerned about. And they did two things to address the concern. First, they put burst disks in -- in one of the outer casing strings. And the burst disks are there so that if that pressure got too

PLANET DEPOS 888.433.3767 | WWW.PLANETDEPOS.COM

NATIONAL OIL SPILL COMMISSION MEETING CONDUCTED ON MONDAY, NOVEMBER 8, 2010
22 (Pages 85 to 88) 85
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

87
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

high, the burst disk would allow it to escape rather than collapsing the casing string. But they gave themselves another way out as well. They said, "We're going to not cement the casing all the way up into the next liner. That will leave us an open space here that will give any pressure a second way of getting out." Now you have an alternate path for that annular pressure to be -- to escape. So there we see the pressure escaping. The end result of this is a lower top of cement. As Fred described, this was a low-volume cement job, about 60 barrels of cement. That decision was driven in part by the annular pressure concerns and in part by the concern about overpressuring the formation. Again, the higher the cement goes in this annular zone, the more pressure it exerts on the formation and the more likely you're going to have lost returns. So in the end BP chose to run the annular cement about 800 feet above the pay zone. Now, MMS

space than with a liner. You can see there is a much bigger open space here for the mud returns to come back up to your riser in a liner. So that's one reason why a long string can be -- can require more pressure to cement than a liner, all other things being equal. There's -- As you see over here, when -when the liner comes down, these returns are coming up. Again, the wider space here, not the skinnier space that they're using in a long string. Another reason as well, differing risk of contamination. Now, we've been showing these wiper plugs largely in schematic view. I'm going to show you in a second more closely what they do. The point for now is to recognize that as they come down, they take some mud with them. That long three-mile tube, even after you've sent wiper plugs and spacer down there, it's going to have a film of mud on it. And again, as I've said, the mud and the cement don't get along. But there is going to be some contamination, and everybody knows this. The

86
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

88 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

regulations only require 500 feet, but BP's internal guidance documents required a thousand feet. It is okay to deviate from those -- from those guidance documents under certain situations. And here the team said, "We want to reduce the pressure on the formation; we are consciously going to make a choice." Fred previewed this issue for you again. The -- the concerns about long string and liner -versus liner that have been expressed in the press have often gone to the presence of barriers in the annular space. That's the first difference between long strings and liners. Again, as Fred showed you, there is a seal up here on a long string. There is similarly a seal down here on the liner. It's called a liner top packer. That goes to whether or not the hydrocarbons could come up inside this annular space. But there are other reasons that a long string versus liner decision becomes important. One is, again, the cement circulating pressure. In a long string you have to push the cement a little harder to get it to come up the annulus because it's a skinnier

contamination, all other things being equal, can be more with a long string. With the liner, you're running the plugs down less distance. Here's the plugs in more detail. What I was talking about before was that if you have these wiper plugs scraping the mud down the sides, they will leave that mud in the shoe track. Fred showed you a slide in which mud in the shoe track, cuttings in the shoe track could cause problems with -- with having -- with converting the float valves. And here what we see is mud in the track brought there by the wiper plugs as they come down. The fourth difference between liners and long string is the cementing approach. On the long string you need to leave that little annular space open to allow for pressure to escape. So again, you don't want to run your cement as high as you might otherwise. On the liner, by contrast, you can eliminate the annular space entirely. You can run the cement all the way up to that seal. And the result is

PLANET DEPOS 888.433.3767 | WWW.PLANETDEPOS.COM

NATIONAL OIL SPILL COMMISSION MEETING CONDUCTED ON MONDAY, NOVEMBER 8, 2010
23 (Pages 89 to 92) 89
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

91
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

that you have a completely sealed system here and more cement. The point here again is that more cement is good. You're running your cement down a long pipe in an uncertain area. The more cement you put down there, the more cushion you have to make sure the job goes well. BP recognized that liners and long strings had different consequences for cementing and engaged in a debate in April in conjunction with Halliburton in deciding how to do things. The original design called for a long string way back before they actually started drilling the well, but the engineering personnel changed their minds when they looked at the ECD issue. And they said, "Let's use a liner instead. It reduces -- it could reduce the pressure on the formation as we cement this well." But finally, after looking at the Halliburton OptiCem models again, in conjunction with an internal BP cementing expert, the team decided that the long string could in fact be cemented.

right in the center. And remember, this is a thousand feet or so. So you want to be -- you want to do everything you can do to keep it centralized. MR. SANKAR: And one way you can do that is with a centralizer. A centralizer -- That's a model. We have a real one sitting up here for a smaller diameter well. It's nothing more than this. It does exactly like what it looks like it would do. It helps hold that pipe smack in the middle of the hole that you've got. MR. BARTLIT: And as you can all see, even with this little artificial centralizer, it keeps in the center all the way around. It doesn't get up against the side. I'll just walk around like Grimsley did so everybody in the back can see. These will be up here, by the way, if you want to look at them during the break, people are welcome to look up. You want to keep it in the center, obviously. MR. SANKAR: So now I'm going to show you in this animation what the value of the centralizer is. If you don't have your pipe centralized -- and we're going to use the one on the right as an example

90
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

92
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

Now, the long string has some value over the long-term life of the well. So there were reasons why they wanted to use a long string that weren't directly related to these initial cementing concerns. Again, using the long string itself, not a huge problem, just requires more attention to the way that you do the other operations. So now we're going to talk a little bit about the famous centralizers that you may have heard about. Fred will show you what these look like. So we're going to go back and show you an animation about what the -- what the actual centralizers do. The actual centralizers used at this well were about 4 feet high. So the ones that we have here are just little models. The point here is that you have that skinny annular space. I'll hold it, you wiggle it. And if you don't have the pipe right in the middle, you can cause problems. Among other things -MR. BARTLIT: You want cement all the way around it, and if it gets down here, it may be harder for cement to get in here. So you want to keep this

of a noncentralized pipe and the one on the left as a centralized pipe. I'm going to start running the mud now. First, I'll show you again what you've seen. This is in plan view what the effect of an uncentralized pipe actually looks like. If you're running the mud, the mud is fine, it's going everywhere. But the cement, you want it to come up on both sides of the well. You can see on the one on the left the cement is flowing evenly on both sides of the pipe. And the one on the right, there is some mud left behind. The mud is taking the preferential flow -- or the cement is taking the easier path up and leaving some mud behind. That mud area is called the channel. That's an area where it's easier for gas and oil to come in. You want to avoid it. So BP's original design called for more centralizers than they eventually used. But there was a problem. There weren't enough of the kinds of centralizers they preferred. They're called centralizer subs. So what's a centralizer sub?

PLANET DEPOS 888.433.3767 | WWW.PLANETDEPOS.COM

NATIONAL OIL SPILL COMMISSION MEETING CONDUCTED ON MONDAY, NOVEMBER 8, 2010
24 (Pages 93 to 96) 93
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

95 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

I'll show you on the next slide. There is a picture on the left of a centralizer sub versus a centralizer with a stop collar. The ones on the left, the centralizer subs, are screwed into the pipe joints as they go down. That means they're very securely on there. They're not going to move around. Whereas the ones on the right, which are more like this, slip over the pipe and require some stop collars to hold them in place. When you have those stop collars, you have additional material on the outside of your casing as it's going down. So now BP, when they talked to Halliburton, and they were talking about the long string and the liner, Halliburton personnel, Jesse Gagliano, ran the Halliburton OptiCem model and said, "Look, we think that you're going to need a fair number of centralizers on here, 21 to be exact, to reduce the risk of channeling in this well." This is based on a computer simulation. So Jesse Gagliano tells the BP engineers in their office -- he works with them in the same office -- he says, "I think there is a potential
94

MR. SANKAR: So Greg Walz says, "We've lined up a Weatherford hand to install those centralizers and we're putting them on a helicopter to get the centralizers and the Weatherford hand out to the rig." So the 15 centralizers go to the rig and they're there. The 15 plus the six will give them the 21 they need. But there is a last-minute decision not to use the additional 15 centralizers. John Guide, again a senior engineer on the project, says, "I just found out that the stop collars aren't part of the centralizers." He's talking now about separate stop collars, top and bottom. He says, "Now I have a total of 45 pieces, those 15 centralizers and two stop collars each, that are going to be external to this casing, and I'm worried about them. First of all, it's going to take ten hours to install them; second, we're adding 45 pieces that can come off as a last minute addition." The concern here is that having those external centralizers not well anchored to the casing can either hang up the casing in the wellhead, which
96

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

problem here. There is a potential for flow due to the six centralizers." All right. So what happens as a result of that? BP says, "We only have those six centralizer subs. What are we going to do?" A BP engineer named Greg Walz sends an e-mail to the design team and says, "We need to honor that model. We need to honor the model to be consistent with our previous decisions to go to the long string." The long string design was going to require that they have more centralizers. David, David Sims here, who is one of the senior engineering managers there, was in the office, talks to Greg, and they agreed that they are going to need more centralizers on this job. So the end result is that Greg Walz says, "I gave Brett the go-ahead." And he means the go-ahead to send more centralizers out to the rig. MR. BARTLIT: If the Commission please, it's time for our break, but it would be better for Sam to finish this issue, if that's all right. CO-CHAIR REILLY: We agreed.

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

makes it very difficult to finish the well, or they can come off and not do their job. His subordinate, Brett Cocales, says, "In thinking about this, who cares? It's done. End of story. We'll probably be fine and we'll get a good cement job. I would rather have to squeeze than get stuck above the wellhead." This is why Fred explained to you what squeezing is. This e-mail is important because it shows that the team recognizes that squeezing is a possibility, and they decrease the possibility of having to squeeze by choosing to use less centralizers. What is interesting is that since the event, the BP report has concluded that in fact the centralizers sent out to the rig were the right kind of centralizers. The stop collars would have been part of the original centralizers, and they wouldn't have had too many pieces to be sliding around on there. In addition, we've learned that the Weatherford person who was on the rig who knew exactly

PLANET DEPOS 888.433.3767 | WWW.PLANETDEPOS.COM

NATIONAL OIL SPILL COMMISSION MEETING CONDUCTED ON MONDAY, NOVEMBER 8, 2010
25 (Pages 97 to 100) 97
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

99
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

what to do with the equipment wasn't actually consulted by the team on the rig. So it may be that they had the right centralizers. Now, in our interviews with the BP engineers -- let's go back to the previous slide for a second -- what we found is that some of them actually believed that despite what the BP report says, they did have the wrong centralizers on the rig. We don't know at this point whether they had the right ones or the wrong ones. The point for us to convey to you is that there is no clarity even now on whether the additional centralizers should have been used on the rig. The next point is that when BP decided to run with only six centralizers, they didn't go back to Halliburton and say, "Can you rerun the OptiCem model? We want to see what the effect of having these six centralizers is going to be." They instead went with their engineering judgment and they proceeded with the well. And I think we'll stop there for now and take our break.

Everything you're seeing from the top of the rig is basically pressure. You're looking at your pressure gauges, and when they do things, you're interpreting what's happening at the bottom of the well. One of the first things you can interpret happening is the bottom plug landing. When that plug hits, it takes some pressure to burst it, and it goes through. As you continue on, the next thing you see is something called lift pressure. Lift pressure, again, is the pressure you see from the cement coming up in the annular space. Again, the cement is coming down, gravity is helping it. When it turns the corner and starts going up into the annulus, it takes additional force. And you see that at the rig. What you can't see at the rig is lift pressure. The other thing you see during this is something called full returns. As Fred described, for every barrel of cement you put in, you want to see a barrel of mud come back at the top of the rig. That tells you that the cement is going down the well and not into the formation. If you're
100

98
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

CO-CHAIR REILLY: I have just about 11:00. Let's reconvene at 11:15. (Recess taken.) CO-CHAIR REILLY: May I ask you to take your seats, please. We will resume. I will turn this back over to you, Sam Sankar. MR. SANKAR: Thank you. I was just having a minor glitch in the audio-visual here. Do I have the right mouse here? All right, we'll go on manual controls here and see if we can get that going again. There is one last little point that we wanted to talk about here. And again, what we have here is a list of issues at the time of the cement job being pumped. The final issue is one that is common in the industry that everybody knows about; it's that there's no direct indicators of cementing success. Next slide, please. What you see here is, again, that same image of the cement being pumped down the well. And there's a couple indicators that we're going to see. Stop it there. And what you'll see is the first thing --

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

losing a lot of returns, it's an indication that the cement may be going somewhere you don't want it to. So you have three indirect cementing indicators: lift pressure, full returns and the plugs landing on time. If the plugs land on time, again, that suggests that the cement arrived down in the bottom of the well, probably without a whole lot of problems. Now, after they pumped the job at Macondo in the very early morning hours of the 20th, Halliburton sent a report back to BP, and it relied on some of these indicators. It said the cement job was pumped as planned. It said both plugs were bumped, full returns seen throughout entire job. And they estimated 100 p.s.i of lift pressure. So these were good indirect indicators of the cementing process. They suggested that things might have gone well. The problem is these are indirect indicators of something that is happening three miles away down a pipe of this small diameter. Imagine your three-mile-long pipe, it's this long, and you're pumping 60 barrels of cement in it and trying to

PLANET DEPOS 888.433.3767 | WWW.PLANETDEPOS.COM

NATIONAL OIL SPILL COMMISSION MEETING CONDUCTED ON MONDAY, NOVEMBER 8, 2010
26 (Pages 101 to 104) 101
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

103 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

figure out what's happening at the other end and all you've got is these secondary indicators. It's not easy, and the industry knows this. There are tools in the industry that recognize these things. Next slide, please. But these indicators alone are imperfect, and that's why BP's own cementing manuals say that when you're trying to determine zonal isolation you have a couple of different options. Three options listed in the manual. You have cement evaluation logs, which I'll talk about in a second. You have temperature logs, which we're not going to discuss but weren't at issue in this -- in this incident. And you have something called cement column back pressure. Cement column back pressure is a fancy word for lift pressure. What's important is that it notes, it says, "Lift pressure will only give you a very coarse estimate and where cement and mud weights are very similar is unlikely to provide a sufficiently accurate estimate." Here the mud weights and the

So the cement bond tool even then has some limitations. And one of the key limitations at Macondo was that it couldn't go past this float collar. So it can evaluate this top section up here, but it cannot evaluate the shoe track cement. Now, what's important to note is this unevaluated section here includes pay zone and it includes the shoe track. So even if you had run the cement evaluation tool, you wouldn't have seen at least one potential flow path up into the well. That's not to say that the cement bond log tool wouldn't have been useful. You could have at least seen where the top of cement was. You could have gotten some gross indicators of how well the cement job had worked. And on the next slide we'll see that BP's report issued after the incident concludes that if the team had done a better risk assessment of cement job in light of all the conditions that existed, it might have chosen further mitigation options to address those risks, and this may have included running a cement evaluation log.
104

102
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

cement weights were in fact very, very similar. So again, now we have -- let's stop it there -- a cement evaluation tool. The cement evaluation tool is -- it's also been called the cement bond log in the press. It's actually a series of different instruments sent down the well, and something that looks almost like a torpedo. It's lowered down in the well, and with a number of sensors it's pulled back up the well and it looks at the cement and tries to get a sense of how it works. The best way to describe what it does is to think about a bell. If you take a bell and you ring it with a hammer, it makes a certain sound. But if you took that same bell and coated it in cement or concrete and you whacked it again, it would make a different kind of a sound. When you're trying to think of a cement evaluation tool or a cement bond log, that's functionally what it's doing. It's checking to see how well the cement in the annular space has bonded to the casing and also secondarily to the formation outside.

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

What's important to recognize is that many operators have told us that they would not have run a cement evaluation log in this instance. Those logs work best if the cement has 48 hours to cure. And here it wouldn't have had that amount of time. Many people would have saved the cement evaluation log step for the production phase. They would have come back and, before perforating the well to get the oil out of it, they would have run the log then to get a sense of the cement. And in the interim they would have relied on extra heavy mud in the well bore or extra plugs in the well bore to help add additional safety to keep the hydrocarbons from coming out of the well. So now I'm going to move on to some questions about cement. What we've gotten to so far is a list of bullet points that you've seen before about all the issues that the crew is dealing with at the time that they've run the cement job. Those bullet points again, to repeat, none of them are individually a huge problem. Most of them are known in the industry. They're dealt with all the

PLANET DEPOS 888.433.3767 | WWW.PLANETDEPOS.COM

NATIONAL OIL SPILL COMMISSION MEETING CONDUCTED ON MONDAY, NOVEMBER 8, 2010
27 (Pages 105 to 108) 105
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

107
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

time in the industry. But there are things that a prudent design team and a prudent cementer would be keeping in their head at the time they're doing the cement job. And the lack of some of the safeguards that they might have had would lead you to have to rely even more on the negative pressure test that Sean is going to describe after I'm done. But before we get to the negative pressure test, we want to talk a little bit about some questions that have been raised about the cement that was pumped down the Macondo well. To do this, first I want to go back to the foam cement concept. Remember that slide when I showed you the animation of heavy cement, light cement and then heavy cement in the back? You can make heavy cement lighter by pumping nitrogen in it. Nitrogen is inert in cement. It doesn't affect its chemical behavior. So by pumping nitrogen in at a 1000 p.s.i. into the cement, you can end up with a foamed cement. It almost looks like gray shaving cream, if it's at a high foam

you test foam cement in a laboratory. On the rig it's generated in a different way than it's generated in the laboratory. In the laboratory you use a blender. You take the blender and you fill it up with some cement. You leave a head space in the top of gas so that when you blend the cement and create the foamed mixture, just like making a margarita, you've got a foamy mixture now that is evenly blended air into the cement, it fills the entire sealed container and gives you a foamed cement that is the same density as the cement you're going to put down the well. So you've got a model in the lab of what's going to be pumped down the well. So after you have created the foam cement in the lab, you can test it in one of two ways. You can pour it in a glass, graduated cylinder, and let it stand for about two hours and just watch it, see what it does. You can also pour it into a plastic cylinder and let it cure for 48 hours in a hot water bath and you can evaluate that as well. But with either method the point is the same, you're looking for density variations. You're
108

106
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

percentage. That's lighter than the original cement. So the base cement is 16.5 pounds per gallon. Foam cement is 14.5 pounds per gallon. Now, foam cement is useful for a lot of purposes, and Halliburton is one of the leading providers of foam cement. And it says foam cement can be mixed at very light weights. Great if you've got lost return problems; you want to reduce the pressure on your formation. And it says explicitly it's a good fit for extreme lost circulation problems where nothing else will work. And as a result, it's done a lot of these jobs. Halliburton says it's used foam cement in over a thousand jobs, including 279 jobs at 15,000 feet or deeper and 79 jobs at 18,000 feet or deeper. So Halliburton recognizes that this is a technology that they believe is good in deep water. But it's important before you use foam cement to test it. Everybody we have talked to in the industry says pre-job cement testing, whether foam cement or any other kind of cement, is critical. I want to show you a little bit about how

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

looking to see whether the foam cement that was originally all one density is changing densities over time. So a stable foam cement will stay just the same way over two hours in a glass cylinder. But if it's unstable, things can happen. One of the things that can happen is you'll get some segregation. When you go back in there and look at the top density and the bottom density using a syringe, you'll find the top is lighter and the bottom is heavier, suggesting that the bubbles have migrated upwards. That can be a sign of instability. If you do it with the plastic tube method, it's similar. You take it, you let it cure for 48 hours, and then you slice it up. One, two, three, four. You cut it in any number of different pieces. The point is, again, you're comparing the density of the top and the bottom, you're comparing the pieces against each other, and you're also comparing them against the design. Because if all the pieces are much heavier than the initial foam cement you poured in there, that means the bubbles have come

PLANET DEPOS 888.433.3767 | WWW.PLANETDEPOS.COM

NATIONAL OIL SPILL COMMISSION MEETING CONDUCTED ON MONDAY, NOVEMBER 8, 2010
28 (Pages 109 to 112) 109
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

111
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

out; it's increased in density. The criteria for determining when you have a failed test are anything but clear. This is the American Petroleum Institute's foam stability criteria. Now, we went and looked at these criteria, and you can read them for yourself. More than a trace of free fluid, bubble breakout noted by large bubbles, excessive gap, visual signs of segregation and large variations in density. What you will notice is that these are all somewhat subjective. There's no numerical criteria, there's no clear cutoff. So Halliburton just before the job reported some results, and after the incident we looked back at those results, and you can see that the lab results bear a date of April 12, 2010, when they were sent to BP. And in that lab result they show the results of the foam stability test. SG top and SG bottom. SG means specific gravity; it's a way of measuring density. And the end result here is they planned on having a 14.5 pound-per-gallon cement and they got 15 at the top and 15 at the bottom. Some have said

run tests on very similar materials provided by Halliburton. What Halliburton provided to us was off-the-shelf ingredients identical to the ones used at Macondo. Now, we didn't have the actual cement used at Macondo. The vast majority of it went down with the rig. There's still a small amount of it, one and a half gallons, that's held under an evidence preservation order that may be tested in the near future. But we used the exact recipe that Halliburton used, and we used off-the-shelf versions of the same material. The Chevron lab, which is acknowledged to be one of the best in the industry, with some of the best cement experts that we could find, said that none of the tests that they ran on the foam were stable. Most of the tests that they ran on other qualities of the cement came out pretty similar to what Halliburton got. But the foam stability test did not. Running the tests nine different ways, all of them were unstable. We went back to Halliburton and we talked

110
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

112 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

that's an unstable foam. Others have said that's pretty good. Half a pound per gallon variation is not terrible in the laboratory. We can talk about that this afternoon. What's also important to note for now is the conditioning time. Conditioning is nothing more than mixing the cement before you test it in the lab. Anybody who has worked with cement knows that the longer you mix it, after some time it starts setting up and developing some strength. So mixing it for a long time in a lab can help that foam perhaps become more stable. So they mixed it for three hours. What's important to note here as well is that on the rig it's not conditioned before it's foamed. You mix it in the tank. You immediately foam it and you send it down the well. Now, there is a long travel time down the well. But, again, on the rig, the cement isn't conditioned before it's foamed. So there were questions raised about this cement after the job by BP, among others. And so the investigative staff worked with Chevron to actually

to them about this. Now, you'll see one strip of data here first, and that's the data from the April 12th test that I displayed to you earlier. When we looked back at the original data in the lab, what we noticed was that it actually seemed to have been tested on the 18th. Why does that matter? It takes 48 hours to run the tests in Halliburton's lab. Remember, the cement job is pumping. It's finished pumping by 1:00 in the morning on the 20th. This test looks like it got started at about 2:00 in the morning on the 18th. So if you run it for 48 hours, it may have been that that test was not finished even inside of Halliburton before it was done. We also know, we're quite sure, that it wasn't given to BP before the job was run. We see again the three-hour conditioning time. We're not sure whether it's stable. And we see that 15-pound-per-gallon density. So when we looked at the data again, then we found another test in April. This one looks like

PLANET DEPOS 888.433.3767 | WWW.PLANETDEPOS.COM

NATIONAL OIL SPILL COMMISSION MEETING CONDUCTED ON MONDAY, NOVEMBER 8, 2010
29 (Pages 113 to 116) 113
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

115
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

it was run on April 13th, soon after the lab test request went in. It has the same test ID number, the same target foam density, but this one is much more dense at the top and more dense at the bottom than the test that was reported. This one, our experts tell us, is clearly unstable. Also interesting is that it has a different conditioning time. Half the conditioning time of the later test. This one clearly was never given to BP before the job, and even though we are sure it was available to Halliburton before the job was run. So then we look further back. Back in February, Halliburton ran a pilot test. Now, a pilot test is not exactly the same as the test that they ran in April. It was done on a slightly different recipe and may have been done on slightly different materials. The overall design was very, very similar. And in February, on February 17th, you get some very troubling foam stability results. Again, clearly unstable. Conditioning time again different. And this time this one was reported to BP in March, but it listed the wrong conditioning time.
114

contributed to the blowout. The interesting question, of course, is what does it mean to pump unstable foam cement down a well. And the truth is nobody really knows with any precision. Everybody agrees that you shouldn't be using unstable foam cement, and BP's report says you could have nitrogen breakout, that is the bubbles could come loose. You could have nitrogen migration and incorrect cement density. This could cause a host of problems. There are textbooks saying that -- or academic articles I should say, saying good foam stability is required to maintain the initial foam structure until setting. Unstable foams lead to a poor structure that is highly interconnected, that's sponge-like. You don't want to have sponge-like cement if you're trying to isolate hydrocarbons. And the academic articles emphasize the importance of having successful foam stability tests before you run a job. So what we have now, we have that unstable

116
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

It listed zero as the conditioning time even though the lab sheets show, or at least suggest, that it was two hours of conditioning time. What's interesting is this one was reported to BP, regular lab sheet sent to the BP engineers. It doesn't appear that anybody highlighted this information. It doesn't appear that anybody at BP recognized the significance of this information. There's also a fourth test. If we'll look even further back, February 13th, yet another pilot test result. The worst yet. No conditioning time, yields high density, clear foam breakout, clear instability. Available before the job to Halliburton? Yes. Ever reported to BP? No. On the basis of the Chevron tests and some of the evidence we'd seen in the internal Halliburton documents -- you may have seen the letter that the investigative staff wrote to the Commission to explain our concern about some of these things. Our primary concern based on the Chevron test was that the data strongly suggested that the foam cement used at Macondo was unstable and that that may have

foam concern, but we also have all of these indicators that were known at the time of the job. And again, I'm going to say this yet another time, a lot of these things individually are common in the industry. Taken together, they are something that should have been in the head of the design team, the cementing team at the time it was cementing the job and, if nothing else, should have led them to be very careful and very concerned about what they were going to do next, which is test the job. I should introduce Sean Grimsley. MR. GRIMSLEY: So now we've heard quite a bit about cement and foam cement and cement testing. What I'd like to do now is reset the stage and bring you back to the Deepwater Horizon on April 20th. Shortly after midnight on the morning of April 20th, the rig crew and cementers finished the cement job. At 5:45 a.m., a Halliburton cementer on the rig e-mails back to shore and says the cement job went well. At 7:30 a.m. BP concludes the cement job

PLANET DEPOS 888.433.3767 | WWW.PLANETDEPOS.COM

NATIONAL OIL SPILL COMMISSION MEETING CONDUCTED ON MONDAY, NOVEMBER 8, 2010
30 (Pages 117 to 120) 117 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 119
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

went so well that they actually decide to send home the contractors they had brought out to the rig to perform the cement evaluation tool. 14 and a half hours later, at roughly 9:49 p.m., is the first explosion on the rig. So it's critical to understand what happened in that 14 and a half hours. So what is the crew doing on the rig after the cement job? They're moving to the next phase of the well, the temporary abandonment phase. The temporary abandonment phase is basically just the procedures that the well undertakes -- or the rig undertakes to get from the picture of the well on the left to the picture you see on the right. What I think many people may not realize is that the Deepwater Horizon does not actually produce the well. It does not extract hydrocarbons, oil and gas, from the well. It drills the well, and then ultimately will cement it in, button it up to leave it for a production or a completion rig to come back at some later date.
118

backup barrier just in case anything happens with the cement down at the bottom. If hydrocarbons begin to leak in, they will be stopped by that surface cement plug. But notice, above that surface cement plug is seawater. And in this case -- we'll talk a little bit more about it later -- BP chose to run a very deep surface cement plug. The depth here is 3,000 feet below the mudline, and rather than keep heavy mud in that space, BP chose to fill it with seawater. Heavy-weight mud is about 6 pounds per gallon heavier than seawater, so the decision to replace all of that heavy-weight mud there with seawater took a lot a substantial amount of pressure from out of the well that was otherwise pushing down and helping to hold the hydrocarbons at bay. The last point I want to make on this slide is the lockdown sleeve. The lockdown sleeve is represented here by these two black boxes which obscure -- the drill people are here -- obscure a tremendous amount of engineering technology. So I'm not trying to change you short here.

120
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

The process by which the Deepwater Horizon buttons up that well is called temporary abandonment, bringing it from the picture on the left to the picture on the right. And you'll see, obviously, there are quite a few differences between those two pictures. First, you'll notice the rig is gone. The rig has taken its riser with it. All the mud, the heavy-weight mud that's in the riser is gone along with the rig. And also the rig brings with it its blowout preventer. So you see here there is no blowout preventer. So it's critically important that this well is going to be sitting there in the Gulf of Mexico without a blowout preventer, that the rig crew ensures that that well has integrity and is fully buttoned up. Now, some of the other differences you'll see is a cement plug. And this is basically a 300-foot plug of cement, a 30-story building of cement, that the rig crew will put in place before they actually temporarily abandon the well. And that cement plug acts as a backup, a

But for present purposes all we need to know is that lockdown sleeve actually locks the long string casing in place. It locks it to the wellhead so at no point, then, will the casing actually lift up. And you may ask yourself, how on earth is that casing going to lift up. There's hundreds of thousands of pounds, millions of pounds perhaps, of casing. Well, it has to do with the completion and production of the well. When a production rig actually come backs to produce this well, it's bringing up very hot hydrocarbons up this production string, and they're also moving somewhat quickly. The heat and the movement can actually create lift, and if the lift gets great enough, believe it or not, this casing string can actually be lifted up. So the lockdown sleeve's purpose is to prevent that from happening during the completion or production phase. Now, one thing I would like to -- one myth I'd like to deal with. There's been a lot of talk in the media about this lockdown sleeve and the fact that

PLANET DEPOS 888.433.3767 | WWW.PLANETDEPOS.COM

NATIONAL OIL SPILL COMMISSION MEETING CONDUCTED ON MONDAY, NOVEMBER 8, 2010
31 (Pages 121 to 124) 121
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

123
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

it was not set before the time of the blowout. And there have been questions as to whether BP should have set this lockdown sleeve earlier in the procedures. I will tell you if there is anything unusual about the lockdown sleeve here, it is that BP was going to set it at all during this phase of the well. Typically lockdown sleeves are not actually placed until the completion or production rig comes back to produce the well. BP, for whatever reason, made a decision here to set the lockdown sleeve at this stage. Now, going forward, whether it may or may not make sense that this should be an additional safety measure when drilling rigs are out there drilling these wells, that's another story. But just keep in mind, it would not have been unusual at all for BP not to have set a lockdown sleeve at all before the Deepwater Horizon left. So again, temporary abandonment, getting the well from what you see on the left at the end of the cement job, to what you see on the right, which is when the rig is going to move away.

discussed earlier, are part of the BOP. They actually close around the pipe and create a seal. So at this point you have created what should be a closed pressure vessel. The rig then pumps down pressure through one of these three lines. And you see in these three lines -- we haven't talked much about them -- but they're basically pipes that run from the BOP back up to the rig. And those pipes allow the rig crew to send fluids down into the well and bring fluids back up without having to rely solely on the drill pipe or the riser. So those pipes are used for a variety of different activities -- back it up, please -- one of which is the seal assembly pressure test. So the crew will pump pressure down into this closed vessel, close the valve at the top of the rig, and then watch for some period of time to make sure that the pressure holds. If the pressure holds, you can be sure, or at least have a very good idea that those seal assemblies are doing well in holding pressure. And out here on the Macondo they ran a seal
124

122
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

So the first step in the temporary abandonment sequence is to test the integrity of the well. As you might imagine, you want to make sure there are no leaks in this well when the Deepwater Horizon picks up and moves away. So there are a variety of tests that the crew will undertake to make sure that the well has integrity. The first is called the seal assembly test. The seal assembly test basically tests the seal, which is right here between the casing and the wellhead. And again, this animation obscures a substantial amount of very high-tech engineering. But suffice it to say, there is a space there that needs to be sealed. So the crew needs to test the casing hanger seal assembly. And this is how they do it. First, they're going to isolate this space right here and create a closed container. They do that by running a drill string down with a packer. This packer right here seals off the top of the well from the bottom. The next thing they will do is close these variable bore rams. These variable bore rams, as Fred

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

assembly test and it passed, and nobody disputes that it was a good test. So we'll move on to the next test, which is the positive pressure test. The positive pressure test is testing something different. What the positive pressure test is testing is actually the integrity of the casing down in the well. And again, what the crew does is pumps pressure -- stop it right there -- pumps pressure down into the well and see if that pressure holds. If the pressure doesn't hold, it indicates that there is a leak. And the way the crew sets up the test is to close now a different set of rams. This time the blind shear rams. So Fred talked a little bit before about the blind shear ram and how it's used in an emergency to cut the pipe and shut in the well. But it is not just an emergency measure. It's actually used, like many other parts of the BOP, for regular operations, this being one of them. So the crew shuts in the well, isolating the bottom from the top, and pumps in pressure. The

PLANET DEPOS 888.433.3767 | WWW.PLANETDEPOS.COM

NATIONAL OIL SPILL COMMISSION MEETING CONDUCTED ON MONDAY, NOVEMBER 8, 2010
32 (Pages 125 to 128) 125
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

127
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

crew will pump in pressure for five minutes at 250 p.s.i to watch if it holds. If it holds, then for 30 minutes the crew will pump in -- or the crew will then pump in 2500 p.s.i pressure and watch if it holds for 30 minutes. If it does, that's a good positive pressure test and it indicates that you have good integrity, at least within the casing string down in the well. The crew at Macondo performed a positive pressure test here. It went well, and nobody disputes that the positive pressure test here indicated that the casing had integrity. The problem, though, with both the positive pressure test and the casing hanger seal assembly test is that neither of them test the cement at the bottom. You see, the positive pressure test, you're pumping a lot of pressure in here, but there are these two wiper plugs at the bottom, and they're actually on a ledge. So when you're pumping pressure into the well, you're pumping against those wiper plugs so the cement is not really seeing any of that pressure. There is only one test that was performed

This is the testimony from Daun Winslow, Transocean general manager for the Gulf of Mexico. "Please tell the Board how important or not important a negative test is." "Answer: It's very important." So I want to set the stage for the negative pressure test. You've seen all those bullet points that we put up before, the situation at the time of the cement job, things that might cause concern in the minds of people about the integrity of the cement job. And we've now come up to the negative pressure test, which all acknowledge is really the only test performed on the cement job that day. So I would like to explain just a little bit basically what a negative pressure test is. A negative pressure test is in many ways just the opposite of the positive pressure test. With the positive pressure test, you're pumping pressure in and seeing if it holds, if anything leaks from inside the well to outside. With the negative pressure test, what you do is you remove pressure that is already in the well
128

126
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

at Macondo that actually tested the integrity of the cement at the bottom. That's the negative pressure test. Now, because the negative pressure test is the only one that tests the integrity of the cement at the bottom, it is a critical test in the life of the well. Not only is it the only one that tests cement, but it is the last test actually performed. So here is testimony from John Guide, who was BP's well team leader for the Macondo well. "What is a negative test designed to evaluate? "Answer: It's also designed to see if the float equipment and the cement, actually the cement in inside the casing is holding, and also the casing itself. "Question: Is it accurate to say that this is the last evaluative test that is performed on a well before the BOP is pulled and the rig is demobilized?" "That is correct." So it's a very important test. Next slide.

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

and see if anything leaks from the outside in. And the thing you're worried about leaking from the outside in are the hydrocarbons down here. So the question is: How do you go about removing pressure that's already in the well? Well, recall that there's 18,000 feet of heavy-weight mud. That exerts a substantial amount of pressure down on the bottom of the well. And in fact, before the cement job, that mud alone was sufficient to hold the hydrocarbons at bay. So what you're going to want to do is remove the effect of the downward pressure of some of that mud and then watch what happens to the well. The next question you've got to ask is how much of that mud do we want to remove, or the effect of which do we want to remove? And that's going to depend on your temporary abandonment plan. Here recall BP decided that it would set its cement plug 3,000 feet deep and replace the mud in that 3,000 feet with seawater. That removes pressure from the well. So here, when starting the negative

PLANET DEPOS 888.433.3767 | WWW.PLANETDEPOS.COM

NATIONAL OIL SPILL COMMISSION MEETING CONDUCTED ON MONDAY, NOVEMBER 8, 2010
33 (Pages 129 to 132) 129
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

131
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

pressure test, you want to simulate that situation, so you want to remove the effect of that 3,000 feet of mud in the well you're taking out plus what ultimately will be 5,000 feet of mud in the riser that you're taking out. So here is what a basic negative pressure test might look like. This is not what happened at Macondo. I just want to give you a sense of how it might be done, what the criteria for success are, and then talk about what actually happened that night. So let's walk through just a generic negative pressure test. So the crew has run the drill pipe. And here on the side is what it's supposed to look like, a temporary abandonment. So this is what you're trying to simulate. So the crew runs a drill pipe down to 3,000 feet below the mudline, or seafloor. It then does what is called displace the mud above that 3000-foot depth. Stop it. Displacing, all that means is that you're taking one fluid, pushing it down through the drill pipe. When that fluid rounds the corner, it then
130

simulate also the 5,000 feet of seawater that this well is going to see at the time of temporary abandonment. And how that is done is with the drill pipe. Because recall, we have displaced mud with seawater through the drill pipe. So the drill pipe itself now is an 8,000 column -- 8,000-foot column of water that simulates or replicates the pressure gradient that the well will see once it has been temporarily abandoned. Now, up here I just want to point out, these little bow ties, those are valves. This one right here when it's green, it's open. When it's red, it's closed. So keep an eye on the bow ties; red closed, green open. So the crew at this point is almost ready to conduct the negative pressure test. The only problem right now is that there is some residual pressure left over in the system from having actually displaced that seawater. The active displacing that seawater, you get some pressure that gets trapped in the system and
132

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

pushes whatever fluid was there already out. That is what is called displacement. So here you are displacing mud, heavy-weight mud with seawater. The other thing to note here is the interface you see. Right there, it's kind of an orangish-purplish interface. That represents spacer. Like Sam talked before, water and mud don't get along, you don't want them to mix. So whenever you are going to displace mud with seawater, you're going to have this spacer in between. So keep rolling. So at some point the crew will get -- will displace the mud from 3,000 feet down below the mudline to above the annular preventer, or the blowout preventer, and then will shut another one of these rams, in this case the annular preventer, around the drill pipe. That annular preventer will create a seal which isolates the mud and spacer in the riser from the well below. So at this point the crew, in this negative pressure test, has removed the effect of this 3,000 feet of heavy-weight mud. But it then must

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

before you start your negative pressure test, you need to bleed off that pressure. And the goal is to bleed off pressure to where you get it down to zero p.s.i when you start your negative pressure test. So the next thing the crew does is opens up that valve on the drill pipe at the top of the -- at the rig and bleeds off pressure. And when I say bleed off pressure, it's just like opening up your valve on your bike tire. If you open it up, air comes out. In this case it's fluid; you open it up, fluid comes up. So they bleed it down until they get the pressure to zero. And people will have a very good idea beforehand how much fluid should be bled off before they will reach zero. They can do those calculations. And if it turns out they're seeing a lot more fluid come back than they anticipate, that can be a problem. But in a good regular negative pressure test, they bleed off the fluid. And the next step is simple, they just watch. Because what the crew has now done is taken

PLANET DEPOS 888.433.3767 | WWW.PLANETDEPOS.COM

NATIONAL OIL SPILL COMMISSION MEETING CONDUCTED ON MONDAY, NOVEMBER 8, 2010
34 (Pages 133 to 136) 133 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 135
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

all of the pressure out of the system. If there is any flow after this point in time, it means something is flowing into the well from down below; hydrocarbons. The other thing the crew can do is shut in the valve at the top and see if pressure builds up; because, again, once that pressure is bled down to zero, the only explanation for it coming back up is that something is flowing into the well, that there is a leak, and you do not have well integrity. So that is what a good negative pressure test would look like. Criteria, no flow for a substantial period of time when that drill pipe is open. No pressure buildup when that drill pipe is closed. Because remember, that drill pipe is communicating with the well. It's basically just a tube. This is not what happened at Macondo. At Macondo the crew set up the test and then they got to the point where they were going to bleed off that pressure. They bled it down on the drill pipe. Couldn't get it actually to go all the way to zero.
134

Now, if you think about the criteria for success, it looks like that test on the kill line was good, but they never reconciled the fact that there was still 1400 p.s.i pegged on the drill pipe. Now, everybody at this point, all parties, and I think everyone who has looked back at this, agrees that this was a failed negative pressure test. These are some quotes from the BP report. "Abnormal pressures observed during the negative pressure test were indicative of a failed or inconclusive test; however, the test was deemed successful." Another quote: "There was 1400 p.s.i on the drill pipe, an indication of communication with the reservoir." And what that means is the well was flowing. Hydrocarbons were leaking in. But for whatever reason, the crew, after three hours, from 5:00 p.m. to 8:00 p.m. that night, decided it was a good negative pressure test. The interesting question is not so much whether it was or was not a good negative pressure test. The question is why these experienced men out

136
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

So they closed the drill pipe back in and the pressure came up to 1400 p.s.i. They opened the drill pipe again to bleed it off, got it down to zero this time. They close in the drill pipe, it comes back up to 1400 p.s.i. They open it up, bleed it off, get it down to zero, close it in, pressure comes back up to 1400 p.s.i. So three times they try and bleed it down and get rid of the pressure and three times it comes back up. So at this point they move it to the kill line off the drill pipe. The kill line is one of those pipes that goes up from the BOP we talked about before. And you can run a test on a kill line; that's fine. The drill pipe and kill line are two straws that are going into the exact same place. They should be seeing the exact same pressure. There shouldn't be any difference whatsoever between them. So it's fine to run the test on that. The crew does it. They open up the kill line, and a little flow comes out and stops. They then watch that for 30 minutes. No flow. No pressure buildup.

on that rig talked themselves into believing that this was a good test that had established well integrity. You see, none of these men out on that rig want to die. None of the men out on that rig want to jeopardize their own safety. None of the men out on that rig want to jeopardize the safety of the men and women they work with day in and day out. The question is: Why did they come to this conclusion? We may never know the answer to that question. Many of the individuals who made those decisions, members of the rig crew who participated in those discussions died in the explosion. Others suffered severe medical injuries or are suffering from such severe medical conditions that they have simply been unwilling to talk at this point. And others have asserted their Fifth Amendment right not to testify. So we may never know. But we do have some information. We have snippets from witnesses who walked in and out of the rig floor that night during those three hours, and we have the data itself. So at this point I would like to go over in

PLANET DEPOS 888.433.3767 | WWW.PLANETDEPOS.COM

NATIONAL OIL SPILL COMMISSION MEETING CONDUCTED ON MONDAY, NOVEMBER 8, 2010
35 (Pages 137 to 140) 137
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

139
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

more detail what that data looked like and what information we have that might explain why the rig crew and well-site leaders there that night came to this decision. So let's start to run -- This is the negative pressure test at Macondo. So here is the setup. You have those three lines going up from the BOP. You've got the riser, and the annular preventer is labeled. The first thing that the crew is going to do after running the drill pipe in is to displace the mud out of these three lines. Now, that's not terribly significant for us except to note that at some point the rig crew is going to use the kill line during these procedures. So at this point they are setting up the test and, like I said before, they're going to displace mud with seawater and spacer to above the BOP. This is the first thing to note at this point, the spacer. The spacer here was unusual. BP wanted to use some leftover materials that they had on
138

here. That in and of itself is not a problem, but what's perhaps more problematic is nobody had used these combined materials as spacer before. So the mud engineers from M-I SWACO were consulted, and they said it should be okay. But everybody acknowledges that they had not used these materials as spacer before. The other thing to keep in mind about the spacer is that it's very heavy, these two materials, 16.5 pounds per gallon. That's almost twice the density of seawater. And you recall, the seawater is pushing the spacer back up during the displacement. And when you have a lighter fluid trying to push a much heavier fluid, the concern is that heavier fluid will drop down into the lighter fluid and so may confound some of the testing that is done later. So keep that spacer in mind. So the rig crew gets the spacer and mud to above the annular preventer and closes the annular preventer in. So at that point the crew sees what in some ways they expect to see, this residual pressure left over in the well. So they go to bleed it down.

140
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

the rig sitting around in two different tanks, a significant volume of leftover materials. These materials were what were known as lost circulation materials. Lost circulation materials are viscous fluids that you can actually put solid particulate matter into that you send down into the well when there has been a lost circulation or lost return event. And that material can actually patch or clog up any of the holes in the formation. BP had some of this stuff laying around on the rig and wanted to get rid of it. Now, here is a quirk of environmental regulation. If BP does not send this spacer, these lost circulation materials down into the well, it has to dispose of it as hazardous waste back onshore. But there is an exception to that requirement for water-based drilling fluids. So BP wants to send these materials down into the well, circulate them back up to surface where they can then overboard them because of that exception. There is no dispute that that was the decision that BP had made

They open up the drill pipe, they're bleeding off some fluids, but here the crew does something unusual. They stop. And they stop at 1250. We're not entirely sure why they do that. But we have a clue. The clue is that the kill line, which also has a pressure gauge, was there at 1250. So the rig crew may have wanted to see if the drill pipe and kill line would equilibrate. Because, again, they should be the same pressures. 1250 on one should mean 1250 on the other. So at this point the rig crew opens up the kill line just to see perhaps if the pressures are equal, and something odd happens. The pressure on the kill line goes down to 645, the pressure on the drill pipe goes up to 1400. This doesn't make, in the abstract, a whole lot of sense given that these should be communicating with the same vessel. So next the crew then tries to bleed down the pressure on the drill pipe. Fluid is coming out, and they bleed down the pressure but they can't get it below 260. If everything is okay, they should be able to get it to zero, but they can't get it to below 260.

PLANET DEPOS 888.433.3767 | WWW.PLANETDEPOS.COM

NATIONAL OIL SPILL COMMISSION MEETING CONDUCTED ON MONDAY, NOVEMBER 8, 2010
36 (Pages 141 to 144) 141 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 143 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

This indicates very clearly that there is a leak somewhere in the well. It doesn't say where, it doesn't say what it is, but there's a leak. So the rig crew shuts back in the drill pipe and the pressure goes back up again. Keep going. Now, at this point the crew notices something. They notice that the fluid level -- Stop. They notice the fluid level in the riser has been dropping. Somebody actually walks over on the rig crew, puts a flashlight down in and sees that the fluid level has dropped. And what they realize is that the annular preventer is leaking, it wasn't closed quite enough. So the crew pressures up on the annular preventer to close it fully. But what's happened now is some of that heavy-weight spacer we talked about, that viscous material, has now leaked down below the annular preventer. But at least the crew has now solved one possible reason as to why there might be a leak. Okay, so they go to try to test again.
142

the bladder effect. And here is what Lee Lambert, who is a BP well-site leader trainee, said about the bladder effect, or at least how it was explained to him by the toolpusher on the rig floor. "What was Mr. Anderson saying about the bladder effect? Can you tell us?" "That the mud in the riser" -- so remember, there's all that heavy-weight mud -- "would push on the annular and transmit pressure downhole, which would, in turn, be seen on your drill pipe." So that was the explanation. Maybe the mud in the riser is somehow pushing on the drill pipe and creating these pressures. But what we know now is that everybody who has looked at this agrees, the bladder effect does not exist. And to the extent such an effect might exist, it certainly would not explain the data that the crew was seeing that night. It wouldn't explain why the pressure would keep coming back up. So after these discussions -- and, again, there is a dispute as to whether they actually took
144

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

So the crew bleeds off the drill pipe, and this time it does go down to zero. Water is flowing. They then close in the drill pipe to watch what happens, and the drill pipe pressure jumps back up again. This is starting now not to make sense and to indicate that there is in fact flow coming up from the well. So what does the rig crew do? Keep going. The rig crew then decides we'll try and bleed off the pressure on the drill pipe through the kill line, which you can do, and they get the drill pipe pressure down to zero. And then they shut it in again. And the drill pipe pressure goes back up to 1400 p.s.i. Now at this point, according to witness testimony, there was a discussion on the rig floor. And according to certain BP witnesses -- and again, some of this is in dispute -- but according to some of the BP witnesses, the Transocean rig crew explained why they were getting this 1400 p.s.i. on the drill pipe. They attributed the cause to something called

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

place -- one of the BP well-site leaders said, "Let's move the test to the kill line from the drill pipe." And the reason given was that when BP submitted its application setting forth its temporary abandonment procedures, it indicated, for whatever reason, that it would run the negative pressure test on the kill line. So one of the well-site leaders said, "Let's move it to the kill line." So they did. They opened up this kill line. They get a little bit of flow, which then stops. And like I said before, everything, at least on the kill line, then looked good. But they never reconciled the fact that there's that 1400 p.s.i. still on the drill pipe. Now, the enduring mystery here is why on earth was there 1400 on the drill pipe and zero on the kill line. How can those two things possibly be reconciled? Well, there are a number of possibilities that people have floated. One is the spacer. We all know that there was a leak in the annular preventer and that spacer actually leaked down below. Some of that spacer could have gotten into the kill line.

PLANET DEPOS 888.433.3767 | WWW.PLANETDEPOS.COM

NATIONAL OIL SPILL COMMISSION MEETING CONDUCTED ON MONDAY, NOVEMBER 8, 2010
37 (Pages 145 to 148) 145
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

147
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

And remember, the purpose of that spacer, as a viscous material, is to actually patch holes and clog materials. There is a possibility that that spacer over time clogged that kill line. Another possibility is that a valve was closed wrong. We don't know what the explanation is for this difference, but the fact is there's no good explanation for that difference. If you can't explain that 1400 p.s.i., it's not a good negative pressure test. So then the question is: Why would these men not have realized that this was a bad negative pressure test? Oh, and just to show you here, it's 1400, zero. This is what it should have looked like in a perfect world. But why would these men not have realized this was a bad negative pressure test? Nobody really in the industry or in government had set forth any procedures governing what the negative pressure test is, how to conduct it or how to interpret it. So for instance, the MMS, which was the
146

that at no point in time during that three hours did anyone on that rig floor call back to shore to say, "Boy, we're getting weird readings; there is a problem here. Can you help us out?" It doesn't appear that anyone from BP did that. It doesn't appear that anyone from Transocean did that. And that is a process concern that we raise for the Commission to take into consideration. One other point. The parties have, as you might imagine, wanted us to assess blame on this. Whose responsibility was it to interpret that negative pressure test? Who signed off on it? BP has said it was Transocean's responsibility as the rig crew in the first instance to do so. Transocean has said that it is BP's responsibility as the well-site leader to sign off on the test. That's not our job. We are not trying to assess blame or fault or liability. The only point we want to make is that those men, the well-site leaders and the rig crew that night at eight o'clock all had
148

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

regulatory agency in charge of deepwater drilling in the Gulf of Mexico, had no regulations governing procedures for conducting or interpreting a negative pressure test. Indeed, there were no regulations requiring one at all. One can make the argument that the crew that night, BP and the crew, had they not conducted a negative pressure test, would have been violating no regulation. BP, while it requires a negative pressure test in these situations, doesn't have any set procedures nor does it train its well-site leaders in particular procedures. And John Guide said, "It could be different on every single rig depending on what the team agreed to." Similarly, Transocean, they too require a negative pressure test in these situations, but they too have no set procedures or no training for their people, at least prior to this event. Now, the final thing -- final two things I'd like to say on the negative pressure test; one is a process point, and that is that it appears to us

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

convinced themselves and agreed that this was a good negative pressure test. And there is no indication to any of us thus far in the evidence that anybody spoke up and said, "There are problems, we shouldn't go ahead." So it's eight o'clock at night and the crew is going to move on to the rest of the temporary abandonment procedure. And I'll just put forward here an animation explaining what the next steps at least were planned to be. So once -- once the crew and well-site leaders green-lighted the negative pressure test, the next step that was planned was to displace the riser entirely. So it was to keep pushing seawater up the riser and pushing the mud out. Because, again, the Deepwater Horizon is going to be leaving, it's going to be taking its riser, and it needs to get rid of that heavy-weight mud. The next step would then have been to set the surface cement plug, that 300-foot, 30-story building cement plug. Once that was done, BP would then -- and the rig crew would set the lockdown

PLANET DEPOS 888.433.3767 | WWW.PLANETDEPOS.COM

NATIONAL OIL SPILL COMMISSION MEETING CONDUCTED ON MONDAY, NOVEMBER 8, 2010
38 (Pages 149 to 152) 149
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

151
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

sleeve. Stop it right there. Just one thing to note about the lockdown sleeve. You'll see that there is all this drill pipe hanging beneath it when it's being set. The reason for that is that the lockdown sleeve needs 100,000 pounds of weight to be set. And the way that BP chose to achieve that 100,000 pounds of weight was to hang, basically, 3,000 feet of drill pipe. And because BP wanted to set the lockdown sleeve last, that is why they needed to set the surface cement plug so deep. They needed that 3,000 feet of space to accommodate the weight from the drill pipe to set the lockdown sleeve. Finally, once the lockdown sleeve is set, the crew would pull up the riser and the blowout preventer and go on to the next job. Now, at this point I would like to make a few comments about the particular temporary abandonment procedures that BP chose and the sequence that they chose to put the steps in from getting from Point A to Point B, because we think they introduced a

testimony that setting the surface cement plug 3,000 feet deep was not only unusual but in fact unheard of. And here is some testimony that you can look at. The second problem with these procedures -or not problem but something that introduced additional risk -- is that BP chose to displace the mud from the riser before setting that cement plug or some other barrier. So once the negative pressure test was passed, the plan would have the crew move right into displacement. And what happens at this point is the BOP is open. It's wide open. There is a straight shot from the bottom to the rig. This again puts a very large premium on the cement job at the bottom and the negative pressure test that tests the integrity of that cement job at the bottom. If that cement job fails, the only thing you've got in the way is that blowout preventer. And the blowout preventer depends on human -- it depends on a human, basically, on the rig. If a human doesn't notice that there are problems down here such that the BOP should be shut in, and hydrocarbons get past that

150
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

152
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

certain amount of risk into the situation that may not have been necessary. And I'll talk about two points here. The first. We've talked a little bit about this already, but it's the removal of that 3,000 feet of heavy-weight mud. Remember, that mud is exerting a force down on the bottom of the well. It's helping out, essentially, the cement job. It doesn't have enough force to hold these hydrocarbons at bay once you pull up and there's no more heavy-weight mud in the riser, but still it helps. So the more seawater you remove, the more stress you're actually placing on the cement job. So the decision to displace that much mud with seawater was a decision to stress the cement job perhaps more than was necessary. And it is a decision that puts a real premium not only on the cement job but on the test of the cement job, the negative pressure test. And here it says -- it basically eliminates 1128 p.s.i. of additional downward pressure. So that's one thing. Two -- Oh, and there has been uniform

BOP, then you've got a problem. We believe that BP, in order to lessen the risk of this situation, could have either set the surface cement plug before displacing the riser to create a second barrier to flow or put in a mechanical plug of some sort, but to put in another barrier to flow during this time of the well. The last point I would like to make is a process one. What is of additional concern to us is that the procedures for temporary abandonment were changing up until the very last minute. So on April 14th, one of the engineers at BP sends out the temporary abandonment procedures. And I'll just go through these very briefly. As of April 14th, the procedure was to run your drill pipe down to 3,000 feet below sea level, then set your surface cement plug. So at that point there would have been a barrier set. Only once that barrier had been set would there be a negative pressure test and then would the crew displace the mud from the riser. So that's as of April 14th, a barrier would be in place before

PLANET DEPOS 888.433.3767 | WWW.PLANETDEPOS.COM

NATIONAL OIL SPILL COMMISSION MEETING CONDUCTED ON MONDAY, NOVEMBER 8, 2010
39 (Pages 153 to 156) 153
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

155
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

displacing the mud from the riser. Fast-forward two days to April 16th and the procedure has morphed. Now the negative test is first, then you go into the hole to 8300 feet, which means we don't need to get into it, that it was a different type of negative pressure test. At that point in time you displace mud from the riser, you monitor the well, and then you set the surface cement plug. So now they moved putting in the barrier from before the displacement to after the displacement. Let's go now fast-forwarding to April 20th. And this is the ops note that was actually sent by the engineers to the rig on the morning of April 20th setting forth what the temporary abandonment procedures would be. And at this point you'll see again that surface cement plug is being sent last. Now, there have been additional changes. First, they're going into the hole to 8300 feet. Then they're displacing, like we talked about before the negative test, running the negative test, then displacing, then setting that

"Don't know why. Maybe trying to save time. At the end of the well sometimes they think about speeding up." So what is important about this is it appeared that at least Mr. Kaluza was not in on those conversations or told about why these procedures might be changing, or in fact if they had changed. And with that, I would like to go back to eight o'clock on the Deepwater Horizon, the point in time that the crew is about to start displacing the riser. MR. BARTLIT: And now if the Commissioners please, we're running a tad late. It's critically important that everybody understand this. It's complicated stuff. I understand the Commissioners want to keep going. CO-CHAIR REILLY: We do. We'll take a shorter lunch break if necessary. MR. BARTLIT: I said earlier, I want to be sure you don't confuse what Mr. Kaluza said with what I said earlier. I said we see no instance where a decision-making person or group of people sat there

154
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

156
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

cement plug. And as it turns out, this is where the blowout occurred, before that cement plug was ever set. The process point here is it is not clear to us why decisions on these procedures are changing in the last week before the blowout. It strikes us at certain times and with certain issues you have to change things on the fly because drilling conditions change. But this type of temporary abandonment procedure, it does not appear, at least preliminarily to us, should have been changing up until the very last minute. Last slide. This is a note from an April 28th interview of Robert Kaluza. He was one of the BP well-site leaders out there that evening on the rig. And he says of this sequence on April 20th: "It was a different sequence. The team in town wanted to do something different. Mark was on vacation. They decided we could do the displacement and negative test together." So they combined displacement and negative test.

aware of safety risks, aware of costs, and opted to give up safety for cost. There are people that make observations about what they thought other people might be doing. You know, I'm not saying -- we do not say everything done was perfectly safe. We're saying -- and people have said people traded safety for dollars. We studied the hell out of this. We welcome anybody that gives us something that we've missed. But we don't see a person or three people sitting there at a table considering safety and cost and giving up safety for cost. We have not seen that. That I -- And you have to be sure you understand that. Now we're going to kick detection. This is Transocean's -- They've got a volume this thick on how you operate in deepwater, which is impressive indeed. They say a kick is when oil and gas gets in the well bore, that the driller -- that's a Transocean person; you'll see him sitting in his chair -- has to continuously monitor what's going on. If there is a kick, the driller has to shut the well in quickly.

PLANET DEPOS 888.433.3767 | WWW.PLANETDEPOS.COM

NATIONAL OIL SPILL COMMISSION MEETING CONDUCTED ON MONDAY, NOVEMBER 8, 2010
40 (Pages 157 to 160) 157
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

159
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

Speed will determine the severity. As I said early, and I'll show you one more time later on, you have to remember things really happened fast. At the bottom what might be three or four barrels of gas, by the time it gets to the surface, because the pressure is less, it's moving like hell, it will erode. It's powerful beyond belief. You'll see the impact of these gas influxes just eroding away carbon steel all the way up to the surface. This really happens fast. Once -- once oil and gas get into the riser, you have almost no time to act, and that's important to understand. Okay. You remember I showed you at the beginning the rotary where the oil and gas came up on the rig and I showed you a little glass shack nearby? This is the driller's shack. This is the driller. He's sitting there and he has a screen in front of him, and he can choose what's to be on that screen and how it's to be displayed. The fact that he can choose what is on the screen is important because we so far do not know what

office that night; everybody had gone home. Okay. We're going to stop this now. This is the Sperry Sun data. And the information as to what was happening when the cement job failed at the bottom of the well and created a kick is here. Let's zero in a little bit. This is the information. And what we've done here is to move it sideways because every time BP displays this information they take it, flip it sideways and expand it. And that's because it's easier to see that way. And that's okay. So here's drill pipe pressure. Here's a pump pressure. Here's the Sperry Sun information. Now, this is a little complicated. We don't know that anybody in the world saw this specific information that night. It was available in the drill shack. It was available in the Halliburton mudlogger shack which I showed you. It was available back shoreside in Houston. But we don't know that anybody was looking at it, because the driller, remember, had this

158
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

160
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

was on a screen like that that night. We don't know what was on the screen because it went down with the rig. It could have been -- We don't know how it was set up. We'll be asking questions of TO and others as to what they think it showed. But we only have a secondary source as to what the -- what the kick evidence really was. Here's a better shot of the driller's screen. We've all been out on the rigs, some of the Commissioners. Commissioner Murray went out on the rig with us and saw this. Now, if you look here, off to the side there's another screen. That has what's called Sperry Sun data. The driller has the Transocean high-tech data. The Transocean high-tech data is gone. Sperry Sun is a subsidiary of Halliburton. Sperry Sun keeps separate information that's available here. It's also available shoreside at BP's office there. If you went into the Macondo office that BP had that night, you could have seen the Sperry Sun data there. There was nobody in the BP Macondo well

information available but would have been looking at the TO screen, not this. So it's a little -- it's difficult for us to surmise what this information shows when we don't know anybody ever looked at it. But what it does show is this. Here -- and I try to imagine myself having been there for eight hours in that chair watching this stuff, and I imagine, "Is this a big deal?" Well, here it is here turned sideways and spread out and the drill pipe pressure -- the pump pressure is constant. You have the drill pipe pressure is increasing. It's a slight increase. It's subtle. Now, if the driller knows that they are at the same time displacing heavier fluids, mud with lighter fluid, seawater, then maybe it makes this upward move of the drill pipe pressure more significant. And one of the points we're going to make here is that this system depends on the right person watching this information at the right time, having

PLANET DEPOS 888.433.3767 | WWW.PLANETDEPOS.COM

NATIONAL OIL SPILL COMMISSION MEETING CONDUCTED ON MONDAY, NOVEMBER 8, 2010
41 (Pages 161 to 164) 161
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

163
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

enough knowledge about all the other activities that are going on on the rig to interpret it the right way, and to act very rapidly. It depends on a -- on people getting every -- basically one person getting everything right at the right time when you have to move fast. At any rate, we've talked to a lot of people here about whether if they were sitting there -- people in the industry generally. And, you know, because I don't have subpoena power, I have to look you in the eye and say I'm telling you what people told me. I can't subpoena people and put them under oath. I wish I could, respectfully to the Commissioners, because I think it's damn important. But it's the way it goes. People in the industry have said to us, "Of course, we would have noticed that. That's a kick detection. We would want to move fast." So I pressed them like I'm pressing myself here. And people then began to say, "Gee, I don't know," at least about this first one. Now, the second one is interesting because

Now, this is a little bit unfair because I'm talking about the Sperry Sun data, and the data the driller was looking at was the TO data. And maybe the TO data was a lot clearer than this. Maybe it wasn't as clear. Maybe there was -- there was digital information that was easier to pick up. We would sure like to know that, if the Commission please. But we don't. I would expect, I guess, that the TO screen, just common sense, would be better than Sperry Sun because it's their rig and their investment and their money. But I don't know that, I'm just -- It's shear total guesswork. But it's a critical thing that would be good to know. Now, one of the issues, we know there was -- there was -- there was a kick then. We know hydrocarbons were coming through the cement job that had not been remediated. It could have been remediated if people had decided to but wasn't. We know there was a leak. Remember I told you earlier that we would discuss where the leak occurred. Did it come up this

162
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

164
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

they turn off the pumps totally to perform a test. The pumps are off, and now the drill pipe pressure is going up quite a bit. We've met with TO at length, and they've given us a lot of data and useful explanations that can explain why at the beginning and the end some of this happened. But nobody can say that in the core of this period the drill pipe pressure wasn't going up when the pumps were off. And most people we talked to throughout the industry say that's a kick and it should have been defected and somebody move fast. The explosion occurred at 21:49. This is 21:10 to 21:12, a half hour to act. The BOP can be closed in 46 or 47 seconds. So the -- the -- We'll be talking about this later, but when I looked at this, just an ordinary person, I said, "Gee, with all the skills that NASA and people have, isn't there a better way to display this information so that it's clear, and we have algorithms that point when things are heading in the wrong direction?"

annulus here or did it come up the shoe? Let's go to the next one. Okay. This is a casing hanger seal. We've talked to Dril-Quip. They made this. They're very cooperative. These guys have some of the best engineers I've ever met, and I've been in this business a long time. And they say there is no damage to the casing hanger seals at all, they are pristine. If the leak came up the annulus, there would be some damage to the casing hanger seals. Remember I told you you would be blown away by the power of this gas under pressure coming up through the riser carrying sands and everything? This is the way the inside of the casing looks when it's made in the factory. This stuff is so strong that on the inside quarter-inch deep slots have been just totally blown away by the force of your own gas coming up through that casing. Amazing, the force of this stuff. But the inside is totally eroded and the outside is pristine. BP agrees that the leak was up the shoe and

PLANET DEPOS 888.433.3767 | WWW.PLANETDEPOS.COM

NATIONAL OIL SPILL COMMISSION MEETING CONDUCTED ON MONDAY, NOVEMBER 8, 2010
42 (Pages 165 to 168) 165 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 167
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

not the annulus. I think TO agrees. We're not sure about Halliburton. We'll ask them today. They may say, "We don't have a dog in that hunt." We don't know that, but that's what we'll be doing this afternoon. At any rate we feel, and more importantly Dril-Quip, who is sitting back here, has told us their view is that the leak came up the shoe and not the annulus. They say if the flow from the annulus -had been the annulus, it would have come from these holes. You've seen what that pressure can do in a big area. These little holes would have been just torn apart if it had come up through the annulus. That's more evidence our way. Now, there has been a discussion here of what happened at the very end. Transocean was good enough to prepare this slide for us which shows the kinds of activities that were going on. The negative test took three hours. They did it two or three times. Sean Grimsley has told you about the discussion. At eight o'clock they deem it
166

what everybody else is doing. That's part of the regulatory aspect of this. Now, the -- Here's the diverters, here's the mud-gas separator. Remember that the hydrocarbons come up here. The crew has a choice of sending the stuff that's coming up. Mud is now on the rig floor. Mud is there because the pressure of the reservoir is pushing the mud up first. And if the mud comes up first, gas is coming up next. When gas comes up, that's really bad. So the crew could send this stuff to the mud-gas gooseneck. It's a mud-gas separator. Mud sometimes has gas in it. You can -- you can separate the mud from the gas, put the mud back in the mud pits, put the gas overboard and you're fine. The mud-gas separator is a very relatively lightweight piece of apparatus. The mud-gas separator in no way could have stood the pressures that were coming up from the bottom of the well. And it didn't. And there's a question here as to whether if the crew had diverted it overboard, if immediately as soon as they saw a problem, instead of sending it

168 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

done, wrongly, erroneously. We have to keep repeating, nobody thought they were taking a chance. Nobody thought that the negative test had been screwed up. For one reason or another, they convinced themselves that a faulty test had actually succeeded. Critical point in this thing. Now, you will have a chance to look at this. We're not going to go through these at length. Transocean has given us this. But it shows the activities that were going on from eight o'clock when they began displacing the riser. Again, these aren't familiar terms. When you take the seawater out of the riser, when you take the mud out of the riser and put in seawater, then there is less pressure holding in the oil and gas at the bottom of the formation. And anyway, we see the different activities that were going on, and it will be up to the Commission to decide if those were too many activities, if they're all being done by different people at different times, if you should have rules about what activities are going on so everybody knows

to the mud-gas, if they had sent it overboard, would that have stopped the explosion? Would it have mitigated it? We have some information on diverters. Remember gas is in the riser now. The issue is BP says the TO crew might have done better if they had sent it overboard instead of to the mud-gas separator. Time is happening rapidly. We're all dealing in hindsight now. Let's see what the existing knowledge was on diverters. The -- This is a Transocean document. Having gas in the riser, bad thing. If there is rapid expansion of gas in the riser, the diverter must be closed and flow diverted overboard. If you look at the TO manual, you're really impressed by it. It's a safety expert's dream. Everything anybody could ever imagine is in there. Richard Sears and I tomorrow will talk a little more about it, because as one looks at it, everything under the sun is covered. It's hard to see at a particular place somebody saying symptoms of that or this. If you see that, do this.

PLANET DEPOS 888.433.3767 | WWW.PLANETDEPOS.COM

NATIONAL OIL SPILL COMMISSION MEETING CONDUCTED ON MONDAY, NOVEMBER 8, 2010
43 (Pages 169 to 172) 169
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

171
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

This is not said by way of criticism. People have tried like hell in this manual to get it right. But it may be that when time is short, there might have been different ways to make clear exactly what should have been done in a short period of time. We'll get to that tomorrow. There is a report on diversion, 1992 to 2006. 16 of 20 diverter uses were successful. The success rate for diverters was very high. Let's go to the next. And this is a point we've covered before. We all know now that a little gas at the bottom is a lot of gas at the top. You've seen the erosion and we can cut to the chase. Let's just cut to the next slide. We're now going to the blowout. Hydrocarbons emerge on the rig. And that's where the initial explosion is. There's been talk of can you fireproof a rig. Production rigs are -- a lot -- a lot of attention is paid to every light fixture being sealed, things like this. Drilling rigs are not as fire
170

knew it, and the well was underbalanced." So people knew there was one barrier, the well was underbalanced, and that called for heightened high vigilance by everybody and their crew. People knew that this was something you've got to really be careful. Now, what's high vigilance? I mean, what are the five steps you ought to take? Should you have your hands somewhere? I don't know, but we all agree that TO, that's a lesson they learned and communicated to their people. Secondly, they say it twice, you've got to recognize when the well is underbalanced. You have to be aware the well is underbalanced and you have to have heightened vigilance. Again I say, a lot of this depends on the right person with the right knowledge and the right background and the right experience being in the right place at the right time and seeing the right information and making a decision quick. Finally, remember I showed you the Sperry Sun kick detect information, the red drill pipe

172
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

protected. Anybody who has any engineering at all knows that gas and air creates a perfect substance for an explosion. To an ordinary person, not a rig expert, if you've got huge volumes of a highly inflammable gas, explosive gas coming up into the riser at extremely high pressures mixed in a perfect air mixture, pretty likely something is going to happen. This is what happened. Transocean tried its darnedest to be sure that people knew that problems could be caused when wells are underbalanced. Transocean had had an earlier well control problem in the North Sea. I've agreed with Transocean and its lawyers that this slide accurately reflects the -- what was learned from that explosion. Transocean and the well's operator analyzed the event and here are the conclusions they reached: "High vigilance is required when you have one barrier underbalanced." We had the -- "The only barrier we had that night was the cement. The cement had failed the negative pressure test, although nobody

pressure going up? And I said the problem is, and gets confusing, that that's not probably what the driller was looking at. One would hope the driller was looking at information that was clearer than that, but we don't know that. And we can't assume it until somehow we try to figure that out. But Transocean knew that they had to highlight to the driller what the kick detectors are when you're not drilling. They were not drilling. There were kick detectors. Some were subtle, some say were less subtle. And again, this is a wonderful observation, but how do you highlight it? These are some of the issues the Commissioners will be dealing with. They're not easy issues. I don't envy the Commission their task here. The last two hours. It's 8:02. The BP is open. The cement, which we now know was flawed, is the only barrier. The negative pressure test is over. It has been wrongly interpreted as successful when everybody now agrees it was unsuccessful. They begin to remove the heavy mud, which underbalances the well and allows the hydrocarbons to come up.

PLANET DEPOS 888.433.3767 | WWW.PLANETDEPOS.COM

NATIONAL OIL SPILL COMMISSION MEETING CONDUCTED ON MONDAY, NOVEMBER 8, 2010
44 (Pages 173 to 176) 173
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

175
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

50 minutes later BP calculates through their -- they have some software called OLGA which we have not unpacked yet. You know what I mean by that. We haven't gone through it and figured out. We assume that it's sensible. And nobody has really quarreled with some -- I've put up here BP's conclusions that most people don't disagree with. Now the well is underbalanced. It took 50 minutes of taking out the heavy mud and putting in the seawater to underbalance the well. That means if the -- if the cement job is failing, the hydrocarbons will start entering the well. Okay. A little after that, nine minutes after that, we get this subtle increase. There's anomalous drill pipe pressure. The well is underbalanced. The symptoms are now starting to show up again on this very Sperry Sun data. I keep saying this, but it's so easy to get confused. We do not know what Transocean's driller was looking at. Now we get -- The pumps are off and then now we see the drill pipe pressure going up more steeply. The BP is open. The cement is the only

MR. BARTLIT: It shows the -- It closes the annulus. So the crew, Transocean's crew, operated then at 21:41. BP says this is the first kick -- this is the first action taken by the crew when they physically see the mud coming up on the floor. We don't know if that's accurate. I'm just telling you what BP says. There are disputes between BP and Transocean as to who said what to who when. There are disputes between Halliburton, BP as to who said to who one -- said what to who when. There are disputes, if the Commission please, about who has responsibility for what. We sat down with everybody. We'd get a lot of arguments. This is where subpoena power, Senator, would be helpful, because it's going to be hard to resolve those unless I can sit people down in a room in a very professional, gentlemanly way and cross-examine them and find out, you know, what's believable and what's not believable. Not that anybody's intentions -- so far I have no reason to believe anybody's intentions -- said

174
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

176
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

barrier. Hydrocarbons are coming in the well. They are going to get up in the drill pipe. When they get up in the drill pipe above the BOP, there is nothing you can do to stop that. When they're above the BOP, you can't stop the influx of hydrocarbons. 21:38, the BP report calculates that hydrocarbons are now in the riser. The BP is open. They're above the BP. If you shut the BP down, you've still got a mile of riser full of hydrocarbons. Imagine the volume. They're going to come out on the rig. Even if the BOP is shut at that point, you're probably going to have a big explosion. Now, would that have solved maybe some of the later problems? Maybe. 21:40, mud actually is coming out on the rig floor. The mud is in the top in the riser. The hydrocarbons are coming up under enormous pressure, they're pushing the mud out on the rig floor. Now the annular preventer is activated. That's that big tire that closes -- I showed you early on. It seems like it's a week ago. (Laughter)

anything to me that they don't believe. But there are -- People are advocates, good ones, high-powered ones. Annular preventer activated. There's a nearby ship, the Damon Bankston. If you go out to these wells, there are all these ships working around them. And if you go out in the North Sea, there will be 20 standoff ships. It's like a small community out there. The drill crew does exactly the right thing. They think of the ship. If there is an explosion, they don't want them to get involved. They say, "Move back, something bad is going on." Gas comes out on the drill floor. You'll see how fast this happens. 21:38, they're in the riser. Eight minutes later the gas is up. First explosion; power lost. Things happen fast. This really brings to life those last couple hours and what was going on. You see clearly that it's when the negative pressure test is wrongly concluded to have worked and they start removing the mud until the pressure on the -- on the hydrocarbons

PLANET DEPOS 888.433.3767 | WWW.PLANETDEPOS.COM

NATIONAL OIL SPILL COMMISSION MEETING CONDUCTED ON MONDAY, NOVEMBER 8, 2010
45 (Pages 177 to 180) 177
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

179
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

is released, that's when everything starts going south. Now, I said earlier we would give this group, and we've given them already to BP, Halliburton and TO, our preliminary technical conclusions. And when we begin the afternoon, I'll say, "Does anyone want to comment on any of these?" They're free to comment. If they want to comment, fine; if they don't want to comment, they don't have to. Not commenting doesn't mean they agree. They can submit a paper within five days, as long as it wants, with every kind of idea under the sun in it. And if we ever get subpoena power, we'll use those papers to cross-examine people further. (Laughter) MR. BARTLIT: I'm not -- I don't mean that in a threat. I mean, it's just a statement, which would be the good thing to do. Okay. Preliminary. That means we will change them if somebody gives us information that we're wrong. But I told all the parties at the beginning of this back in August that I would tell you

On the rig, you don't stir it for three hours before you foam it. You foam it and then you send it down the well. The sequence is different. It may be scientifically that foaming it and then taking that long trip down the well gets the same scientific result as first conditioning for three hours and then foaming it. We don't know that. The negative pressure test -- Oh, cement evaluation tools might have identified the failure. Most operators would not have run the tools at that time. They would have relied on the negative pressure test. The Halliburton -- or BP conceded in its report that maybe if they had done a risk assessment at that time of all the things we showed the Commission earlier, all those cement issues, maybe they would have run the cement bond log instead of sending Halliburton home. They candidly admitted that. But we don't know what the cement log would have shown. It probably would have shown top of cement, but might not have shown some of these other things.

178
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

180
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

exactly what we're thinking so nobody is surprised, and you have every chance in the world to prove, tell us how we screwed up and how we're wrong. I don't think we are, but everybody makes mistakes. Flow path was exclusively through the shoe track and up the casing. The cement may be contaminated, may be displaced by other materials in the shoe track, and in some portion of the annular space failed to isolate the hydrocarbons. Remember, the annular space cement is what walls off the hydrocarbons. So the hydrocarbons couldn't get in unless something happened there, channeling, contamination, something. Pre-job laboratory data should have prompted redesign. We look at some of these differing results and we think maybe more time could have been spent getting consistent results. Remember that the -- most of the lab reports show that this stuff works better if you stir it for three hours in the laboratory before you foam it.

The negative pressure test repeatedly showed the primary cement job had not isolated hydrocarbons. I think Sean Grimsley drove that home. Despite showing that, BP and TO treated the negative pressure test as a success. BP's temporary abandonment procedures introduced additional risk. Setting down at 3,000 feet instead of 300 feet reduces the pressure holding the hydrocarbons in at the bottom of the well. BP had good reasons for doing that, which you heard. But we feel, and we're ready to be talked out of it if we made a mistake, I keep saying this. I don't want anybody after January 11th saying, you know, "You missed something Fred." Tell us now. We think that setting the temporary abandonment plug, 300-foot plug, that low instead of 300 feet introduced some additional risks. We have -- People have told us looking at this that the simultaneous activities and the nature of the monitoring equipment made detection more difficult during riser displacement. This is -- If there is something that I'm

PLANET DEPOS 888.433.3767 | WWW.PLANETDEPOS.COM

NATIONAL OIL SPILL COMMISSION MEETING CONDUCTED ON MONDAY, NOVEMBER 8, 2010
46 (Pages 181 to 184) 181
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

183
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

less certain about than others, it's this one, because you can argue endlessly over the effect of moving mud around in these pits. But we've heard this enough times that that is a preliminary conclusion we're confident we're prepared to make. Nevertheless, the kick indications which I showed you, the two drill pipe red lines, were clear enough that, if observed, would have allowed the rig crew to have responded earlier. The irony here is we don't know what the drill -- what TO's driller was looking at. I would hope the information would be at least as good as Halliburton's Sperry Sun information. Once the rig crew recognized the influx, there were options that might have prevented or delayed the explosion. Diverting overboard. I explained the diverters. Instead of putting this stuff up through the mud-gas separator, sending it overboard. And the -- and triggering the emergency disconnect earlier might have shut in the well and limited the impact of an explosion. And there are issues as to whether the

costs $1.5 million is overhanging the heads of people on the rigs. They want to do a good job, but they don't want to risk their lives or the lives of their buddies. So there is a complex sort of a matrix here. And the matrix is they want to be efficient and they don't want to waste money, but they don't want their buddies to get killed, or themselves. And I've been on a lot of rigs. I do not believe anybody on these rigs -- now, this is personal. I don't believe people sit there and say, "Well, this is really dangerous but the guys in London will make more money." I don't think they think that way. I think it's more complicated than that. Okay? So what we're saying is that human beings that made the decision shoreside and on the rig, we don't see a concrete situation where human beings made a tradeoff of safety for dollars. Thanks so much for your attention, and in the afternoon we'll be asking a number of questions of the panels. CO-CHAIR REILLY: Thank you Fred, Sean,

182
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

184
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

emergency disconnect would have worked, other things would have worked, were the cables damaged. There's a lot of complexity to this. That's why we say might have shut in the well. Technical conclusions regarding the BOP should await results of the forensic BOP examination and testing. I'm sure you wanted to hear more about the BOP. As I said at least five times, it's premature. And finally, and it really is important that you -I've mentioned this three times that you distinguish what I'm saying. As we stand here today, and we've asked everybody, we don't see where a man or two men or a group of men were making one of these decisions and they had in their minds that if we do it this way, it will be safer; if we will do it this way, it will be cheaper; we're going to do it the cheap way instead of the safe way. We haven't seen that. We know, Commissioners, that $1.5 million a day is a lot of money, even in the United States government today. And the idea that a day's delay

Sam, for that tour de force. We will resume at 1:30. That's in 30 minutes. See you then. (Recess taken.) MS. MELCHERT: Good afternoon. Thank you. I'm Elena Melchert. I'm the commission manager at the Department of Energy, the representative for this Commission. Designated Federal Officer Deputy Assistant Secretary Christopher A. Smith has appointed me to serve as the designated officer for the remainder of this meeting, or at least until his return. With that, I call this meeting back to order and turn it over to the chairs. CO-CHAIR REILLY: We will now resume with the panel discussion with BP, Transocean and Halliburton. And I'll turn it back to you, Fred. MR. BARTLIT: Thanks, Bill. Gentlemen, as I said earlier, we were going to give you a chance to comment on any of the conclusions. If you don't comment, that doesn't mean you admit them, it means that you didn't -- right now

PLANET DEPOS 888.433.3767 | WWW.PLANETDEPOS.COM

NATIONAL OIL SPILL COMMISSION MEETING CONDUCTED ON MONDAY, NOVEMBER 8, 2010
47 (Pages 185 to 188) 185
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

187
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

you weren't prepared to add something. People can add material later, send it in to our website within five days, and we'll consider it. We might talk to you again about it. But I just want to go through this again. First, the flow path was through the shoe track and up the casing, not the annulus. We know BP agrees with that because we read the report. Mr. Ambrose, do you have a position on that? MR. AMBROSE: Fred, could we get a little more amplification? MR. BARTLIT: That's unusual for me. MR. AMBROSE: Yeah, it may be a first for you. (Laughter) MR. BARTLIT: Is that better? MR. AMBROSE: Yes, it is. MR. BARTLIT: Do you have a view on whether the flow path was through the annulus, like BP said in their report, up through the shoe track? MR. AMBROSE: Just from the work we've done

And I'm not really in a position to contest it either way. MR. VARGO: My name is Richard Vargo. I'm the Gulf of Mexico cementing manager for the region. And I do disagree with the -- with the conclusion that's drawn. MR. BARTLIT: Do you think that the leak came up the annulus? MR. VARGO: I think it was initiated up the annulus, yes, sir. MR. BARTLIT: And what do you base that on? MR. VARGO: Basically there's a -- there's a few pieces of data that we have, and I think that's been shared already. But basically, as a result of the cementing operation and displacement, we believe that gas and oil was pushed up the annulus. If you go back before the actual incident and -MR. BARTLIT: Excuse me, a second. Let's put the long string up there so we can see what we're talking about, please. I'm sorry to interrupt. MR. VARGO: That's fine.

186
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

188
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

to date, we agree with it's the most likely path of hydrocarbons. MR. BARTLIT: Are you doing further work? MR. AMBROSE: We continually look at new evidence as it comes in such as when the seal assembly was pulled. And when we come to final conclusions, we will determine our final answer. MR. BARTLIT: You both looked at the seal assembly that came up, the one that I showed on the screen, and you feel that supports your view that the leak came up through the shoe track. Mr. Gisclair and Mr. Vargo, you're both Halliburton. You don't both have to have opinions. Do either of you have an opinion regarding where the flow path was? CO-CHAIR REILLY: I'm sorry, Fred. I need to interrupt. Ms. Melchert asks that people speak into the microphone and begin, when they are the first to answer a question, to introduce themselves. MR. GISCLAIR: Yes. I'm John Gisclair, insite support service coordinator for Sperry Sun.

If you go back before the casing was run and the cleanout was run -- a cleanout trip was run after logging. It was noted that there was 1200 units of gas that was circulated out of the well prior to them coming out of the hole. This is with -- this is with the mud in the hole, obviously. Once casing made it on bottom and circulation -- doing a bottoms-up circulation was not performed, I believe that gas was allowed to coalesce in that area. As they started to pump mud down -- down the drill string, down into the casing and up into the annulus, that positioned those fluids all throughout and trained all throughout the annulus. What that does is -- and because we indicated that there's no losses, you're essentially taking that pressure from downhole and you're essentially carrying that pressure up into the annulus up towards the base of the seal assembly, and that's roughly 13,000 p.s.i., plus or minus. At the point of the -- at the end of the cementing operation, obviously we had indicated to BP,

PLANET DEPOS 888.433.3767 | WWW.PLANETDEPOS.COM

NATIONAL OIL SPILL COMMISSION MEETING CONDUCTED ON MONDAY, NOVEMBER 8, 2010
48 (Pages 189 to 192) 189 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 191
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

and I think it's been -- it's already been brought out that we felt like there was going to be channel present potentially in the cementing operation, which would then allow communication for those fluids to continue to flow. MR. BARTLIT: Let me just interrupt, sir, for a second. MR. VARGO: Yes, sir. MR. BARTLIT: Only to set the stage. MR. VARGO: Yes. MR. BARTLIT: BP concluded in its report that there were no leaks from the reservoir, either before or during the cement operation. I take it you agree with that? MR. VARGO: There was no leaks. MR. BARTLIT: No leaks of hydro -- The hydrocarbons did not enter the well before or during the cement operation? MR. VARGO: Well, I disagree with that, then. MR. BARTLIT: When do you think the hydrocarbons entered the well?
190

As you indicated before, during the negative test, or prior to the negative test, we did a casing test, and we agreed that the casing test was successful. If the casing test was successful and we had had gas and oil coming in through the shoe track, as you pressured up and did that casing test, you would see anomalies in that casing test, because you would be pressuring up gas which would pressure up at a different rate than you would have liquids pressure up. So you would have a change in slope of that pressure test. And we don't see that in the pressure test. So I don't believe anything has entered inside the casing at that point. MR. BARTLIT: Is it your position that hydrocarbons never entered the well through the Halliburton cement job but they were present and pushed up here and those were the hydrocarbons that exited on the well floor? MR. VARGO: I believe the hydrocarbons went up the annulus. And as I said, they made it up to the

192
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

MR. VARGO: I believe they entered the well while we were doing the cementing operation and displacing. Because remember, the well is very much in balance. And we know from the prior trip that gas had coalesced inside the well bore. So I believe gas was continually coalescing inside the well bore. And as we did the cement job and displaced it, it was pushing that gas and oil up into the annulus and bringing it up towards the seal assembly up to the top near the BOP. MR. BARTLIT: Do I understand Halliburton's view, then, that when the cement operation began, that there were hydrocarbons in the annulus here, and as the cement came out and turned the corner, it pushed these hydrocarbons up the annulus? MR. VARGO: Yes, sir. It's my view that as we began the cementing operation, that gas and oil was present there, and we continued to push that up into the annulus, and you drug that pressure from the base of the pay sands and you drug that pressure all the way up to the seal assembly. It's roughly 13,000 p.s.i.

seal assembly. Remember, after the cementing operation, we sealed the seal assembly. Okay? So you're trapping that pressure that's underneath. We do the pressure test. It indicates good integrity on the casing. After the casing test, we then go into the negative test operations. As soon as you create the negative test and you reduce that pressure of the hydrostatic mud on that seal assembly, essentially what you're doing is you're removing that pressure, and you're going to create now a differential across that seal assembly. Now think about the 13,000 p.s.i., and you have roughly 3400 or 3600 p.s.i. essentially sitting on top. That's the mud weight that's pushing down on that 13,000 p.s.i. That results in around 9500 p.s.i. acting up on the seal assembly. When you now evacuate that mud and you put seawater inside the riser, you then take off that margin and now you have a resulting pressure that's acting up that's almost 11,000 p.s.i. That 11,000 p.s.i. is then acting on that

PLANET DEPOS 888.433.3767 | WWW.PLANETDEPOS.COM

NATIONAL OIL SPILL COMMISSION MEETING CONDUCTED ON MONDAY, NOVEMBER 8, 2010
49 (Pages 193 to 196) 193
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

195
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

entire seal assembly from the 22-inch all the way into the 9-7/8ths. It's roughly 237 inches squared force area. If you run those calculations, you're roughly looking at close to 2.5 million pounds of force that's now acting up on that seal assembly. The casing inside the 14.5 pound per gallon of mud weighing down -- and that mud weighs roughly 750,000 pounds. So you end up having a resulting force up of 1.5 million pounds. I believe the blowout was initiated from gas and oil coming in during the negative test and coalescing in the BOP area. With the rapid influx, once it started, I believe you had a failure point at the 9-7/8ths by 7-inch casing, which is a weak point in the casing, and I think that's when fluids then began to move up the casing. MR. BARTLIT: So you think during the negative test, hydrocarbons got in here, came up here and came in -MR. VARGO: No. MR. BARTLIT: No? MR. VARGO: The hydrocarbons are sitting up

MR. BARTLIT: Is this where you're looking? MR. VARGO: Yes, sir. So that's just a rough quick assessment, sir. MR. BARTLIT: Mr. Bly, do you have any comment on that? MR. BLY: Only to go back to the work that we did in our report. This topic as to the flux issue is covered extensively in the report, in the appendices. I was very confident when the report was issued two months ago today that that had been the flow path. We demonstrated that with well flow modeling matching the surface pressure data, and then confirmed it with additional information that became available to demonstrate that it had not come up the annulus. And since that report has come out, there has been further confirming information, not least of which is the picture that you have here which demonstrates it did not come up around the seal assembly.
196

194
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

at the seal assembly already -MR. BARTLIT: Up here? MR. VARGO: -- as a result of the cementing operation and displacement. So they're sitting up there waiting. Okay? Once you do the negative test and you create that pressure differential across the seal assembly, now you have a seal assembly lift up. That gas and oil then go ahead and coalesces inside the BOP area. And then you went ahead and you circulated out after the negative test and you thought everything was okay because the gas and oil is already there. You're not going to have gas and oil migrate 18,000 feet from the shoe assembly after the pressure test all the way up that casing and then cause a blowout. I believe the gas and oil was already present in the annulus and that's what caused the initial blowout. Subsequent rapid flow of the fluids moving up, then I believe potentially parted the 9-7/8ths by 7-inch crossover, which was the weak point in the casing. And --

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

MR. BARTLIT: Do you understand the point Mr. Vargo is making? MR. BLY: I -- I could not follow the logic of his description. MR. BARTLIT: I guess I would respectfully suggest, Mr. Vargo, you give us a written piece on this. I think I get the outlines of what you're saying. It's new to me, new to everybody. And then we'll allow the other parties to examine it, do whatever math, and comment on it, and allow you to -and then I'll allow you guys to comment in return. CO-CHAIR REILLY: We will, Fred. Thank you. MR. BARTLIT: Let's go back to our conclusions. The next conclusion is cement potentially contaminated or displaced by other materials in the shoe track and in some portion of the annular space failed to isolate the hydrocarbons. I know you agree with that, Mr. Bly. And I guess, Mr. Ambrose, do you? MR. AMBROSE: Bill Ambrose of Transocean.

PLANET DEPOS 888.433.3767 | WWW.PLANETDEPOS.COM

NATIONAL OIL SPILL COMMISSION MEETING CONDUCTED ON MONDAY, NOVEMBER 8, 2010
50 (Pages 197 to 200) 197
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

199
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

Presently, we've looked at some level of the cement, but it's outside of our area of expertise. So we defer today to Halliburton and BP to address this issue. MR. BARTLIT: I guess, Mr. Vargo, maybe you disagree with that one also? Let's put it up again, please. Cement failed to isolate hydrocarbons in the annular space. MR. VARGO: Yes, I agree that it did not isolate -MR. BARTLIT: So you agree with -MR. VARGO: -- the hydrocarbons in the annular space. MR. BARTLIT: -- proposition No. 2? Thank you. Our next point is that pre-job laboratory data should have prompted a redesign of the cement slurry. Mr. Bly, do you have a view on that? MR. BLY: I think it's worth making a comment on this because there has been new information

at the time of the job, I believe those results were adequate to continue with the job. However, depending on which lab test that you're looking at, obviously there was a lot of design that was working towards the point when we actually executed the job. MR. BARTLIT: Well, do you agree or disagree with that conclusion No. 3, tentative conclusion? MR. VARGO: I'd say we're still looking into it right now and -MR. BARTLIT: Thank you. MR. VARGO: -- don't have a position. MR. BARTLIT: The next point is that cement evaluation tools might have identified a cementing failure. Let's first ask, is it -- and I don't know if there is sufficient expertise, but is it true that a cement evaluation tool, the one that Sam showed, would have probably been able to identify top of cement? Is that true or not, or don't you know? MR. BLY: I'm not an expert. The experts that worked on this on my team suggested it might but

198
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

200
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

since we concluded our report. When our report came out, we had signaled that we felt this was the case and we saw evidence -we didn't see evidence that some critical information had been looked at in the testing and used in the design process. That was particularly around foam stability and other matters. And that was our view at the time of our report. I was interested to see the letter that came out within the last ten days from the commission that seemed to concur with that and the fact that there may have been even further information that wasn't available to the team. So I think this is a very, very important point. MR. BARTLIT: Mr. Ambrose? MR. AMBROSE: Again, I have to defer on this point. MR. BARTLIT: Mr. Vargo, do you -- in hindsight today, do you agree with that looking at it now, or disagree? MR. VARGO: Based on the laboratory results

that it's a much more reliable test to do after cement has a long time to set up. MR. BARTLIT: So BP agrees with what Sam said, that most people would do the test later on. You said in your report that if BP had done a risk assessment at the time, you might have done the cement bond log at the time rather than waiting, as most people do. What is the risk assessment that BP could have done at the time that you're referring to in your report? MR. BLY: So the criticism that we raised was that we didn't see any individual point that was wrong. The CBL was, you know, a matter of engineering judgment. But we did believe that given the nature of this job, they could have -- the team could have done a more formalized risk assessment. That may have led to a CBL if they thought it was appropriate at the time and may have led to other mitigation measures. MR. BARTLIT: We put up a list of issues pertaining to the nature of this job earlier to the cement work. Would the formal risk assessment have

PLANET DEPOS 888.433.3767 | WWW.PLANETDEPOS.COM

NATIONAL OIL SPILL COMMISSION MEETING CONDUCTED ON MONDAY, NOVEMBER 8, 2010
51 (Pages 201 to 204) 201
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

203
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

involved going through all of those factors as a group rather than taking them one at a time? MR. BLY: I -- I think the way that the 13 that you showed isn't probably how it would have actually worked, because I think there was linkages and contingencies in those. The first few were to do with the nature of drilling in the Gulf of Mexico and the difficulties. Those were well understood and in fact informed subsequent decisions around, you know, the choice of foam cement by the cementing contractor and many of the things. So I think some of those things would be in there. But I don't believe the 13 is actually how someone would have sat down and looked at it. MR. BARTLIT: I'm not familiar with the term "formal risk assessment." Is that a process that's used within BP? MR. BLY: There's a number of different processes that could be described as formal assessment, yeah. But it typically would be a process, yes.

team to think a bit more carefully about it. That was really the nature of that -- that area of the report. MR. BARTLIT: Mr. Vargo, do you have a view on the utility of cement evaluation tools, the cement bond log? MR. VARGO: I think cement evaluation tools are good in identifying top of cement. They'll use what they call a cement bond log tool. They can use ultrasonic-type tools to identify top of cement. And yes, they are effective in identifying tops of cements and foam cements and conventional cements as well. MR. BARTLIT: Let's turn to the -- Megan, to the demonstrative on top of cement, because people may have forgotten why that's important. You told us that the cement bond log could have value in identifying top of cement. Let's look at that. I know I catch you by surprise, kid, but that's the way it goes. While you're looking for that, let's go to the next one and we'll come back to it. And this is my fault, not hers, believe me. Negative pressure test repeatedly showed

202
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

204
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

MR. BARTLIT: It would be good to get some idea. You said in your report, and of course we agreed I'm going to -- we're going to stick with your report. You said in your report that if you had done a formal risk assessment you might -- might have, in your words, run the cement bond log. Now, can you tell us in a nutshell what would that formal risk assessment have monitored? MR. BLY: What we were thinking about was that -- or there was a number of factors that the team saw that indicated they were okay. As you -- it was reported earlier this morning, there was reports back from the rig that said, "Look, the cement job went well," et cetera. And so at face value there was -- there was a lot of confirming evidence that things were okay. As my team went back through it, they said, you know, that was all right but there were some factors here. The low difference between lift pressure that was described, et cetera. That we said, you know, in hindsight, those could have caused the

that primary cement job had not isolated hydrocarbons. I take it you all agree with that? MR. BLY: Yes, sir. MR. BARTLIT: Yes? Yes? Yes? Yes? MR. BLY: Yes, sir. MR. BARTLIT: Despite those results, BP and TO personnel treated the negative pressure test as a complete success. In meeting with you and TO people, Mr. Ambrose, I have seen a difference emerging as to whether your people -- maybe I've seen it. I may be wrong -- whether your people maybe didn't take a position on it and you wanted to put -- it was BP that had this responsibility. And that's a lousy question. But what I want to know is, Mr. Ambrose, do you agree that BP and TO personnel treated the negative pressure test as a complete success? MR. AMBROSE: I think when you look at the negative test, there were a lot of -- there was a lot of confusion at that period of time. If industry standard is that the operator will provide approval for negative test --

PLANET DEPOS 888.433.3767 | WWW.PLANETDEPOS.COM

NATIONAL OIL SPILL COMMISSION MEETING CONDUCTED ON MONDAY, NOVEMBER 8, 2010
52 (Pages 205 to 208) 205
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

207
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

MR. BARTLIT: The operator is BP. MR. AMBROSE: BP in this case. You know, our personnel are not -- did not have the experience or the authority to approve or disprove a negative test. And so when the approval came back that it was a good negative test, our people proceeded ahead on good faith that it was a good test. MR. BARTLIT: Do your people know what a negative test is? MR. AMBROSE: Certainly in the course of normal business we understand what a negative test is. MR. BARTLIT: You do them all the time? MR. AMBROSE: When you look at the structure of negative tests, the operator will design a negative test and we will set that negative test up to that design. And then their interpretation of that test and the experience to interpret that test resides with the operator. MR. BARTLIT: Did your people on the well that night have the training and ability to interpret a negative pressure test?
206

monitor it back, it was giving correct results, that we believe that it was communicating with the formation. When the decision -- When the crew was told to change that lineup to the kill line, that spacer placement became ever so important but may have been overlooked. And that added confusion, and in that regards the test became complicated. MR. BARTLIT: Were your people, did they have the training and experience that Transocean people to look at that 1400 pounds that was always stuck on the drill pipe and draw a conclusion as to the meaning of it? MR. AMBROSE: Today I don't know. Because we haven't been able to talk to those people as to what they were thinking or how they may have discussed that situation. MR. BARTLIT: Mr. Bly, I take it you agree with that second-to-last bullet? MR. BLY: Yes, sir. We covered this again in some detail in our report, attempted to go back and piece together every step that had happened. And our

208
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

MR. AMBROSE: Interpretation is the responsibility of the operator. MR. BARTLIT: That wasn't my question, was it? My question was not whether whose responsibility it is. My question is: Did they have the training and experience to interpret a negative test? MR. AMBROSE: I can't sit here today and tell you if they did or did not have the training and experience to do the interpretation, which is the role of an engineer. MR. BARTLIT: So as far as you know, then, today, you don't know whether the TO personnel we've listed here had the experience and training to tell if a negative pressure test is successful or not? MR. AMBROSE: In this particular case, there were complications with regards to the negative test, which I'm sure we'll get into in some detail. With the depth that it was being displaced to and the complications of the spacer, when in 20/20 hindsight we look at this today, we can -- we can say that when the test was set up on the drill pipe to

conclusion was that there had been a number of discussions between BP and Transocean personnel. It appeared that they were trying to do this test correctly, but at the end of the day they misinterpreted the results. MR. BARTLIT: If under Transocean's policies, even if arguendo, assuming this, it was BP that was supposed to do the primary interpretation, if your guys, your people on the rig saw a test they believed had failed, they would say so, wouldn't they? MR. AMBROSE: Absolutely. MR. BARTLIT: Do you have any reason to believe, Mr. Bly, that the TO personnel, along with your people, also believed that the negative pressure test was a success? MR. BLY: I believe -- I believe they both thought the test was a success, yes. MR. BARTLIT: This is one of these areas, Commissioners, where it would be useful, I suppose, to sit people down under oath. I told you yesterday that I would try to point out areas where having subpoena power and the ability to actually cross-examine people

PLANET DEPOS 888.433.3767 | WWW.PLANETDEPOS.COM

NATIONAL OIL SPILL COMMISSION MEETING CONDUCTED ON MONDAY, NOVEMBER 8, 2010
53 (Pages 209 to 212) 209
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

211
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

might be useful. This is an example. You've seen the facts develop. Now, BP's temporary abandonment procedures introduced additional risk. We don't quantify the additional risk. Do you agree or disagree with that, Mr. Bly? MR. BLY: I -- I don't exactly agree. In our -- In our work we went through what turned out to be the eight critical things that we thought had contributed causally here. We clearly -- We clearly identified the -the -- you know, the failure to isolate at the bottom of the well and the negative test and subsequently the monitoring. So we didn't see the procedures here as particular to that. We felt they were covered in the other things we described. MR. BARTLIT: You saw the testimony. At least the people who did testify thought it was unusual instead of setting the upper cement plug at 300 feet, it was unusual to go down to 3,000 feet. You saw that?
210

MR. BARTLIT: Originally you were going to set in mud, right? MR. BLY: I can't remember that detail. That was said this morning and I just -- I didn't remember that. MR. BARTLIT: Megan, can you put up Sean's sequence? People do set cement plugs in mud, don't they? MR. BLY: I think there is a mixture of -MR. BARTLIT: Some -- some set in seawater. Is that your experience, Mr. Vargo? MR. VARGO: Yes, they're set in either mud or seawater. It depends. MR. BARTLIT: You guys are the guys that set these plugs, right? MR. VARGO: Yes, sir. MR. BARTLIT: How often do you set them in mud compared to setting them in seawater? MR. VARGO: On the surface plugs, I would say that we set them -- typically we'll displace out at the top 300 feet to seawater and then set the plug
212

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

MR. BLY: Yeah, I can comment on that. MR. BARTLIT: Okay, good. MR. BLY: So it seems to me there's two things that happened here. One was the decision to set a cement plug in seawater, which is the decision that says you'll circulate the seawater before you plug the well. MR. BARTLIT: Let me just stop you for a second. Your initial plan was to set it in seawater, isn't -MR. BLY: Correct, yeah. And I -MR. BARTLIT: So the initial plan -- and I'm sorry to interrupt -- was the one you would have been working on for a long time, isn't that true, initial abandonment plan? MR. BLY: I can't tell you for a fact. I don't remember that. But I was going to just remark that setting a plug in seawater is a pretty common practice, and it has a good engineering basis. I think many in the industry would say that's -- that's a good way to get a firm plug.

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

at other areas in the well. Obviously, we're setting them in mud. MR. BARTLIT: Now, you said you typically set to 300 feet. We know this was set down to 3,000. How many plugs have you set in your experience, in your career? MR. VARGO: Many. MR. BARTLIT: A thousand? MR. VARGO: Sure. Thousands. MR. BARTLIT: Can you quantify for the Commissioners in some way how often you set the plug as low as the 3000-foot plug was set here? MR. VARGO: I've never seen it set this deep before. MR. BARTLIT: In your whole career? MR. VARGO: My whole career. MR. BARTLIT: Mr. Bly -MR. VARGO: I'm sorry, his plug, yes. MR. BARTLIT: Here's the original April 14th Morel e-mail. You were going to set the cement plug in mud at that time. Do you recall that now? MR. BLY: I recall it from this morning's

PLANET DEPOS 888.433.3767 | WWW.PLANETDEPOS.COM

NATIONAL OIL SPILL COMMISSION MEETING CONDUCTED ON MONDAY, NOVEMBER 8, 2010
54 (Pages 213 to 216) 213
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

215
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

discussion, yes. MR. BARTLIT: Now, if setting a plug in mud wouldn't work, your guys wouldn't have made the initial proposal to set it in mud, would they? MR. BLY: I think there's engineering choices you're making throughout the course of these things. MR. BARTLIT: Was that a yes or a no? MR. BLY: Well, I don't know what was in his heads. You asked me to speculate about what they were thinking and why they decided. I can't do that. What I can tell you is there's engineering choices that you make, and I think setting it in mud is something that happens sometimes and sometimes people choose to set them in seawater. MR. BARTLIT: Who is Mr. Morel? Is he an engineer? MR. BLY: Yes, he's a BP engineer. MR. BARTLIT: Is he a vice president? You said -- Oh, BP. I'm sorry. MR. BLY: No. Yeah. MR. BARTLIT: Who would have been part of
214

CO-CHAIR REILLY: Agree. MR. BARTLIT: Now, the reason that you didn't set the cement plug at 300 feet of mud was because you wanted to hang all that drill pipe on the -- in setting the lockdown, right? MR. BLY: I think that's a separate decision. That -- that decision had to do with the depth of the plug setting as opposed to the decision to set it in seawater. MR. BARTLIT: But -- but moving the upper plug down from 300 feet to some 3,000 feet did take a lot of the mud out of the well, didn't it? MR. BLY: It increased the underbalance on the well, that's correct. MR. BARTLIT: And when you replace mud with seawater, that's called underbalancing the well, increasing the underbalance, right? And increasing the underbalance means there is less force at the bottom of the well to holding the hydrocarbons in. Does the panel agree with that? CO-CHAIR REILLY: Yes, sir. CO-CHAIR GRAHAM: Yes, sir.

216
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

the decision to initially set the cement plug in mud other than Mr. Morel? MR. BLY: That would have been the engineering and ops team I think would have worked together on those kind of design decisions. MR. BARTLIT: And of course, you knew they were qualified to make a decision like this? MR. BLY: Yes, I did. MR. BARTLIT: So if your team who made this initial decision to set it in mud later changed it, if they're qualified, then we can't say, can we, that it's a mistake to set it in mud? MR. BLY: I didn't say that. MR. BARTLIT: Oh, I know you didn't. But it's not a mistake to set it in mud, right? MR. BLY: I don't believe so. It's an engineering tradeoff decision. MR. BARTLIT: People set them in mud all the time and it works; is that true? Does the whole panel get that? CO-CHAIR GRAHAM: I agree.

MR. BARTLIT: Okay. Let's go to the next page of our conclusions. MR. BLY: I don't -- We haven't completed the point. You know -MR. BARTLIT: Okay. MR. BLY: -- what -- what I said was it was more drawdown. There's no -- there's no reason at all to believe that increases the risk. If the plug had been set at, you know, 500 feet below the mudline, the well would have still been underbalanced. And if that -- if the flow indicators had been missed during the negative test, the same thing would have happened. So I think -- I think the point, and the reason that I've taken an exception to it, is it's making a judgment about a very small change in risk that I think is not -- you know, wasn't a causal factor in this -MR. BARTLIT: Well, that may be. You're saying there is a small change in risk that you don't think was a causal factor? MR. BLY: Yeah. I think it's hard to even

PLANET DEPOS 888.433.3767 | WWW.PLANETDEPOS.COM

NATIONAL OIL SPILL COMMISSION MEETING CONDUCTED ON MONDAY, NOVEMBER 8, 2010
55 (Pages 217 to 220) 217
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

219
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

gauge how much of a change in risk there actually was. Once it's underbalanced, it's going to flow. If you don't catch it -- If you miss the negative test, the same thing is going to happen. MR. BARTLIT: As I told all of your counsel, the purpose here is not to argue or cross-examine. And I would perfectly be willing to accept a short paper from BP on why there was no increase in the risk by going down to 3,000 feet; or, if so, the risk was small and inconsequential. I mean, if you want to submit that, you're welcome. We can -- The purpose of this, we told the Commissioners yesterday, is so that you can see the differences emerge, and if we need further work, we will invite submissions. Okay? Okay. Number of simultaneous activities and nature of flow monitoring made kick detection more difficult during riser displacement. You -- I think in your report, Mr. Bly, you said that might have been the case. You weren't certain about it, but you said it might happen. Transocean was good enough to give us a

flowing, and that through the course of that, for whatever reason, those conditions were not observed and acted on until quite late into the event. And you're right, we said it's possible that the activities going on may have -- you know, may have made it so that the crew didn't notice. But what we also said, it didn't have to, because we believe the well was monitorable even with the simultaneous activities underway. MR. BARTLIT: I think -- You know, you didn't try to put yourself in the head of any particular person, you just opined that a lot was going on. I take it you disagree with that. Is this routine, these kinds of activities at the end of a well, Mr. Ambrose? MR. AMBROSE: I think the term "simultaneous" operations or activities for us may mean something different. It's more -- you know, the activities you're talking about in this regard are really sequential activities required to -- to finish the end of the well. And the chart, as you can see, it does show

218
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

220
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

slide which we used, which I guess you prepared, Mr. Ambrose, you and your team. And here it is. We'll start with Mr. Vargo. You probably don't have any opinion on whether any kick detection was obscured by all the other activities going on. I take it Mr. Gisclair, the same? You don't have a dog in that dispute? MR. GISCLAIR: I would agree with that statement. The number of simultaneous activities most certainly would have obscured a lot of the data that would normally be used to evaluate a kick. MR. BARTLIT: Mr. Bly, I've carefully read your report, and you don't reach a conclusion on whether the simultaneous activities did obscure it. You offered the opinion that it might. Can you -- Do you have anything to add to that since your report was filed? MR. BLY: No, sir. I mean, the primary thrust of our findings and work was that, you know, we believe that the well was in a condition where it could flow for quite some time, 40 or 50 minutes before the event, and that it indeed was

that a lot of these things are sequential in nature and they just -- they're necessary steps to make sure that we can temporarily abandon the well. MR. BARTLIT: Is this a very normal end-of-the-well sequence of activities? MR. AMBROSE: Up unto -- Up to the point where we start noting the well control activities. MR. BARTLIT: Right. MR. AMBROSE: So yes, we do in our analysis also agree that the underbalance point happened just before eight o'clock. Or excuse me, just before nine o'clock. And there were different things happening during that time. MR. BARTLIT: I think BP said 8:52? MR. BLY: Yeah, that was our estimate. MR. AMBROSE: Ten minutes till. And I think the -- the dilemma is one of the things that you said in your opening remarks, you have to get into the heads of the people that were on the rig to understand. And unfortunately, we can't do that. We can only suppose maybe what was going through our crew's head that night.

PLANET DEPOS 888.433.3767 | WWW.PLANETDEPOS.COM

NATIONAL OIL SPILL COMMISSION MEETING CONDUCTED ON MONDAY, NOVEMBER 8, 2010
56 (Pages 221 to 224) 221
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

223
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

What I can say at this point is when you look at the trend on a minute-by-minute basis, with 20/20 hindsight you see trends that when the driller took actions, he saw trends that he expected to happen. And, you know, there were points in time when things were masked. An example of that is when the trip tank was emptied into the flow line towards the end of that period, where the flow just started coming in. It's -- you know, coincidence is not your best friend sometimes. MR. BARTLIT: Good point. MR. AMBROSE: And he did -- he did your -the necessary thing at that point to put the 14-pound oil-based mud that was in the strip tank back into the mud pit system, and it's just unfortunate that at that point in time it masked what was the biggest inflow at that point. MR. BARTLIT: Well, that's an interesting point I haven't thought of, and I -Have you -- has Transocean given attention since this -- you said it was a coincidence and that

cooperative with the investigation. MR. BARTLIT: Thank you. Okay, let's go back. By the way, let's go those -- Megan, to the chart that's got the red line and the pump line, what I call the kick chart. This is something that we've talked about a lot. And it's true, isn't it, that the TO representation on the driller's screen of these events, you don't know what it looks like as you sit here today? MR. AMBROSE: The driller's screen, it's a very high-tech system. When we went to the Nautilus, I think you had a good impression of -MR. BARTLIT: Yes, I sure did. MR. AMBROSE: -- what that looked like. They're very customizable. So, you know, depending on the operation at the time, the driller could have been looking at the screens in any one of different formats. So today we don't know. The day old logger for the drilling system, for the high-tech drilling system went down with the rig. So we can only suppose

222
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

224
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

the actions regarding the strip tank could have masked what is going on. Have you thought about any different ways of conducting these end-of-the-well activities that could avoid, like you said, an unfortunate coincidence which masked what was really going on? MR. AMBROSE: Well, we haven't concluded our investigation yet. You know, we just, I believe it was three weeks ago with your assistance, received some more information that helped us understand better what was happening the last hour. And until we get all the facts, it's hard to make those kinds of conclusions. MR. BARTLIT: Fair enough. Before the Commission's report is due in January, if in December you think more about these end-of-the-well activities and have any concrete ideas for how you could segment them to avoid things like that unfortunate coincidence you told us about, we would appreciate it and we will receive it and consider it. Okay? MR. AMBROSE: We'll continue to be

that he was looking at something similar to what we've provided the Commission. MR. BARTLIT: For the record, Commissioners, TO refers to their system as the high-tech system. That's just their internal lingo for that. Would you expect the driller to have been looking on your system at some -- it might be different, the data might be presented differently, but some indication of drill pipe pressure? MR. AMBROSE: The driller would have had standpipe or drill pipe pressure on his screen, yes. MR. BARTLIT: Would you expect him to be monitoring that at all times during this period? MR. AMBROSE: I think when you look at particularly the sheen test, I think that is one of the areas where you're talking about -MR. BARTLIT: Why don't you explain to the Commissioners the sheen test, because that's something I mentioned briefly but didn't explain. MR. AMBROSE: Okay. The sheen test was a period where shortly after nine o'clock the 14-pound

PLANET DEPOS 888.433.3767 | WWW.PLANETDEPOS.COM

NATIONAL OIL SPILL COMMISSION MEETING CONDUCTED ON MONDAY, NOVEMBER 8, 2010
57 (Pages 225 to 228) 225
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

227
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

oil-based mud is coming back into the mud pits and they're expecting that the 16-pound water-based spacer is about to arrive back. What you're doing is shutting down your pumping operations to look for the interface to make sure that you have 16-pound mud back at the top of the riser because that's the point where you then discharge overboard after that point. So shortly after nine o'clock the mud pumps were shut down for a period of about four and a half minutes. So I think this is where you have to go minute by minute with the driller to understand what he may or may not have seen when it comes to the driller screens. Precisely after the mud pumps were shut off, there was almost 60 seconds of constant steady drill pipe pressure. And so the natural tendency -and we've talked with drillers on the rig to say, "How would you go about this period of time, this four and a half minutes, to get an idea of maybe what would happen?" And having looked and seen 60 seconds of

MR. BARTLIT: Does everybody on the panel agree that in hindsight, and Mr. Gisclair, this will be for you. Mr. Gisclair is with Sperry Sun, and he's an expert on the Sperry Sun data. We spend time with him, if the Commission pleases. And there isn't anybody in the world that knows more about this data or studied it more than he has. And we appreciate your coming here, Mr. Gisclair. Do we all agree that at a time when you're putting heavier fluids in instead of lighter fluids and the drill pipe is steady, that this what to a layman is a small increase, was an indication that the hydrocarbons were coming from the reservoir into the well? Do you agree with that? MR. GISCLAIR: The expectation would be that if hydrocarbons were introduced into the annulus, that yes, you would see a decrease in the standpipe pressure while pumping. MR. BARTLIT: So you agree that looking at this, for example, a Sperry Sun person like you, would
228

226
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

constant pressure, that would have told him that things appeared constant in the well. And then when he confirmed that, he may have then turned to do the next step in the process which was line up another mud pump to pump down the kill lines. MR. BARTLIT: So let me be sure I understand. And I appreciate the forthrightness of your remarks. You're saying that people might look at this for 60 seconds and if it looked okay, either of these, they might turn to do something else and not be focused at all times on those lines times as they evolved? We don't know, we're really guessing. But you're using your judgment based as somebody who has been in this business a while. Is that what you're telling me? MR. AMBROSE: We're just -- We're doing our best to estimate because -MR. BARTLIT: Right. MR. AMBROSE: -- we can't talk to Dewey.

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

have wondered what was going on down there? Would it have been a cause to make further inquiry? MR. GISCLAIR: Yeah. If it were represented in this fashion and if the mudlogger had been looking at the screen, concentrating on the standpipe pressure, they would have seen that ramp up and it might have given pause and he would pick up the phone and call the driller. It's not necessarily an indication of a kick per se, but it would be something to investigate. MR. BARTLIT: Would this second period on the Sperry Sun data be more of an indication of a kick than the earlier one that we've got circled? MR. GISCLAIR: Again, if it were presented in this fashion. The log that you have there on the left is the actual log that they were watching on the Horizon. And the standpipe pressure, especially that first increase, it basically draws a straight line, and it's very difficult to spot that 100-pound increase over that extended period using that particular presentation. Now, this being a fairly unconventional

PLANET DEPOS 888.433.3767 | WWW.PLANETDEPOS.COM

NATIONAL OIL SPILL COMMISSION MEETING CONDUCTED ON MONDAY, NOVEMBER 8, 2010
58 (Pages 229 to 232) 229
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

231 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

response to a kick, as I said normally when you're receiving a kick you would expect a drop in standpipe pressure due to the lighter hydrocarbons introduced into the annulus. This in fact increased the standpipe pressure. So it's not your typical indicater of a kick but it, again, is something to give pause. MR. BARTLIT: You pointed to something that concerned us as laymen, engineers but not experts in your business, and that is the difficulty of somebody sitting there at the end of an eight -- the eighth hour of his shift and seeing any trend here. Wouldn't the fact that the crew was putting -- was displacing heavy mud with lighter seawater have given more significance to that line? MR. GISCLAIR: Again, you would expect a slight drop in standpipe pressure. And the rate of drop would depend on the flow rate in. But yes. If I may, I would like to just -MR. BARTLIT: Yes. MR. GISCLAIR: -- clear up a little something regarding the data itself and how you would

MR. GISCLAIR: I'm sorry. MR. BARTLIT: We worked at one time on -Did we ever animate this one slowly, this left-hand one? I can't remember that. I know we've got one on this one, and I pointed out today that whenever BP wants to explain this data, they take this and flip it sideways and stretch it out, which enables you to see things. Do you agree as the expert here on Sperry Sun data that turning it sideways and stretching it out enables you to see things that might not be as apparent in the original vertical trace? MR. GISCLAIR: Yes. You can emphasize certain traces, certain responses, and make them look more or less significant. MR. BARTLIT: Ahh, Megan, you're great. Let's sort of start up here. And keep going. This is this first kick line here, and that's sort of what he would be seeing as it traced down there, right? MR. GISCLAIR: Right. MR. BARTLIT: And it's your view that I
232

230

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

actually be watching this. We refer to this data a lot as realtime data, but in the strictest sense, it's only realtime as you're watching it. It's no different than watching a ballgame live and seeing a replay. It doesn't matter if that replay is two minutes later or two hours later in the news. When you're looking at that replay, it's no longer live. So the data that we're looking here, while it was collected in realtime and monitored in realtime, we are now no longer looking at it in realtime. And to view this data and to watch this data in realtime is significantly different than going back post job and looking at it. So when you're staring at these traces, you're going to have to wait a significant number of minutes in some cases to notice a certain trend. For instance, this 100-pound increase. So, it's not something -MR. BARTLIT: Just a second. MR. GISCLAIR: -- that would be normal -MR. BARTLIT: Megan.

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

guess that this is as clear as it could be? MR. GISCLAIR: Yes. The displays that you have, turning it sideways and changing the scales and changing the time frame, those will work in situations like this when you're trying to do an analysis, but they're not really conducive to proper rig monitoring. The scales that are chosen for displays out in the mudlogging shack, at least -- I'm not familiar with the ones that are presented to the driller. But the mudloggers will select a scale, they will select a presentation that is most efficient to them for identifying certain anomalies. To present that sideways comparison on that much reduced and zoomed-in scale on a standpipe pressure would make it very difficult for them to track large increases or decreases in standpipe pressure. What you would end up with is the standpipe would reach the top of the scale and you would have to either wrap it up from the bottom or it would just hit a peak and flatline. And you don't want to see that when you're monitoring the well. MR. BARTLIT: Here is another -- Here is

PLANET DEPOS 888.433.3767 | WWW.PLANETDEPOS.COM

NATIONAL OIL SPILL COMMISSION MEETING CONDUCTED ON MONDAY, NOVEMBER 8, 2010
59 (Pages 233 to 236) 233
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

235
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

the sideways one going more slowly. And of course, we all know that this is not the way it was presented on the Sperry Sun data. One thing I've never been sure of -- I should have asked this before. Transocean has its data, its own system. Why in the world does Sperry Sun -- Who pays Sperry Sun to keep separate data? BP? MR. GISCLAIR: BP. MR. BARTLIT: Why don't they just use the TO data; do you know? MR. GISCLAIR: Actually, most of the data was the TO data. The standpipe pressure that you see in that Sperry database was actually Transocean's data that was collected in their high-tech system and transmitted to us in realtime and stored in our database. MR. BARTLIT: I didn't know that. MR. GISCLAIR: Most of the -- most of the data that is in that Sperry database was transmitted to us realtime from Transocean. Some of the data that was not transmitted to us that was a result of our own sensors was the flow-out, the gas, and there were a

MR. BARTLIT: Mr. Ambrose, do you know? It was interesting. I had never focused before. Mr. Gisclair just told us that this drill pipe pressure I've been focusing on came from Transocean. You have that same information. Your mudlogger had the zeros and ones that make up -- or was it an analog system? MR. AMBROSE: Several of the sensors are Transocean sensors. The question that we've had is which ones. And we don't -- We've never received the map that says which particular sensors on these charts were being measured from Transocean sensors. It's something we haven't had. Yes, these are -- the sensors are -- it's standpipe pressure from Transocean. I think the difference you'll find, and one of the things when we talked with the NOV, National Oilwell Varco, regarding animating some of this, one of the things I know that you wanted to do -MR. BARTLIT: Yes. MR. AMBROSE: -- they said, well, our system -- and this is one of the big differences --

234
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

236
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

couple of standpipe transducers located around the rig for our MWD service. But the tank volumes, the flow in, the pump stroke indicators, the choke and kill pressures, the standipe pressures, all of that was collected by Transocean sensors and transmitted to Sperry for storage. MR. BARTLIT: Mr. Bly, maybe you can tell us. TO already has data. It would be a simple matter to, by telemetry, send that shoreside for your people to look at in your room there. Why would you not have the TO data sent shoreside -- I'm not implying anything, but I'm just curious -- but pay extra to have Mr. Gisclair's group send Sperry Sun data shoreside? MR. BLY: I think if you look at the totality of what you use Sperry Sun mudlogging information for, well control is one part of that. There is geological information, et cetera, et cetera. So there's a lot of things that it's used for. And I think that's the reason why in particular it is sent in to the beach.

monitors and records things five times a second. This is every 5 seconds. So there's a 20 times difference in the sample rate, and that's one of the reasons why it is different data in that regard. And we still do not understand some of the way it's been presented in that it's averaged data, so it's not the original points, so to speak. And again, it's just -- so it's not exactly the same data, but it's from -MR. BARTLIT: It's trend data rather than point-by-point data? MR. AMBROSE: Again, we're not exactly certain how it's averaged or represented. We're using it to the best of our abilities, but it's -- some of it appears to be accurate. MR. BARTLIT: Let me inform the Commission that anybody with a head on their shoulders would say, isn't there a way to take the existing data, which we now know came in part from Transocean, and get the Transocean model that's been made and put the zeros and ones in there so the Commission could know whether the -- you know, exactly what the driller was

PLANET DEPOS 888.433.3767 | WWW.PLANETDEPOS.COM

NATIONAL OIL SPILL COMMISSION MEETING CONDUCTED ON MONDAY, NOVEMBER 8, 2010
60 (Pages 237 to 240) 237
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

239
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

looking at. We've been told some people don't want to do it. Others think it's difficult to do. Obviously, any -- that would be -- if I were you, men and women, I would want to know that. So that might be something we would want to pay more attention to. It's not my field. I don't have any answer. Do you think, Mr. Ambrose, it's possible from an engineering point of view to take Mr. Gisclair's data and put it in the software that drove the TO technical high-tech data so we could get some better look as to what your driller was looking at? MR. AMBROSE: It's possible. And we've asked that that be done. We've run into a few roadblocks, and we're still asking that that gets done. MR. BARTLIT: Well, I think it would be -I think the Commission would agree it would be worthwhile us pursuing this particular issue after this meeting. Maybe the Commission could lend some weight to yours and my efforts to resolve this

think with some more effort we may be able to look at what it -MR. BARTLIT: Well, anything that the Commission can do to back you in that effort, we will do within reason, obviously. Okay. Let's go on to the next -By the way, how many different places on the rig would the TO high-tech data have been displayed? We know it's in the driller's shack. Any other places on the rig that night? MR. AMBROSE: The high-tech data was broadcasted on the closed-circuit television system. So any TV on the rig and staterooms or in offices would have had the same data available to it. It was in the toolpusher's office on the drill floor, and it was also in the company man's office. MR. BARTLIT: Do you know -- I know you investigated this. Do you know whether any TO employee at any level looked at the TO high-tech data that night during this period other than the driller in the drill shack? MR. AMBROSE: We do not know at this stage.

238
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

240
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

problem. Do you think -- and I'm saying this now not in a provocative way, but if I were the owner of the rig, you guys, I would want my high-tech data to be as valuable as possible. We all can see -- I think some of us agree with Mr. Gisclair that some of these on his data are hard to pick up by a driller. Do you have any opinion as to whether the TO high-tech system on the rig that night would have presented this kick information in a clearer or more dramatic or vivid format than the Sperry Sun data was presented? Do you have any idea at all? MR. AMBROSE: Until we can recreate the screens, I think it's premature to speculate what it may or may not have looked like. The other dilemma with this is that we don't know exactly how the driller would have had it set up that night. We can only estimate that based on what maybe some other drillers from the rig would have typically done in the same situation. So, you know, it's an unfortunate thing that we won't know exactly what it looked like. But I

MR. BARTLIT: And your data does not go shoreside? MR. AMBROSE: No, our data stays on the rig. MR. BARTLIT: How come? MR. AMBROSE: Typically this data is important to operators to maintain, you know, historic records of. Once we've drilled a rig, they tend -- I mean, they own that data in some respects. So we historically as an industry have never retained mudlogging-type data for ourselves. MR. BARTLIT: Now, Mr. Gisclair, your data, which we're fortunate enough to have, and we have it because it was sent shoreside, right? MR. GISCLAIR: Yes, sir. MR. BARTLIT: Now, how many different places on the rig that night was this data? How many different screens have this? MR. GISCLAIR: It would have been the same as the high-tech data. It's available on the closed-circuit TV, its own dedicated channel. Anybody wanting to see the Sperry data would simply just look

PLANET DEPOS 888.433.3767 | WWW.PLANETDEPOS.COM

NATIONAL OIL SPILL COMMISSION MEETING CONDUCTED ON MONDAY, NOVEMBER 8, 2010
61 (Pages 241 to 244) 241
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

243
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

at the TV specifically. MR. BARTLIT: Have you found anybody, one single person on the rig that night, that says, "Yes, I actually saw this Sperry Sun data"? MR. GISCLAIR: No, sir. My access to rig personnel has been very limited. MR. BARTLIT: And I guess your answer is the same, Mr. Vargo? MR. VARGO: Yes, sir. MR. BARTLIT: Thank you. Okay, let's go on to the next point, please. Let's make the point. The kick indications were clear enough that, if observed, would have allowed a rig crew to respond earlier. And, of course, you know, we're stuck with not knowing what was observed. Is it agreed or disagreed that if the Sperry Sun data had been observed by somebody skilled in interpreting the data, they either would have allowed them to have responded earlier or might have allowed the crew to respond earlier? Mr. Bly, do you have an opinion on that?

them by everybody, and we'll keep doing that, I promise. Now, next point is once the influx was recognized, BP says -- I think that was at 21:41 when the mud came up was the first time you think it was recognized? MR. BLY: That's when we believe the first action was taken, about then. MR. BARTLIT: There were several options that might have, might have, prevented or delayed the explosion and/or shut in the well. You saw the information I put up on diverting overboard. We know your view. You don't say it would have, you say it might have. Mr. Ambrose, this is your company's document. It says that if there is a rapid expansion of gas in the riser, you've got to divert overboard. Your people know, obviously, that once gas gets above the BOP, things happen really fast, don't they? I mean, everybody knows that in your business, or is that -MR. AMBROSE: Yes.

242
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

244
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

MR. BLY: Yes. As we said in our report, we believe that there were indications that could have been observed on the rig. MR. BARTLIT: Mr. Ambrose, do you have an opinion on that? MR. AMBROSE: Under the circumstances that you just outlined, yes, I would agree with that. MR. BARTLIT: Mr. Gisclair? MR. GISCLAIR: Yes, sir, I would say that the indicators observed would have noted -- been noted by an experienced handler. I don't know that I would necessarily call some of those indicators clear, but yes, if noticed, they would have caused alarm. MR. BARTLIT: Clear enough, is what I hear. Is that what -- We're trying to get it right here. MR. GISCLAIR: Right. MR. BARTLIT: And if there is a better way to phrase it, if any of you have better ways of phrasing this deal to get it perfect, just submit them to us and we'll consider them. You know, we have met with all of you endlessly and we've made lots of changes to make sure we get it accurate. We've run

MR. BARTLIT: So they know that there is a time to move fast, correct? Are your people trained to use the diverter and divert flow overboard under certain conditions? MR. AMBROSE: I think when you look at this particular case, you have to look -- and, again, I think you outlined it quite well at the beginning. It's speed. This particular case, just to put it in perspective, was a 550-ton freight train hitting the rig floor. Things happened very quickly, and then it was followed by what we estimate to be a jet engine's worth of gas coming out of the rotary. So it was a very -MR. BARTLIT: You mean the whole supply of a jet engine? MR. AMBROSE: As if a 757 jet engine of gas was coming from the rotary. That's the order of magnitude of this event. MR. BARTLIT: Do you agree with that, Mr. Bly? Is that a useful analogy for the Commission? MR. BLY: Once it was allowed to -- the

PLANET DEPOS 888.433.3767 | WWW.PLANETDEPOS.COM

NATIONAL OIL SPILL COMMISSION MEETING CONDUCTED ON MONDAY, NOVEMBER 8, 2010
62 (Pages 245 to 248) 245 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 247
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

well was allowed to get out of control, it was a very, very dynamic thing. I don't agree with the characterization, however, that it was happening very quickly and instantly. I mean, hence the importance of recognizing that it came through the bottom of the well, it had to displace an entire well bore of mud from the bottom up for it to happen, and that there were indicators for at least 40 minutes before it happened. So that, to me, isn't an instant. That's a fairly long period of time in this business. Now, once it got into the riser and began to move, absolutely, it was a very dynamic unloading of the well. MR. BARTLIT: Mr. Kaluza was on the well that night, right? MR. BLY: He was on the rig that night, yes. MR. BARTLIT: Was Mr. Vidrine on the well or shoreside? MR. BLY: Both of those gentlemen were on the rig that evening. MR. BARTLIT: So you had two well-site
246

MR. AMBROSE: Yes. MR. BARTLIT: Why, instead of having a driller for TO being the only person to look at this, why weren't Mr. Kaluza and -- What were they doing at the time? How come they weren't assigned, one of them, to look at this data as it came in? They're highly experienced, they're engineers probably, they're well trained. Why rely on one person? They're on the rig. Why not have them look at the kick information as it comes in? MR. BLY: Well, the leadership on the rig is providing a broad, you know, oversight management of the well, making sure the well is delivered to standard. The process of monitoring the well is an active minute-by-minute activity. It happens through the course of each phase of the drilling operation. As described in -- you know, and I think recognized in the industry and described in the Transocean book, you need someone to be actively looking at each -- at each minute as you drill the well or circulate fluids through the well or what have

248
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

leaders. Are they -- Can you tell the panel -- the panel a little bit -- the Commissioners a little bit about the qualifications of people to become a well-site leader for BP? MR. BLY: Well-site leaders -- I don't remember these particular guys, if they're engineers or not. Some of them are, some aren't. MR. BARTLIT: Generally speaking. MR. BLY: Yeah, generally speaking, multiple years to move into deep water, multiple years of experience working up through the ranks. These fellows had both been working in offshore and deepwater operations for many years. I can't remember exactly. I think Kaluza was at least eight or ten, and Vidrine was more than that. MR. BARTLIT: Well, we earlier pointed out and you heard me say repeatedly that the system depended on a person being in the right place at the right time and looking at the right information and drawing the right conclusions. I take it you all agree with that, right? MR. BLY: Yes, sir.

you. And that's what the purpose of the driller in the driller shack is. MR. BARTLIT: You know, I've asked this question, if the Commission is interested. Everybody in the industry says the same thing, that it's the -a lot of people say the same thing, not everybody. Any time you say everybody, you're always going to be wrong. And I've always said well, why -- This is really important. Why not have -- You have two of these experienced people. Why not have two eyes on this data, which Mr. Gisclair has told us can be hard to interpret, instead of just one pair of eyes? People have asked me to ask you that question. MR. BLY: I can give a view. It's not something that we covered explicitly in the report -MR. BARTLIT: No. MR. BLY: -- but I think in many cases that you do -MR. BARTLIT: And again, the rule is that if you -- we said we're going to stick to the report. And if I ask a question that you think is unfair and

PLANET DEPOS 888.433.3767 | WWW.PLANETDEPOS.COM

NATIONAL OIL SPILL COMMISSION MEETING CONDUCTED ON MONDAY, NOVEMBER 8, 2010
63 (Pages 249 to 252) 249
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

251
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

goes beyond that, you don't have to answer it. I mean, that's the rule. MR. BLY: I can a view. I mean, I think on these fifth generation rigs you do often see two sets of eyes. There is a driller and an AD, and in this case there's the Sperry Sun. In our case the mudlogger provides more information. So I think there are multiple eyes that are looking at it on these critical wells. MR. BARTLIT: Do we know if your mudlogger, Mr. Gisclair, that night was watching this information? MR. GISCLAIR: He was at his station. He was monitoring the rig. I don't know at what points he was looking at that specific display. MR. BARTLIT: It needs to be made clear to the Commission, please, that there is -- these screens are different all the time. The drillers can pick different parameters. They can display them in different ways. They can pick the things they want to see. They're very flexible. It's sort of almost like a video game. You can put anything you want. You can

to the speed, which I was referring to earlier. This is -- this event, once it started to unfold, accelerated very rapidly. And what may have been okay initially on the mud-gas separator quickly, as the fluids began to accelerate up the well bore and hit the drill floor, would have surpassed what the mud-gas separator could have handled. MR. BARTLIT: Like I said today -MR. AMBROSE: What the point would be, like I would -- it's impossible to say. MR. BARTLIT: I read all through your manual and I'm impressed by the attention to detail in it. I may have missed it, but is there a specific instruction given to drillers that if in doubt, divert overboard? Anything like that? What is in the -- What do you want the drillers to have in their head about when they dump this stuff overboard and when they use a lesser tactic? MR. AMBROSE: When you go to the manual, it will basically reference if you suspect or think that you have gas in your riser, then you should go

250
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

252
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

put up what you want. You can make it look the way you want it to look. And that's why we have such a hard time all of us. Mr. Ambrose and I and Ms. Clingman have talked for hours about this, trying to figure out, and we don't get any closer. We all want to know what's on there, but we can't know it. Okay. The diverter. Did the crew ever use the diverter to overboard the hydrocarbons, Mr. Ambrose? Do you know that one way or the other? MR. AMBROSE: We don't know for certain yet. We've studied the information. We all agree that they did go to the mud-gas separator first. But at this stage we don't know yet if they had ever switched to the full divert overboard. MR. BARTLIT: Is it true that, like I said today, the mud-gas separator is a pretty fragile piece of equipment compared to the diverter in terms of the pressures, volumes, your jet engine's worth of gas, of jet engine fuel coming out? MR. AMBROSE: It can handle a substantial amount of flow. But in this case, again, it goes back

overboard. So the question is: Did Dewey suspect or think that he had gas in his riser? And if you look at the steps that he took that we can now see in the data towards the end of the event, his initial response of closing the annular was the appropriate first normal response. He did that. MR. BARTLIT: And Dewey is Dewey Revette who was in the drill shack that night? MR. AMBROSE: That's correct. Who we lost. MR. BARTLIT: Yes. MR. AMBROSE: We lost him. That was a normal first response. The manual then goes on to say, you know, if you continue to get flow at that point, there's one of two things that could be the problem. It could be that either gas is in your riser and expanding or your annular could be leaking and you could still be getting that fluid addition to your riser or your annular. His next action was to close the variable bore ram, which you can now see in the data. And that's what caused the pressure increase from 9:47

PLANET DEPOS 888.433.3767 | WWW.PLANETDEPOS.COM

NATIONAL OIL SPILL COMMISSION MEETING CONDUCTED ON MONDAY, NOVEMBER 8, 2010
64 (Pages 253 to 256) 253
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

255
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

onward. MR. BARTLIT: So Mr. Ambrose is saying that once the mud came up on the floor, Dewey Revette in the shack closed the annular. And they can tell that by looking at pressures. And Mr. Bly agrees with that; is that correct? MR. BLY: We say we believe that was likely the last step. MR. BARTLIT: And then in a little while that wasn't entirely holding, and then he closed one of the pipe rams and closed around it, and that's shown in the pressure. So he took two actions when there were hydrocarbons in the riser, correct? MR. AMBROSE: He took three, because we also know that he diverted. MR. BARTLIT: Overboard? MR. AMBROSE: He diverted to the mud-gas separator, we know. We still have not concluded on did it ever switch to go overboard. MR. BARTLIT: Now, my question is this: If there is mud on the floor, Mr. Revette closes the

what happened when they closed the BOP. The hook load, if you look at that trend -MR. BARTLIT: Please tell the Commission what the hook load is. MR. AMBROSE: Hook load is the weight of the drill string that you can measure. The hook load decreased during this period of time where everything started happening fast, fluid started moving quickly. And this particular tool joint, which was positioned we believe originally between the two annulars, the upper and the lower annular, moved upward into the upper annular. And when he closed the annular the -- it's not just the rubber piece, the donut. There are actually some metal fingers that position that and squeeze that closed. The fingers contacted the tool joint and then caused this washing or erosion to occur and allowed flow to continue. MR. BARTLIT: Was the annular here and this is gas rushing past the annular that did this, or is it the other way around? MR. AMBROSE: That's correct, gas and fluid. It would have been moving from left to right

254
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

256
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

annular, is it likely, if you have an opinion, that the pressures, the sand, gas, everything coming up was such that you just couldn't get the -- the annular wouldn't shut under those conditions? MR. AMBROSE: We've done an extensive look at the recovered riser joint and the pieces of drill pipe that came out of that joint. When you look at the tool joint, I don't -- Can you put up my one slide for the tool joint? We believe that the -- you know, of course it is a lot of force. The flow at that point was quite great. This is what a normal -MR. BARTLIT: This is your slide. MR. AMBROSE: Yeah. This is what a normal tool joint would look like. This is actually one of the recovered pieces. The damage was just from opening it up from the riser. But this gives you a perception of what a normal piece of drill pipe looks like. If you could flip to the next one. The eroded area there that you see in the middle, we believe that this piece was closed in that upper annular of the riser -- of the BOP. And this is

on the picture. MR. BARTLIT: So the annular is here. It's closed or part closed but some gases are getting through it, and these gases and the sands they carry with them are so powerful they just eroded this piece of steel? Is this carbon steel? MR. AMBROSE: It's an S130 -- 135 p.s.i. material, yeah. MR. BARTLIT: Pretty good stuff. MR. AMBROSE: Yeah. This is just several minutes. MR. BARTLIT: This gives us an idea of what a couple minutes of these sands coming up here can do to steel like this. Okay. Let's -- Do you have any more comments on this, Mr. Ambrose? MR. AMBROSE: It just goes back to the speed. Could he have anticipated or did he know? And it's one of the questions we're going to have for a long time, is what was he suspecting was coming at him. He took all the actions that were normal and appropriate. It's just unfortunate that the magnitude

PLANET DEPOS 888.433.3767 | WWW.PLANETDEPOS.COM

NATIONAL OIL SPILL COMMISSION MEETING CONDUCTED ON MONDAY, NOVEMBER 8, 2010
65 (Pages 257 to 260) 257
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

259
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

of this event, it overcame the equipment. MR. BARTLIT: I'm kind of an ex-engineer. But I was floored when I heard how fast this stuff happens. Do you -- do you train your toolpushers and your drillers to appreciate the speed with which things can go south here? MR. AMBROSE: I think that all of our toolpushers that work on deepwater wells understand the magnitude of this. MR. BARTLIT: Let's go back, please, Megan, to our conclusions. One of our conclusions was diverting overboard, as using the diverters, not the mud-gas separator, might have prevented or delayed the explosion. Do you agree with that, Mr. Ambrose, or you just don't know? MR. AMBROSE: I don't know that there is a way you could tell. The magnitude of this event, it was too great. The question is, would the diverter packer, which is another large rubber element right
258

MR. AMBROSE: Within its design limits, yes. MR. BARTLIT: Okay. That the variable pipe -- variable bore pipe ram closed? MR. AMBROSE: That's evidenced by the increase in drill pipe pressure. MR. BARTLIT: You don't think that the shear ram was ever closed? MR. AMBROSE: We do think it was closed but after -- after the explosion by the automatic mode functioning, the AMF emergency system, yes. MR. BARTLIT: Do you think when they -This is probably an unfair question. I'm just curious. Do you think when the BOP comes up and now that these Norwegians are looking at it, will there be enough left of the upper annular, for example, to look at it and figure out what happened? MR. AMBROSE: I can't take a position on it yet. We have not been able to look -- We know that from the pictures that were taken on the back of the Q4000 service vessel when they took pictures looking

260
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

under the rig floor, have withstood the massive amount of mud that was coming at it, and seawater. And then again, the slip joint packer in itself is rated to the same level. Would it have withstood it? And we, sitting here today, can't tell you whether or not it would or would not have. It's something we're going to continue to look at it, and when we have conclusions on it, we'll let you know, you know, share it with you. MR. BARTLIT: I take it everybody agrees that the final technical conclusions regarding the BOP should wait to see what the Norwegian company learns about the BOP. MR. AMBROSE: We agree with that. I will share with you that we do believe the BOP worked within its design limits from the evidence that we've seen so far. And we would be happy to share that with you. MR. BARTLIT: So you've done work which indicates that the BOP worked; that is, that the annular closed when it was supposed to close, the upper annular? Is that a yes?

downward into the BOP, we saw the wash patterns around the blind shear ram that we were expecting would have happened during the event. MR. BARTLIT: In other words, if the blind shear ram was closed, you would see wash patterns? MR. AMBROSE: Correct. You have to consider that the drill pipe at that point was -- we believe that it failed and severed. So you would have had flowing oil through that five-and-a-half-inch oil pipe at the point in time that the blind shear rams would have closed on it. So it's somewhat like snipping a fire hose with a pair of scissors. When you do that and it's under pressure, it's going to shoot out sideways. And the blind shear rams are not designed for that particular condition. That would have eroded away the rubber seals on the side of the blind shear rams as they were closing. And you saw what it did to metal, so the thought that rubber would have survived that particular case on the blind shear ram under these high flow conditions is unlikely.

PLANET DEPOS 888.433.3767 | WWW.PLANETDEPOS.COM

NATIONAL OIL SPILL COMMISSION MEETING CONDUCTED ON MONDAY, NOVEMBER 8, 2010
66 (Pages 261 to 264) 261
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

263
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

MR. BARTLIT: Finally, you heard me say, and I worded it in a very specific way, that we had seen no evidence that particular men or groups of men were making a decision and consciously had a safety thought focus and a dollar thought focus and chose dollars over safety. We're not talking about process or other things. We're talking about real people making real decisions. Have any of you seen any evidence on the rig that night that anybody made a decision which favored dollars over safety? MR. AMBROSE: No. MR. GISCLAIR: No, sir. MR. VARGO: No, sir. MR. BARTLIT: Okay. That completes my go-around. Sam will now ask some questions. You'll be glad, Mr. Vargo, to talk some more about cement. Let's take a break. Oh, I'm sorry, it's not my prerogative. (Laughter) CO-CHAIR REILLY: You've been quite in charge, Fred. Let's do take a 15-minute break.
262

natural trial lawyer advocacy and that kind of thing. So if you can answer now, fine. But if you can't, we would like to know, from the three companies, would you publicly support the Commission in giving us the subpoena power we need to clean up some of these areas that I was talking to you guys about in the last hour and a half? Anybody prepared to talk now? MR. BLY: All I can say at this point is that I would have to take that back and discuss it more broadly with BP. MR. BARTLIT: Is it okay with you? MR. AMBROSE: I have to say the same. What I was going to say is I think we've been very open and supportive of your investigation. We will absolutely continue that, and I will take that back and ask. MR. GISCLAIR: Pretty much the same. I've been willing to meet with you as often and in any way that you would like, but I really couldn't answer for my company on that regards. MR. BARTLIT: And I've informed counsel of the Commission's request. And if any of them have a

264
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

(Recess taken.) MR. BARTLIT: If the Commission please. CO-CHAIR REILLY: Yes, sir. MR. BARTLIT: One last question. There is this little issue of subpoena power. You can tell it's a little bit of a burr under my saddle. And someone said that some legislators didn't want us to have subpoena power because we might be too hard on you guys, or something like that. So somebody at the break had the idea of saying to you three companies -- and I know you can't speak for them. But would you be willing -- It's something may need to think about. Would you be willing, the three -- Halliburton, TO and BP -- would you be willing to tell people in Congress that you support our having subpoena power because it -(Laughter) MR. BARTLIT: Oh, I'm not kidding. Because it will obviously add to get to the bottom of this. We all agreed when we started this that we owe it to those men and their families to get to the bottom of this, and we've got to try to put aside some of our

position, we'll listen. Otherwise, we'll -- I sort of expect they're going to say they've got to go back and talk to their clients. I said that my whole life and did okay by doing it, so... No comments? Thank you. Thanks for your cooperation, gentlemen. CO-CHAIR REILLY: Thank you. MR. GRIMSLEY: Okay. I would like to take over some of the questioning from Fred now that we're back from the break. Mr. Vargo, I wanted to start with you because you set forth an interesting theory that I don't think that any of us had heard before about the flow path for the hydrocarbons. And I believe -- if we could put up that slide of the long string. I believe you said that it was your view that the hydrocarbons, even before the cement job was set, were already being pumped up as the cement was being pumped down, up this annulus? MR. VARGO: That's correct.

PLANET DEPOS 888.433.3767 | WWW.PLANETDEPOS.COM

NATIONAL OIL SPILL COMMISSION MEETING CONDUCTED ON MONDAY, NOVEMBER 8, 2010
67 (Pages 265 to 268) 265
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

267
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

MR. GRIMSLEY: Okay. And I think you also said that they then were trapped up here but at some point there was a differential pressure -- there was a differential pressure that was such that eventually it broke through that seal. MR. VARGO: That's correct. MR. GRIMSLEY: Okay. Are you familiar as to when in the process the casing hanger seal assembly is actually set? MR. VARGO: The casing seal assembly is set after the cementing operation is complete. MR. GRIMSLEY: Okay. So at the point in time when the cement job is being poured and you say the hydrocarbons are coming up this annulus, there is no seal assembly up here, is there? MR. VARGO: No. The flow path is out the top of the -- out of the top of the casing. One other point that I didn't make, too, before, which I omitted, is that in the operational placement, we're monitoring pressure on surface. Okay? So we're monitoring the actual placement of the cementing operation. And I think you or someone else

the point where you end up with about 100 p.s.i. at the end of the job. That's the amount of lift I believe that you indicated and that was indicated to BP. But the trend doesn't indicate that you were actually lifting -- lifting a lot of cement. MR. GRIMSLEY: Well, my question is a bit simpler. You acknowledge -- you say that the hydrocarbons are actually being pushed up during the cement job, correct? MR. VARGO: That's correct. MR. GRIMSLEY: How long does it take those hydrocarbons to get up that annulus to the seal? MR. VARGO: Well, if you look at the volume of the displacement and the volume of the cement that you pump, it's very close to the volume of the annulus. You used a marker before to indicate at the beginning of operations in circulating the pump and the cementing operation that that would put the top of the fluids right across the -- or right across into the BOP, and that's correct. There's that -- you've carried those fluids
268

266 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

mentioned before that you're expecting to see cement lift at the end of the cementing operation. Well, that number, while it's a valuable number, there is also the trend that goes along with the actual watching of that displacement of the operation. And typically what you'll see as you're lifting a heavier fluid in the annulus is that you'll see that pressure gradually increase. What we noted on the data from the cementing operation is that all through the displacement that the pressure is continuing to decrease, which is completely against the trend analysis that the simulation program anticipates. The only way to have the pressure drop while you're displacing at that point is that something is either -- there is less of a restriction in the annulus or something is lighter in the annulus to cause that pressure to continue to drop, so you don't see the actual trend. What you would expect to see is the pressure increasing. As you're lifting the cement, what you see is the pressure actually decreasing to

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

throughout the cementing operation up the annulus all the way up to the hanger assembly at the end of the cement job. And then that's when you go ahead and you set your seal assembly. MR. GRIMSLEY: But that's what I'm curious about. The seal assembly is not actually set during the time of the cement job -MR. VARGO: No, it's not. MR. GRIMSLEY: -- the reason being that you actually need to circulate the mud out this interface while you're cementing, otherwise the mud has nowhere to go, right? MR. VARGO: That's correct. MR. GRIMSLEY: So why is it, if there is no seal up here during the cement job, when you say that the hydrocarbons are actually coming up through the annulus, but the hydrocarbons didn't just go straight up through? MR. VARGO: Because you still have pressure from the mud acting down on the -- acting down on the fluids. Immediately after the cementing operation, you do set the seal assembly. But then you have a

PLANET DEPOS 888.433.3767 | WWW.PLANETDEPOS.COM

NATIONAL OIL SPILL COMMISSION MEETING CONDUCTED ON MONDAY, NOVEMBER 8, 2010
68 (Pages 269 to 272) 269
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

271
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

barrier that's created at that point. You haven't locked it down. What you've done is you've essentially set the seal assembly on top of the casing. MR. GRIMSLEY: But if my understanding of what you said earlier is correct, you said that almost the entire volume of the annulus had been circulated by the time the cement job got to the bottom, correct? MR. VARGO: No. What you've done is -- as a matter of course of pumping the mud in front of the cementing, the spacers, the cement and then the displacement, that takes your marker from the base of the well and moves that all the way up the annulus to the point of the BOP stack. That's when the cement job ends. And that's when you set your seal assembly. MR. GRIMSLEY: So the hydrocarbons, under your theory, will have moved all the way up to right here by the time -MR. VARGO: That's correct. MR. GRIMSLEY: -- the cement job ends? Well, I'm curious. When hydrocarbons are moving up like that, why wouldn't it have been that they moved
270

MR. GRIMSLEY: Okay. So your view is that the hydrocarbons had migrated up to right about where the seal was, and just as the hydrocarbons got there, the casing hanger seal assembly was set? MR. VARGO: That's correct. That's my opinion. MR. GRIMSLEY: And then after that point in time, the hydrocarbons exerted so much pressure on the casing hanger seal assembly that it actually lifted it up? MR. VARGO: Once you evacuated the mud out of the riser and you've displaced it with seawater, you then create a higher differential across that seal assembly, which was enough -- could be enough pressure or force to actually act and lift up the seal assembly and then allow the gas that has coalesced at that point to then migrate into the well bore and be there to allow you to circulate it out once you start the swap-out of the drilling fluid to seawater in the riser. MR. GRIMSLEY: Okay. Now, you're aware that recently, I think in the last month or so, we've

272
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

from the seal assembly? It hadn't been set by the time of the end of the cement job. MR. VARGO: I said that there was pressure on -- there's still pressure on there that's holding it back, and immediately after the cementing operation you do set the seal assembly. MR. GRIMSLEY: So there was sufficient pressure, in your mind, in the riser to actually hold back this 13,000 pounds of p.s.i. you said that hydrocarbons -THE WITNESS: I believe there was enough there that it did not allow to migrate up. You didn't have any lost returns throughout the cementing operation but yet you see that pressure drop all throughout the displacement of the cementing operation, which is against what we would anticipate seeing. So something has to -- something has to allow for that pressure to drop throughout the cementing displacement as opposed to the pressure increasing. That's the only -- that's the only relevant data that I can see that explains the data.

actually brought up from the bottom the casing hanger seal assembly from Macondo -MR. VARGO: Yes, sir. MR. GRIMSLEY: -- correct? Have you seen the pictures of that casing? MR. VARGO: Yes, sir. MR. GRIMSLEY: -- hanger seal assembly? I would like to show one of those pictures, please. And right here, as I understand it, these two flanges are the metal seals in the casing hanger seal assembly, correct? MR. VARGO: That's correct as far as I know, yes. MR. GRIMSLEY: And when they're actually sealed inside of the wellhead, those metal-to-metal fittings fit inside of other metal, correct? MR. VARGO: Yes, sir. MR. GRIMSLEY: So if this whole casing hanger seal assembly were to have been lifted up, those lips would have had to go past other metal, correct?

PLANET DEPOS 888.433.3767 | WWW.PLANETDEPOS.COM

NATIONAL OIL SPILL COMMISSION MEETING CONDUCTED ON MONDAY, NOVEMBER 8, 2010
69 (Pages 273 to 276) 273
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

275
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

MR. VARGO: The whole assembly would have had to have lifted up. MR. GRIMSLEY: Okay. Do you see any damage on the outside of this casing hanger seal assembly to suggest that those lips actually were pushed up past other lips? MR. VARGO: Well, I'm not an expert on this type of equipment, so I can't say it is or it isn't, but it looks pretty good. MR. GRIMSLEY: It looks pretty good to you? And you wouldn't expect it to look like that if in fact it had been lifted up and then dropped back down? MR. VARGO: That I can't say. MR. GRIMSLEY: Okay. Are you familiar with a lead impression tool? MR. VARGO: Yes, I am. MR. GRIMSLEY: What is a lead impression tool? MR. VARGO: A lead impression tool is something that is typically run in the well to get an impression of something that might be looking up to

been had nothing happened? MR. VARGO: Let me preface this with this comment. As a result of the incident, I was requested by BP management to go into the BP operations Incident Command Center and work with BP and their engineers to help solve the problem that we had, and I led our cementing team in BP's office for roughly four weeks while we were dealing with the incident, and I was privy to a lot of the information that was going on in there. And at the time when we were looking at the wellhead through the ROV, from what I could see -- and again this is my opinion -- I could see -- you could see that the seal assembly had lifted up. That's what it appeared to be in the ROV pictures. So, you know, what has happened afterwards I have not been privy to. Only the time that I spent working with BP in trying to solve the problem. Again, that's my opinion, sir. MR. GRIMSLEY: Okay. Would you agree, though, if it turns out that there is additional information, one, that these casing hanger seals are

274
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

276
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

you for fishing operations so you know how to go back in and fish the tool that may be in the hole. MR. GRIMSLEY: Well, my understanding is that one use of a lead impression tool is to make sure at some point before you set the lockdown sleeve that the casing hanger seal assembly is in the spot that you want it to be. Is that your understanding as to one use of the lead impression tool? MR. VARGO: I'm not -- I'm not experienced with that, sir. MR. GRIMSLEY: Are you aware that the DD2, which is one of the rigs drilling the relief wells, was the one that actually pulled up the casing hanger seal assembly here? MR. VARGO: Yes, sir. MR. GRIMSLEY: And are you aware that the DD2 ran a lead impression tool before it pulled up the casing hanger seal assembly? MR. VARGO: I'm not aware of that. MR. GRIMSLEY: And are you aware that when that lead impression tool was run, it showed that the casing hanger seal assembly was where it should have

not damaged and; two, that the lead impression tool showed that the casing hanger seal assembly was where it was supposed to be, that that would call into question the opinion you have set forth here today about the flow path? MR. VARGO: If that's the case, then we would also have to explain the data that we have that I've just presented with regard to the pressure drop during the displacement of the cementing operation. You know, when we look and we investigate these types of incidents, or any incident for that matter, we're always trying to look at all of the given information that's provided to us. The solution has to fit all the information. So there is a lot of information out there that may not have been considered. So I would say that at the end of the day, that all of that information has to be explained as to why the pressure drop occurred during the displacement of the cementing operation and potentially why there isn't a lot of damage here. What I would say is I believe --

PLANET DEPOS 888.433.3767 | WWW.PLANETDEPOS.COM

NATIONAL OIL SPILL COMMISSION MEETING CONDUCTED ON MONDAY, NOVEMBER 8, 2010
70 (Pages 277 to 280) 277
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

279
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

personally, again this is my opinion -- that the initiation of the blowout occurred by the lifting of the seal assembly. But I do believe that the flow and that the continual flow occurred up the casing to the crossover points. MR. GRIMSLEY: Fair enough. Mr. Ambrose, I wanted to ask you a question about a conversation you had with Mr. Bartlit. I believe you said that you did not think that the rig crew was trained in how to interpret a negative pressure test. MR. AMBROSE: Not directly. I do not believe that our programming covers specifically negative tests. MR. GRIMSLEY: Wouldn't the rig crew members on the rig floor that night, though, know how to interpret a negative pressure test? MR. AMBROSE: I would say in their general experience they've done them and they know what to expect from them. But the interpretation lies with the engineers as the operator. MR. GRIMSLEY: It lies with BP in this

the BOEM, and he was asked this question: "Question: Who on the Deepwater Horizon was interpreting the negative test data for the first and second test? "Answer: Who was interpreting the data? "Question: The data for the negative test, who was interpreting? "Answer: Usually the company man and the toolpusher up there." The toolpusher is a member of the rig crew, correct? MR. AMBROSE: That's correct. MR. GRIMSLEY: For Transocean, correct? MR. AMBROSE: It would have been Jason Anderson in this case. MR. GRIMSLEY: And you would expect that the toolpusher and the driller on the rig floor would actually participate in interpreting the negative pressure test? MR. AMBROSE: Again, when you look at the general way this works, typical industry practice is the operator provides the plan. We execute the setup
280

278
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

case? MR. AMBROSE: Yes. MR. GRIMSLEY: Okay. I just want to show you a few pieces of testimony and just ask you some questions about it. Who is Jimmy Harrell, by the way? MR. AMBROSE: Jimmy Harrell is the OIM. MR. GRIMSLEY: He's the OIM? What is an OIM? MR. AMBROSE: Offshore installation manager. MR. GRIMSLEY: So is the offshore installation manager the person from Transocean highest in charge on the rig during drilling operations? MR. AMBROSE: He is. MR. GRIMSLEY: That's as opposed to the captain who is in charge when the rig is moving from one place to another? MR. AMBROSE: Or in emergency situations. MR. GRIMSLEY: Okay. Mr. Harrell testified before the Joint Investigation Board, the Coast Guard,

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

of that plan, and then the interpretation resides with the operator. So it's a collaborative effort at some point. And I can understand where opinions or other people's statements may be a little blurred in that respect, but the interpretation lies with the operator. MR. GRIMSLEY: Will you agree, though, with Daun Winslow's statement that the negative pressure test is an important test? MR. AMBROSE: Absolutely. MR. GRIMSLEY: Because it is the last evaluative test done before the rig is going to move on, right? MR. AMBROSE: It is. MR. GRIMSLEY: And it is in fact the only test to test the integrity of the cement job at the bottom, right? MR. AMBROSE: Yes. MR. GRIMSLEY: So it's important to get it right? MR. AMBROSE: Of course.

PLANET DEPOS 888.433.3767 | WWW.PLANETDEPOS.COM

NATIONAL OIL SPILL COMMISSION MEETING CONDUCTED ON MONDAY, NOVEMBER 8, 2010
71 (Pages 281 to 284) 281
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

283
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

MR. GRIMSLEY: Okay. So you would expect that your experienced rig crew would know how to interpret a negative pressure test so that they weren't relying solely on the skills of the well-site leader who was out there from BP, wouldn't you? MR. AMBROSE: Again, the interpretation of a negative test resides with the operator. That role and the responsibilities are fairly clearly defined. They call the shots as to when tests are passed. No different than a positive casing test. They make that call as to when that test is passed as well. The negative test is no different than that. So from the standpoint of who makes the decision that a test has passed, that interpretation lies with the operator. MR. GRIMSLEY: Okay. I want to show you just one more quote from Mr. Harrell, then. There was a question: "And was the negative test that you wanted performed, was that test a successful test in your judgment?" And remember this question is being asked of Mr. Harrell, the OIM.

engineers. MR. GRIMSLEY: So I want to come to you, Mr. Bly. Do you agree that the BP well-site leaders are principally responsible at the end of the day for interpreting the negative pressure test? MR. BLY: As we said in our report, what was -- what was clear to us was that both parties were actively involved in the discussions and the attempts to make sure that the test was done correctly and to interpret it. And in this case both parties agreed that it was -- it was successful. MR. AMBROSE: I think that brings up a point. When you look at the testimony that I think Mr. Bartlit had put up from Lee Lambert, they neither agreed or disagreed with the discussion. It was a call then that they then took back to what we thought was BP. We -- we had reason to believe there was a phone call back to shore that Mr. Kaluza had gone in to call in the fact that they were actually doing a second test. So there is some discrepancy in that regards that we still have not had clarity on.
284

282
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

"Yes. Well, I thought it was, and they wanted to do another one. I reckoned nothing wrong with doing a second test to confirm." "Question: So the BP person, that is, Mr. Kaluza, wanted to do a second test?" "Answer: I didn't say." But does that indicate that at least Mr. Harrell that night, in his judgment, had concluded that the first negative pressure test was a success? MR. AMBROSE: I'm not certain. There's been a lot of -- there's been a lot of confusion about first test, second test. In our minds after looking at this for several months, in 20/20 hindsight, you know, really there was nothing moved around. I think it was one test. So whether or not he was referring to the whole thing or the second one, we're not sure. At the end of the day, again, the engineers that designed the test need to approve it. And if you look at testimony from BP's own personnel such as Mr. Guide, he agrees with that, that BP should have been the person that interpreted this, and their

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

But did they agree or disagree with the conversations, it's -- you know, we have no way of knowing. MR. GRIMSLEY: Well, one of our concerns is when we look at what happened that night is that there seems to be some finger-pointing, and I wonder if there was just a clear chain of command as to who was supposed to be conducting this test and interpreting it. So Mr. Bly, this is a question and answer with Mr. Guide. He was asked: "Was it Mr. Kaluza's and Mr. Vidrine's responsibility to determine whether the results of the negative test were satisfactory before moving on from that operation?" "Answer: They were, whichever one was on tour at the time, one of the people who are supposed to determine if the negative test was successful or not." Do you agree with that statement? MR. BLY: I think that's the right statement from a BP perspective because those are our senior-most people on the rig.

PLANET DEPOS 888.433.3767 | WWW.PLANETDEPOS.COM

NATIONAL OIL SPILL COMMISSION MEETING CONDUCTED ON MONDAY, NOVEMBER 8, 2010
72 (Pages 285 to 288) 285
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

287
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

MR. GRIMSLEY: Mr. Bly, do you agree that of the tests that were performed at Macondo that evening, the negative pressure test was the only one that tested the integrity of the cement at the bottom of the well? MR. BLY: Yes, that aligns with what we said in our report. That's right. MR. GRIMSLEY: And Mr. Vargo, do you agree as well, that that was the only test that tested the integrity of the cement that night? MR. VARGO: Yes, sir. MR. GRIMSLEY: Now, I showed a long animation this morning, and I want to make sure it was right. I think you guys were probably watching. Did you see anything that was incorrect about that animation that we went through showing how the pressures went up and down and the decisions that were made? MR. BLY: For this -MR. GRIMSLEY: The negative test. MR. BLY: I couldn't track through every step of the way, and I couldn't quite tell if it

if it's a policy. It's sort of the behavior that we expect from people. MR. GRIMSLEY: But there was no, to your knowledge, written policy saying this is when you need to call back in these types of situations? MR. BLY: Well, for -- in particular to the negative tests, we -- as was said earlier, there wasn't a standardized way of describing how that was to be done. It was to be done, and I think it was generally recognized, you know, that you're looking for pressure flowback. In fact, one of the things that we highlighted in our work and have recommended is that we do have a more formalized or standardized way of doing that test to trigger when someone may need to call back and get additional input. MR. GRIMSLEY: Okay. Given what you said was an expectation within BP that certain issues should be elevated with a call back to shore, do you think in line with that expectation, this particular issue on this negative pressure test should have been called back to shore?

286
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

288
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

matched with our timeline, so I'll -MR. GRIMSLEY: But nothing jumped out at anybody? I just want to make sure we've got it right. MR. BLY: I didn't catch anything, but that doesn't -- I mean, it was quite a lot of detail you showed, so I can't sit here and tell you exactly what we showed in our timeline. I just couldn't keep up with you. MR. GRIMSLEY: Mr. Ambrose? MR. AMBROSE: Somewhat the same. There's a lot of detail over that two-and-a-half-hour period, so I couldn't tell if the pressure gauge on your charts were exactly correct or not, and timing. MR. GRIMSLEY: Does BP, Mr. Bly, have a policy in place, or did it have a policy in place prior to this event, where its people on the rig should call back when there are these types of data anomalies during testing? MR. BLY: We have a -- it's an expectation that if people feel they don't understand what is going on or they need help, that they will escalate and call back. So absolutely. That's -- I don't know

MR. BLY: I think -- It's hard for me to know what the guys were thinking. It seems to me they felt that they had it in good shape and didn't need to consult higher, you know, input. MR. GRIMSLEY: Mr. Ambrose, similar questions to you. Did Transocean have any policy in place at the time of this event that would have required its men on the rig floor to have elevated concerns that they were having with these data anomalies to higher level management either on the rig or onshore? MR. AMBROSE: I don't believe there is any policy with regards to negative tests on that, no. MR. GRIMSLEY: Is there a similar expectation, or was there at least at Transocean, as it sounds like there was at BP, that when there were odd-looking anomalies in the data on an important test, that it should be elevated up management either on the rig or back to shore? MR. AMBROSE: With Transocean in general we have what's called a stop-the-work, stop-the-job philosophy. If you have any concerns or are

PLANET DEPOS 888.433.3767 | WWW.PLANETDEPOS.COM

NATIONAL OIL SPILL COMMISSION MEETING CONDUCTED ON MONDAY, NOVEMBER 8, 2010
73 (Pages 289 to 292) 289
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

291
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

uncomfortable, then anyone can do that. I think Jimmy Harrell demonstrated that when earlier in the day he believed that the negative test was not even going to be conducted. He said stop, we're going to do that. That's been covered in testimony. So any time there is an anomaly that can't be explained or that people are uncomfortable with, then they tend to stop the job and figure out what's going on and elevate that to where it needs to go. MR. GRIMSLEY: Is this the type of anomaly, though, within Transocean that you believe should be called in up the ladder, either on the rig or onto shore? MR. AMBROSE: You know, I can't say. Every situation is a little bit different, and I can't get into the heads of the guys that night to understand what they were thinking or how they interpreted this or looked at the situation. I think there was good faith that a lot of people looked at it, the BP's engineers and well-site leaders interpreted it correctly, and that they in

all of our facts and we conclude on the investigation, we'll make our report public and then we'll decide how to proceed in the best interest. MR. GRIMSLEY: Do you know, Mr. Ambrose, were people within Transocean at least trained on how to conduct a negative pressure test, or even what a negative pressure test was as part of their training? MR. AMBROSE: As before, the -- I do not believe specifically a negative pressure test is covered in our training program. Just in general work experience, they may have understood what a negative pressure test was. MR. GRIMSLEY: All right. I would like to put up on the screen the application that BP submitted to the MMS on April 16th setting forth its temporary abandonment procedures in which BP discussed or at least set forth the type of negative pressure test that it expected to perform. Mr. Bly, I just want to ask you a question. Is that or does that describe the negative pressure test that was actually performed on April 20th at Macondo?

290
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

292
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

turn went forward on that recommendation. MR. GRIMSLEY: Now, earlier in the presentation we pointed out that neither BP nor Transocean had specific procedures governing how to conduct or interpret a negative pressure test. Was that correct as of the time of the event, Mr. Bly? MR. BLY: Yes, we said that in our report. That's correct. MR. GRIMSLEY: As for Transocean, was that also correct? MR. AMBROSE: I believe that's correct, yes. MR. GRIMSLEY: And I know Mr. Bly said that BP is taking perhaps remedial steps to fix that or to address that possibly in the future. Is Transocean, to your knowledge, Mr. Ambrose, doing anything to ensure that its crew understands how to conduct and interpret a negative pressure test? MR. AMBROSE: As you know, we're still in the course of our investigation, so as soon as we have

MR. BLY: Yeah, I think it does. Negative test casing to seawater gradient equivalent. Yes, it does. MR. GRIMSLEY: Okay. I want to just walk through this. So it says negative test casing to seawater gradient equivalent. So my understanding, my natural reading of that -- and I want you to correct me if I'm wrong -- is that the negative pressure test was going to be performed before displacing that 3,000 feet of seawater. What is your understanding of the phrase "seawater gradient equivalent"? MR. BLY: I don't know if I'm going to be able to have a debate with you about the technical meaning of the steps in this. I mean, there's people that work on my team that could. I'm just not sure if I can go through this with you. I'll try, but I'm not sure if I can answer every question you've got here. MR. GRIMSLEY: Okay. The question is just whether Step 1 says that you're actually going to displace mud with seawater down to 3,000 feet before you conduct the negative pressure test.

PLANET DEPOS 888.433.3767 | WWW.PLANETDEPOS.COM

NATIONAL OIL SPILL COMMISSION MEETING CONDUCTED ON MONDAY, NOVEMBER 8, 2010
74 (Pages 293 to 296) 293
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

295
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

MR. BLY: I don't see the 3,000 feet point on here. That's what I'm missing. MR. GRIMSLEY: And in fact, it's not until Step 2 that the drill pipe is run down 3,000 feet below sea level, correct? MR. BLY: Right. So that's the 8,367. MR. GRIMSLEY: And that is after the negative pressure test that's described in the first bullet point, right? MR. BLY: It appears to be, yes. MR. GRIMSLEY: Okay. So is this -- If that is the case, is this consistent with the negative pressure test procedure that was actually run on the night of April 20th? MR. BLY: Oh, I see. I understand your question now. I think -- so the point is they went -on the night of the 20th they went straight to 8,367 to do the test. MR. GRIMSLEY: And then did the test after having displaced 3,000 feet of seawater whereas in the permit submitted to MMS on April 16th, they said we would do the negative test before displacing?
294

had gone down to the office to report back to shore that they were conducting a second negative test. So on that basis we've questioned whether or not a phone call was made back to shore at that point for the reason of doing a second negative test. Again, we have not been able to talk to Mr. Kaluza or Vidrine or anyone else from the BP or other third parties' side. So it's just based on testimony or discussions with Transocean people. MR. GRIMSLEY: Who were the Transocean people that you had those discussions with? MR. AMBROSE: I could not name them off the top of my head. We've done several interviews, so we would have to look back through the notes and I can give you the names. MR. GRIMSLEY: Did any of those Transocean people who you talked with say that they actually witnessed a phone call by Bob Kaluza back to shore? MR. AMBROSE: No. That's what I'm saying, is that it was just a discussion that he was supposed to be going down to call. And so we have been asking the question, "Was a phone call made?" The perception

296
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

MR. BLY: Correct. MR. GRIMSLEY: Okay. So the test performed on April 20th was a bit different from what was actually sent to the MMS on April 16th? MR. BLY: Yes. MR. GRIMSLEY: Now, I think there's been some dispute as to whether there were -- I asked you about calls back to shore and whether any were actually made during the conduct of the negative pressure test. I think Mr. Ambrose said there were calls back to shore made by BP. BP has said there is no evidence that there were any such calls back to shore about the negative pressure test. So I understand Mr. Bly's position from his report. But Mr. Ambrose, what is the basis for your statement that there were in fact calls by well-site leaders, or at least one well-site leader, back to shore during the conduct of the negative pressure test? MR. AMBROSE: Just in general discussion with a few people on the rig. They -- that Mr. Kaluza

of our people, it seems to be, is that a phone call was made. MR. GRIMSLEY: Well, this is obviously significant. If this was elevated back to shore, it changes the whole decision-making process. But you're saying right now you have no direct evidence that any such call was made? MR. AMBROSE: That's what we're raising, is there's some discussions we've had that Mr. Kaluza went back to make a call that they were going to do a second negative case. And if that's the case, did that happen, did not happen, that's an open issue in our investigation right now. MR. GRIMSLEY: Now, BP decided to use 400-plus gallons of spacer as part of the displacement procedure during the negative pressure test. And as I understand it, that spacer was made up of two combined lost circulation materials that were up on the rig floor -- or not floor but up on the rig. Is that correct, Mr. Bly? MR. BLY: Yes, that's correct. That's what we've got in our report. It was two pills that were

PLANET DEPOS 888.433.3767 | WWW.PLANETDEPOS.COM

NATIONAL OIL SPILL COMMISSION MEETING CONDUCTED ON MONDAY, NOVEMBER 8, 2010
75 (Pages 297 to 300) 297
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

299
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

put together, about 450 barrels. MR. GRIMSLEY: Whose decision was it to use that material as spacer? MR. BLY: I can't remember the specifics of how the decision was made. It was -- I suspect that the well-site leaders were involved. I believe that they asked the mud company to look at it and see if it was an appropriate procedure. MR. GRIMSLEY: Do you know if anybody before on that rig or otherwise at BP, or even M-I SWACO for that matter, had ever used the combination of these two materials as a spacer before? MR. BLY: I don't know. MR. GRIMSLEY: Did, in your investigation, your team do any analysis of whether these two materials could be combined and used effectively as a spacer? MR. BLY: As part of our investigation we went and looked at, you know, what that material would behave like when it was combined, yes. MR. GRIMSLEY: What was your conclusion as to whether it was an appropriate as a spacer?

know now, do you think it was visible to use a spacer made up of lost circulation material that might clog up one of these lines as a spacer? MR. BLY: I don't know if it was advisable or not. I think if it had been placed above the BOP, not let leaked past the BOP, you know, to get across the stack and therefore have the opportunity to block the kill line, it would have made no difference. MR. GRIMSLEY: Do you agree that it most likely would have been good practice or at least helped with the negative pressure test if once the crew had recognized there was a leak below the annular preventer such that spacer was getting down below the BOP, to have flushed out all that spacer before continuing on with the negative pressure test? MR. BLY: I can agree with that, yes. MR. GRIMSLEY: Mr. Ambrose, what is your view as to -- Well, had anybody at Transocean utilized these two materials as a spacer before? MR. AMBROSE: In general use, I don't know. We have not looked companywide to see if we have used loss circulation material before for spacers.

298
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

300
MR. GRIMSLEY: Is there any policy in place that would have required the Transocean rig crew, once they realized that the spacer had leaked below the annular preventer, to circulate it out to make sure that they could get a good baseline for the negative pressure test? MR. AMBROSE: I don't believe there is any policy for that, no. MR. GRIMSLEY: Do you think it would have advisable, given what we know now, to have circulated out that spacer prior to conducting the negative pressure test? MR. AMBROSE: If you look at -- If you look at the first setup for the negative test on the drill pipe, whether there was spacer or not in the annulus, space underneath the BOP was not really a factor for conducting the test so long as the annular had been closed and sealed. It still looked like being full of seawater gave a correct result and that it did flow back to the rig. I think that when you look at the switch that was made to the kill line kind of mid-plan there, that

1 2 We looked at what the material behaved like when it 3 was combined, and it was indeed viscous and, you know, 4 heavy. 5 MR. GRIMSLEY: And so I think one of your 6 not conclusions but one of your hypothesis as to why 7 there was zero pressure on the kill line is perhaps 8 that spacer, that viscous spacer actually leaked into 9 the kill line and may have in fact clogged it; is that 10 right? 11 MR. BLY: Yeah, that's correct. I mean, 12 the point of our work was that we -- you know, which 13 you outlined very clearly this morning, was that there 14 was this conflicting information about the 1400 and 15 the zero. And so we are very interested to understand 16 how could that have happened, how could you see that 17 condition. 18 One possible scenario was that there was 19 blockage in that kill line. And our view was that one 20 possible explanation of that was that the spacer could 21 have done it, yes. MR. GRIMSLEY: Looking back knowing what we 22

MR. BLY: We didn't make that conclusion.

PLANET DEPOS 888.433.3767 | WWW.PLANETDEPOS.COM

NATIONAL OIL SPILL COMMISSION MEETING CONDUCTED ON MONDAY, NOVEMBER 8, 2010
76 (Pages 301 to 304) 301
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

303
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

that -- that switch or that assumption that the spacer may not have been a factor was overlooked, and that that's what then caused the kill line to be overbalanced or marginally close to balance with the formation with the spacer in the annular space. MR. GRIMSLEY: Mr. Bly, what was the process within BP by which the decision was made to utilize this spacer, these lost circulation materials, the spacer? Was there a management chain process? Was there a rigorous vetting process? Or was it ad hoc? MR. BLY: I'm sorry. We may have covered this in the report. I simply can't remember the details to your question. I'll have to come back to you on that. MR. GRIMSLEY: Okay. But is that the type of decision that would have been subject to a rigorous management of change process at BP? MR. BLY: Not necessarily. I think that's the type of decision where you would look at -- you know, there would be a pretty reasonable basis for the people on the rig to make a judgment and say, "We need

because I think in our previous meetings before this hearing you suggested that there may have been other problems that were caused by use of this viscous spacer, and that is that it may have affected the pumps after the spacer had been used during the negative pressure test. Is that right? MR. AMBROSE: What we saw, if you look back to the 19th when they were displacing the cement, the cement -- I think they said the plugs, you call it, they bumped or they landed into the shoe on time. What that means is when you look at the stroke, the mud pump strokes that it took to pump that fluid down to the bottom of the well, the estimated number of strokes were very close to what actually happened. So that would tell you that your pumps -your mud pumps were running at the expected efficiency. In our analysis of the mud pit data, and looking at what happened when the spacer was being pumped, what we saw were lower pump efficiencies than what were assumed during the displacement. And that likely led, then, to the spacer being under-displaced

302
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

304
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

a spacer." You made the point earlier you need a viscous spacer to separate the oil-based mud and the seawater that you're circulating out. That material is, you know, appropriate for a spacer; let's get it checked with the mud people and test it. And, you know, I think that would be within the bounds of what you would expect people on the rig to be able to make. I don't see that as a decision that would have necessarily driven you to a formalized or highly detailed MOC. MR. GRIMSLEY: Okay. And just to be fair, engineers or folks who made the decision did check with the mud engineers from M-I SWACO who are in charge of those fluids, right? MR. BLY: Yeah. That's what I remember from our work. There was a discussion. And you know, it wasn't a thoughtless act. They thought about it and they asked the right people and decided it was appropriate. MR. GRIMSLEY: Now, Mr. Ambrose, I want to ask you a question, one last one about the spacer,

and set up for the negative test. MR. GRIMSLEY: So you think the spacer may have affected the pump efficiency of the pumps thereafter? MR. AMBROSE: It looks that it did. We have not been able to do any tests on -- with mud pumps with the same type of spacer. If the lost circulation material -- you know, it could have affected the pump liners and their efficiency. What I can say is that the data -- the data showed that, you know, approximately 450 barrels of fluid should have been pumped. But if you look at the pit data, 422, 25 barrels of fluid were pumped during the course of pumping out the spacer. So our conclusion, tentative, is that the spacer did lead to some inefficiency in the mud pumps when setting up for the negative test. MR. GRIMSLEY: And just to put this in context, if there are inefficiencies with those mud pumps, later on during other operations you may not have a really good view of the amount of fluids you're actually pumping down into the well and it may

PLANET DEPOS 888.433.3767 | WWW.PLANETDEPOS.COM

NATIONAL OIL SPILL COMMISSION MEETING CONDUCTED ON MONDAY, NOVEMBER 8, 2010
77 (Pages 305 to 308) 305
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

307
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

confound the ability to see whether there is in fact a kick, correct? MR. AMBROSE: While you're on your mud pits, the volumes would be hard to read, yeah. MR. GRIMSLEY: Do you have data on that issue that you would be willing to share not only with the Commission but with others so that they could study it? MR. AMBROSE: All right. We've provided to the Commission. We're not 100 percent finished with it, and when we complete our report, it will be made public. MR. GRIMSLEY: Could we put up the slide of the temporary abandonment procedures, and namely the one that shows the three that are right next to each, April 14th, 16th and 20th. So this is a version of a slide that I showed earlier during the presentation which shows how the temporary abandonment procedures changed over the last week leading up to the blowout. Mr. Bly, you'll agree that the procedures did change in terms of what the sequence of steps was

MR. GRIMSLEY: And who at BP would make the decision as to whether something was sufficiently risky or to trigger the management of change process? MR. BLY: This would be a typical type thing that would be worked by the engineering team and the operations team in town. MR. GRIMSLEY: So as far as you know, did anybody besides just the immediate engineering team have any input into the changes in the temporary abandonment procedure in the last week before the blowout? MR. BLY: I don't know. MR. GRIMSLEY: Can we go to the picture of the displacement with only one barrier. So Mr. Bartlit, or Fred, asked you some questions about setting the surface cement plug 300 feet deep, and I think you had a conversation about that. I would like to ask you about another aspect of the temporary abandonment procedures that we had identified as being potentially more risky than was necessary. And that is that after the negative

306
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

308
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

going to be that the team had planned at Macondo? MR. BLY: Yes. As I said, I didn't -- I don't remember all the detail we looked at in the report, but I'll take your word for it that the displays you put up demonstrate that it changed. MR. GRIMSLEY: Okay. Is it typical for something such as the temporary abandonment procedures to be changing this significantly up in the last week before they're planned to be used? MR. BLY: I can't speak to that. I don't know what would be typical for this particular detail. MR. GRIMSLEY: Okay. Is the temporary abandonment procedure something that's subject to a management of change type process at BP, or at least was it before this event? MR. BLY: If there was something that was changed that was felt to change the safety profile of the well, then you would yes, you would see a management change for that. If it's a minor change that's not felt to change the risk profile, then you would say no, or it would be an informal management change.

pressure test, the crew, according to the plan, was to open the BOP and then begin to displace all of the mud and spacer from the riser, ultimately leaving 8,000 feet of seawater and mud below it. Do you recall that part of the presentation? MR. BLY: Yes. MR. GRIMSLEY: And do you agree that at this point in time with the BOP open, that the only other barrier is the cement job at the bottom to flow from the pay zone? MR. BLY: I agree that the only other permanent barrier is the cement job. But clearly at that time you've got operational barriers, including monitoring the well, and if there is an indication that the well is getting out of balance, closing the BOP stack. MR. GRIMSLEY: Okay. So you've got -- But the only mechanical or physical barrier at that point in time is actually the cement job at the bottom of the well? MR. BLY: That's correct.

PLANET DEPOS 888.433.3767 | WWW.PLANETDEPOS.COM

NATIONAL OIL SPILL COMMISSION MEETING CONDUCTED ON MONDAY, NOVEMBER 8, 2010
78 (Pages 309 to 312) 309
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

311
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

MR. GRIMSLEY: So would you agree that this design whereby there is not a second mechanical or physical barrier puts a real premium on both the cement job and the negative pressure test that evaluates it? MR. BLY: Can you help me with what you mean by "premium"? MR. GRIMSLEY: Well, again, because the cement job at the bottom is the only physical barrier, you're going to want to make sure that that's good and tested and proven, right? MR. BLY: Yes, absolutely. If your point is that the negative test is very important to demonstrate the integrity of that seal at the bottom, I absolutely agree with that. MR. GRIMSLEY: Well, would you agree it's even more important in a temporary abandonment sequence where there is no plan to put another barrier in place before there is displacement of the riser with mud? MR. BLY: More important than very important?

heard that as well, that people trust cement jobs oftentimes in these situations more where they're done in seawater rather than mud. But isn't it true that there are other types plugs besides cement plugs that one could set as a barrier; for instance, a bridge plug or some other mechanical barrier? MR. BLY: Yeah, I believe that's true. MR. GRIMSLEY: So if BP was concerned about setting a cement plug in mud as opposed to seawater, it could have exercised the option to set a mechanical barrier of some sort in mud without having to displace 3,000 feet of seawater? MR. BLY: You're asking me about alternative designs, which I can only agree, yes. So if you want to set a plug in there, you could set a plug in there, yes. MR. GRIMSLEY: Well, you had said that you didn't think that this was a particularly risky design when all things were considered together. Do you know whether in fact the team considered to use mechanical plugs, bridge plugs, that could be set in mud?

310
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

312
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

MR. GRIMSLEY: Yeah. MR. BLY: I don't know how to measure that. It's very important. MR. GRIMSLEY: Okay. Now, BP could have set a cement plug prior to displacing the mud from the riser; is that right? MR. AMBROSE: Yes, that would be -- that is a choice that could be made, yes. MR. GRIMSLEY: Do you know what the reason was that BP chose not to put in the cement plug prior to displacement of the mud from the riser? MR. BLY: I don't remember all of the evaluations, but I understand that it's a common engineering choice to set the cement plug in seawater. I think that's fairly common in the industry. And the reason for that is when you do that you have a better change of getting a high quality cement plug. Setting the plug in mud, which is the alternative, can lead to contamination issues, et cetera. So you have a chance of having a lower quality cement plug. MR. GRIMSLEY: And to be fair, we have

MR. BLY: I don't happen to know if they looked at that during the design phase, no. MR. GRIMSLEY: Okay. We talked about whether -- and these are my words -- this particular sequence put a premium on the cement job and the negative pressure test. But do you think it also puts -- in my words, you understand what I meant -- a premium on monitoring up on the rig? Because, again, the only way that BOP gets closed is if somebody hits a button; isn't that right? MR. BLY: Well, as we've outlined in the report, you know, our review, there were critical things that failed: the cement at the bottom, the monitoring, and the time to activate the BOP. So I think -- I don't know quite how to say I agree with premium, but all those were very important barriers to have in place on this well, as they are on every well. MR. GRIMSLEY: But by reducing down to only one physical barrier, these procedures were perhaps more dependent than others on humans monitoring that test; is that right? MR. BLY: Yeah, that's fair. I mean, I've

PLANET DEPOS 888.433.3767 | WWW.PLANETDEPOS.COM

NATIONAL OIL SPILL COMMISSION MEETING CONDUCTED ON MONDAY, NOVEMBER 8, 2010
79 (Pages 313 to 316) 313
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

315
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

been clear about what I thought the controls in place were for this operation, and that those are the things that fundamentally failed to allow the initiation to go through to the accident. If you're asking me is it possible in hindsight to go and create more -- you know, potentially another barrier for safety in here, yes, it may be possible. And in fact, if you look at the recommendations that we've made to BP which have been accepted, there's clearly things you could focus on in the negative test itself to sort of try to put more protections in here. So if that's the point of your question, I can agree with that. MR. GRIMSLEY: Yeah, ultimately that's where we're going. Do you think going forward it may make sense to perhaps reconsider whether another barrier should be put in, a physical barrier that doesn't rely on human frailty to protect against any problems down here at the bottom with the cement? MR. BLY: In the aftermath of an event like

which added the complexity of doing the displacement before setting a cement plug. You know, had the one on the 14th been run, the consequences would have been much different than what they were at the end of the day. So it's -- the evolution of the changes, and I think it goes to one of the -- this isn't about one thing. It's about multiple things and multiple changes along the way. The evolution of those procedures, whether or not it was recognized, the risks that were changing is one of the questions that we have from our investigation. MR. GRIMSLEY: Well, just one last follow-up with you, Mr. Ambrose. That April 20th ops note was sent out to the rig, right? MR. AMBROSE: I believe it was at 10:43 a.m. MR. GRIMSLEY: Okay. And at some point members of the rig crew understood what the procedures were going to be for going forward that day, right? MR. AMBROSE: It would have been in the

314
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

316
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

this, you have to go back and rethink everything. You know, clearly it was believed there were many protections in place here. I believe that's true. I demonstrated in my report which ones failed. And yes indeed, you would go back and say is there ways to put more control barriers in place. And that may include the one you're suggesting. MR. GRIMSLEY: Mr. Ambrose, do you have any views on the temporary abandonment procedures that were put in place on April 20th? MR. AMBROSE: From what we've seen, when you look at the evolution of the plans, there was a lot changing. And I think there's a question of oversight and review of those plans along the way. The plan that was originally outlined that we've seen -- and we don't -- to be clear, we don't really understand the logic behind the changes. We've only seen a typed-out sheet of paper with the plan. But the plan that was typed out on the 14th is a much more conventional procedure for doing a displacement. Those plans were never seen before the one, I believe, that arrived on the rig on the 20th,

pre-tour meeting, yes. MR. GRIMSLEY: So your people on that rig understood what the sequence was going to be? MR. AMBROSE: Yes. However, the ops note did not include the spacer. That was added. Sometime -- we don't have evidence to know when -- but the spacer was added into the plan sometime between the 10:43 ops note and the displacement. MR. GRIMSLEY: Putting aside the spacer, your folks on the rig knew that morning what the temporary abandonment procedures and the sequence of events were going to be from that ops note, correct? MR. AMBROSE: When they received it and they discussed it, then they would have known about it, yes. MR. GRIMSLEY: Did anybody, to your knowledge, from Transocean on the rig that day voice any concerns about the riskiness of those temporary abandonment procedures? MR. AMBROSE: So far those that we have talked to, no. The ones that we cannot talk to, I don't know what they thought of the plan.

PLANET DEPOS 888.433.3767 | WWW.PLANETDEPOS.COM

NATIONAL OIL SPILL COMMISSION MEETING CONDUCTED ON MONDAY, NOVEMBER 8, 2010
80 (Pages 317 to 320) 317
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

319
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

MR. GRIMSLEY: But as of right now, you have no evidence that anybody from Transocean, on that rig or otherwise, voiced any concerns about the riskiness of these particular temporary abandonment procedures? MR. AMBROSE: I have no specific knowledge of somebody standing up and saying that, no. MR. GRIMSLEY: And now I'd like to turn it over to Sam Sankar, and he's going to ask some questions about cement. MR. SANKAR: I'm going to suggest that we take a five-minute break to switch equipment, if that's okay with the Commission. CO-CHAIR REILLY: Yes. Five minutes. (Recess taken.) MR. SANKAR: So I want to return for a moment and talk about the cement again. Just to reorient you here since we've been talking about a lot of other issues, the cement that we're talking about now is the cement at the very bottom of the well, what's called the primary cement job. There's cement at all these other levels in the higher parts of the

conclude a successful cementing operation until you have done all the testing and actually done a bond log, really, to ascertain if you have isolation. MR. SANKAR: So your position would be on behalf of Halliburton that even a negative pressure test is not enough and that until you have a cement bond log, it's not complete? MR. VARGO: It's my opinion that -- It's my opinion that in order -- There's two parts to cementing. There is placement and there is actually isolation, hydraulic isolation of the zones of interest. So, you know, obviously placement is getting it there. Zonal isolation, hydraulic zonal isolation is the other part. And you can confirm that with a negative test and also with a bond log, and I think a bond log is the better means. MR. SANKAR: It's a better means? MR. VARGO: That's my opinion. MR. SANKAR: Would you agree, though, that in many instances industry operators would wait until at least 48 hours before running that bond log?
320

318 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

casing as well, but for now what we are taking about is the final cement job. And I want a ask a few questions to see if we can get agreement on some of our general points that we made during the course of the overall presentation. The first one is about cementing in general. And many of the folks that we talked to in the industry, they all said to us that a primary cement job shouldn't be considered complete until it's been completely tested and pressure tested or otherwise evaluated. Is that something we can all agree with, Mr. Bly? MR. BLY: I think the final tests are very are important, yes. MR. SANKAR: Mr. Ambrose? MR. AMBROSE: I agree with that, yes. MR. SANKAR: And Mr. Gisclair? MR. GISCLAIR: I would agree. MR. SANKAR: Mr. Vargo? MR. VARGO: I would agree that you can't

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

MR. VARGO: Yes, I do agree. MR. SANKAR: So the bond log that you're talking about is not a bond log immediately after the cement job? MR. VARGO: That's correct. MR. SANKAR: So if I understand you correctly, what you're saying is the system of the cement can't really be verified until in some cases 48 hours after the cement job is placed? MR. VARGO: That's correct, sir. MR. SANKAR: So is it Halliburton's view, then, that a primary cement job can never be relied upon until 48 hours after it's done? MR. VARGO: No, sir. It's my opinion that you use the data that you have from the cementing operation to ascertain whether you have a successful cementing job. One of those means is to look at the pressure response while you're placing the cement and look at your lift pressure. That's one indication, obviously, to look whether you have returns. Once you're done and complete with the cementing operation, when you bleed back the casing,

PLANET DEPOS 888.433.3767 | WWW.PLANETDEPOS.COM

NATIONAL OIL SPILL COMMISSION MEETING CONDUCTED ON MONDAY, NOVEMBER 8, 2010
81 (Pages 321 to 324) 321 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 323
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

enclose the floats, that you have isolation in the float shoe. And then eventually when you go back to go back in the production phase to go after the reservoir that you run a bond log. Those are all the ways that you properly ascertain a good cementing operation. If you were going to drill out the shoe and drill ahead, then you would run a formation integrity test to test the integrity of the cement as well. MR. SANKAR: Primary cement job. MR. VARGO: Primary cement job. MR. SANKAR: So I do want to drill down on this a little bit more. Sorry about the metaphor there. Are you saying, then, that you can't rely on a primary cement job until you have run a cement evaluation log? That you can't rely on a primary cement job as a barrier and -MR. VARGO: You can't rely on zonal isolation until I think you have run a bond log. That's my opinion. MR. SANKAR: So is it Halliburton's
322

those words in our report, or very similar to that. MR. SANKAR: Mr. Ambrose? MR. AMBROSE: Cementing is really outside of our area of expertise, so our opinion on it, complex or not, it's probably different on that. MR. SANKAR: Well, that's an interesting point. I do want to follow up on that a little bit. Mr. Ambrose, is there anything that your crew does on the rig to learn about the kind of cement job that is being done while they're there on the rig? MR. AMBROSE: Are you referring to training or -MR. SANKAR: I'm referring to situational awareness. Is there anything in your policies or manuals that requires your drillers, your OIM to be aware of the kind of cement job that is being pumped while they're supervising the drilling monitor screens and other equipment? MR. AMBROSE: I think as far as awareness, clearly they would be aware of what was being done, what type of job was being done, whether or not nitrogen was being injected or not.
324

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

position, then, that relying on the primary cement job in this well was itself a problem? MR. VARGO: I think prior to the operation we had a good indication that we were going to have channeling during the cementing operation and then that was going to cause a problem with zonal isolation. So that's my opinion. MR. SANKAR: But you're suggesting, I think, that even with all the indicators being good, it's Halliburton's position that a primary cement jog done by Halliburton can't be relied upon until a cement bond log is done, which can't be done for at least 48 hours after the job is pumped? MR. VARGO: To achieve zonal isolation, yes. MR. SANKAR: Another point that I think may be of general agreement is about whether this was a complex cement job at Macondo. Mr. Bly, would you agree that this was a complex cement job for which the accuracy of the placement of the cement was very critical? MR. BLY: Yes. We said I think exactly

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

For the specifics of the cement operation, as far as waiting time, channeling, any of those issues, typically we're not involved in those discussions or issues. And that's not, I would say, uncommon. So we wouldn't have all the details, so to speak, but we would have a general awareness of what was going on. MR. SANKAR: So if I understand you right, this means that the drillers, the guys who are operating and monitoring kick detection equipment, aren't aware at the time that they're monitoring this whether the cement job that is being pumped is complex, simple, high risk or low risk? MR. AMBROSE: I don't know if we have it in those categories, and I'm not sure that I can respond to that particular question today. MR. SANKAR: Let me ask a simpler question, then. Do you think it would make sense for the drillers, the people who are monitoring the kick detection equipment, to have some awareness of the complexity or riskiness of the cement job that's being pumped in a situation where it is providing primary

PLANET DEPOS 888.433.3767 | WWW.PLANETDEPOS.COM

NATIONAL OIL SPILL COMMISSION MEETING CONDUCTED ON MONDAY, NOVEMBER 8, 2010
82 (Pages 325 to 328) 325
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

327
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

cement and zonal isolation? MR. AMBROSE: I somewhat step back to the facts of where we are in the investigation. You know, we haven't seen any indication that a kick or any major lost circulation event occurred during the cement job. Whether or not that should be a change in the future I think is something, once we have our complete understanding of the investigation, then we'll decide. MR. SANKAR: That's fair. I should return to the original question, then, with Mr. Vargo and Mr. Gisclair. Do you agree that this was a complex cement job in which the accuracy of the placement was critical? MR. VARGO: I believe the -- I believe that the job was critical for placement. As far as calling it complex, I believe that it's more complex than a conventional cement job that doesn't include nitrogen, but it is a fairly routine operation that we perform on a regular basis in the Gulf of Mexico and in deep water. MR. SANKAR: Now, Mr. Gisclair, I should

the cement job was complete there was no flow of hydrocarbons; is that correct? MR. BLY: Yes. We analyzed both before and during the cement job and concluded that there's no hydrocarbons flowing at that time. MR. SANKAR: And Mr. Ambrose? MR. AMBROSE: Same. MR. BLY: Mr. Vargo? MR. VARGO: I believe there was no flow after the cement job, that's correct. MR. SANKAR: So at the time of the cement job -- and I think this may be an important point for the public to understand. At the time the cement job was complete, that is when the fluids were still in the well, when the mud was in the well bore, everything here agrees that the well was, as they say, static, it was not flowing, there was no communication with the -- or there was no influx from the reservoir at that point. Is that correct, Mr. Bly? MR. BLY: That's correct. MR. SANKAR: Does anyone disagree that

326
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

328
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

just say I know you're from Sperry Sun and you're a subsidiary of Halliburton, and I'll assume that unless you raise your hand on these cementing questions, you would refer that I direct the questions to Mr. Vargo. Is that fair? MR. GISCLAIR: Oh, thank you very much. (Laughter) MR. SANKAR: We'll start with you, Mr. Vargo, on this one. Do you agree that this primary cement job failed to isolate the hydrocarbons in the well? MR. VARGO: I agree. MR. SANKAR: Mr. Ambrose? MR. AMBROSE: Based on our conclusion that flow happened up the casing, yes. MR. SANKAR: And Mr. Bly? MR. BLY: Yes. MR. SANKAR: Now, Mr. Bly, do you agree that the hydrocarbons -- well, I shouldn't hodgeball on you. I think your report says that you believe that the hydrocarbons were not flowing out of the well at the time of the cement job. So at the time that

point? One thing that I think we've found in our investigation is that given the posture of the parties -- and it's understandable at some point, people advocate positions with some amount of certainty, and we as a somewhat neutral posture have had some difficulty in finding the same level of certainty in some of the positions. On cement in particular, one of the problems we face is that this cement down here is a long way. It's a long way down the Macondo well. And now it's been further isolated by more cement in the well itself. So many of the forensic clues that we might have to look at that cement after the fact are going to be hard to reach. So given the fact that we all agree it appears that the primary cement job failed to isolate the hydrocarbons, do you agree that there is no way to be sure beyond any doubt why the cement failed to isolate the hydrocarbons? Mr. Bly? MR. BLY: Beyond a shadow of a doubt is the

PLANET DEPOS 888.433.3767 | WWW.PLANETDEPOS.COM

NATIONAL OIL SPILL COMMISSION MEETING CONDUCTED ON MONDAY, NOVEMBER 8, 2010
83 (Pages 329 to 332) 329
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

331
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

question? MR. SANKAR: To a certainty. MR. BLY: I suppose it's impossible to know to a certainty, yes. MR. SANKAR: Mr. Ambrose? MR. AMBROSE: Again, cementing is outside of Transocean's area of expertise, and we've had very limited amount of data or information on the cement. So it's hard for us to -MR. SANKAR: It's a fair response. It's a fair response. Mr. Vargo? MR. VARGO: I believe the cementing operation did not isolate the hydrocarbon-bearing zone. That was shown in modeling that was done prior to the operation. And I would have no reason to believe that we would have isolation, especially in account of the fact that we had hydrocarbons blowing out from the well. So I believe that there was no isolation of the reservoir. MR. SANKAR: That's an answer to a question, but it's not an answer to my question. My

a mud channel that was existing in the well, cement channeled up and did not isolate the zone, and that's why you didn't have isolation. MR. SANKAR: Is there a way for us now to go down in the well and find out whether that was in fact the case? MR. VARGO: I don't believe there is. They've plugged and abandoned the well. MR. SANKAR: We do have two bits of -- at least that I know of, two bits of forensic evidence that could be analyzed in the coming months. One is rocks. I call them rocks although we're not exactly sure what they are. Materials that landed on the Damon Bankston, the ship that was asked to leave the side of the Deepwater Horizon during the blowout, and some rocks actually landed on the rig -or I'm sorry, landed on the ship, and they are currently in USGS possession. And they're being tested. I'm wondering whether any of you have a position on whether or not the data from those rocks would be instructive, or could be instructive on what

330
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

332
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

question, of course, was: Is there any way to be sure why the cement didn't do its job? MR. VARGO: Because we did not have the ability to centralize the pipe properly. The hydraulic simulations indicated that we had channeling prior to the operation. So I believe that is reasonable information to indicate that we did not have isolation. MR. SANKAR: Can you be sure about that? MR. VARGO: Now today -It's my opinion, sir. MR. SANKAR: So I'll take that as a no, you can't be sure? MR. VARGO: Do you believe that there was isolation? I mean, I don't believe that there was isolation. MR. SANKAR: I believe we all agree that there was no isolation. My question was whether we can all be sure about why it happened. MR. VARGO: I believe that it's due to the fact that we had pipe laying on the low side of the hole and that a channel was created in which there was

happened at the bottom of the well, or whether they're something that's simply irrelevant at this point. Mr. Bly? MR. BLY: It's difficult for me to answer. I don't know if I'll have a view on those rocks. MR. SANKAR: All right. I'll just ask Mr. Vargo on this. MR. VARGO: I don't know. I mean, I guess we'll have to analyze it and see what comes back. MR. SANKAR: And how about the one and a half gallons of cement, dry blend cement that remains from the Deepwater Horizon that was sent back to Halliburton's lab just before the blowout and that remains I believe, still in Halliburton custody at this point? MR. VARGO: That's correct, we do have some cement and additives and water that are in our possession and we're waiting for the -MR. SANKAR: Am I correct that it's roughly one and a half gallons or so? MR. VARGO: I believe that's the volume that's remaining.

PLANET DEPOS 888.433.3767 | WWW.PLANETDEPOS.COM

NATIONAL OIL SPILL COMMISSION MEETING CONDUCTED ON MONDAY, NOVEMBER 8, 2010
84 (Pages 333 to 336) 333
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

335
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

MR. SANKAR: And do you believe that testing that cement could provide any information about what might have happened at the bottom of the Macondo well? MR. VARGO: I believe it's my opinion that it could. MR. SANKAR: So there is some value to testing that? MR. VARGO: I think so, yes, sir. MR. SANKAR: Mr. Ambrose, I don't know if you have a view on this. MR. AMBROSE: Again, I defer to the cementing experts on that one. MR. SANKAR: Fair enough. And Mr. Bly? MR. BLY: Well, as we highlight extensively in the report, we looked very hard at this question about cement. And based on what we saw in the early part of our investigation, we had questions about the stability of the cement, the stability of the foam cement. And it's well documented. We did testing and concluded that in all likelihood the cement

provides the proposed cement designs to go with that. MR. SANKAR: Does BP determine other parameters about the job, including top of cement, the rate of cement flow, things like that? MR. BLY: I don't know who determines rate of cement flow, if that's a Halliburton proposal, BP. I don't know that detail. BP would typically determine -- describe where they wanted the top of the cement to be, yeah. MR. SANKAR: So I guess I take it generally that BP views Halliburton as providing expert services in the cementing process; is that correct? MR. BLY: Yes, sir, particularly when you're dealing with specialized products like foam products. I mean, those are very specialized cementing products. MR. SANKAR: Mr. Vargo, I'm curious about Halliburton's view on the same issues. When an operator like BP hires Halliburton to cement a well, what does Halliburton view its role as being? MR. VARGO: Well, Halliburton is going to

334
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

336
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

fundamentally failed; it was unstable. I believe you said this morning that the test done by Chevron on behalf of the Commission came to the same conclusion. So I think there's -- it might be useful to do more testing. I think we've got a pretty clear understanding of what happened, though, in that the cement was not stable. MR. SANKAR: I would like to ask a question about the role that -- how BP treats its cementing contractors on these rigs. What, to BP, was Halliburton's role as the cementing contractor at the Deepwater Horizon? MR. BLY: Well, I mean, we -- you know, we hire them as one of the, if not the leading cementing contractor in the world, to provide advice, cementing services, designs and pumping services for these wells, for these deepwater wells. MR. SANKAR: And in BP's view, is the design done by BP and executed by Halliburton? MR. BLY: It's an iterative process. BP provides the deals of the well, the well bore, pressures, configurations and things. Halliburton

provide the cementing services as well as other pressure pumping services on the rig. We're going to provide the designs for cementing the wells. We work with -- we work with the operator, the engineer involved. We'll also work with the cementing specialist that's inside BP. And it is a collaborative effort throughout the design and execution phase of the well to determine the best -- the best process and products to use to create zonal isolations. So that's how we work together. MR. SANKAR: Do you recommend the procedures that you're going to use to cement the well? MR. VARGO: We will make recommendations on procedures. Typically BP has the final call on the actual procedures that are used on the execution of the job. MR. SANKAR: So you do provide some advice on the kinds of parameters and kinds of things that should be considered during the course of a cement job; is that correct?

PLANET DEPOS 888.433.3767 | WWW.PLANETDEPOS.COM

NATIONAL OIL SPILL COMMISSION MEETING CONDUCTED ON MONDAY, NOVEMBER 8, 2010
85 (Pages 337 to 340) 337
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

339
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

MR. VARGO: Yes, sir. MR. SANKAR: Do you ever predict the success of a cement job or do you ever suggest whether or not it will achieve zonal isolation? MR. VARGO: We give -- Yes, we can provide the results of the simulations and give them the -what we believe is, you know, a good reasonable estimation of the success of the primary cementing operation prior to it being done through the simulations that we run. MR. SANKAR: So the simulation sounds like the primary vehicle for giving the advice -MR. VARGO: That's one of the avenues, yes, sir. MR. SANKAR: -- for the job? Okay. I'm just curious, what is a cement job like this, a primary cement job like this on Deepwater Horizon cost? MR. VARGO: For this particular job, I don't know the exact number but I would say about $45,000 maybe $50,000. MR. SANKAR: I do see some higher numbers

The smaller casings, the deeper in the wall, obviously less volume, so there's typically a lower cost in cementing those. And this is just the revenue that we charge BP, yes. So I would say, you know, it's probably relatively close to another typical type of cementing operation that's a foam cementing operation at those depths. MR. SANKAR: Approximately $200,000? MR. VARGO: Approximately. MR. SANKAR: Who recommended nitrogen foam cement on this job? Mr. Bly, do you know? MR. BLY: I don't know which individual did. MR. SANKAR: I don't mean the individual. I'm curious where the origin of the idea of using foam cement came from on this job. MR. BLY: Well, it comes from Halliburton. They propose the best way to do a job like this, and foam is one of the things they promote as very good for dealing with, you know, pore pressure, frac

338
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

340
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

in here, and I will confess that I don't know if they're correct. I'll put them up on screen and -MR. VARGO: Sure. MR. SANKAR: -- you can tell me whether -MR. VARGO: That's fine. MR. SANKAR: -- they're right. So on one page here that's one number, $98,635.92. That's the first page. I'm going to go to the second page, which I'll represent to you is the page on which the foam cementing costs are outlined, and those are here. And that's $88,000. So you can correct me later if I'm wrong about this. It seems to us like the cost of this job was nearly $200,000. Is that a high cost foam cement job? MR. VARGO: I would say that's probably fairly equal to the other type work that we do. There's two different types of foam cementing operations that we conduct. Usually on surface and conductor pipes, which those are very large types of cementing operations.

gradient and flow conditions. MR. SANKAR: And mr. Vargo, what is your view of who recommended the use of foam cement on this job? MR. VARGO: I'm not exactly sure who recommended it, but under these conditions where you have a close tolerance and pour-in fracture gradient where you have the potential of loss returns, this type of product, it's adjustable so that if we put the system out there we can adjust the design based on the fracture gradients that we see out there. It's not like you're putting one cement out there with one density. We have the ability to adjust it. So I would assume, and I don't know 100 percent for sure, but I believe that we did make the recommendation to run this type of system. MR. SANKAR: And you said earlier that when you make a recommendation like this, you still look to the operator to make the final decision on whether or not your recommendation should be used, right? MR. VARGO: Right. We'll make recommendations and they'll either ask us to continue

PLANET DEPOS 888.433.3767 | WWW.PLANETDEPOS.COM

NATIONAL OIL SPILL COMMISSION MEETING CONDUCTED ON MONDAY, NOVEMBER 8, 2010
86 (Pages 341 to 344) 341
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

343
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

on or to potentially change that. MR. SANKAR: Do you treat different operators differently based on their level of experience with your services? MR. VARGO: I don't think we treat them differently. We have different -- we work for different operators that have varying levels of experience inside their organizations. As you mentioned before, Chevron, they obviously have their own lab and cementing specialists. Shell does as well. ExxonMobil does. BP has cementing specialists. And then we have operators that we work for that have very little cementing experience and we're relied upon for pretty much all of the recommendations. MR. SANKAR: Would you -- Where would you put BP in the spectrum of organizations and their sophistication, specifically with your foam cement in deep water? MR. VARGO: They're one of the operators that we use foam cementing on. Many of the deepwater

Mexico? MR. BLY: I don't know if we're inexperienced, but that's probably the right number for using foam at that depth, yeah. MR. SANKAR: So at this point for Macondo, BP was, would you say, relatively inexperienced in the use of foam cement in deep water? Or at these depths? MR. VARGO: Yeah. Yeah, we had to rely on Halliburton to give us good advice on the nuances of foam, yes. MR. SANKAR: And was Halliburton aware of BP's level of expertise with foam cement in Macondo? MR. VARGO: I believe so. MR. SANKAR: Do you think that would have or should have influenced the level of advice you were giving to them on this job? MR. VARGO: I think we're making -- we're making recommendations based on what we think is the right job for the well. And under these conditions, I think the design engineer that was working with BP made the assessment that this was the best recommendation, and that was recommended.

342
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

344
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

operators that we work with use foam cementing in the surface and conductor pipes. There are a couple of operators that use it in the latter part or the latter stages of the well, which is the deeper sections. MR. SANKAR: So we asked Halliburton for the data on foam cement jobs they've done in the Gulf of Mexico. They came back with a spreadsheet. And again, this can all be corrected if I have this wrong. The spreadsheet we looked through and we saw that there were 393 total foam cement jobs that had been done in the period from 2002 to 2010. That sounds like a pretty large number, but if you look here at the 33, the 33, as we understand it -- and again we stand to be corrected in the future -- only 33 of those were on that final production string in the deepwater -- the last string of casing where you're trying to achieve zonal isolation of a hydrocarbon layer. And of those 33, only four were for BP. The rest were for Shell. So based on this, Mr. Bly, would you characterize BP as being somewhat inexperienced with the use of foam cement in deep water in the Gulf of

And he worked with the drill team and the cementing specialist to vet out the job and to prepare for it. MR. SANKAR: Can we put up the slide with the situation at the time of the cement job. Again, this is probably very familiar to you since we spent a lot of time on it this morning. What we were trying to communicate here is that there were a number of issues that the crew should have known about at the time of the cement job, the difficult drilling conditions, serious lost returns, forced to stop drilling earlier than planned. That's a simple way of explaining the fact that the -- that there was not a whole lot of room below the casing in an area called the raffle that is used as a way of helping with your cement job. And I'm simplifying somewhat, but we can use that for now. There was low circulating pressure after the conversion, no bottoms up, and a host of other issues that you've already heard us discuss. I think, Mr. Bly, your report agrees that many of these things were in fact risk factors that,

PLANET DEPOS 888.433.3767 | WWW.PLANETDEPOS.COM

NATIONAL OIL SPILL COMMISSION MEETING CONDUCTED ON MONDAY, NOVEMBER 8, 2010
87 (Pages 345 to 348) 345
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

347
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

in hindsight at least, your team could have assessed in a different way or a better way. Is that fair? MR. BLY: Yeah. As I hinted at this morning, I think some of those risk factors are linked to others. So the first three suggest that you should be very focused on foam -- you know, I mean a cement job that's going to work in pore pressure frac gradient environment. I think that's exactly what was done here. You know, we asked for advice and how would we do that. So I simply struggle with the notion of having these be kind of random risks. I think some of them are contingent on others. MR. SANKAR: Mr. Vargo, were your team members aware of any of these issues ahead of time during the course of designing the cement job? MR. VARGO: Yes. Our personnel worked in-house with BP and the drill team, so I would say that they were aware of many of these things. MR. SANKAR: Were they aware that there was going to be a low cement flow rate? MR. VARGO: As we came closer to the job, I

MR. VARGO: Yes, sir. MR. SANKAR: Were you aware that they had had difficulty converting the flow equipment? MR. VARGO: Yes, sir. MR. SANKAR: And, of course, you were aware of the centralizer issue? MR. VARGO: Yes, sir. MR. GRIMSLEY: Did your crew raise any of these issues to BP as possible concerns with the cement job? MR. VARGO: I'm not certain if they did or they did not. MR. SANKAR: Well, I can tell you for sure that they raised the centralizer issue. MR. VARGO: Yes, that I know that they raised. MR. SANKAR: Do you know if they raised any others? MR. VARGO: No, sir, I'm not aware of that. MR. SANKAR: So, to your knowledge, the only -- the only issue that you know that they raised was the issue of the low number of centralizers?

346
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

348 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

believe the rate at which we were going to displace the job was reduced to ensure that we wouldn't exceed the fracture gradient on placement of the job. And I believe that occurred relatively close to the cementing operations. MR. SANKAR: But they were aware at the time that they pumped the job? MR. VARGO: Yes, sir. MR. SANKAR: And in fact the last OptiCem models sent out as late as four days before the job reflected the correct flow rate that would be used on the job; is that correct? MR. VARGO: I believe that's correct, sir. MR. SANKAR: And the cement volume, your crew was aware of the total amount of volume of cement that would be pumped down the well? MR. VARGO: Right. This was a relatively small volume of cement, and the reason for that was for cement shortfall on the previous shoe. MR. SANKAR: Were you aware of the bottoms-up circulation, the lack of the bottoms-up circulation?

MR. VARGO: Yes, sir. MR. SANKAR: Out of all -- Out of all of the things that they knew about in the cement job? MR. VARGO: Well, I think the in-house engineer that works with BP, I mean, I think they're continually discussing all of those things. Some of those things occurred right before the cementing operation, the difficulty to convert the float equipment, the low circulating pressure after conversion. I mean, these were occurring on the execution of the cement job. So these didn't occur before -- in many days. These occurred -- some of these were occurring as the cement job was being -getting ready to be pumped. MR. SANKAR: Did Halliburton ever suggest to BP that it might be difficult to achieve zonal isolation given all these issues? MR. VARGO: I believe -- I believe Mr. Gagliano did indicate to BP that he did not believe they would get zonal isolation due to the fact that the pipe would be decentralized because they weren't going to use the proper number of

PLANET DEPOS 888.433.3767 | WWW.PLANETDEPOS.COM

NATIONAL OIL SPILL COMMISSION MEETING CONDUCTED ON MONDAY, NOVEMBER 8, 2010
88 (Pages 349 to 352) 349 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 351
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

centralizers. MR. SANKAR: Besides centralizers, did he raise any other issues? MR. VARGO: I'm not -- I'm not sure about that, sir. MR. SANKAR: So I want to go to the report where we talked about -- where Halliburton first modeled the centralizer issue. This is the cover of the report. It's got a lot of technical information. And I do this just to orient you that we're all talking about the same report. In your report, Mr. Bly, I think you agreed that this was, at least at the time, the best model of cementing that was available to the crew on -- to your engineering team and to the crew on the rig. MR. BLY: The 18th -- I mean, it's a model of cement placement. MR. SANKAR: It's the best that was available at the time, though; is that right? MR. BLY: For cement placement. It doesn't say anything about stability or some of the other critical issues that I think you are beginning to
350

indications in this report that you believe should have alerted the BP engineering team that there was a problem? MR. VARGO: I believe the fact there was going to be channeling which was increasing the flow potential on the well. MR. SANKAR: So this drawing here, as I have understood in speaking with your engineers, shows channeling. Several of your engineers have explained to me that this portion of the drawing here, the green material over here indicates that mud will be left in the well bore. Is that channeling? MR. VARGO: That's indicating channeling, yes, sir. MR. SANKAR: Is this the only indication in this model that there's going to be channeling? MR. VARGO: I believe this is the visual picture that shows the channeling. MR. SANKAR: And it's on page 23; am I right? MR. VARGO: I don't know. Did you give this to me?

352 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

surface here. MR. SANKAR: It does predict -- do you agree that it predicts some amount of channeling and some amount of gas flow? MR. BLY: What that model will do is, as I've learned through the course of this investigation, it will tell you where you have a risk of channeling. And where the pipe is not centralized, the risk of channeling increases. MR. SANKAR: Do you believe that Halliburton should have done more to flag the information about channeling and gas flow in this report when they sent it to you? MR. BLY: I don't -- I don't remember exactly when that report was sent, but this is the one that came out right before. Yeah, I think what we highlighted in our work was that there were things passing hands, that there was no signaling about what was critical in these things. So yes, I guess I agree with your point. MR. SANKAR: Mr. Vargo, what are the

MR. SANKAR: How about this? (Laughter) MR. VARGO: Yeah, if it's on page 23, that's where the -- that's where the diagram would be, yes, sir. MR. SANKAR: Yeah. And it doesn't say anything about channeling on here. You just have to know that it's the green means channeling here, right? MR. VARGO: I believe that's just the interpretation of the data. There is another point in the data that shows where the top of cement is going to be, the number, the actual number footwise where the top of cement is going to be. MR. SANKAR: So there is another part of this report that's been discussed a lot in the press. And I see you nodding your head, so I assume you understand this part. And this is about gas flow potential. Right here it says: "Based on analysis of the above-outlined well conditions, this well is considered to have a severe gas flow problem." MR. VARGO: That's correct. That's due to

PLANET DEPOS 888.433.3767 | WWW.PLANETDEPOS.COM

NATIONAL OIL SPILL COMMISSION MEETING CONDUCTED ON MONDAY, NOVEMBER 8, 2010
89 (Pages 353 to 356) 353 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 355
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

the channeling. MR. SANKAR: That's due to the channeling. Is this the -- is this the best indication to the BP design crew that there is going to be a channeling problem on this job? MR. VARGO: This is one indication. The reason why the gas flow potential, I believe, is so severe is because you are bringing cement up higher. It's showing a channel, so your gas flow potential is going up. MR. SANKAR: But you routinely do cement jobs that do you have a severe gas flow potential; isn't that right? MR. VARGO: I would say we do do jobs that have a severe gas flow potential, and that's one of the reasons we recommend the foam cementing operations. MR. SANKAR: So this in and of itself is not a red flag to you? MR. VARGO: Oh, it's a red flag, absolutely. MR. SANKAR: It's a red flag?
354

MR. VARGO: I don't have any view whether it was incorrect or correct, no, sir. MR. SANKAR: If it were incorrect, would that mean that this model can't be relied upon as a prediction of channeling? MR. VARGO: That is a -- that is a factor that plays into the gas flow potential calculation. MR. SANKAR: I think you -- I heard you say earlier that one of the reasons that you are -- that Halliburton's view is, or your view is that there was a problem with this job because of this modeling. Am I right? MR. VARGO: Problem with the channeling, yes, sir. MR. SANKAR: So if this input were changed, it might change your conclusion about that; am I right? MR. VARGO: I don't think that would change the fact that the job would have channeled. MR. SANKAR: You don't think that the pore pressure would have changed the fact the job would have channeled?
356

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

MR. VARGO: Yes. MR. SANKAR: Was it called out anywhere beyond -- and I'll represent to you this is page 18 in this report. MR. VARGO: I don't know if -- I don't know if it was brought up or not, sir. I know this was given to BP, but I don't know that it was actually pointed out. MR. SANKAR: And this is the best model that was available at the time. Do you agree that there were erroneous input data that was used in this model? MR. VARGO: I don't know. Are you talking about the actual directional profile? MR. SANKAR: There's two issues I was going to bring up. The first is the pore pressure. I'm going to bring it up right here. Actually I'm not. The pore pressure here is called out as 13,197 p.s.i. Now, I understand from the BP report that pore pressure was incorrect. Do you have any view as to whether that was actually the correct pore pressure for the job?

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

MR. VARGO: No, sir. MR. SANKAR: Okay. MR. VARGO: I think that would have changed the gas flow potential, but not the fact that the job would have channeled. MR. SANKAR: I'm going to show you the centralizer specifications here. We're going to call out a fairly large section here and hope we will be able to see it. Do you see here that the centralizers are all placed 45 feet apart on this chart? MR. VARGO: Yes, sir. MR. SANKAR: And do you see at the top that the nominal diameter of the centralizers is 8.6 inches? MR. VARGO: Yes, I see that. MR. SANKAR: Are you aware that -- at least it's BP's position that that nominal diameter of the centralizers is incorrect and that in fact the centralizers were placed not in these positions at all? MR. VARGO: That's very possible.

PLANET DEPOS 888.433.3767 | WWW.PLANETDEPOS.COM

NATIONAL OIL SPILL COMMISSION MEETING CONDUCTED ON MONDAY, NOVEMBER 8, 2010
90 (Pages 357 to 360) 357
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

359
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

I will say this: At the time of design we don't always know exactly the placement. We know that they are going to be put -- these are centralizer subs, so we know that they're going to be put on each joint, and the relative length of the joint, roughly 45 feet. And I'm sure that's the assumption, in my opinion, that the engineer probably made in why he put them in that length and distance apart. What I have here -- He can get the information from the provider of the centralizers, which is not Halliburton, which is I believe Weatherford. So I can't speak to whether he got that information or not. MR. SANKAR: Would you agree at least that correcting incorrect centralizer information diameter and placement might change the results of this model? MR. VARGO: I don't believe it will fix the fact that the job channeled. MR. SANKAR: Is Halliburton planning on rerunning the model with correct input data? MR. VARGO: We can -- we're still working on that. MR. SANKAR: Are you willing to make the

the contrary. But as far as the results that I reviewed prior to the operation, and I believe you showed them up there before, the 1.8 and 1.8 SG on top and bottom, that would indicate, and I would say that an engineer looking at that would assume that that is a stable system and they would go ahead and execute the job. MR. SANKAR: Have you reviewed all the testing data? MR. VARGO: I have, sir. MR. SANKAR: And based on the totality of the testing data, is your conclusion the same, that the foam cement would probably have been stable? MR. VARGO: Well, you put up the information I guess back in February on the initial testing. And I guess one thing that would be valid to point out is that we are designing and we are testing that cement right up until the operation typically. The initial tests that are run, and as you all indicated, and I think I have indicated too, that our two goals are placement and zonal isolation. So initially in the initial stages of testing, we're

358
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

360
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

results public when do you that modeling? MR. VARGO: The investigation is continuing into this, so I would assume that it would become public. MR. SANKAR: I'll take that as a maybe. MR. VARGO: I mean, I don't -- You know, we can go back and we can model it with the exact location of the centralizers, with the exact specifications from Weatherford, and we can rerun the model. And I'm sure that that's something, at least in my opinion, I think that we can do. MR. SANKAR: I want to talk a little now about the nitrogen foam cement in particular. BP's report, as Mr. Bly mentioned earlier, suggests that the nitrogen foam cement pumped down this well was in fact unstable. Halliburton -- Mr. Vargo, I should say, do you have a position as to whether the foam cement pumped down the well was likely to have been stable? MR. VARGO: Results that were provided just prior to the execution of the job indicates stability. I know that there was testing done prior to that to

doing what we call pilot testing, which is to ascertain the volumes of materials that we're going to need out on the rig to perform the jobs. So those early tests are going to allow us to order out the proper chemical volumes to have on the rig, and then we will continue to tweak those tests until we get up to the actual operation, until we get the actual cement in that we're going to use. And the last test that I showed, or the last test that was shown to me showed that they had what I think a reasonable engineer would show as a stable system and that they could move forward. MR. SANKAR: So I'm going to put up that data chart. And of course, as I mentioned earlier today, this slide here shows a three-hour conditioning time. MR. VARGO: Yes, sir. MR. SANKAR: Who sets the conditioning time for the test? MR. VARGO: The engineer is looking at the job placement time. And I believe towards the end -towards the end when they had slowed down the job,

PLANET DEPOS 888.433.3767 | WWW.PLANETDEPOS.COM

NATIONAL OIL SPILL COMMISSION MEETING CONDUCTED ON MONDAY, NOVEMBER 8, 2010
91 (Pages 361 to 364) 361
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

363
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

that obviously increased the conditioning time. And that's probably the engineer that was working on this was the one that chose the three-hour conditioning time. MR. SANKAR: Was the job placement time changed between April 13th and April 18th? THE WITNESS: I don't know the exact dates but I know that they had slowed down the displacement and that's why they needed the additional amount of time for placement, and that's why they used the three-hour conditioning time. MR. SANKAR: So did they derive the job placement time -- or the conditioning time from the job placement time? MR. VARGO: Yes, sir. MR. SANKAR: If that's true, could we -- I think I'll ask the question differently. Why would somebody use a zero conditioning time if that's the case? MR. VARGO: I don't know. I mean, that was early on in the planning stages of the job. They had just gotten on the well, I believe, just before that,

think at this point I would choose to run this slurry in the well. MR. SANKAR: So is it your position that if you had gotten this data back from the lab in February, you would have looked at that foam stability data and said, "I wouldn't run that cement down the well"? MR. VARGO: At that day -- you know, there are several factors that we consider in testing the cement. One is the pump time, compressive strengths. Stability test is another test that we're running. So based on those results, I would not have, at that time on February 17th, chosen to run that in the well. MR. SANKAR: As an engineer at Halliburton, if you had seen those results, would you have considered redesigning the slurry at that point? MR. VARGO: It depends. Obviously, you are going to change the slurry. You are redesigning from the point on the 17th through the 18th of April. There is a redesign that does occur. You change your retarded concentrations. I believe the water concentrations change as well. So there was a

362
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

364
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

so they were doing some preliminary tests. So I don't know why they chose it. At that time I don't think they knew exactly what they were going to do. So maybe they didn't indicate or request a conditioning time on the slurry. MR. SANKAR: Why would they choose a different conditioning time for a test in the same time frame when they had no further information on the job? MR. VARGO: They probably were then looking at how long it would take them to place a job, so they reran the test with a two-hour conditioning time. And that would have been probably a faster displacement rate than that that was actually used based on the tests for April 18th. That's my opinion. MR. SANKAR: Would you agree that both of these February tests produced unstable foam results from the lab? MR. VARGO: I would say -- I would say the results from the February 13th would be data that I would not run in the well. The 19th -- the 17th indicates some stability. But again, I don't

redesign process that did go on from the 17th through the 18th. MR. SANKAR: Is there anything in Halliburton's e-mails or documents to suggest that the redesign process considered the instability results from February? MR. VARGO: I'm not aware of that, sir. I guess I should also, you know, let you know that we do a lot of testing on a lot of these cement slurries as we are going through the process. Many times we have a target window for a lot of the different parameters that we are asked to achieve. That would be pump time, compressive strength, and some of the other things that we test for. So we're doing testing in the background trying to achieve those results. It may take several tests for us to achieve those results and sometimes they're not all exactly recorded. Obviously, we're going to report the data once we actually know exactly what we're going to do. MR. SANKAR: Do you have any sense as why you report one set of data and not another to the

PLANET DEPOS 888.433.3767 | WWW.PLANETDEPOS.COM

NATIONAL OIL SPILL COMMISSION MEETING CONDUCTED ON MONDAY, NOVEMBER 8, 2010
92 (Pages 365 to 368) 365
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

367
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

operator? MR. VARGO: If we felt like the data was not valid to what we were doing, then we may not report it. Like I said, if we -MR. SANKAR: As you know, this is -MR. VARGO: -- if we're trying to place the cement, and it's going to take us four to six hours to place the cement. We run the tests and it only takes three hours to pump off, then that's a test that we're not going to use. So we're going to rerun the test and provide them with the results of what we actually meant to achieve based on their -- based on their recommendations of their requirements. MR. SANKAR: Was I correct this morning that eventually this April 18th test was reported to BP and eventually this February 17th test was reported to BP? Am I correct about those? MR. VARGO: I know the 18th test was. MR. SANKAR: Okay. Well, I will represent to you that on March 8th this test was sent out. MR. VARGO: Okay. MR. SANKAR: Would you agree with me that

available internally? MR. VARGO: I don't know exactly when that test was available. MR. SANKAR: So standing here on this day, Halliburton has no position on whether or not the April 18th test -MR. VARGO: I believe -- I believe we knew the thickening times to place the job, and I believe that the stability tests were being run at the time. MR. SANKAR: So Halliburton does not know at this point whether or not it had any past foam stability results at the time it pumped the job? MR. VARGO: I don't know if we did or not at that point. I know that the test results were posted afterwards, from what I understand. MR. SANKAR: You would agree with me that this test date is correct, that they began testing this job on April 18th? MR. VARGO: That's what I -- I believe those are part of the results when the results were available on the 18th. MR. SANKAR: I'm sorry, you agree those
368

366
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

in both cases better foam stability test results were reported than the alternates that were run in the same time frame? MR. VARGO: I mean, the results -- again, you know, the 5959 has indications that you don't have settling but it's not obviously at the design density. So, you know, that's not something that we would have run in the well. The same with the April 13 test. MR. SANKAR: The April 13 test, that's not something you would have run on the well? MR. VARGO: But then again, all of those tests aren't representative of what we were going to actually run in the well based on the job placement time and the conditioning time. MR. SANKAR: I want to ask you that question again. I think you said that this result right here on April 13th, that's not something you would have run in the well; am I correct? MR. VARGO: Not at that time, no. MR. SANKAR: On the April 18th test, does Halliburton have a position of when that test was

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

were when the results were available on the 18th? MR. VARGO: That's what I understand. MR. SANKAR: All right. So this is the -MR. VARGO: Actually, I don't know. I don't know exactly when the results were available, sir. MR. SANKAR: And just a limited point here. This is where we, the Commission, drew this -- I should say the investigative staff drew this information from. There is a lab note here, 2:15 a.m. on 4/18/10, with conditioning time, three hours. It's our understanding -- it sounds like Halliburton doesn't have a position as to whether we're right or wrong -- that this task would have taken 48 hours from this point, from the point at which it was poured. And 48 hours from 2:15 a.m. would of course be 2:15 a.m. on April the 20th? MR. VARGO: It doesn't take 48 hours to perform the test. That may have been something that -- I mean, what we do is we pour that test up and then the cement has to set up. The time period for the cement to set up may or may not take that long.

PLANET DEPOS 888.433.3767 | WWW.PLANETDEPOS.COM

NATIONAL OIL SPILL COMMISSION MEETING CONDUCTED ON MONDAY, NOVEMBER 8, 2010
93 (Pages 369 to 372) 369
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

371
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

So I don't know exactly the time period that it takes for that stuff to set up. MR. SANKAR: This is testimony from Mr. Tawney Row. Would you agree he says: "We then transfer that cement -- that foam cement slurry into a PVC test specimen cell. We then seal the top of that cell and we cure the sample in a water bath at a 180 degree temperature for 48 hours." MR. VARGO: That would be -- That would probably be the procedure, yes. But it can be pulled earlier if you believe you have cement that's set up prior to that. MR. SANKAR: Do you have any indication that this test was pulled any earlier? MR. VARGO: I don't know. MR. SANKAR: My apologies. I need to pick up... This is a table here presented from the National Academies of Engineering. I focus on this only to point out the foam stability tests here report 99 lab hours here. Would you agree with me that 48 plus 48 is

MR. SANKAR: Do you believe that any of your engineers on the job at the time were aware of the potential issues with nitrogen foam cement? MR. BLY: No. As we looked through the information they were using and the analyses they were doing, they were focused on, as I said, aspects of the work, the ECD and things, but no indication that they had, you know, been given notice or had any concerns at all about the stability of the foam cement. MR. SANKAR: So we also looked through the e-mails here. What we see here is an e-mail from Jesse Gagliano. Would you agree, Mr. Bly, that this is just before the job, three days before? MR. BLY: Yeah. Yes, sir. MR. SANKAR: And here we see that Mr. Gagliano was talking about lab tests. This is the small changes between the amounts of the retarder, that would be -- Incidentally, from Halliburton's point of view, would change in retarder concentration from -- and I'll shorthand it -- 8 gallons to 9 gallons in the mix meaningfully affect foam stability?

370
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

372
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

96, and that's probably the 48-hour test span that we're talking about, the two tests that were actually reported? MR. VARGO: Again, I don't know when the tests were pulled exactly, sir. MR. SANKAR: Mr. Bly, if BP had had the information in either the February test reports or the April test reports and had reviewed them carefully, would it have allowed Halliburton to pump the cement job? MR. BLY: Absolutely not. When we looked at our report -- our investigation, we saw lots of evidence of the engineering team working together, working on aspects of the cement job, mostly to do with placement. The presumption, of course, is that the cement is going to be stable and it's not going to have fundamental problems. These indications would say there's fundamental problems with the cement, and that would -- that would change everything. It would be the precursor to literally all 13 of your points on the 13-point slide.

MR. VARGO: It would have to be tested out. I mean, I think we would ask the advice of our lab manager by changing .01 gallons per sack, if that's going to affect the foam stability. MR. SANKAR: Do you have any personal view on that, whether it's likely to or not? MR. VARGO: It would depend. You'd have to -- you'd have to really test it out to really understand 100 percent, I believe. MR. SANKAR: And Mr. Bly, you see here that this Mr. Brian Morel, and he's e-mailing back. It says: "I would prefer the extra pump time with the added risk of having issues with the nitrogen." Do you know what he means when he says, "I prefer the extra pump time"? MR. BLY: I don't. I don't know what that means. MR. SANKAR: Would it be reasonable to think that at that time he was at least thinking about the possibility of nitrogen foam instability? MR. BLY: I really -- I really don't -- I

PLANET DEPOS 888.433.3767 | WWW.PLANETDEPOS.COM

NATIONAL OIL SPILL COMMISSION MEETING CONDUCTED ON MONDAY, NOVEMBER 8, 2010
94 (Pages 373 to 376) 373
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

375
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

don't know. MR. SANKAR: Fair enough. Were your engineers concerned about Halliburton's competence at the time that the cement job was about to be pumped? MR. BLY: Not that I'm aware of. You know, as we went through the investigation, I did become aware of some e-mails that were around for the MBI. Nothing I've seen raised issues about competence. There was some questions about timeliness and getting work done on time. MR. SANKAR: And would you agree that it's crucial to have foam stability tests completed before a cement job is pumped? MR. BLY: I would agree that it's important to know if the fundamental properties of the cement you're going to use are sound, yes. And I think that would be a part of it. MR. SANKAR: This e-mail sent from Brian Morel to Mark Hafle, another BP engineer. There is at least a suggestion from our investigative staff viewpoint that there was a view among the BP engineers

bullets slide. I want to close briefly with a discussion about the criteria for evaluating success of the cement job. Mr. Bly, I think your report concluded that the team on the job used lift pressure and returns to declare that the cement placement was successful. Correct? MR. BLY: Yes. MR. SANKAR: And your report also concluded, based on internal engineering practices, that those criteria were insufficient and that a proper risk assessment would have led them to do more work, more evaluative work? MR. BLY: Correct. Yeah. Yeah, we said that while it was clear that they had thought through it, they had gotten a positive indication that the cement job had been pumped correctly, we were critical of the decision to use lift pressure alone as an indication of top of cement. MR. SANKAR: What were Halliburton's criteria at the time for determining that it had pumped the job successfully, Mr. Vargo?

374
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

376
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

at this point that Jesse, in this case Jesse Gagliano, the Halliburton cementing engineer, was, quote, not cutting it. Would you agree, Mr. Bly, that this is at least a suggestion that there were concerns among your engineers that the lead Halliburton person on this job was at least not being timely? MR. BLY: I would agree with at least not being timely, because the other things I saw indicated that was the primary complaint. MR. SANKAR: And again, the timeliness in particular here is about lab tests. Would you agree? MR. BLY: From memory, yeah, that's right. MR. SANKAR: So would you agree that BP was aware that there might be problems with getting lab results for this cement job back in time? MR. BLY: I'd agree with -- The first two things I agreed with is that they were -- it appeared that they had to push to get results done and that there had been an indication that this -- that this had happened before. MR. SANKAR: Can we go back to the cement

MR. VARGO: At the time of the execution, when we -- when we performed the job on the rig, obviously did we achieve the density, the target density, did we pump all the additives associated, did we see the plugs bump. Those are the design -- those are the criteria that are used on the rig to assess whether it was a successful job or not. And that's execution of the design. MR. SANKAR: And this is just to clear up some misconceptions that we believe we have seen in the press. Mr. Vargo, do you believe that they received full returns on this cement job? MR. VARGO: From what I understand, yes, sir. MR. SANKAR: Mr. Bly, do you agree with that? MR. BLY: Yes. We -- Our final answer was about three to four barrels loss, which is effectively full returns, yes. MR. SANKAR: And Mr. Ambrose, do you have a view on that issue?

PLANET DEPOS 888.433.3767 | WWW.PLANETDEPOS.COM

NATIONAL OIL SPILL COMMISSION MEETING CONDUCTED ON MONDAY, NOVEMBER 8, 2010
95 (Pages 377 to 380) 377
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

379
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

MR. AMBROSE: We've studied it, but we're still in the process of looking at the cement. MR. GISCLAIR: If you don't mind, I can corroborate that. MR. SANKAR: Oh, I'm sorry. We've come back to your areas of expertise. MR. GISCLAIR: That is one of the areas that the data does reflect certain aspects of the cement job. And it does not show any significant losses. As Mr. Bly mentioned, maybe three barrels. MR. SANKAR: I think Mr. Gisclair is demonstrating his client's penchant for cooperation by raising his hand even when not called upon on this case. Do you all agree that it would not have been standard industry practice to run a cement bond log at this time; that is to say -- I should ask the question better. Is it common practice in the industry -would it have been common practice in the industry to run a cement evaluation log at this time? Mr. Vargo, do you have a view on that?
378

CO-CHAIR REILLY: All right, fine, two-minute break. (Recess taken.) MR. BARTLIT: Let's resume. Mr. Ambrose, I noticed something sitting here, and I want to briefly touch on it. We all saw this before, that at 21:01 to 21:14 there were these anomalies, and that the first steps taken by the crew were at 21:41. And I think we said that maybe nobody in the crew noticed an anomaly until 21:40 when the mud came up on the rig floor. Do you recall that? MR. AMBROSE: I do. MR. BARTLIT: Now, a day ago you guys sent me this slide on the end-of-the-well activities, and I was sitting here looking at it, and I noticed something. And the issue is this indicates that the kick wasn't noticed until 21:40, that the anomalies were not noticed. Let's look at your slide. Your slide here says, "Stop pumping to check anomaly." And it's not 21:41 or 21:40. It's 21:35. Do you see that? And then it says, evaluate anomaly from

380
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

MR. VARGO: Typically no, I don't think the industry does run a bond log at this time. MR. SANKAR: Okay. Mr. Gisclair, do you have a view on that? MR. GISCLAIR: I don't have a view on that. MR. SANKAR: All right. And Mr. Ambrose, any experience in that area? MR. AMBROSE: No. MR. SANKAR: Mr. Bly, do you have a sense -MR. BLY: I agree. MR. SANKAR: You agree. So all the parties here agree that -- Maybe I should correct the question. Given all the indicators here, even then it would not have been standard industry practice to run a cement bond log at this time? Having clarified the question, does anybody change their answer? (No response.) MR. SANKAR: I'm going to take a two-minute break. Is that okay?

21:35 to something like 21:38. The slide you gave me appears, doesn't it, that your crew -- This is your slide. You prepared it and asked me to show it, and I showed it. Your slide appears to show that your crew recognized an anomaly at 21:35 and then evaluated the anomaly at 21:37 or 21:38, which is four or five minutes ahead of the time that the mud came up on the drill floor; isn't that true? MR. AMBROSE: We do have a different timeline than what you've seen in the BP report. MR. BARTLIT: Right. MR. AMBROSE: Again, you have to go back and live it in the moment. We talked about that. MR. BARTLIT: Yes. MR. AMBROSE: When the mud pump pressure relief valve went off, you may remember that happened about 9:21. At that time we believe they isolated the mud pump downstairs, and then they -- they opened the kill line on the drill floor for the first time. This would have been the first time that the kill line would have been opened, and they could have monitored pressure on the kill line after the negative test.

PLANET DEPOS 888.433.3767 | WWW.PLANETDEPOS.COM

NATIONAL OIL SPILL COMMISSION MEETING CONDUCTED ON MONDAY, NOVEMBER 8, 2010
96 (Pages 381 to 384) 381
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

383
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

When that happened, it had a very strange trend, and over a period of about seven minutes it started to build pressure, which would have been expected, they should have built pressure, maybe acting as if it was plugged. We don't know. And that anomaly happened as the driller was ramping up the mud pumps after the pressure relief valve, which he shut the operation down at that point and then started ramping mud pumps up again. Once he stabilized the rate of the pumps, the anomaly that we're talking about, as we believe then they saw a differential pressure between the kill line and the drill pipe. They weren't as close as they should have been. And at two minutes after -roughly two minutes after seeing that, they shut the pumps down to check that anomaly. So they stopped the operation to figure out what -- what may have been happening. The pumps ramp down to a computer-controlled system. You could stop and the pumps ramp down over a two-minute period. And I believe at approximately 9:31, 32, the pumps were off

MR. BARTLIT: What time does your timeline put mud on the drill floor? I think BP was 21:40. MR. AMBROSE: We're about three minutes after that. MR. BARTLIT: 21:43. Okay. Now, let's -- let's go back, Megan, please, to this one. So we now see that 21:31 to 38, right in here, your guys are seeing things you said were confusing, there was differential drill pressure seen, they were discussing it. You said it was -- well, you used the word "confusing." MR. AMBROSE: Well, actually from the time that they started the pumps back up after the sheen test, for every action the driller took, he saw the expected reaction on the pressure gauges. And so for -- for the better part of the -- up until 9:27, the actions that he was taking with the mud pumps, he expected. He saw what he expected on the pressure gauges. And the pressure, particularly right around 9:27, was falling off as it should have. So that
384

382
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

and a steady solid pressure was being shown on the drill pipe. It's a confusing signal. With months of work we've determined that it appears as the kick was coming in, the influx was coming in, it was changing heights of fluid columns in the well. And the geometry of the well was such that as the 14-pound mud that was -- When this all started, there was about 500 barrels of 14-pound mud below the drill pipe, and that had been pushed up into the BOP, and as it hit the BOP it was -- it kept a constant pressure, a sign that fluids are moving. So we figured they were scratching their heads to figure what was happening, why they saw this pressure differential. There is a statement from one of our personnel that had gone through the drill floor at that time that they were discussing differential pressure. So that's the anomaly we're talking about there. Our timeline puts mud on the drill floor a bit later than BP's. If you look at the actions that we knew -- we know happened between 9:34 --

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

trend was correct. The anomaly was that now that the kill line had been opened, the differential was causing some concern. And so then they stopped. They shut the operation down to check that. MR. BARTLIT: So your crew, in the period 9:34 to 9:38, is discussing this confusing differential pressure between the drill pipe and the kill line, right. MR. AMBROSE: That's correct. MR. BARTLIT: So something is going on and they see it, and you say that it didn't come on the drill floor until 21:43. This means you had about -before the BP reports the hydrocarbons got in the riser, your guys were discussing a confusing differential pressure situation. If it had hit the BOP then before it got in the riser -- of course if you hit the BOP before the hydrocarbons get in the riser, it makes a difference, doesn't it? MR. AMBROSE: You know, again, it all goes to the mindset of how were they interpret what was happening.

PLANET DEPOS 888.433.3767 | WWW.PLANETDEPOS.COM

NATIONAL OIL SPILL COMMISSION MEETING CONDUCTED ON MONDAY, NOVEMBER 8, 2010
97 (Pages 385 to 388) 385 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 387
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

MR. BARTLIT: With all respect, if you hit the BOP -- if you're having a discussion before the hydrocarbons get in the riser about anomalies, if you hit the BOP before it gets in the riser, that will make a difference, won't it? MR. AMBROSE: It's hard to say in this particular case with the flow rates that were happening at that point. I couldn't speculate whether or not it would have or would not have closed it 100 percent. MR. BARTLIT: That wasn't my question. Again, with all due respect. MR. AMBROSE: It could have made a difference. We can't speculate. MR. BARTLIT: I know. But I'm not asking you to speculate. What I'm saying is that if you -if before the BP report calculates hydrocarbons got in the riser, back here, four or five minutes before, while everything is still below the BOP, if your guys that were discussing the anomaly had hit the BOP, it might make a difference if you hit the BOP while the hydrocarbons are still underneath the BOP, right?
386

focused on in the report, so I don't know, but I'll take your word for it. It sounds reasonable. MR. GRIMSLEY: Okay. But you know it was a fair bit behind schedule? MR. BLY: Yes, fair enough. Yeah. MR. GRIMSLEY: Now, BP sent home the Schlumberger contractors in the morning of April 20th; is that right? MR. BLY: Correct. MR. GRIMSLEY: How long would it have taken to run the cement bond log? MR. BLY: Ten, 12 hours. MR. GRIMSLEY: Okay. Now, there was some concern about centralizers, and I know there was confusion about whether the right centralizers were out on the rig or not. Do you recall that? MR. BLY: Yes. MR. GRIMSLEY: How long would it have taken to -- if the wrong centralizers were out there, to get the correct ones from shore out to the rig? MR. BLY: I can't remember. I think it was analyzed. It would have taken a day or something,

388
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

MR. AMBROSE: Any time you stop hydrocarbons below a BOP it's better than above. MR. BARTLIT: Thank you. That was the only question I had. I just noticed this in this report, if the Commission please. CO-CHAIR REILLY: Does that conclude your questions, Fred? MR. BARTLIT: It does. CO-CHAIR REILLY: Thank you. Okay. We're running out of time. Make it five minutes. MR. GRIMSLEY: Yes, this will be very quick. One question that we had not asked and I meant to ask, Mr. Bly, given all of the problems leading up to April 20th, my understanding is that the rig was behind schedule with regard to finishing this well. Is that right? MR. BLY: I believe that's right, yeah. MR. GRIMSLEY: Does 45 days behind schedule sound about correct? MR. BLY: It does. It wasn't something we

maybe more than that. MR. GRIMSLEY: All right. And we've talked about it with Sam, that BP did not in fact have the final test results before it poured the cement job; is that right? MR. BLY: We had -- we didn't have the final foam stability tests. MR. GRIMSLEY: Is there a reason that BP would have poured the cement job before it had the final test? MR. BLY: I think if you look at the information that was available to the team, they were looking at the conventional aspects of cement jobs that are important. So, you know, hardening times and things like this. MR. GRIMSLEY: Is there a reason that BP would not have waited to get those foam stability tests before pouring the final cement job? MR. BLY: I think we didn't appreciate the importance of the foam stability tests. MR. GRIMSLEY: Is there a reason that BP would not have waited to get those centralizers that

PLANET DEPOS 888.433.3767 | WWW.PLANETDEPOS.COM

NATIONAL OIL SPILL COMMISSION MEETING CONDUCTED ON MONDAY, NOVEMBER 8, 2010
98 (Pages 389 to 392) 389
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

391
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

they thought were in fact the right centralizers before they ran the final production casing? MR. BLY: There could be a range of reasons. One of them, when the realization happened, the production casing was already being run. You don't want to sit with an open hole, you know, because that imports additional risks. So you do have risk tradeoffs to make once -- once they were in the position they were in. MR. GRIMSLEY: If the rig crew had recognized there was a problem, or the well site leader, with the negative pressure test, how long would it have taken to actually diagnosis and remediate whatever problem there might have been at the bottom of the well? MR. BLY: I don't know. It wouldn't take very long. If you realized that the bottom of the shoe wasn't holding, you would know you have a problem with your -- with that barrier. MR. GRIMSLEY: So if you know you have a problem with that barrier, how long, then, would it take to remediate or fix that problem?

presentation by Fred and his colleagues and the candor of the responses by the representatives of the firms, for which we are very appreciative. My fundamental takeaway from this is the enormous complexity and the subtlety of the activity that deepwater drilling constitutes and therefore the necessity to be careful about the temptation to come to a one-size-fits-all reaction to this individual incident. I will say I am concerned, and I think Sean's last questions were sort of leading to my concern, and that is there seemed to be a compulsion to get this rig completed in that April 19th, April 20th time period, and as a result of that, a number of things which might have made the outcome of this quite different were deferred or abandoned. I'm curious to find out why was this time period so central and why would it not have been appropriate to have deferred until you knew whether the cement was stable. Every test of the cement up until April 18th had been a failure. And you hadn't gotten

390
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

392
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

MR. BLY: I don't know that off the top of my head. MR. GRIMSLEY: That's it. CO-CHAIR REILLY: Thank you. MR. BARTLIT: We're done. I want to say that it's unusual to be questioned by relays of lawyers coming back over the same points, and, you know, it's normally not done. I think people need to understand that. The reason that it was done here is because we don't have subpoena power and we're still doing some probing. But I appreciate your willingness to sit here for the same areas coming at you from different directions. Thank you. CO-CHAIR REILLY: Senator Graham and I will now make closing comments. Senator Graham. CO-CHAIR GRAHAM: Thank you very much, Mr. Chairman. It's been a long day for the audience, the witnesses, the Commissioners, but I think a very full-some day marked with the quality of the

the April 18th, which was the only one that had an indication that it was defective. And the issue of channeling, which seemed to be a major issue -- Our friends from Halliburton talked about the consequences of not having appropriate security of the pipe could have been corrected in a few hours with substitution of the proper equipment for that which was considered to be inappropriate. So I would hope that tomorrow we might get on to the question of just what was driving for a decision on that particular narrow 24 hours. We've had repeatedly representations of examples of how we can do our job better if we can tell the American people that we've had access to all the people, all the information that could contribute to getting to the truth in this issue. With my friend Bill Rielly, we're going to make one last effort in the next few days to try to get subpoena authority for this Commission so that we can go to the American people in early January and say, this -- this is the best, most complete, objective, independent report of what happened and what we should do about it that is

PLANET DEPOS 888.433.3767 | WWW.PLANETDEPOS.COM

NATIONAL OIL SPILL COMMISSION MEETING CONDUCTED ON MONDAY, NOVEMBER 8, 2010
99 (Pages 393 to 396) 393
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

395
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

available to the American people with what we know as of today. I believe this hearing today has contributed to our, hopefully, ability to be persuasive on those who have thus far been reticent to give us that authority. CO-CHAIR REILLY: Thank you. Thank you, Bob. I would say that one of the questions I was asked at the press conference earlier was what can we say to the families who lost loved ones on the rig. With respect to what we now know and what caused their deaths, I think we have significantly -- our investigative team has significantly advanced our understanding, certainly far beyond where it was when we began this investigation. And I complement them on the thoroughness and the professionalism with which they conducted their work. As I think about the lessons for policy and for the Commission's recommendations, I'm conscious of the fact that what we heard about were apparently a lot of decisions that simply are difficult to explain

experienced two full months of a gushing well leading to 200 million gallons being spilled. We would not have seen Congress underfund the regulatory agency consistently over the better part of the last 20 years and the consequent failure of the MMS to rise to the challenges posed by technologies that simply became so sophisticated that they scarcely were any match for the people they were regulating. I think that some of those questions go beyond the purpose of the inquiry today. They are important for the future of the Commission's deliberations. We, I think, learned as much to be concerned about as to put at rest some of the questions that we previously raised. I think we did resolve quite a number of uncertainties and questions. I would myself repeat what Senator Graham said about our hope that we do finally get subpoena power and that whatever loose ends remain, that we can in the time remaining to us -- and we have to conclude our work by January 11 -- resolve even more of the doubts and uncertainties that continue. I will thank the panelists for the

394
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

396
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

or just look like they were plain wrong: the cement test failures, the negative test failure, the muds that were removed leading to more pressure in the well, underbalancing, the indication of a kick that was apparently missed or ignored, and the apparent failure to activate the diverter. When I think about what kinds of recommendations we could make with respect to either industry practice or governmental policy, we're going to have to think long and hard to go beyond some of the more obvious points here. The question I raised in my opening statement was whether there had been a systemic issue here or whether there this was an anomaly, a one-time event, the consequence of unusual circumstances and extraordinary challenges. Well, obviously the challenges were extraordinary. However, it's very difficult for me to conclude that there was not a culture of complacency affecting everything involved with this exercise, with this experience. If we had not been complacent, I suppose the most obvious reality is we would not have

presentations that they've made, the cooperation that the companies have engaged in with us, and say that I very much hope that as one more indication of good faith, you will go back and get agreement from your leaders, your CEOs, to support subpoena power for us. I think it's fully consistent with the directions that we have gone together with you and to the fairness and respect that our investigative team has paid to you. I hope that you agree. Well, we've been looking back today. Tomorrow morning we will look forward, and perhaps we will have a little less negative information, particularly as we learn about safety cultures and the kinds of experiences that companies have had in creating them and improving on them and making them exemplary performers. With that, I will conclude our conversation today. Thank you all for being most attentive. I must say, it wasn't difficult to be attentive to this gripping presentation which was so well presented. Thank you until tomorrow morning.

PLANET DEPOS 888.433.3767 | WWW.PLANETDEPOS.COM

NATIONAL OIL SPILL COMMISSION MEETING CONDUCTED ON MONDAY, NOVEMBER 8, 2010
100 (Pages 397 to 398) 397

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

(Whereupon, the proceedings were adjourned at 5:58 p.m.)

398
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

REPORTER'S CERTIFICATE I, the undersigned Registered Professional Reporter and officer before whom the foregoing proceedings were taken, do hereby certify that the foregoing transcript is a true and correct record of the proceedings; that said proceedings were taken by me stenographically and thereafter reduced to typewriting under my supervision. I further certify that I am not of counsel, not related to counsel or the parties hereto, and not in any way interested in the outcome of this matter. SUBSCRIBED AND SWORN TO under my hand this 11th day of November, 2010.

______________________ JOHN L. HARMONSON, RPR

PLANET DEPOS 888.433.3767 | WWW.PLANETDEPOS.COM

NATIONAL OIL SPILL COMISSION MEETING CONDUCTED ON TUESDAY, NOVEMBER 9, 2010
1 (Pages 1 to 4) 1 3

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

NATIONAL COMMISSION ON THE BP DEEPWATER HORIZON OIL SPILL AND OFFSHORE DRILLING ---------------------------x FIFTH MEETING, DAY TWO : Transcript of Proceedings : ---------------------------x Monday, November 9, 2010 Grand Hyatt Washington 1000 H Street, NW Washington, DC (202) 582-1234 9:03 a.m.

Job No.: 5958 Pages: 1 - 387 Reported by: Lee Bursten, RPR
2

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

CONTENTS Call to Order 5 Opening Remarks by Co-Chair Reilly 7 Opening Remarks by Co-Chair Graham 11 PANEL II(a) Presentation by Dr. Thomas 16 Presentation by Mr. Williams 27 Presentation by Mr. Lewis 48 Questions from the Commissioners 69 PANEL II(b) Presentation by Mr. Lewis 87 Presentation by Mr. Bourgoyne 115 Presentation by Dr. Smith 118 Questions from the Commissioners 173 PANEL III Presentation of Dr. Cruickshank 184 Questions from the Commissioners 209 PANEL IV Presentation of Mr. Bromwich 217 Questions from the Commissioners 226

4

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

National oil spill commission meeting held before:

SENATOR BOB GRAHAM, CO-CHAIR WILLIAM K. REILLY, CO-CHAIR FRANCES G. BEINECKE, MEMBER DONALD BOESCH, MEMBER TERRY D. GARCIA, MEMBER CHERRY A. MURRAY, MEMBER FRANCES ULMER, MEMBER and CHRIS SMITH, Designated Federal Official

Pursuant to Notice, before Lee Bursten, Registered Professional Reporter and Notary Public in and for the District of Columbia.

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

CONTENTS CONTINUED PANEL V Presentation of Mr. Tillerson 245 Questions from the Commissioners 264 Presentation by Mr. Odum 276 Questions from the Commissioners 288 Wrap-Up: Fred Bartlit and Richard Sears 308 Closing Remarks by Co-Chair Graham 363 Closing Remarks by Co-Chair Reilly 365 COMMENTS FROM THE PUBLIC By Mr. Clemens 370 By Mr. Hendricks 372 By Ms. Gowan 376 By Ms. Polsenberg 379 By Mr. Gravitz 382

PLANET DEPOS 888.433.3767 | WWW.PLANETDEPOS.COM

NATIONAL OIL SPILL COMISSION MEETING CONDUCTED ON TUESDAY, NOVEMBER 9, 2010
2 (Pages 5 to 8) 5
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

7
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

PROCEEDINGS MR. SMITH: Good morning, everybody, and welcome to day two of this fifth meeting on the National Commission on the BP Deepwater Horizon Oil Spill and Offshore Drilling. I'm hereby calling this meeting to order. My name is Chris Smith, and I am the Designated Federal Official for this Commission. And I'm also the Deputy Assistant Secretary for Oil and Natural Gas at the United States Department of Energy. I'll be guiding us through a busy day of panels today. Before we proceed, I would like to familiarize everybody with the safety procedures for this building. In case of emergency or fire, you'll see the exits to my left and your right. Please proceed out to the left and up the escalators. There will be a security personnel that will escort you out through the street. So that's the procedure in case of emergency. We would also like to ask everybody to turn your BlackBerrys or cell phones to vibrate or silent.

Management, Regulation & Enforcement, followed by a panel on industry safety culture, featuring panelists from Shell Oil Company and from ExxonMobil. Starting at 4:00 we'll be hearing wrap-up comments from the Commission's chief counsel, Mr. Fred Bartlit, and the senior science and engineering advisor, Richard Sears. Following closing remarks by our two co-chairs, there will be public comments made from 5:00 to 5:30. In addition, any member of the public who is wishing to make a public comment to this Commission may do so in writing via the Committee's website, which is www.oilspillcommission.gov. Again, that's www.oilspillcommission.gov. At this point I would like to hand the floor to our two co-chairmen, Senator Bob Graham and the Honorable Wayne Reilly. CO-CHAIR REILLY: Thank you, Chris, Mr. Chairman. Good morning. Presentations and examinations yesterday uncovered a suite of bad decisions: failed cement;

6
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

8
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

The President established this bipartisan Commission to determine the root causes of the BP Deepwater Horizon (inaudible) and provide recommendations on how we can prevent future accidents offshore and mitigate their impact should they occur. This committee is conducting its work in compliance with the Federal Advisory Committee Act which sets a high standard for openness and transparency. And as such, today's hearing will be held here in this public forum and broadcast live via video feed. Before I hand the event over to our two distinguished co-chairs, I would like to provide a quick summary of today's agenda. This morning we'll be hearing from a panel of experts on oil well drilling and operations, featuring panelists from Bayou Petrophysics, Shell Energy Resources, Seldovia Marine Services, and Louisiana State University. We'll break for lunch at 12:30, and at 1:00 we'll reconvene with two panels on regulation, featuring panelists from the Bureau of Ocean

tests; premature removal of mud underbalancing the well; a negative pressure test that failed, that was adjudged a success; apparent inattention, distraction, or misreading of a key indicator that gas was rising toward the rig. Our investigator team did not ascribe motive to any of those decisions, and reported that they found no evidence that those flawed decisions were made to save money. They didn't rule out cost. They just said they weren't prepared to attribute mercenary motives to men who made -- who cannot speak for themselves because they are not alive. But the story they told is ghastly. One bad call after another. Whatever else we learned and saw yesterday is emphatically not a culture of safety on that rig. I referred to a culture of complacency yesterday. And speaking for myself, all three companies we heard from displayed it. And to me, the fact that each company is responsible for one or more egregiously bad decisions, we're closing in on the answer to the question I posed at the outset of yesterday's

PLANET DEPOS 888.433.3767 | WWW.PLANETDEPOS.COM

NATIONAL OIL SPILL COMISSION MEETING CONDUCTED ON TUESDAY, NOVEMBER 9, 2010
3 (Pages 9 to 12) 9 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 11
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

hearing, and that is whether the Horizon Macondo disaster was a unique event, the result of some special challenges and particular circumstances, or indicates something larger, a systemic problem in the oil and gas industry. BP, Halliburton, and Transocean are major respected companies operating throughout the Gulf. And the evidence is that they are in need of top to bottom reform. We are aware of what appear to be a rush to completion at the Macondo well. One must ask where the drive came from that made people determine that they couldn't wait for sound cement or for the right centralizers. We know a safety culture must be led from the top and permeate a company. The Commission is looking beyond the rig, and not just to yesterday and what happened on April 20th, but to the months and years that preceded it. BP has been notoriously challenged on matters of process safety. Other companies may not be so challenged. And today we will hear from two whose reputations for safety and environmental protection are
10

CO-CHAIR GRAHAM: Thank you, Mr. Reilly. As Co-Chairman Reilly has just said, today we're going to be focusing on the future, not the past. But the future is always influenced by our past experiences, and so will we be. Yesterday we had a very detailed description of the well drilling operation, as well as the details of intercompany decisions and how those decisions played out and contributed to the ultimate disaster. There was in the news reports of yesterday's hearing a statement that I think was stated in too broad a term. The statement was that there was no evidence that there were conscious decisions made to trade off safety for profit. I agree with that statement as it relates to those things that occurred on the oil well rig itself, those men whose lives were going to be in the safety risk equation. There's certainly no evidence that they degraded their own mortality. I think the larger question is the one that Co-Chairman Reilly has just focused on, and that is, the reality is there were a series of

12
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

exemplary. They will tell us, I believe, that safety and efficiency reinforce one another, and that their safety cultures have contributed to their profitability. Both companies and their safety and risk management systems have received extensive examination by the Commission's staff in meetings I have attended. They are very impressive. Nevertheless, their rigs have been shut down over the summer just like those of other companies because of the performance to which they have not been implicated, the performance of BP, Transocean, and Halliburton. This has led us in the Commission to learn from the nuclear industry, which has an institute that promotes best practices, reinforces government regulation, and polices the laggards. So if yesterday we heard from the laggards, yesterday we looked back, today we hope to learn from the leaders and to look forward, and to look at companies which have learned from their own crises and disasters and rose to become standard bearers. Thank you.

almost inexplicable failures in the hours leading up to the disaster. There were a series of actions which are difficult to explain in this environment. To just select one, the fact that there were three different temporary abandonment plans adopted in the week before the final execution of the plan is illustrative of the fact, the lack of consistent planning for safety. The problem here is that there was a culture that did not promote safety, and that culture failed. Leaders did not take serious risks seriously enough, did not identify a risk that proved to be failing. Today we will be looking at the same issues as yesterday, but from a different perspective, including the perspective of some of those within the industry with the best reputations for an effective safety culture. I hope that in the course of this, that we might have some new perspectives on what happened at Macondo, what were the motivations that led to various decisions to be made. I might say one specific issue that I'm going to be interested in is

PLANET DEPOS 888.433.3767 | WWW.PLANETDEPOS.COM

NATIONAL OIL SPILL COMISSION MEETING CONDUCTED ON TUESDAY, NOVEMBER 9, 2010
4 (Pages 13 to 16) 13
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

15
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

why was the date April 20th so -- such a committed date. There were multiple reasons why it would have seemed prudent to have delayed the final actions until various safety measures, some of which were within a few hours of completion, could have been available for consideration as to the wisdom of moving forward with the next step. That is just one of the questions which I hope we'll get some additional intelligence upon today. With that, we will turn to the first component of our program today, which is Panel 2, experts on oil well drilling and operations. For this presentation, Mr. E.C. Thomas, consulting petrophysicist and owner of Bayou Petrophysics. Mr. Thomas. Also Mr. Steve Lewis, advanced drilling technology implementation engineer, Seldovia Marine Services. Mr. John Rogers Smith, associate professor of the department of petroleum engineering at LSU. And Darryl Bourgoyne, director of Louisiana State University, Petroleum Engineering Research and
14

and we will then have a second panel in the second morning session. While each of the experts is focused on a particular topic, we will be asking them to comment on other topics at various points during the presentation. And unlike yesterday, we expect the Commissioners, if you have questions of any of these experts, to please go ahead and ask those questions. Just to orient the Commission, the topics for discussion today for the first morning session will be deepwater geology and formation issues at Macondo, Mr. Thomas will be speaking principally to that issue; well design generally, not specifically at Macondo, Mr. Williams I believe will be speaking to that issue; and then finally, drilling operations and implementation of well design, not only generally but at Macondo. Mr. Lewis will be speaking to that issue. In the second morning session, just to give you a preview, we will have a discussion once again with Mr. Lewis on precementing issues that you saw some of in the presentation yesterday. We will
16

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

Technology Transfer Laboratory.

1 Mr. Thomas? 2 DR. THOMAS: Yes, sir. 3 CO-CHAIR GRAHAM: Do you have an opening 4 statement? 5 PANEL II(a) 6 EXPERTS ON OIL WELL DRILLING AND OPERATIONS 7 MR. GRIMSLEY: Commissioners, if I could 8 for a moment, there will actually be three panel 9 members this morning. We also have Charlie Williams 10 of the Shell company, who will be answering 11 questions today. 12 Just to give you a sense of what the 13 format will be, this morning we're going to hear 14 from five different deepwater and non-deepwater 15 drilling experts in two separate panels, on various 16 subjects relating to well design and deepwater 17 drilling issues generally, as well as Macondo and 18 the blowout. 19 We will be splitting the panels into two. 20 One in the first morning session, which includes the 21 individuals Commissioner Graham has just introduced, 22

also be speaking with some other experts on the negative pressure test, contemporary abandonment procedures. Finally, we'll be speaking with one of the experts on kick detection and response, both generally and at the Macondo well. MR. SANKAR: If it pleases the Commissioners, I'll begin the process by asking some questions of the experts that we have. We can switch over to my slide presentation here. Again, we have Dr. E.C. Thomas, who is a consulting physicist. He has 32 years of experience in the field; Charlie Williams is a scientist for well engineering and production technology for Shell; and Steve Lewis, with 40 years field experience in drilling operations in various places. I want to start by talking a little bit about deep water and what makes deep water special with Mr. Thomas. Mr. Thomas, what do you do for a living? DR. THOMAS: I'm a consulting petrophysicist. MR. SANKAR: Can you tell us a little

PLANET DEPOS 888.433.3767 | WWW.PLANETDEPOS.COM

NATIONAL OIL SPILL COMISSION MEETING CONDUCTED ON TUESDAY, NOVEMBER 9, 2010
5 (Pages 17 to 20) 17
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

19
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

about your experience in the oil industry? DR. THOMAS: I worked as a research (inaudible) physicist, then manager of that department. Then I went to New Orleans to be a field engineer. And then I served as the leader of those sections, went to head office training, and taught petrophysics in both beginning, intermediate, and advanced sessions, and then went to head office to be a technical advisor to the vice president of technology. MR. SANKAR: Does your experience include deep water experience? DR. THOMAS: Yes, it does. MR. SANKAR: I'm going to put up the slide we showed yesterday showing people what deep water might actually mean. So do you agree generally with this picture of where the boundary of deep water would be in the Gulf (inaudible)? Not to be sure about every specific, but that is the generally accepted boundary line? DR. THOMAS: The generally accepted boundary line is a thousand feet or more.
18

and that we end up with a much narrower margin between the pore pressure gradient and the fracture gradient of those rocks. MR. SANKAR: So am I right though that the narrow pore pressure and fracture gradient that you're talking about is some of the same factors that makes it so attractive? DR. THOMAS: It certainly provides the ability to have high reservoir energy and therefore high flow rates from the wells. MR. SANKAR: Can you give me a sense on order of magnitude level of the difference in production from a deepwater well to a well inside that line, a well on the shelf? DR. THOMAS: Roughly it's an order of magnitude, say, from 2,000 barrels a day to 20,000 barrels. MR. SANKAR: I'm going to move and show a slide about the actual pore pressure and fracture gradient at Macondo. Have you reviewed this chart or anything about the pore pressure and fracture gradient at Macondo?
20

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

MR. SANKAR: When did industry start moving to drill wells in deep water? DR. THOMAS: In the 1980s. MR. SANKAR: We've heard some suggestions in the media and elsewhere that one of the reasons the industry went to deep water is because of concerns raised by environmentalists and shallow water. Is that true in your view? DR. THOMAS: Absolutely not. MR. SANKAR: Why did the industry go to deep the water. DR. THOMAS: To put it simply, that's where the oil was. Unique geological opportunities there. MR. SANKAR: Speaking of those unique geological opportunities, I'm wondering if there's anything that comes attendant with those opportunities. Are there any challenges we face in deep water? DR. THOMAS: Absolutely. The good thing is that we have high porosity and high permeability. But that carries with it then rocks that are weaker,

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

DR. THOMAS: Yes, I have. MR. SANKAR: When you start drilling a well like Macondo, do you know ahead of time what the pore pressure and fracture gradient is going to look like? DR. THOMAS: We can only estimate it. MR. SANKAR: So do the numbers then change over the course of drilling the well? DR. THOMAS: Yes, they do. MR. SANKAR: How does that affect your operations at the well? DR. THOMAS: We continually have to monitor all the signs that give us the clues as to are we going to be exceeding the fracture gradient or not, being over pressure. And we have to stay within that window. MR. SANKAR: And how narrow was the window in numerical terms at Macondo? DR. THOMAS: Well, by the time they were at their final point, it was about 1.8 or 1.7 pounds per gallon mud equivalent. MR. SANKAR: And that's the difference

PLANET DEPOS 888.433.3767 | WWW.PLANETDEPOS.COM

NATIONAL OIL SPILL COMISSION MEETING CONDUCTED ON TUESDAY, NOVEMBER 9, 2010
6 (Pages 21 to 24) 21
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

23
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

between the pore pressure and the fracture gradient, am I correct? DR. THOMAS: That is correct. MR. SANKAR: I don't have a sense and many people don't have a sense of whether that is a small number. Is 1.8 a small number to you? DR. THOMAS: It's a small number for me. MR. SANKAR: What's the rule of thumb of what you would like to have? DR. THOMAS: Well, in general we would like it to be as large as Mother Nature can make it. But if we can, we are happy to have at least 2 pounds per gallon separating the two. MR. SANKAR: So what does having a 1.8 pound per gallon differential mean to you in terms of the complexity of the situation? DR. THOMAS: Basically they were getting very close to not being able to drill any further at all. MR. SANKAR: We discussed an e-mail yesterday from Mr. Bobby Bodek of BP where he talked about a lot of things. He was explaining to some of

"lost returns," we're talking about that the reservoir is taking mud. And to offset that, we inject materials to try to plug that up. Not only did they use regular lost circulation materials, but they used some very advanced polymer materials to try to plug it. MR. SANKAR: And is that a typical approach or appropriate approach to deal with lost returns? DR. THOMAS: Sure. Yes, it is. MR. SANKAR: Does it get you back to the original state before you had a fracture or lost returns? DR. THOMAS: Generally, no. Once you have parted the grains, then it makes it easier to do it the second time. MR. SANKAR: So would it be fair to say then that something like a Band-Aid, you're doing this but you're never going to be quite where you were before? DR. THOMAS: Yes, that's a good analogy. MR. SANKAR: But nevertheless, is having
24

22
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

the partners at the well the decision to (inaudible). It was implying that drilling ahead any further would unnecessarily jeopardize the wellbore. What does that mean to you? DR. THOMAS: In this case I think he was referring to the fact that they had planned to make this well a producer. Therefore, if they wanted to drill any further to their stated TD, they would have to set a liner. If they set a liner at this stage, then they would not have been able to have the wellbore size to make the (inaudible) that they wished to have. MR. SANKAR: Another issue we talked about yesterday was lost returns on April 3rd at this well. Are lost returns an indication of a narrow pore pressure and fracture gradient? DR. THOMAS: It is one, yes. MR. SANKAR: And how did they respond to the lost returns problem here at Macondo? On examination of the background (inaudible) because we like this. DR. THOMAS: As you can see, when we say

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

that fix in place, is that sufficient to allow you to continue drilling? DR. THOMAS: Yes, it is. MR. SANKAR: Do you have an opinion on whether the well was actually stable after they finished drilling at total depth, based on your review of the materials? DR. THOMAS: In my opinion it was stable. They had managed to stay within that window. They had TD, they had a stable well for four days. They logged and made several wiper trips in between to remove debris from the well, and they did that without any incident. MR. SANKAR: So when you say that the well was stable at this point, does it mean that they had solved their problems and that from then on it would have been okay? DR. THOMAS: Well, they had solved that problem of getting down. But they could never ignore the fact that they were in a geological environment that had a very narrow pore pressure/fracture gradient window.

PLANET DEPOS 888.433.3767 | WWW.PLANETDEPOS.COM

NATIONAL OIL SPILL COMISSION MEETING CONDUCTED ON TUESDAY, NOVEMBER 9, 2010
7 (Pages 25 to 28) 25
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

27 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

MR. SANKAR: And does that mean, for example, the later process, including cementing and running casings, those were issues they would have to consider in the process, correct? DR. THOMAS: Absolutely, they would be paramount. MR. SANKAR: How does having a narrow pore pressure/fracture gradient window affect the cement job? DR. THOMAS: They would have to pay particular attention that they not exceed the fracture gradient due to the weight of the cement. MR. SANKAR: And is that why they chose in your view to use the lighter foam cement? DR. THOMAS: I believe that's so. MR. SANKAR: And you heard me describe yesterday the cement job, based on e-mails and reports from BP. It's a complex cement job, and it is a complex wellbore. Have you evaluated in your professional experience wells that were as complicated as Macondo? DR. THOMAS: Yes, I have.

water wells produce more? DR. THOMAS: Well, that's just about the only undrilled acreage that's left. MR. SANKAR: Is it inevitable when you go to deep water that you're going to have safety of narrow pore pressure and fracture gradient concerns? DR. THOMAS: Yes, it is, because of the geological environment that has put the rocks in that particular location. MR. SANKAR: And given that environment, does that necessarily drive you to more complicated well designs as well? DR. THOMAS: Yes, it does. MR. SANKAR: Thank you, Mr. Thomas. I want to turn now to Charlie Williams from Shell. Let me first ask you, Charlie, what do you do for a living for Shell? MR. WILLIAMS: I'm a chief analyst, well engineering and production technology. I'm a technical consultant, technical advisor. I advise on different major projects, and I also do technical projects, and also advise on the R&D program.
28

26
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

MR. SANKAR: Were they drilled safely? DR. THOMAS: Yes, they were. MR. SANKAR: What is it that made Macondo complicated that was similar to those other wells? DR. THOMAS: Just to repeat myself, it is really the very narrow margin between pore pressure and fracture gradient, and the very high deliverability of these rocks. So it's a unique geological environment. MR. SANKAR: And on other wells that were drilled safety, they were able to negotiate these narrow pore pressure and fracture gradient pressures? DR. THOMAS: Yes, if you pay attention to the drilling, you can certainly do that. MR. SANKAR: If people want to go to the Gulf of Mexico to get more oil, where do they have to go? DR. THOMAS: They're going to have to go to deep water. MR. SANKAR: Is that because of the productivity issues you described earlier, deep

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

MR. SANKAR: At Shell, did you guys also have a similar view about the relative productivity of deepwater wells versus shelf wells? MR. WILLIAMS: Yes. MR. SANKAR: And do you consider deep water to be a more challenging drilling environment than shallow water? MR. WILLIAMS: In general. You can have challenging wells in either environment, but in general there's unique challenges to deep water. MR. SANKAR: And would you agree with Mr. Thomas's view that narrow pore pressure and fracture gradient is one of the challenges? MR. WILLIAMS: That's correct. MR. SANKAR: What are some of the other challenges of deep water? MR. WILLIAMS: There's many, but one aspect is, simply because it's the deep water, so you have currents, you have water depth, you have (inaudible) and conditions that you have to design for. So you end up with these dynamically positioned or anchored rigs.

PLANET DEPOS 888.433.3767 | WWW.PLANETDEPOS.COM

NATIONAL OIL SPILL COMISSION MEETING CONDUCTED ON TUESDAY, NOVEMBER 9, 2010
8 (Pages 29 to 32) 29 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 31
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

It's a challenge to have the technology to do all of that correctly. It's a challenge because you have this long riser. That's unique to deep water. In most wells, this mud system we talk about that's so important to have in the well and maintain correctly now exists not only in the well but in the riser. So managing mud in the riser and managing that total system, total circulating system is different, simply because you have 10,000 feet or 2,000 feet of riser to contend with. And then of course you have your log preventers on the ocean floor, quite a bit down. You have to do all of the work on those remotely with ROVs, and you have to pull up, if you want to do maintenance or repairs, you have to, you know, pull those back out of the water over a considerable distance in the water depth. So there's many challenges like that that aren't, of course, faced in shallow water or onshore. MR. SANKAR: And does Shell therefore use
30

employing? MR. WILLIAMS: Well, I would say a typical team with the operating staff would be as much as 20, and certainly at least 15. MR. SANKAR: And how long does it take this kind of team to put together a plan to drill a deepwater well? MR. WILLIAMS: Again, it depends whether you're doing an exploration well. You don't know as much about the environment, and you have to determine those things in advance versus the development well, where you already know a lot about the geology. But to answer the question, anywhere from eight months to as much as, you know, a year, depending on the complexity. MR. SANKAR: And during the course of that time, is it normal that the design would have changed? MR. WILLIAMS: Yes. MR. SANKAR: And how does Shell usually or how is -- in your best practice, what is the process for changing those designs during the course of that

32

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

different size teams on its deepwater wells than it does on the shallow water wells? MR. WILLIAMS: Yes. MR. SANKAR: How many people (inaudible) to work on a deepwater well? MR. WILLIAMS: So typically you'll have the three drilling engineers, you'll have a lead drilling engineer, (inaudible) drilling engineers. You'll have the people who are going to be operationally on the rig, so there's usually six operation staff, they're involved in claiming the wells also. Then you'll have on the order of six to ten subsurface people, so that will be petrophysical people, reservoir engineers, geophysicists, geologists, all the people who look at what the prospect looks like and actually help determine the location of where you're going to drill. And then there will be part-time people, technical people that come in, you know, as well. MR. SANKAR: So for full-time employees, typically in what range of people is Shell

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

process? MR. WILLIAMS: Well, it's a defined collaborative process. As I mentioned, the team is large, and so we bring in all these technical groups, including the operational people that are going to be involved in drilling the well. And they work, you know, they start out on, you know, what's the location of the well we're going to drill, and start looking at all of the complexities and challenges that we have to deal with in doing various designs. And they really hone that design over this period we talked about, and see if, you know, you could change the position of the well or you could change other aspects of the design, would it be more optimal to better meet the challenges. And that evolves over that period of time. And then at different stages in there we have even bigger reviews. We'll have a review -- recently I was involved in a review, we brought in the entire rig crew, the entire contract rig crew, and they also looked at the well design. And so we looked

PLANET DEPOS 888.433.3767 | WWW.PLANETDEPOS.COM

NATIONAL OIL SPILL COMISSION MEETING CONDUCTED ON TUESDAY, NOVEMBER 9, 2010
9 (Pages 33 to 36) 33 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 35

for this maximum, you know, collaborative, cooperative environment. At the end of that process, when we've chosen the design, then it's approved, and then it becomes, you know, the design prog that is used to execute the well. MR. SANKAR: So you do involve the rig crew then at least sometimes in the design process? MR. WILLIAMS: Correct. MR. SANKAR: How about the (inaudible)? MR. WILLIAMS: Correct. MR. SANKAR: When you make changes, (inaudible) I assume there are some kinds of changes that are minor, that don't require this kind of process? MR. WILLIAMS: Yes. As Dr. Thomas mentioned, as you're executing the well, there are certain things that you don't know exactly. For instance, you have good ways of predicting pore pressure, but it may be different as you drill. So as these things occur, there are certain operational things that you do, you might change the mud weight,
34

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

of our clear design philosophies is maintaining barriers. And that includes the barriers that go into temporary abandonment. MR. SANKAR: I want to put up a slide here that I think you gave me. We'll move the discussion over a little bit to the trapped annulus issue I described yesterday. Do we have the laser pointer somewhere? You can always count on your chief scientist to have a laser pointer. It's a little dim, but I think it will work for purposes of illustrating. The well we have, the well drawing we have here, which is very simplified drawing, does it show a trapped annulus and a deepwater well? MR. WILLIAMS: Yes, it does. It's that white space. It's above the cement, in between the two cross sections of pipe. MR. SANKAR: So it's that white section in there. Then this is the inside of the wellbore, and then there's a space outside between the inside casing and the next outside casing; is that right? MR. WILLIAMS: Yes.
36

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

two tenths of a pound up or down. There's certain routine operational changes. Those are made by the Shell -- the drill site leader makes those kinds of operational changes. If we make a change to the design basis, what we call the prognosis, that goes through the same approval process as approved in the original prog. And it goes through the same kind of consultation. In fact, the people in the office who did the original approval and the people in our remote operating centers are also consulted and changes are made, and in particular if it's changes that involve changing the permit. So we go back and do these approvals the same way that we approve the original design. MR. SANKAR: Would changing the procedures for a temporary abandonment process fall on one side or the other in that spectrum of major-minor? MR. WILLIAMS: Well, it would be particularly reviewing those kinds of changes, because it involves establishing barriers. And one

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

MR. SANKAR: So it's this space right here? MR. WILLIAMS: Correct. MR. SANKAR: This is the wellhead, this is the mud line, this is the ocean floor here, and this is the formation in which we're drilling? MR. WILLIAMS: And the important feature is that it's sealed at the bottom and sealed at the top. MR. SANKAR: So we discussed a little bit yesterday the prospect of heating this space up. Can you describe just briefly what makes that space heat up when you're producing deepwater well? MR. WILLIAMS: Yes. The temperature and the zone that you're producing, there's a temperature gradient that increases with depth, like a pressure gradient, so the heat in the zone you're producing, the temperature is higher than it is in the well. You put the well on production, it's bringing up this hot production, relatively hot production. And then the heat is transferred to that hot production in all of these tubulars that

PLANET DEPOS 888.433.3767 | WWW.PLANETDEPOS.COM

NATIONAL OIL SPILL COMISSION MEETING CONDUCTED ON TUESDAY, NOVEMBER 9, 2010
10 (Pages 37 to 40) 37 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 39
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

are on the outside of the well. So it heats up this space along with everything else. MR. SANKAR: So any deep well, regardless of whether it's deep water, can potentially have an annular pressure buildup issue? MR. WILLIAMS: Correct. What's unique in deep water is your ability to control that pressure, because of the seal that's in the wellhead housing. MR. SANKAR: We talked a little yesterday, you may have seen about some of the methods for controlling this annular pressure buildup. Are burst disks one of those methods? MR. WILLIAMS: Correct. MR. SANKAR: What do they actually do functionally? MR. WILLIAMS: They drill a hole in the tube in the casing, and into that insert this disk. And the thickness and shape of that disk is designed to fail at a certain pressure and then relieve that pressure into the next (inaudible) strength. MR. SANKAR: So it would be a hole,
38

is. MR. SANKAR: So burst disks are one method of dealing with annular pressure buildup. Are there other methods as well? MR. WILLIAMS: Yes, other techniques involve limiting the amount of heat that's transferred. One of the very common ones is to use insulated tubing. So the tubing that goes inside this final casing would be insulated, and that would allow the heat to travel with the production and limit the heat transfer into this annulus and thus the pressure buildup. Other possibilities are putting in insulating fluids in there to limit the heat transfer. And also you can put in different kinds of fluids and materials that have more compressibility than the liquid. MR. SANKAR: And that's in this space here, you would put in a compressible material, or you could put in compressible material? MR. WILLIAMS: Right. MR. SANKAR: Going to a different issue, I
40

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

functionally, in this casing here? MR. WILLIAMS: Yes. MR. SANKAR: And are there any drawbacks to using that kind of approach to managing annular pressure buildup? MR. WILLIAMS: You know, there's advantages and disadvantages to all of the techniques. One of the complications with using burst disk is that you're limited, the pressure in that casing is then limited to the pressure rating of the burst disk. So if you needed to have a higher pressure in that casing, then you will be limited by the burst disk, not by the design rating of the casing which was higher than the burst disk. MR. SANKAR: And why might you want to have a higher pressure in that casing? MR. WILLIAMS: If you had certain kinds of problems on the well where you wanted to circulate out for instance pressure that had gotten in there, and you wanted to circulate that out and rekill the annulus or refill the annulus with a control fluid, you could be limited by what pressure the burst disk

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

wonder if you can talk a little bit about the choice between using long strings and liners in deep well. Do you often have to make that choice, using a line or a long string? MR. WILLIAMS: Yes, it's a common decision. We use both long strings and liners and tiebacks. The choice is, like all the other design choices you make on the well, it depends upon, you know, many factors, but in particular it depends on the uniqueness and unique characteristics of a particular well that you're designing for. And some of the considerations are things like how long it would take you to run, you know, a long string versus a liner, compared to the condition of the well at the bottom of the hole. There are certain time dependent things that occur on the bottom hole condition. Whether you have high confidence that you can get a long string to run all the way to the bottom of the hole because you have to install this hanger on the top of the long string, and you want that. MR. SANKAR: So imagining this as the long

PLANET DEPOS 888.433.3767 | WWW.PLANETDEPOS.COM

NATIONAL OIL SPILL COMISSION MEETING CONDUCTED ON TUESDAY, NOVEMBER 9, 2010
11 (Pages 41 to 44) 41
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

43
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

string, you want to get that all the way to the bottom of the hole? MR. WILLIAMS: Right. You want the hanger to be in the right place. And sometimes you want to be able to rotate the pipe because of your cement design. And it's difficult to rotate a long string. It's easier to rotate a liner. MR. SANKAR: How does rotating the pipe help? MR. WILLIAMS: It helps, it really turbulizes the cement, and in certain cases to make the cement more effective. It's essentially a version of mixing a down hole. MR. SANKAR: So that sounds like it's an issue about cementing. Are there any other issues about cementing a long string versus cementing a liner? MR. WILLIAMS: The other key thing you look at in making this choice, it's another geometry consideration, if you circulate the cement down, you (inaudible). If you run a long string or if you run the liner, it's going to go through your drill
42

you're cementing, running the liner is in my view more straightforward on reestablishing the barriers. MR. SANKAR: Speaking of barriers, I want to ask you a little bit about the barriers that you can use during temporary abandonment phases of a well. In your view, when you temporarily abandon a well, what barriers would you put in place, and what should be in place? MR. WILLIAMS: Typically in wells in deep water, our procedure would be to have, you know, a plug near the bottom. When we say a plug, we normally send a mechanical plug with cement, and we would put that close to the bottom of the well. In particular we might want to put that, if we have a liner top, put that above the liner top. And then we put, you know, another one that's at an intermediate depth. Then we always have one at the surface. The one at the intermediate depth, we also have a mechanical device close to -- the one on the surface would have drillable, a resin type plug, and, you know, also cement again. So we would
44

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

string and your liner when you circulate it. And just the sizes and spaces affect the pressures that you circulate at. So you do look at that. But, you know, back to your question about the cement, you know, if you have concerns that you might lose returns or partially lose returns during your cement job, the thing about a liner is that you can reestablish your barrier by putting a mechanical ceiling device or multiple mechanical ceiling devices on top of the liner or squeeze, what we call squeeze cementing, which would be forcing cement down through the top of the liner. And this procedure is sometimes in my opinion more effective than perforating holes in the pipe, which would be your other alternative, even though it's done both ways. MR. SANKAR: Would you say then in general, if it's a situation where you have a tough cementing situation due to the formation, it's easier to cement the liner in than a long string? MR. WILLIAMS: If you're concerned that you will lose returns or might lose returns when

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

normally have in our temporary abandonment procedure, temporary abandon procedures, have three plugs, sometimes as many as five plugs, depending on what you want to isolate. MR. SANKAR: So you have as many as five plugs? MR. WILLIAMS: More typical would be three. MR. SANKAR: You spoke briefly, (inaudible) mechanical plugs and cement plugs. Would you explain briefly the difference between those? MR. WILLIAMS: I think people can see in the diagrams, about running a packer or a bridge plug, I think it's been referred to. These are not quite exactly the same, but for practical purposes it would be similar to what is called a bridge plug. So it would be a device that has slips on it that bite into the casing and hold it in place, then has a metallic mandrel inside it that allows you to put cement below it, and then you can close, there's an internal valve, you can put cement above.

PLANET DEPOS 888.433.3767 | WWW.PLANETDEPOS.COM

NATIONAL OIL SPILL COMISSION MEETING CONDUCTED ON TUESDAY, NOVEMBER 9, 2010
12 (Pages 45 to 48) 45
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

47 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

MR. SANKAR: Does it rely on cement to achieve the barrier? MR. WILLIAMS: No, you actually effectively have two. You have a mechanical barrier also (inaudible) in addition to the cement. MR. SANKAR: Does it make it easier then (inaudible) to use the cement plug as well? MR. WILLIAMS: It gives you a positive placement of your plug. Your top cement is on top of this mechanical device. Where it's placed, you know exactly where it's placed and exactly the dimensions of it. MR. SANKAR: Can you place mechanical plugs in mud? MR. WILLIAMS: Yes. MR. SANKAR: Can you place cement plugs in mud? MR. WILLIAMS: Yes. MR. SANKAR: Do you have a view as to whether cement plugs can equate with synthetic (inaudible)? MR. WILLIAMS: Yes.
46

is under control just by virtue of the kill weight mud in there. MR. SANKAR: Now, we've heard a lot, sort of back to a different point, we heard a lot -maybe you didn't hear a lot yesterday about negative test procedures. Do you consider a negative test procedure to be an important test of the well? MR. WILLIAMS: I do. MR. SANKAR: Do you do it on every well before you have the temporary abandonment? MR. WILLIAMS: No. MR. SANKAR: No? What kind of wells do you not do it on? MR. WILLIAMS: Our common practice on a typical deepwater well, where we drill this single well with a floater, we do this temporary abandonment, and then we leave the kill weight mud in the well and the plugs in the well. When we come back for the completion and drill out these plugs, then we do all of our displacement and testing at that point in time. You know, we test the plugs, but doing
48

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

MR. SANKAR: Is it as good as putting them in seawater? MR. WILLIAMS: Yes. You have to worry about or you have to be concerned about spacers. All that's done, it's done routinely in both. MR. SANKAR: So to explain that, how do you in your view use cement plugs safely in (inaudible) mud? MR. WILLIAMS: You want to have a spacer between the cement, in the synthetic oil based mud, to avoid the mixing. But, you know, it's routinely done on primary cementing, and similarly, you can routinely do it when you place these plugs, which is a common operation that's successful. MR. SANKAR: What's the advantage of leaving the mud in wellbore at the temporary abandonment phase? MR. WILLIAMS: When you're temporarily abandoning a well, obviously it's never underbalanced during this entire set of temporary abandonment procedures. You leave the kill weight mud in there. All these operations you do, the well

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

things like interbalance testing, we do later in the completion thing. So we leave it full of kill weight mud and full of the tested loads. MR. SANKAR: So you're leaving the well overbalanced at the temporary abandonment phase; is that correct? MR. WILLIAMS: Correct. That's our design choice. MR. SANKAR: Does this mean -- if your primary cement job fails in that kind of a situation, what's the effect of having a primary cement job failure? MR. WILLIAMS: If that happened during your temporary abandonment, the kill weight mud would keep the well under control. MR. SANKAR: Thanks, Mr. Williams. I'm going to move on now to Mr. Lewis and ask him a few questions. Mr. Williams was kind enough to come to us from Shell to explain some areas, technical areas in which he's highly experienced, but he has not reviewed the details of the Macondo well design of the Macondo process.

PLANET DEPOS 888.433.3767 | WWW.PLANETDEPOS.COM

NATIONAL OIL SPILL COMISSION MEETING CONDUCTED ON TUESDAY, NOVEMBER 9, 2010
13 (Pages 49 to 52) 49
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

51
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

Mr. Lewis, by contrast, has been retained by the Commission's investigative staff to look at precisely some of these issues. Mr. Lewis, what material relevant to the Macondo well design in daily drilling operations have you reviewed? MR. LEWIS: I've reviewed the complete sequence of drilling plans that were developed internally for this well, starting with the plans in 2009 before the (inaudible) moved off of the well, continuing through the final plans for the temporary abandonment, and the internal operations notes that were sent back and forth between the rig and the office in town for those modifications of the plan. I've also reviewed the applications for permit and drill and the applications for modifications that were submitted to the MMS. And I have reviewed the BP incident report, specifically with emphasis on their review of the casing design for the original well plan. I did that because that is the best access to the design, basis of design information that I could find.
50

MR. LEWIS: Yes, they are. MR. SANKAR: And was burst disks one of the methods that they used to control pressure buildup at Macondo? MR. LEWIS: Yes, the BP design includes (inaudible) burst disks. MR. SANKAR: And in your view what impact did burst disks have on the function of the well overall? MR. LEWIS: As Mr. Williams indicated, the burst disks essentially degrade the pressure, (inaudible) casing. And if nothing goes wrong, that's not a problem. But if you find yourself in a scenario where you have an unexpected, or suspected even, ingress of pressure into that annulus, actually into either annulus that that piece of casing is exposed to, you then have to rethink all of your actions at the lower pressure rating of the burst disk as opposed to the pressure rating of that string casing. Operationally, burst disks aren't a problem if nothing goes wrong.
52

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

I've also reviewed the daily drilling reports, but primarily in the EDR review, concentrated on the last month of the well, and emphasis on the last two weeks. MR. SANKAR: Are you familiar with the process of the design of the Macondo well? MR. LEWIS: I'm very familiar with the documentation of that design. I have some insight into the process, because the organization that Mr. Williams here described is similar to many that I've functioned in. And the basic philosophy of design as an iterative, circular process where one comes up with an initial design, evaluates the implication of that design on the overall objective of the well, are consistent within the industry. So yes, I would say I have an understanding of the design process. MR. SANKAR: And looking specifically at the design choices that they made, is it fair to say that you agree with Charles Williams, I should say, that there are lots of means of controlling annular pressure buildup in a well like this?

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

MR. SANKAR: So could burst disks have an impact on the way that you contain wells if something does go wrong? MR. LEWIS: Absolutely. MR. SANKAR: Are you familiar with the concept of a protective casing in deepwater wells? MR. LEWIS: I believe you're referring to what I call an intermediate casing. But yes, I understand that concept, and that basically is the -- by design, your last string of casing before your production casing would be a long string going from just above your production settlement all the way back to your wellhead without liners that (inaudible). MR. SANKAR: What's the value of that protective casing? MR. LEWIS: It gives you a more continuous pressure rating through that interval. And it eliminates the possibilities of failures at locations such as liner hangers. MR. SANKAR: Was there any indication in your review that BP used a protective casing at

PLANET DEPOS 888.433.3767 | WWW.PLANETDEPOS.COM

NATIONAL OIL SPILL COMISSION MEETING CONDUCTED ON TUESDAY, NOVEMBER 9, 2010
14 (Pages 53 to 56) 53 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 55
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

Macondo? MR. LEWIS: No, in this design there is no what we would call a protective casing under that definition. MR. SANKAR: We heard Mr. Williams describe his practice of leaving wells overbalanced when you're temporarily abandoning them. Have you reviewed the progress of the Macondo well, was BP planning to leave the well overbalanced at the time? MR. LEWIS: No, they were not. MR. SANKAR: Is there any downside to using the kill weight liner approach to overbalance the well (inaudible)? MR. LEWIS: There is no operational downside, no. There is a requirement for time and materials to accomplish that. MR. SANKAR: Is there any upside to leaving a well underbalanced? MR. LEWIS: In my mind there is extreme upside, in that you have the basic laws of physics then controlling that well for you, as opposed to a mechanical device that we have built. You're
54

plugs when one returns to the well. MR. SANKAR: I want to move over to talk a little bit about well design. When you in your practice first design a well, how much detail do you put into the original initial well design? MR. LEWIS: It's my feeling that a well design needs to include as much detail as is technically possible. The first thing one needs to define is what the well is going to accomplish. That tells you what the basic well should look like, whether it's an exploration well or a production well. And then each element of that well needs to go through a complete design cycle, rolling into the next element of the complete design cycle that goes back and checks the implications of that design, both on the previous portion and the future portion of the well. So it should be, and my experience is, a pretty complete engineering process. MR. SANKAR: And when you face unplanned events in the course of drilling a well, how does that affect your design?
56

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

hydrostatically overbalanced. You never bring the well under balance. It cannot flow. MR. SANKAR: I'm trying to clarify. I asked is there any advantage to leaving the well underbalanced. MR. LEWIS: No, none whatsoever. MR. SANKAR: You also heard Mr. Williams describe a number of plugs, mechanical and cement plugs that he would typically use in a well, a deepwater well. How many plugs did BP choose to use or plan to use in this well before it abandoned the well? MR. LEWIS: The design called for one. MR. SANKAR: Could they have used more cement plugs as well? MR. LEWIS: Yes, they could have. MR. SANKAR: Was there any operational downside to adding mechanical plugs or cement plugs as well? MR. LEWIS: The only operational downside becomes, once again, time and materials, and then the time and materials required to remove those

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

MR. LEWIS: Well, it implies the necessity to go back and completely reevaluate the design, both the portion of the well that's already been completed and what you had in mind for contingencies for compensating for those unplanned events. But you should go through that same design cycle of looking from top to bottom and looking at the entire life cycle of the well, considering the implications of those decisions. MR. SANKAR: So are you suggesting if you have an unplanned event and you have to deal with a (inaudible), you're functionally not redesigning the well from scratch, and that happens? MR. LEWIS: You're redesigning the well from that point forward, but back-checking against the previous design to make sure that those two are compatible. MR. SANKAR: Does having an unplanned event like lost returns, for example, impose any -make any changes from the way you think the rig crew should be operating in the field? MR. LEWIS: An unplanned event should

PLANET DEPOS 888.433.3767 | WWW.PLANETDEPOS.COM

NATIONAL OIL SPILL COMISSION MEETING CONDUCTED ON TUESDAY, NOVEMBER 9, 2010
15 (Pages 57 to 60) 57 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 59

reinforce the level of vigilance on the rig and hopefully move people into thinking -- looking ahead of the bid, thinking about what the next steps in the procedure are going to be, and making sure that they have the right equipment and the right personnel lined up to accomplish those steps. So an unplanned event, rather than focusing you on solving that immediate problem, should also broaden your scope of vision to looking towards the future of that well. MR. SANKAR: When you were talking about the initial design and the responses to unplanned events and the nature of the design re-review that you do at that point, what in your view are the benefits of this extended design review and reevaluation process? MR. LEWIS: The immediate benefit is to guarantee the continued operational efficiency of the well. You also have the opportunity at that point to bring in everyone else's eyes and see if, from the other aspects of their interest in the well, you have done anything that would compromise
58

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

production well. MR. SANKAR: And if you had additional detail, what would that have helped to do? MR. LEWIS: It would have helped, I believe, focus both the field and the office staff on the difficult and almost marginal nature of what they were attempting to accomplish here, brought in a heightened level of vigilance, allowed for proper timing to mobilize equipment and materials, and possibly allowed further discussion of options. MR. SANKAR: And that further discussion you talked about, you heard Mr. Williams describe the process of involving the well site leaders and the rig crew in those design discussions. Is that your view of how things should be done? MR. LEWIS: Absolutely. It's my feeling that the people executing that plan should understand the basis of the design that came from and be able to suggest an input modification, if from their perspective and experience they're appropriate. MR. SANKAR: Again, in your view, the
60

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

their efforts. MR. SANKAR: And how about operational logistics? MR. LEWIS: Operational logistics is half at least of drilling a well. And by that I mean you have to have the right equipment and the right people there at the right time to do the job. Unplanned events will imply an immediate need to reevaluate your entire logistic and material supply structure. MR. SANKAR: So stepping back to look at Macondo now, in your view, having reviewed the original design of the Macondo well, was it adequately detailed? MR. LEWIS: The initial design was adequately detailed for an exploration well. MR. SANKAR: And how about the later design that you saw as they evolved? MR. LEWIS: I felt that they were deficient in detail, especially in light of the fact that by that point it had become fairly apparent that this well was going to be completed as a

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

subsequent designs that BP did for this well, they included the kind of detail that would have allowed people in the field to think about those? MR. LEWIS: I do not believe they did. MR. SANKAR: You heard yesterday from some of the discussions, some of the explanations that I gave, that BP didn't run a number of additional centralizers at one point because they believed, or at least they didn't -- or believed they didn't have the right centralizers available. Having reviewed the process of the designs, was there enough time after BP chose to use the tapered long string to get enough centralizers of the proper kind? MR. LEWIS: If they had properly managed their materials and acquisition process, yes, they had time to do that. MR. SANKAR: So is it fair to say, based on your comments about the value of design, that the lack of centralizers could have been the result of an inadequate design process? MR. LEWIS: At least the result of inadequate communication about that design process,

PLANET DEPOS 888.433.3767 | WWW.PLANETDEPOS.COM

NATIONAL OIL SPILL COMISSION MEETING CONDUCTED ON TUESDAY, NOVEMBER 9, 2010
16 (Pages 61 to 64) 61 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 63
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

yes. MR. SANKAR: You also heard me talk about the modeling of the cement design that was done, and the decision not to rerun that model in the very last few days. Is there any reason in your view not to rerun that model in the last few days before cementing the well? MR. LEWIS: Actually in my view it's exactly the opposite. There's very many reasons to redo that design. MR. SANKAR: Now, in the last phase of the Macondo well, they were worrying about the lost returns and the pressures at the bottom of the well; is that correct? MR. LEWIS: (Inaudible). MR. SANKAR: In terms of well design, what are the different ways you can deal with those kinds of bottom hole pressures? MR. LEWIS: There are basically three elements you can manipulate to adjust bottom hole pressure, and those are the weight of your fluids, the density or fluids, the speed with which you pump
62

changing those cogs for the eventual (inaudible)? MR. LEWIS: Yes, sir. MR. SANKAR: You described I think an iterative design process here. I'm wondering if you think the iterative design process also applies to procedures that are used to build the well. MR. LEWIS: They should, yes. MR. SANKAR: And in particular, how about temporary abandonment procedures? MR. LEWIS: Oh, those definitely should be designed with the same degree of rigor. MR. SANKAR: Some of the slides that Sean showed the Commission yesterday discussed three different temporary abandonment procedures that were used at Macondo, and those three changes I think were all made within a week or so of the blowout. In your view, is that a lot of changes to be making in the final week? MR. LEWIS: That's an unusual number of changes to be make (inaudible) execution of a portion of the well that is, A, that critical, and B, then known to be a requirement for quite some

64
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

those fluids, which controls the frictional pressure that that's producing, and then you can adjust the geometry of the wellbore through your design. MR. SANKAR: So did you see evidence that BP was thinking at least about some of those things when they dealt with the bottom hole pressures? MR. WILLIAMS: Actually there's evidence that they thought about all those things. MR. SANKAR: Can adjusting one of these things influence other things? MR. LEWIS: Definitely. It will have influence on the other aspects. MR. SANKAR: And what happens when you -in your view of the design process, is it proper to reevaluate all the things at the same time when you change one of the variables? MR. LEWIS: Yes. Absolutely, it's critical. It's an interdependent system. It's a machine. And if you change one cog in that machine, you have to consider whether or not it meshes with the others. MR. SANKAR: Are there implications for

time. MR. SANKAR: So is there anything that would have prevented them from establishing their temporary abandonment procedures earlier in the life of the well? MR. LEWIS: No, there's not. MR. SANKAR: Do you think it would have helped if they had thought about it earlier? MR. LEWIS: It would have allowed people to give the matter more thought in a less time sensitive environment. And I think that would have been beneficial. MR. SANKAR: And more generally, what are some of the other things that you consider essential at the end of a well activity to make sure the process goes smoothly? MR. LEWIS: A well is actually a pressure vessel. The design function is to control and contain the fluids from accepting the (inaudible). And in the process, especially of a temporary abandonment, but in every aspect of the well construction process, containment is paramount.

PLANET DEPOS 888.433.3767 | WWW.PLANETDEPOS.COM

NATIONAL OIL SPILL COMISSION MEETING CONDUCTED ON TUESDAY, NOVEMBER 9, 2010
17 (Pages 65 to 68) 65 67
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

At the end of a well operation, there are many things that need to be done in order to move forward. And there's also a natural human tendency to look towards the future operation, and a tendency to lose focus on what we've just accomplished. It seems to me that at the end of a well it's even more important to maintain that vigilance and focus. MR. SANKAR: Have you ever worked on a well where you felt the vigilance and focus tapered off at the end of the well process? MR. LEWIS: Absolutely. MR. SANKAR: Is that just the way it works sometimes? MR. LEWIS: It's the way it works sometimes. It's also an extremely variable thing, it can occur in any organization that I've been associated with, on the basis of the flow of both that individual well operation and the other wells that the organization is dealing with at the same time. MR. SANKAR: I take it from your earlier comment that you would prefer a higher level of
66

deepwater drilling. An expert in drilling, yes. MR. SANKAR: Have you drilled in deep water? MR. LEWIS: Yes, I have. MR. SANKAR: Have you followed with professional interest the industry's move into deepwater well (inaudible)? MR. LEWIS: Yes, I have. MR. SANKAR: What's your view of the industry's ability to deal with the risks and challenges presented by deep water? MR. LEWIS: I'm confident that the industry can meet those risks. MR. SANKAR: And do you believe the industry has done everything it can to meet those risks? MR. LEWIS: No, I don't. I feel that the industry has done a very credible job, in fact a somewhat amazing job of being able to move into that environment and correctly, safely drill and complete a well. Where I feel we have been remiss is in our development of capability to respond to failures in
68

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

vigilance or at least maintain a high level of vigilance during those end of well procedures? MR. LEWIS: Yes, I would. MR. SANKAR: What do you have to do as an organization to make sure that you have that level of influence over (inaudible)? MR. LEWIS: You have to have, obviously, the resources in terms of manpower available. You need those same resources when you're designing a well. But you have to have the commitment to maintaining the mental focus on what you're doing. You have to have the commitment to paying attention to the present time as opposed to worrying too much about the future. MR. SANKAR: Is there in your view sometimes a tendency for engineers to move on, thinking about the next job, at the end of a well? MR. LEWIS: Yes, there is. It's a natural thing. MR. SANKAR: Mr. Lewis, do you consider yourself an expert in deepwater drilling? MR. LEWIS: Not really an expert in

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

that environment in a timely and safe manner. I also think that we have, as an industry, failed to cooperate internally in the development and adoption of appropriate best practice. This is a very, very competitive industry, more so than anything that I know of. Of course it's the one I know. But the willingness to exchange technical information is limited in that that technical information is a tool to use in our ultimate goal of basically making a profit for the owners. The need for that exchange of information, however, increases with the technical difficulty of our operations. The willingness as a group to define and adhere to best practices will require an acceptance across the industry spectrum of what is an acceptable level of risk. You had one example described today of what I consider a very conservative but very appropriate abandonment procedure, Mr. Williams's discussion there of multiple barriers and, more importantly, never leaving the well underbalanced. I have worked in areas where regulatorily you cannot

PLANET DEPOS 888.433.3767 | WWW.PLANETDEPOS.COM

NATIONAL OIL SPILL COMISSION MEETING CONDUCTED ON TUESDAY, NOVEMBER 9, 2010
18 (Pages 69 to 72) 69
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

71
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

leave the well underbalanced. MR. SANKAR: What are some of those areas? MR. LEWIS: Well, in Alaska, for instance, state regulations require it. And in Norway, where I have abandoned wells, you're required to leave wells overbalanced there also. It's not required in our environment in the Gulf of Mexico by either practice, generally accepted practice or regulation. So it's going to take in my mind an evolution of the industry to recognize and uniformly accept that the bar has to be raised here. We have to work to a higher standard of protection in this environment. MR. SANKAR: If those things are done, do you think deepwater wells can be drilled safely? MR. LEWIS: Yes, I do. MR. SANKAR: Thank you very much, Mr. Lewis. With that I'll ask the Commission if it has any questions. CO-CHAIR REILLY: Dr. Thomas, are there reservoirs with such concentrations, great
70

encounter that gradient problem internally right at the mud line, say, or at the formation, beginning of the formation? DR. THOMAS: That is correct. CO-CHAIR REILLY: Would you say anything about the formation of this well and the characteristics that it has and how it might compare to non-deepwater environments? We had a spill, a very long lasting one in Mexico, and that was in something like 140-50 feet of water, Ixtapa, some time ago. Is it your information that relatively shallow wells with formations relatively near the surface also can present just as many problems to manage as the deep ones? DR. THOMAS: I have not reviewed that particular well, so I don't know the environment that they were drilling in. There are always possible geological complications that if one doesn't pay attention to, then those sorts of things can happen. But I think in the environment that we are in, in deep water, the geological environment, while somewhat hostile, yet at the same time is very
72

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

concentrations of high pressure oil and gas that they just cannot be controlled when you tap into them? DR. THOMAS: Not to my knowledge. CO-CHAIR REILLY: So any pressure situation can be managed successfully to extract hydrocarbons? DR. THOMAS: I'm not prepared to say "any." But -CO-CHAIR REILLY: You have not seen any -DR. THOMAS: Not seen any evidence of any. CO-CHAIR REILLY: So there's no such thing as a well situation or a geological situation that poses too large a problem to even attempt to drill? DR. THOMAS: Not from a standpoint of pressure so far. But I can imagine cases where there might be very narrow margins between pore pressure and fracture gradient such that they could not be drilled. But you would stop before you got there. CO-CHAIR REILLY: And you would be able to go some distance before you got there, you would not

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

uniform. CO-CHAIR REILLY: Do you have any observations or impressions about Alaska and the challenges that are presented there? That's relatively shallow water and relatively high formations and low pressure. Are there issues there that you think with respect to drilling are particularly difficult or challenging? DR. THOMAS: I'm not an expert in Alaska, sir. I do know that they have drilled wells successfully there without any incident. So I wouldn't expect there to be any problem. But I would have to defer to someone who has actually worked that environment. I have not. CO-CHAIR REILLY: When you train people in industry, do you train -MR. SANKAR: I'm sorry to interrupt. We do have someone on the panel who has extensive experience in Alaska. You might want to direct it to Mr. Lewis. CO-CHAIR REILLY: Fair enough. MR. LEWIS: Operationally, below the BOP,

PLANET DEPOS 888.433.3767 | WWW.PLANETDEPOS.COM

NATIONAL OIL SPILL COMISSION MEETING CONDUCTED ON TUESDAY, NOVEMBER 9, 2010
19 (Pages 73 to 76) 73 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 75

Alaskan drilling is not unusually hazardous. In fact in many areas of the state, it's fairly straightforward. The mode environment does imply some constraints. Those can be managed through proper program planning and proper development of response technology. But on a subsurface basis, no, we're not -- in the areas which I have drilled, which are actually extensive, I've drilled all over the state, both onshore and offshore. It's not particularly tough country. CO-CHAIR REILLY: I want to come back to an issue -- I won't ask you, Mr. Williams, what do you think about Alaska drilling, I think I know. Dr. Thomas, when you train people in industry, when you train them to drill wells, do you highlight or establish routine responses or protocols for certain kinds of experiences that they might encounter? Do you teach them, for example, about how to recognize a kick in the system, just to cite one example? And I wonder if there are others. DR. THOMAS: I'm afraid I'm going to have
74

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

in the last week, and what implications that had for safety; and secondly, why the experienced drilling crew and all of the others who were on this rig did not see the pattern of anomalies, one after another after another after another, to get to that heightened sense of concern that they should have had. I know it's easy in retrospect, but Mr. Bartlit laid out a dozen things that should have put people on high alert, the final being the negative pressure test, which obviously failed but was declared positive. In retrospect, one has to sort of ask, for both of these mysteries, were they being driven by a sense of, we're in a hurry, we have to finish this job, let's get on with it, clouding one's ability to adequately assess the risk and put a premium on safety? I mean, that's one plausible answer. Perhaps there are others. And I would just ask you, from your many years of experience, Mr. Lewis, on rigs and doing drilling, why else than a sense of
76

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

to defer, simply because I train in petrophysics. I do not train people in drilling. So if someone else would like to answer that, I think they would be more qualified than I would. CO-CHAIR REILLY: No further questions, Mr. Chairman. CO-CHAIR GRAHAM: Are there other questions? MS. ULMER: Thank you to the panel for providing additional insight for us this morning, I sincerely appreciate it. I found it very useful in putting into perspective some of the things we heard yesterday. So thank you very much. I direct this question to Mr. Lewis, but if others on the panel wish to address that, that would be fine. Yesterday we heard many things that raised questions that were not directly answered. But of all of them, the two mysteries that were described, I would like to put before you and ask you if you have opinions about them. The first mystery was why in the world BP changed its temporary abandonment plan three times

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

let's-get-this-job-over-with would drive people to change the plan at the last minute, given how important that plan was to the safety of this temporary abandonment? And why else would the rig crew ignore all of these anomalies that should have put them on high alert? MR. LEWIS: We -- we're going to do this. I can speak both generically to the drilling command and control structure. And I can speak to a certain extent to BP, in that I have worked for BP both as a well site leader and a drilling engineer. I am around BP continuously on the north slope of Alaska, they dominate what goes on in the industry there. And I have read a number of internal communications from both field level to fairly senior management from the last year inside the BP structure with respect to the Macondo well. And I've been there and done this in terms of designing drilling and finishing a well. Your question as to the changes of the abandonment plan over time, the only explanation I have for that is that it's a detail of the plan that

PLANET DEPOS 888.433.3767 | WWW.PLANETDEPOS.COM

NATIONAL OIL SPILL COMISSION MEETING CONDUCTED ON TUESDAY, NOVEMBER 9, 2010
20 (Pages 77 to 80) 77 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 79
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

was not necessarily known to be required when they first started the well. This was an exploration well with a possible production completion. My suspicion is that -- well, it's not my suspicion, it's my belief that that detail was left unattended to, probably due to the lack of availability of mental resources, engineering time, until it became apparent that it was going to happen, and then there was what I would have to describe as scrambling to catch up on that design. That opinion is based largely on the documents that I see, and the fact that there was no real detail of abandonment in the initial plans. And then the final plans and the operations note, while the engineering may have been adequate in those, the operational details in my mind was totally deficient. What was sent to the rig did not include a procedure. It was simply, accomplish these major steps however you feel you wanted to. That's totally inadequate in this environment. The only thing I can attribute that to is lack of engineering resources and lack of command
78

The -- whether or not that concern at senior management level was verbally communicated down to people in the field, I cannot say. But the pressure to make progress is actually inherent in the business. And it takes a stated, conscious management presence to counter that. As I mentioned, we're very competitive. Drillers -drillers drill against each other. We want to be the fastest, best driller there is. And our natural tendency is to want to be making progress to that end. Sometimes we focus too narrowly on the immediate step and don't step back and look at the complexity of these wells. In this new -- I say "new," in the last 20 years, involvement of the design team and the field team together provides a check and balance against that tendency. As was said, none of these guys made a conscious decision that, okay, I'm going to do this because it's faster but it's not as safe. I don't believe they did that. But the overall impetus to make progress and to in some cases of design and
80

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

and control of the process, process control breakdown. The question of why the people in the field did not (inaudible) to this sequence of questionable events and raised flags is much more difficult to address. And many of those individuals were killed in the incident. And then other individuals whose positions one would think would require that cognitive process have not been available for answering those questions. I know that there was pressure on this group of people to get done and move on. I have seen internal BP communications at senior management level inquiring as to whether or not the well was going to be done in time, whether or not the rig would be released if time. And by "in time" in this case, they had commitments to wells, regulatory commitments that were required to maintain in one case viable lease -- that required well work, the rig was needed on those wells to protect the assets of that other lease.

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

execution choose a route that was quicker, that involved fewer steps, that part of it does come from management. So I can't tell you why they continued, step after step after step to miss the point, to not go into high alert, to not go shutter down, we don't know what's going on here, we have to figure this out. I can't tell you that. But I can tell you that there is continuous pressure to move forward, to make progress, get it done. MS. ULMER: Mr. Lewis, I appreciate your candor. I guess for those of us who have never worked on a rig, we can only imagine all of the complexities of these things that are happening all at the same time, as well as the pressure to get it done. What I am curious about, and particularly because our Commission's mission is to really think about what we can recommend that will change the balance between the pressure to get it done and the pressure to do it right and be safe, is I'm trying to think through what it is that could be required,

PLANET DEPOS 888.433.3767 | WWW.PLANETDEPOS.COM

NATIONAL OIL SPILL COMISSION MEETING CONDUCTED ON TUESDAY, NOVEMBER 9, 2010
21 (Pages 81 to 84) 81 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 83 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

either at the industry by way of best practices, as you've described, or by government in terms of regulation that would up the ante on the safety equivalency. Now, you mentioned that in Alaska and in Norway, you're required to leave wells overbalanced. Obviously that must be a regulation that doesn't apply in the Gulf of Mexico. Do you think that would be helpful, that kind of thing, not necessarily just the overbalance, but that kind of additional requirement by government to put additional pressure on the industry to be able to ensure the safety when these wells get closed down? MR. LEWIS: I think there's a balancing point. I think that some of the MMS regulations -I'm sorry, I'm still stuck in some of the old terminology here, I'm not even sure I know the acronym for the agency. But their regulations I feel are inadequately specific both in definition of the intent of some of them, but more importantly in their continuous use of qualifications where they say, "or as the operator in their best judgment
82

I think that a very important part of today will be this afternoon, when we hear from two of the major companies with respect to their safety cultures. And it might be interesting to ask those people how they feel about melding that with a regulatory environment that together induces best practices. MS. ULMER: Thank you. MR. WILLIAMS: I'm just going to add a comment on that. I agree we have to have a regulatory requirement that has some requirements, obviously, some specific requirements. I think it also needs to be a performance based, because I think that, you know, to deliver the kind of safety performance and industry performance that we want, there has to be this integration of safety culture, and the specifics of safety. You have to have the safety culture of performance. And just like Mr. Lewis's discussion about drilling fast, certainly one of the key things is optimally drilling. But as we all know, if you try and drill too fast, you end up having hole problems
84

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

decides." An example is maximum anticipated surface pressure. It says you have to bring a casing design and show us what the maximum anticipated surface pressure is. And then it never says anything about how you calculate maximum anticipated surface pressure. And there are an innumerable array of assumptions that you can use in that calculation which will drive that number from either total reservoir pressure or total formation fracture pressure to zero, depending on how you want to play with the input. Now, the regulation says that the MMS will review your data and see if it's appropriate. The reality is that they have neither the staff nor the tools nor the financing to do that. If we're going to talk about increased regulation, we need to talk first about increased financing and increased staffing and increased technical competence of the people who are charged with enforcing these regulations.

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

and lost returns and stuck pipe. And actually it not only affects the safety, it actually then ultimately affects your efficiency. So I think it was mentioned earlier, I think Chairman Reilly mentioned it, that good performance also is good safety and good safety culture. So I think it has to be a combination of those two things. MR. BOESCH: Mr. Lewis, you indicated that one reason for the change in plans for the temporary abandonment within the last week might have been as a result of the lack of previous attention to converting this well, making sure this well was available as a production well. When in the process of drilling this well was it determined that this would be left as a production well? MR. LEWIS: Well, that final decision would not have been made, would not have been finalized until they had evaluated the logging data that was run after they TD'd the well. However, I believe that there was a fair degree of confidence in their geophysical interpretation that it would be

PLANET DEPOS 888.433.3767 | WWW.PLANETDEPOS.COM

NATIONAL OIL SPILL COMISSION MEETING CONDUCTED ON TUESDAY, NOVEMBER 9, 2010
22 (Pages 85 to 88) 85 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 87
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

completed. The drilling of that section of the well would have given you your preliminary confirmation of that, in that we are now essentially logging while drilling, to a certain extent. However, the point of this is that the amount of time available from that decision point, which was ten days, two weeks from the failure, is totally inadequate to obtain the materials necessary to achieve this abandonment, totally inadequate to achieve the materials to complete the well with. You're talking lead times here of months, to six or eight months or a year on some of these items. If you have not designed for them before that point in time, not only are you going to be rushed with a design, you're going to be running in circles trying to find stuff to do it. I may have lost the thrust of your question there. Have I adequately covered that point? MR. BOESCH: I think you've responded that it was not until maybe two weeks prior to the incident that the determination was -- the
86

which it was used. MR. BOESCH: Was there material suitable as a spacer that is more regularly -- a type that is more regularly in use as a spacer available on the rig? MR. LEWIS: There most likely was. I would expect there to have been. Normally what you would have used is simply a viscosified fluid, possibly weighted. A standard procedure is to use a spacer that's about halfway between the fluid you're displacing and the other fluid in terms of density. Your weighting materials, your viscosifiers and the base fluid that you want to build that spacer out of all showed available on the rig, yes. MR. BOESCH: Thank you. CO-CHAIR GRAHAM: We're now going to take a ten-minute break. We'll reconvene at 10:48. (Recess.) PANEL II(b) EXPERTS ON OIL WELL DRILLING AND OPERATIONS MR. GRIMSLEY: We have a couple of additional distinguished experts for our panel, as

88
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

information was available to make the determination that this would be a production well. And I think I've gotten that from your answer. MR. LEWIS: Yes. MR. BOESCH: And what you also said, though, is that it was not adequate anticipation of that possibility to accumulate the required material and the equipment, to do that in a comprehensive way. MR. LEWIS: My point there was, because of those requirements, this design should have been pretty well in place, well before that (inaudible). The apparent shuffling and scrambling was not really necessary. And there was one thing that was thrown into this design at the last minute, and that's the use of this excess loss circulation material as a spacer. That decision was a last minute change and was driven by an attempt to simplify a disposal issue that would have been considered a hazardous waste, and required shoreside transportation and disposal if they had not been used in the manner in

well as Mr. Lewis, who is making an encore appearance on our second panel. He'll be talking about some additional issues. This panel may be more technical than the first. We're going to be asking these individuals -- take that down, please. Can we go to my computer? We're going to have these individuals testifying about some more technical issues relating to the Macondo well, and some of the things we heard about yesterday that we didn't have the opportunity to discuss with some of the representatives from the companies. So I would like to introduce our new panel members, first Dr. John Smith. He is an associate professor of petroleum engineering. He's been on the faculty at LSU since 1998. He teaches courses on drilling engineering and operations and well control. He has 20 plus years of experience as an engineer and researcher, primarily offshore, and with a drilling focus. He is a member of the IADC Well Control Committee. Just so you know, the presentation

PLANET DEPOS 888.433.3767 | WWW.PLANETDEPOS.COM

NATIONAL OIL SPILL COMISSION MEETING CONDUCTED ON TUESDAY, NOVEMBER 9, 2010
23 (Pages 89 to 92) 89 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 91
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

software we use is Trial Max 6. There is a free advertisement for it. Okay. Back to Professor Smith's bio. I didn't want you to see the e-mails popping up in the bottom corner, so I turned that off. Professor Smith is also a member of the IADC Well Control Committee. He has testified and written reports for the joint BOEM/U.S. Coast Guard investigation into the BP oil spill. So beyond testifying today for this Commission, he has already testified for the joint investigation panel looking into the oil spill, and he's written extensively on, among other subjects, the negative pressure test at the Macondo well. Our second new panelist is Darryl Bourgoyne. He is also at LSU. He is director of a full scale petroleum engineering laboratory at LSU, and has been so for the last eight years. He instructs courses in well control at LSU, both undergraduate and industry courses. He holds an MS and BS in petroleum engineering degrees from LSU. He also has eight years' experience
90

that, as we showed yesterday, is to drop a ball into the tube, pressure up, then at some point when the pressure gets hot enough, the tube should come through and these valves convert to one-way valves. So that's just to reorient you to understand what float valves and float conversion is. Is that about accurate, Mr. Lewis, my description of the float equipment and the float valves? MR. LEWIS: It's a good start. MR. GRIMSLEY: All right. What does it mean, to say "float valve conversion"? MR. LEWIS: Float valve conversion is what you've just described there of converting from auto-fill, which simply means that the valve is held open to its function as a one-way check valve. MR. GRIMSLEY: How is an auto-fill float valve converted? MR. LEWIS: This particular design is simply a differential pressure across that tube, which causes some pins -- and show them if you want to, that assembly that is unsheared, the larger
92

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

relating to deepwater well control operations and modeling before joining the LSU faculty, much of that in the Gulf of Mexico. He spent three years as a well site leader for Chevron in the Gulf of Mexico. So we're going to be asking these panelists questions on a variety of subjects, but each of them has been prepared to focus on one. So I would like to start with Mr. Lewis and talk a little bit about float equipment. You'll recall that yesterday, during the presentation, Fred discussed the troubles that the crew had at the Macondo well actually converting the float equipment. And as you recall, the float equipment are basically two what are otherwise one-way valves that have what's called an auto-fill tube in them. And that auto-fill tube allows mud to go through the tube when the casing of the valves is actually running into the hole. But once the casing has actually landed at bottom, you want to convert these valves to a one-way valve. The way to do

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

portion there has shear pins in it that will break at a given stress that's applied by the pressure on it. How you adjust the shear pressure for those is either by adjusting the number or the strength of the pins or changing the size of the orifices at the bottom. So it's an adjustable tool. But you have to make that decision in advance, of course, of putting it together in your assembly. MR. GRIMSLEY: So once the float equipment is actually at the bottom, and you're at the point where you want to convert the float equipment, this ball which has been seated up here, (inaudible) drops down, and then you apply the pressure to that ball, and when the pressure gets great enough, it will actually convert the equipment? MR. LEWIS: Actually what you apply is a differential pressure across the hole. That differential pressure is created by flow through the floats there that are above the hole. Until you have flow through those ports, there is no differential pressure.

PLANET DEPOS 888.433.3767 | WWW.PLANETDEPOS.COM

NATIONAL OIL SPILL COMISSION MEETING CONDUCTED ON TUESDAY, NOVEMBER 9, 2010
24 (Pages 93 to 96) 93 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 95 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

MR. GRIMSLEY: How much differential pressure was necessary to convert the float valves used at Macondo? MR. LEWIS: This particular tool by the manufacturers, this is a (inaudible) tool, but their data tables provided, in the graphical presentation it would have taken between 5 and 700 PSI to convert this valve. The equation that they provide also is a basic fluid-dynamics, friction-loss-through-nozzle type calculation. And I did those numbers with the mud weight in the hole at the time and calculated right at 600 PSI. MR. GRIMSLEY: 600 PSI is what differential pressure you would expect to convert float equipment that was used at Macondo? MR. LEWIS: Yes, sir. MR. GRIMSLEY: Now, looking at this float equipment, when you drop the ball, it plugs up this hole in the bottom. But there are these two additional holes on the side through which mud can flow; is that right? MR. LEWIS: Yes, that's what I was
94

minute. MR. GRIMSLEY: Did at any point in time the flow rate at Macondo exceed six barrels per minute? MR. LEWIS: Subsequent to running the casing, no. MR. GRIMSLEY: So at some point when the crew was trying to convert the float equipment, we saw yesterday they pressured up to 3142 PSI, do you remember that? MR. LEWIS: Yes, that's correct, they did. MR. GRIMSLEY: And it was at that point that they reestablished circulation in the system? MR. LEWIS: That's correct. MR. GRIMSLEY: When they were trying to convert and pressuring up to 3142 PSI, was there any flow in the system at that point? MR. LEWIS: There would have been none. MR. GRIMSLEY: So there would have been zero barrels per minute through those holes? MR. LEWIS: That would be correct. MR. GRIMSLEY: Could the float equipment
96

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

describing, the float boards. MR. GRIMSLEY: How does one obtain 600 PSI pressure when you have these holes on the side through which mud can flow? MR. LEWIS: Well, as I said, you have to pump mud through those holes at at least 600 gallons per minute if not more to guarantee that you have sheared the pins and therefore converted the valve. MR. GRIMSLEY: So is the flow rate more important then than the pressure that's actually being asserted by the pump? MR. LEWIS: The flow rate is the only thing that's important. The pressure at the surface is actually irrelevant. The mechanism that activates it, as I said, is differential pressure. The tool in fact is, as described and designated, a flow activated pull-open. MR. GRIMSLEY: So just to make clear, what flow rate would you have expected would have been necessary at Macondo to convert these float valves from two-way valves to one-way valves? MR. LEWIS: A minimum of six barrels per

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

have converted with zero barrels a minute through those holes? MR. LEWIS: Not by design, no. MR. GRIMSLEY: And then you said afterward, what was the maximum flow rate achieved after the circulation was reestablished? MR. LEWIS: The maximum flow rate that I saw in the data from the rig pumps was four barrels per minute, and the maximum rate achieved that I saw from the cementing record was 4.3 barrels per minute. MR. GRIMSLEY: Did the flow rate ever exceed, at any point in time after the attempted conversion, six barrels per minute? MR. LEWIS: No, it did not. MR. GRIMSLEY: Mr. Lewis, do you have an opinion sitting here today as to whether the float equipment at the Macondo well converted? MR. LEWIS: It's my opinion that it probably did not. There is one possible mechanism that might have allowed it to convert that I can think of; that is that when, under the presumption

PLANET DEPOS 888.433.3767 | WWW.PLANETDEPOS.COM

NATIONAL OIL SPILL COMISSION MEETING CONDUCTED ON TUESDAY, NOVEMBER 9, 2010
25 (Pages 97 to 100) 97 99
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

that the obstruction was below the flow, the path was cleared, and circulation was established, the surge of pressure might have been adequate to give you that much differential. BP in their report said that they were doing further investigation into that possibility. And I would be very interested to see the results of that. MR. GRIMSLEY: But just so I understand it, is it your opinion today that it's more likely than not that the flow equipment did not convert because the flow rate never exceeded six barrels per minute at Macondo? MR. LEWIS: I would say the preponderance of the evidence would indicate that, yes. MR. GRIMSLEY: Okay. What are the implications for the well and the cement job if in fact the float equipment did not convert? MR. LEWIS: The function of this type of float equipment primarily is to isolate the cement once it's been put in place, to allow it to stay static while it's setting up (inaudible) compressive
98

issue is kind of academic in that they do to a certain extent impede flow. And if they have not converted, that element of protective barrier is not achieved. MR. GRIMSLEY: So to the extent these valves being closed might have prevented hydrocarbons from migrating up the center of the casing, when they are not closed, they are no longer a barrier? MR. LEWIS: That's correct. MR. GRIMSLEY: So we have two implications that you've described if these float valves are not converted; one is it could impact negatively the cement job, and two, it eliminates any argument that these valves are a barrier to flow? MR. LEWIS: That's true. MR. GRIMSLEY: Now, you said that the flow rate never exceeded the six barrels per minute necessary to convert the flow valves at Macondo, right? MR. LEWIS: By the record, that's correct. MR. GRIMSLEY: Have you seen evidence to

100

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

strength, and preventing it from blowing back into the well due to the hydrostatic (inaudible). MR. GRIMSLEY: Let's look at this animation here of the cement job, which is what the cement job should look like at the end when the plugs have bumped. So what are you saying the implication would be if these float valves were open and still had that tube? MR. LEWIS: It would allow the cement to U-Tube back in place. MR. GRIMSLEY: What would that mean for the cement job? MR. LEWIS: That would present the opportunity for further contamination of the cement, and that would be the primary risk. MR. GRIMSLEY: Would that be a concern? MR. LEWIS: It should be, yes. MR. GRIMSLEY: What implications would there be for the well if these float valves had not converted, besides implications for the cement job? MR. LEWIS: There's debate as to whether or not float valves are a mechanical barrier. The

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

suggest that BP knew at the time that they would have needed to achieve at least six barrels per minute of flow in order to convert that float equipment? MR. LEWIS: Yes, I have. MR. GRIMSLEY: What evidence have you seen? MR. LEWIS: In the precementing portion of their well completion procedure, it specifically states that the rate required to convert the valves is greater than four barrels a minute by a factor of two. They say eight barrels. That's consistent with the common industry practice of making sure that you achieve adequate pressure and flow rates to function down the hole. MR. GRIMSLEY: So I'm putting up on the screen a page from BP's April 15th drill plan. Is this the drill plan you're talking about? MR. LEWIS: Yes, that's exactly the plan I was talking about. MR. GRIMSLEY: I've highlighted bullet 11. It says right here that BP intended to use at least

PLANET DEPOS 888.433.3767 | WWW.PLANETDEPOS.COM

NATIONAL OIL SPILL COMISSION MEETING CONDUCTED ON TUESDAY, NOVEMBER 9, 2010
26 (Pages 101 to 104) 101
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

103 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

eight barrels per minute of flow to convert the float equipment, correct? MR. LEWIS: That's correct. MR. GRIMSLEY: Again, is there any evidence that BP ever achieved even six barrels per minute of flow that might have converted the float equipment? MR. LEWIS: No, there is not, that I see. MR. GRIMSLEY: Would it have been prudent in your mind for the operator to insist that at least at some point during attempting to convert the float equipment, the flow rate would have exceeded the six barrels per minute that you had identified earlier? MR. LEWIS: Given the equipment that they ran in the well, that's actually a functional requirement. A more prudent approach would have been to have redesigned, re-specified this piece of equipment to a lower shearing pressure, once the narrow pore pressure/fracture gradient had been identified. This equipment can be modified, as I said, such that it would have sheared at the sorts
102

maximum (inaudible). MR. GRIMSLEY: If we look down further in the document, the line we've just been discussing which talks about getting the flow rates of eight barrels per minute, and then we move down to cementing the production casing, what flow rates are identified down here in regard to actually setting the cement? MR. LEWIS: Well, as you can see there, it's three barrels a minute, four and two. MR. GRIMSLEY: And at those flow rates, would the float equipment have converted? MR. LEWIS: Not as I understand the piece of equipment that was run, no. MR. GRIMSLEY: Is there any way in your mind to reconcile the fact that in this document is this line number 11, which says eight barrels per minute of flow rate is needed to convert the float equipment, with these numbers down here, saying circulation rate should be kept below four barrels per minute during the cement job? MR. LEWIS: No.
104

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

of flow rates that they ended up using. MR. GRIMSLEY: So there's actually additional equipment that would have sheared in a much lower flow rate than eight barrels per minute? MR. LEWIS: It's the same equipment adjusted to a lower shear pressure. MR. GRIMSLEY: Do you have any sense why BP did not want the flow rate to reach six barrels per minute, much less eight barrels per minute, during the conversion to the subsequent cement job? MR. LEWIS: Yes, that's directly related to (inaudible) equivalent (inaudible) 14.5 barrels per gallon range. MR. GRIMSLEY: Do you know what maximum flow rate BP had identified for circulation prior to and during the cement job? MR. LEWIS: I don't know what they felt the maximum might actually possibly be. I do know from the cement OptiCem calculation runs that they completed their design based on four barrels per minute. So I would have to infer from that that it was their belief that four barrels per minute was a

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

MR. GRIMSLEY: Is that just a mistake of some sort? MR. LEWIS: It strikes me as being a mistake, yes. MR. GRIMSLEY: Now, if the crew or the individuals on the rig, in this case BP, had any suspicion that the float valves had not converted, what action in your opinion should have been taken to either mitigate or remediate the situation? MR. LEWIS: The standard practice, if your floats have failed, is that you apply a little bit of pressure, by "a little bit" maybe a few hundred pounds, to your mud column and inside of the wells above that float. And then you lock that pressure in and you hold it in place while the cement has the opportunity to set. MR. GRIMSLEY: So what you're doing in that situation is you are accounting for the fact that the valves have not closed, so cement could come back up through the valves, so you're putting a little bit of pressure down in the system to counterbalance any flow back up through those float

PLANET DEPOS 888.433.3767 | WWW.PLANETDEPOS.COM

NATIONAL OIL SPILL COMISSION MEETING CONDUCTED ON TUESDAY, NOVEMBER 9, 2010
27 (Pages 105 to 108) 105 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 107
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

valves, correct? MR. LEWIS: That's correct. You put enough pressure on to basically bump your plugs, your wiper plugs, make sure they are seated on top of the float, and hold that wiper plug in place until your cement is set. MR. GRIMSLEY: Did you see any evidence that BP in this situation took that remedial step? MR. LEWIS: No, they did not. MR. GRIMSLEY: Would BP or others on the rig be able to perform other operations while they were applying this downward pressure at the bottom of a hole to hold the system in place? MR. LEWIS: They would not be able to conduct any operations below the BOP and other rig operations in the riser or above the BOP that they could have continued with. MR. GRIMSLEY: For instance, would the crew have been able to perform the riser hanger seal assembly test or the positive pressure test during that period of time? MR. LEWIS: I believe the answer to that
106

of an open float valve and a path for flow? MR. LEWIS: That would have made no difference at all to the float valve itself as a barrier. What it is designed to do is to replace the function of the float valve of isolating the cement from pressure (inaudible) while it's in the process of setting up; and that it would have accomplished. MR. GRIMSLEY: Are there any remedial steps that in your opinion should have been taken in order to account for the fact that the float valves may have been opened, so no longer a barrier to flow up the casing? MR. LEWIS: If that had been identified as a failure, yes, then either the placement of a mechanical plug or simply more cement would have been appropriate steps. MR. GRIMSLEY: And how long would it have taken generally to put a mechanical barrier down into the well? MR. LEWIS: I believe that their round tripping time on this rig was about 18 hours each

108
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

is no. I had thought of one possible way to manipulate the choke and kill line. But I would have to look in more detail at the hanger assembly itself in order to answer that question. But I think the answer to that is no. MR. GRIMSLEY: So in your opinion, sitting here today, you believe that the crew and BP would have had to delay those procedures to accommodate the remedial pressure needed to account for an open float valve? MR. LEWIS: They would have had to delay at least some of those, yes. The negative test definitely would have had to have been delayed. MR. GRIMSLEY: Now, you identified a second problem with having the float valves not being converted. That other problem is the float valves are no longer a barrier to flow of any sort from below; is that correct? MR. LEWIS: That's true. MR. GRIMSLEY: Now, this remedial measure you've already identified, pressuring down while the cement is curing, would that have solved the problem

direction. It would seem to me that for setting a plug of this nature, you might be able to do that a bit faster. But I would say a minimum of 24 hours. MR. GRIMSLEY: And how about taking the other option of just adding more cement? MR. LEWIS: That would have been at least as long also, in light of the fact that you would have to have tripped the Macondo with a drill string to do that, and then place your cement. MR. GRIMSLEY: In your mind, if there were any question as to whether the float valves converted, would it have been prudent to take the remedial steps that you have identified in order to ensure that there were no problems as a result of an unconverted float valve? MR. LEWIS: I think that would depend actually on one's intentions for their next steps in the abandonment. In light of the fact that their abandonment plan included leaving this well underbalanced, then I think it definitely would have been prudent to have done something more with that, yes.

PLANET DEPOS 888.433.3767 | WWW.PLANETDEPOS.COM

NATIONAL OIL SPILL COMISSION MEETING CONDUCTED ON TUESDAY, NOVEMBER 9, 2010
28 (Pages 109 to 112) 109 111
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

MR. GRIMSLEY: Now, you said earlier that your opinion sitting here is that it's more likely than not that the float equipment did not convert. What other information would be helpful to you to determine whether that opinion is in fact correct or not? MR. LEWIS: Well, I don't think there's any information we can gain at this point in time, in that the well was abandoned -- excuse me, the well was killed and then plugged before there were any forensics done inside that wellbore. From a purely engineering standpoint it would have been very, very interesting to me to have run back into that well to TD, to investigate its actual physical configuration after the well was killed. That was not done. I have no knowledge of why it was not done. It would be in a certain sense a science project to have done that. But it might have also given us some information to use in enhancing design for future completions. MR. GRIMSLEY: But as I understand it, given what the people on the rig knew, in particular
110

checked their floats, they decided the floats were holding, they proceeded. MR. GRIMSLEY: I just want to back up a little bit. You mentioned the flow check test. What is a flow check test? MR. LEWIS: That is simply, once you have bumped your pumps -- bumped your plugs, you pressure up the system a little bit with that same pump that you've been pumping cement. How much pressure test you put on is a function of the design of the casing. And then your completion equipment, it's specified in your procedure. You hold that pressure for a certain period of time to guarantee that your well is in fact latent. Then you release the pressure completely, you open the valves, you let that drill string that you've been pressuring to bleed back to a pit, and you monitor for both the volume of the flowback, the time it takes the flowback, and whether or not the flow completely stops. That's standard procedure. It's called check floats. In the plan it would be written

112 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

the operator that day, that the floats may not have converted, that in your mind there were certain remedial and other diagnostic steps that should have been taken? MR. LEWIS: Actually this is one of those decisions somewhat similar to the negative pressure test evaluation, where the people felt that there was not a problem. They did their flowback test on the floats, they watched it for three minutes, which I think is a little bit shy, they got back an amount of fluid that was possibly appropriate for the amount of pressure they had on that well. But given the very low differential pressure between the cement in place and the mud inside the well, there is a lot of reason to question as to whether or not that was a valid test of that float. And in fact that's the conclusion that BP investigative came to in their analysis. They say specifically that we don't feel that was a valid test. However, the guys on the rig that day had their flow chart, the flow chart saying check floats, and floats hold, proceed. They

"check floats." Everybody knows you pressure up to whatever it said in the previous step, which will be specified there. You let the pressure off, you record the volume, you watch it for X period of time. MR. GRIMSLEY: You said that such a float check was performed here, but you don't think it was sufficient to identify whether the float in fact was sealed. MR. LEWIS: I believe that's true, yes. MR. GRIMSLEY: Can you explain one more time why that is? MR. LEWIS: Well, two issues there. One, the differential pressure in the safety design was so small that there's a question as to whether or not it really would U-Tube on you. You've got some viscosity effects in that fluid, both the mud and the cement do take up a little additional gel string. And to get that fluid moving takes a little bit of energy. Whether or not the pressure differential between those two columns was adequate to do that is questionable.

PLANET DEPOS 888.433.3767 | WWW.PLANETDEPOS.COM

NATIONAL OIL SPILL COMISSION MEETING CONDUCTED ON TUESDAY, NOVEMBER 9, 2010
29 (Pages 113 to 116) 113 115 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

Also, simply watching for three minutes is a little bit low. Almost any written plan will say a minimum of watching for five minutes. Now, it says three minutes there. The accuracy of report writing in the field of recording these sorts of things is such that they may have watched it for more than three minutes. They may not have. But the point is that they recorded the fact that this was a successful test after three minutes, according to the record that they presented in the Halliburton cement completion report. Both of these issues make the results somewhat questionable. MR. GRIMSLEY: So you agree with BP's conclusion that the float check that was performed was inadequate to determine whether in fact the float valves had converted? And I'll read from the BP report. "However, the investigation team concluded that with the 38 PSI back pressure predicted in the Halliburton April 18th, 2010 opposite program, the back pressure test that was conducted was not a reliable indicator of float
114

never obtained the design specification for proper functioning of that tool, then something is wrong and something needs to be done. MR. GRIMSLEY: I would like to move on to temporary abandonment procedures. I'm going to focus my questions on Mr. Bourgoyne and Dr. Smith. I would like to put up on the screen the April 20th ops note. There's been a lot of discussion about how the temporary abandonment procedures changed over the course of the last week within BP. The last manifestation of those procedures is in this April 20th ops note, which was sent to the rig and other members of the team at 10:43 a.m. on the morning of April 20th, less than 12 hours before the blowout. Mr. Bourgoyne, you've looked through these steps. In your opinion, is this temporary abandonment procedure an unusual one? MR. BOURGOYNE: It is unusual. Particularly striking is the depth of the cement plug. It didn't have the -- or is not usually placed so deep. Also it is unusual to include the
116

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

tolerance seal." MR. LEWIS: Yes, (inaudible). MR. GRIMSLEY: What would your recommendation in the future be as to how one should conduct a float check like this to ensure that in fact the float collars had sealed? MR. LEWIS: If one is designing such a low differential column, I cannot think of just right now a procedure other than an extended flow check and/or possibly simply maintaining pressure on that facing for a few hours until they had the opportunity to have an initial set. I don't think that would be required or advisable if you had no indication of a problem with your float set. If you had started circulation, if you had taken circulation to the design flow rate without problem, and you had an indication that you had float closure in terms of a positive check after that point in time, I wouldn't think that any other step would be (inaudible). However, in a case like this where you had a sequence of questionable events, and you have

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

negative test with the displacement to combine those two. And then the well does not necessarily have to be underbalanced when abandoning. It doesn't have to be left underbalanced while placing the cement. MR. GRIMSLEY: We heard in the first panel from Mr. Williams that at Shell they never during the temporary abandonment procedure or do not during the temporary abandonment procedure leave the well underbalanced. Here it was underbalanced. Can you explain a little bit about what you meant by these procedures are unusual, given that the well was going to be so underbalanced? MR. BOURGOYNE: Displacing the seawater above the wellhead and doing the negative test, the... MR. GRIMSLEY: Let's put it this way. Did the well need to be underbalanced at any point in time during this temporary abandonment procedure? MR. BOURGOYNE: No, it didn't need to be underbalanced. Only for the negative test, and that could have been (inaudible) overbalance reestablished.

PLANET DEPOS 888.433.3767 | WWW.PLANETDEPOS.COM

NATIONAL OIL SPILL COMISSION MEETING CONDUCTED ON TUESDAY, NOVEMBER 9, 2010
30 (Pages 117 to 120) 117 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 119 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

MR. GRIMSLEY: How would you establish the -- reestablish the overbalance? MR. BOURGOYNE: By simply opening the pressure back up or opening the BOPs to put the riser back on the well. The cement could be placed in mud. It can't be underbalanced at that point. You could also take the additional step of, before you even do the negative test, circulating heavy enough mud to provide that riser and to keep the well in an overbalanced condition at all times. MR. GRIMSLEY: Explain a little more what you mean about that, utilizing heavier weight mud to maintain an overbalance. MR. BOURGOYNE: Well, the well was overbalanced when it was drilled with 14 pounds per gallon mud. But that 14 pounds per gallon mud had to reach all the way back to the surface. That is, the riser had to be filled with 14 pound per gallon mud. You could achieve that same pressure with a heavier mud that only reaches back to the sea floor. So that essentially puts a riser margin, as a term of art, to provide an overbalance, even
118

MR. GRIMSLEY: Why is that unusual? DR. SMITH: Because the whole idea of doing the negative test is to establish a fluid column, in this case in the drill pipe, that preserves an overbalance on the annulus side, until you've closed the preventer or closed some other tool that seals off that heavy hydrostatic in the annulus and allows you then to bleed pressure off the drill pipe to reduce pressure in the well only after the BOP is closed. MR. GRIMSLEY: So is it fair to say that performing the negative pressure test after having removed 3,000 feet of seawater unnecessarily stresses the well before you've even tested whether the well can handle it? DR. SMITH: It's not necessary in the absolute sense. And some of that pressure reduction was offset by the fact that there was this heavier spacer. The intention was, at that point it would have been in the riser, but not a desirable approach to doing the test, to have this reduction on pressure inside the well before you close the annual
120

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

when this riser is full of seawater. MR. GRIMSLEY: Mr. Lewis, do you see anything unusual about this particular temporary abandonment procedure, in your experience? MR. LEWIS: I think that the points that Mr. Bourgoyne brought up there are the same things I would question. MR. GRIMSLEY: I want to ask about specifically some of the particular steps in here, the first of which is the fact that these temporary abandonment procedures call for displacing 3300 feet of mud below the mud line with seawater. Dr. Smith, do you agree that that is a prudent procedure within the context of these temporary abandonment procedures? DR. SMITH: In the manner in which it was conducted and the effect that is not prudent, the displacement of seawater in the annulus back up to the BOP stack resulted in an underbalance relative to the 14 pound per gallon mud before the negative test ever started. And so that's the step that's particularly unusual.

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

preventers, the simplest explanation I can give. MR. GRIMSLEY: Why is that? DR. SMITH: Because you're creating this pressure differential from outside the well to inside the well before you've confirmed that the well will withstand that pressure differential, and before you close the preventer, so that you've got a rapid means of controlling it if it doesn't contain that pressure. MR. GRIMSLEY: We've had some calculations here, and this is from a slide I put up yesterday. You and I met since then, and you corrected some calculations. But my understanding now is that removing 3300 feet of mud from below the mud line and replacing it with salt water eliminates 926 PSI of additional downward pressure on the bottom of the well. I believe in our conversations you said that that introduced an unnecessary amount of risk into the situation. What did you mean by that? DR. SMITH: Well, I said it was not an absolutely required level of risk. And the point

PLANET DEPOS 888.433.3767 | WWW.PLANETDEPOS.COM

NATIONAL OIL SPILL COMISSION MEETING CONDUCTED ON TUESDAY, NOVEMBER 9, 2010
31 (Pages 121 to 124) 121
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

123
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

is, we're going to -- at some point we're going to remove hydrostatic pressure at the wellhead level, at the sea floor level, etc. And so whatever mechanisms we use to prepare the well for temporary abandonment, we know that we're going to remove the 14 pound per gallon mud and the hydrostatic it creates inside the well at the level of wellhead. When we move the rig off location and the riser is gone, that mud's no longer there. This is a reduction in pressure below that depth inside the well that's not absolutely required as part of the abandonment procedure, as has already been described by Mr. Bourgoyne. MR. GRIMSLEY: So let me get this straight. When you're going to move off wells, in any event you're going to be removing the mud that's in the riser, so there's hydrostatic pressure exerted by the mud in the riser, and that's going to be gone when you temporarily abandon the well. The question then is whether and to what extent it makes sense or introduces additional risk to remove additional mud below the mud line. Is
122

been stated, yesterday and today both. MR. GRIMSLEY: And so was it necessary for BP to put that additional stress on the cement job at the bottom? DR. SMITH: No. MR. GRIMSLEY: Now, my understanding is that the reason BP wanted to remove that seawater down to 3,000 feet was so it could set the cement plug into water; is that your understanding? DR. SMITH: That's my understanding, yes, sir. MR. GRIMSLEY: Was it necessary to, even if they wanted to set the cement plug in seawater, was it necessary for BP to remove all -- even if -I take that back. Even if BP had wanted to set the cement plug down here at 3,000 feet, was it necessary to do so in seawater? DR. SMITH: No, sir. MR. GRIMSLEY: Could a cement plug be set in mud? DR. SMITH: Yes. MR. GRIMSLEY: Let's imagine that BP
124

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

that fair? DR. SMITH: That's right. MR. GRIMSLEY: And in this case, removing that additional mud below the mud line, as you calculated it, removes an additional 926 PSI of hydrostatic pressure, exerting a downward force on the cement at the bottom and the hydrocarbon pay zone, correct? DR. SMITH: Right. MR. GRIMSLEY: Does that have any implications, removing that additional pressure, for the cement job at the bottom? DR. SMITH: It means it's required to control a greater stress, there is a greater pressure differential acting outside the well to inside the well than there otherwise would have been. MR. GRIMSLEY: Was it necessary to actually remove, in this temporary abandonment procedure, that 3,000 feet of mud and replace it with seawater? DR. SMITH: No. I think that's already

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

decided it did not want to set cement plugs in mud, because perhaps cement doesn't do as well in mud. Were there other types of plugs that could have been used that would have done just fine in mud, such as mechanical barriers or bridge plugs? DR. SMITH: They could have used a mechanical barrier like a bridge plug, yes, sir. MR. GRIMSLEY: Have you seen any indication in the documents you've looked that BP considered the possibility of using a mechanical barrier or a bridge plug rather than the surface cement plug that was used? DR. SMITH: No, sir, but I have not had access to their planning documents. MR. GRIMSLEY: Mr. Lewis, have you seen any indication that BP considered the possibility of using a bridge plug or mechanical plug? MR. LEWIS: Actually there is one reference very early on in the initial documents, in the predrilling instructions, indicating that a packer type mechanism should be on board for the possible use in an abandonment. But beyond that,

PLANET DEPOS 888.433.3767 | WWW.PLANETDEPOS.COM

NATIONAL OIL SPILL COMISSION MEETING CONDUCTED ON TUESDAY, NOVEMBER 9, 2010
32 (Pages 125 to 128) 125
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

127
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

you know -MR. BARTLIT: In order to avoid lawyers standing up all over the place and asking questions (inaudible), we worked out a deal with all the lawyers that if there's anything we miss (inaudible), they could e-mail me a question. This is the first one we've gotten. So far, so good. And I want to be sure that Mr. Grimsley has the question. We won't (inaudible) we want to know. It is the only question we have. I want to be sure it's asked. Thank you. MR. GRIMSLEY: Now, the decision was made to set the cement plug down at 3,000 feet. Was that required, could they have set the cement plug at a much higher level as part of this temporary abandonment procedure? DR. SMITH: Yes, it would have been typical to set it closer to the sea (inaudible). MR. GRIMSLEY: And even if they wanted to set the cement plug at 3,000 feet, set it in seawater, were there other ways to increase the hydrostatic pressure below the surface of the cement

taken to actually perform that procedure, to replace the lighter mud with this heavier weight mud? DR. SMITH: Probably somewhere between one and two days, based on what Mr. Lewis has said about the time required for them to trip, and maybe a little less than that in that they're already tripping to 8300 feet. MR. GRIMSLEY: And in fact is it possible that BP could have circulated such heavier weight mud such that there would have been no underbalance whatsoever seen at the bottom of the well? DR. SMITH: I can't remember that I've done that calculation. We would need to check that. MR. GRIMSLEY: But certainly -- well. In any of your experience, have you ever seen a situation in which a cement plug was set at 3,000 feet below the mud line, putting aside the seawater issue, but just a surface cement plug set 3,000 feet below the mud line? Mr. Bourgoyne? MR. BOURGOYNE: Not in the top plug for temporary abandonment. MR. GRIMSLEY: Dr. Smith?

126 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

128
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

plug to account for the additional underbalance from the displacement above? DR. SMITH: Yes, the density of the fluid below the plug could have been increased in the way that Mr. Bourgoyne has described earlier. The deeper the plug is set, the less practical that becomes. MR. GRIMSLEY: Okay, but in this case are you saying that BP could have chosen to increase the weight of the mud that was actually down here below the cement plug? DR. SMITH: Yes, sir. MR. GRIMSLEY: What would have been the process by which BP would have had to have set that heavy weight cement or set that heavy weight mud? DR. SMITH: The most straightforward method would have probably been to run the drill string or the work string down to a depth just above the issue track in order to circulate that heavy mud in place to fill that space in the well below that depth, below the 8367. MR. GRIMSLEY: How long would it have

DR. SMITH: I really don't have the recent direct knowledge to comment. MR. GRIMSLEY: Mr. Lewis? MR. LEWIS: I'm kind of halfway between these two previous answers. Not as a top plug, I think would be what I have to say. MR. GRIMSLEY: Have you ever seen one set so deep with seawater above it, any of you? MR. LEWIS: No. DR. SMITH: No. MR. GRIMSLEY: Now, Mr. Bourgoyne, one of the reasons I understand that BP chose to set -- to displace this 3,000 feet of mud with seawater was because it wanted 3,000 feet to accommodate the drill string which it would hang off a lockdown sleeve in order to set that lockdown sleeve; is that your understanding? MR. BOURGOYNE: That's my understanding. MR. GRIMSLEY: And that's because they wanted 100,000 pounds of weight, which was equivalent to 3,000 feet of drill string? MR. BOURGOYNE: That's reasonable.

PLANET DEPOS 888.433.3767 | WWW.PLANETDEPOS.COM

NATIONAL OIL SPILL COMISSION MEETING CONDUCTED ON TUESDAY, NOVEMBER 9, 2010
33 (Pages 129 to 132) 129
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

131

MR. GRIMSLEY: Are there other ways besides hanging 3,000 feet of drill string off of a lockdown sleeve to achieve 100,000 pounds of weight? MR. BOURGOYNE: Yes, you can run heavier tubulars or even casing. MR. GRIMSLEY: Can you also put weight on top? MR. BOURGOYNE: Yes, especially if you use casing on top, I mean collars. MR. GRIMSLEY: And also one of the reasons, assuming they wanted to use the 3,000 feet of drill string, that they needed to set the surface cement plug so deep was because they wanted to set the lockdown sleeve last, is that your understanding? MR. BOURGOYNE: That's correct. MR. GRIMSLEY: Was there any requirement that the lockdown sleeve be set last during this procedure? MR. BOURGOYNE: None that I'm aware of, no. MR. GRIMSLEY: We've been told that the

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

haven't had access to that. MR. GRIMSLEY: Mr. Lewis, have you seen anything like that? MR. LEWIS: Actually I think we have one technical clarification here. It's the polished bore that they were desiring to protect, and using the lockdown sleeve for that protective element. There are bore protecters specifically designed for that type of purpose. I saw no evidence that they had considered those other options. So no. MR. GRIMSLEY: The final thing I want to ask about is the fact that at least from our perspective, there was no barrier in place to set that surface cement plug during the period of time in which the riser was being placed. So that the only barrier was the cement job at the bottom, which turns out to have been untested, and the BOP. Do you agree with that, that that was the state of affairs as a result of this temporary abandonment sequence? Mr. Bourgoyne? MR. BOURGOYNE: Yes, I do. MR. GRIMSLEY: Dr. Smith?
132

130
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

concern was that BP didn't want to harm the seal. There's a seal at the top of the lockdown sleeve, polished bore receptacle, that BP did not want to harm that seal by virtue of having operations going up and down through that lockdown sleeve. Does that sound reasonable to you? MR. BOURGOYNE: To try to preserve the lockdown sleeve by minimizing the number of trips through it? It's a reasonable thing to consider. I wouldn't be concerned with operations that were planned especially before the temporary abandonment. It's just a work string, after all. MR. GRIMSLEY: And aren't there other ways, sleeves for instance that you can put in place that would actually protect the lockdown sleeve during further operation? MR. BOURGOYNE: Sure. MR. GRIMSLEY: Is there any evidence you've seen that BP considered any of those possible ways to protect the lockdown sleeve? MR. BOURGOYNE: I haven't reviewed those particular planning records and things like that. I

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

DR. SMITH: Yes, sir. MR. GRIMSLEY: Mr. Lewis. MR. LEWIS: Yes, that's correct. MR. GRIMSLEY: Dr. Smith, what is your view on the advisability of having only one barrier, putting aside that it was not tested, but putting one barrier in place, besides an open BOP during the displacement process? DR. SMITH: It's the minimum number of barriers that we would generally accept. And I think that's the fairest thing to say. MR. GRIMSLEY: Mr. Lewis? MR. LEWIS: It's putting all your eggs in one basket. MR. GRIMSLEY: What do you mean by that? MR. LEWIS: I mean just what Dr. Smith just said, it's the minimum barrier. There's only one there, and you have purposely brought this well significantly underbalanced. And doing that against a single barrier that has been problematic in its creation, and has never been really tested, is of dubious wisdom, in my point of view.

PLANET DEPOS 888.433.3767 | WWW.PLANETDEPOS.COM

NATIONAL OIL SPILL COMISSION MEETING CONDUCTED ON TUESDAY, NOVEMBER 9, 2010
34 (Pages 133 to 136) 133
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

135
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

MR. GRIMSLEY: Is there any reason that there had to be during these temporary abandonment procedures only that barrier at the bottom? Mr. Bourgoyne? MR. BOURGOYNE: No. MR. GRIMSLEY: What else could BP have done to ensure that the cement at the bottom was not the only barrier? MR. BOURGOYNE: It could have put the second cement plug in before removing the mud. MR. GRIMSLEY: Would it have been, in your opinion, prudent to have done so? MR. BOURGOYNE: Most definitely. MR. GRIMSLEY: Dr. Smith, do you have a view on that? DR. SMITH: I think there's multiple alternatives that would have achieved a second barrier that could have been considered. There's just many different ways to conduct this procedure, that you have different options about how you achieve the barriers and the controls that you want. And so increasing the mud density; setting the
134

question that was handed to me, and this is for Mr. Lewis on the flow conversion. You're aware that BP is currently doing testing or at least has indicated that it's doing testing to determine whether the surge, after circulation was reestablished at the 30.42 PSI, may have created a sufficient flow rate to convert the float equipment. Are you aware of that? MR. LEWIS: Yes, I am aware of that, in fact I referred to it when I said in their report they indicated they were doing that, and I would be very interested in seeing their results. I'm curious as to whether they are physically testing equipment in a mockup, or if they are modeling that, or just how they're going about that. I find that kind of an intriguing question. MR. GRIMSLEY: Okay. And so you've given your preliminary opinion here today, but you would be perfectly willing obviously to consider any test results from the surge testing that BP is performing? MR. LEWIS: The more science, the better.
136

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

first; setting the plug in a higher density mud, in the mud to begin with; setting an extra cement plug or an extra mechanical barrier before can you go to the mud way back to cement water. There's just lots of options. MR. GRIMSLEY: And all of those would have been in your mind prudent options? DR. SMITH: Sure. And there's complications and potentially risks associated with each one that would need to be considered. You're doing a regular engineering design process of trying to get an optimum design where you're trying to balance multiple objectives. MR. GRIMSLEY: Did BP employ any of those additional options that you just identified? DR. SMITH: No, sir. MR. GRIMSLEY: Mr. Lewis, do you have any additional opinions on that? MR. LEWIS: I think it's been pretty clearly stated. MR. GRIMSLEY: I would like to move on to the negative pressure test. Actually, the one

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

MR. GRIMSLEY: So the negative pressure test. Dr. Smith, have you developed any opinions on the negative pressure test conducted at Macondo? DR. SMITH: Yes, sir. MR. GRIMSLEY: In your opinion did the negative well test performed at Macondo establish well integrity? DR. SMITH: No, sir. MR. GRIMSLEY: Why not? DR. SMITH: Because it was a test that showed there was not well integrity. MR. GRIMSLEY: What data in particular showed there was not well integrity? DR. SMITH: When they opened the drill string fluid, it would continue to blow back the (inaudible), which would be indicative that there was a seal, and that when they didn't close the drill string to stop that blowout from the drill string, the pressure built back up, indicating that there were fluids leaking into the well, repressurizing the system. MR. GRIMSLEY: In your opinion (inaudible)

PLANET DEPOS 888.433.3767 | WWW.PLANETDEPOS.COM

NATIONAL OIL SPILL COMISSION MEETING CONDUCTED ON TUESDAY, NOVEMBER 9, 2010
35 (Pages 137 to 140) 137 139

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

indicate that the well was in fact flowing? DR. SMITH: The data that's in the Sperry-Sun data records does not reflect that, because it did not record fluid going to the cementing unit. So the records that we have are the indications, as in the BP report, that the people who were on-site said that fluids were flowing back to the cementing unit. MR. GRIMSLEY: Okay. But given the fact that the pressure was building back up, was that an indication that the well was flowing? DR. SMITH: Yes, sir. MR. GRIMSLEY: In your opinion, was the negative pressure test conducted properly? DR. SMITH: No, sir. MR. GRIMSLEY: Why not? DR. SMITH: Because they didn't begin with the conditions they stated they should begin with. MR. GRIMSLEY: In your opinion was there any explanation why there would be zero PSI in the kill line and 1400 PSI on the drill pipe? DR. SMITH: Yes, sir, there's two
138

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

In addition, what's not in the BP report is that there's this strong evidence that before the negative test ever began, that the 16 pound per gallon spacer was not in fact all displaced above the wellhead, that there was something on the order of 700 PSI excess hydrostatic pressure measured on the drill pipe that had to be due to heavier fluid being below the wellhead or the BOP stack in the annulus that was supposed to be filled with seawater. So that heavier fluid being present reduced the -- better way to say it would be, it provided some barrier to pressure being felt on the kill line. And that was seen kind of throughout the beginnings of this test, when they opened the kill line, the pressure had dropped on the -- when they opened the valve between the BOP and the kill line, so they could feel pressure in the well through the kill line, the pressure on the kill line dropped, because the drill pipe pressure dropped. But they weren't equal. If the test had been ready to conduct as planned, the pressure is on
140

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

explanations, and the potential explanations in the BP report. One is that someone unintentionally closed the valve on the outlet from the BOP to the kill line. I think that's very unlikely, given that they are intending to monitor the kill line. The other is that because the fluids in the well below the BOP stack were not what was intended to be there, what was intended to be there was seawater, and what was actually there was some mixture of seawater in the 16 pound per gallon spacer, that those fluids could get up into the kill line and potentially cause bridging or plugging in the kill line. So there's a -- and there's in fact -- in my opinion there's evidence of that during this period of time when they re-pressured the kill line from the top and pumped into it. There's evidence that the kill line was acting like it was partially plugged, and that that plugging, or excessive gel strength in our language, had to be broken for the kill line to take the fluid at the pressure it should have.

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

the kill line, and the drill pipe should have been equal always. It never achieved that. MR. GRIMSLEY: That's what I was going to ask. Putting aside the potential effect of the spacer, should the pressures on the drill pipe and kill line have been equal throughout the test? DR. SMITH: Yes, sir, in my opinion. I take this from physics. MR. GRIMSLEY: Is that because there are basically two straws going into the same vessel? DR. SMITH: Two straws going into the same vessel, that were supposed to have the same fluid in each straw. MR. GRIMSLEY: Once the rig crew recognized that there was a spacer that had leaked down below the annular preventer, what in your opinion would have been the prudent course of action for the crew and well site leaders to have taken? DR. SMITH: To have circulated that heavy spacer out, get the system back to being filled with seawater, as was the original intent. MR. GRIMSLEY: Was that done here?

PLANET DEPOS 888.433.3767 | WWW.PLANETDEPOS.COM

NATIONAL OIL SPILL COMISSION MEETING CONDUCTED ON TUESDAY, NOVEMBER 9, 2010
36 (Pages 141 to 144) 141 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 143
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

DR. SMITH: No, it was not. MR. GRIMSLEY: How long would it have taken, do you think, to have circulated -- to have flushed out the system, essentially, of that spacer and to put the system back in a position where you could conduct the negative pressure test reliably, without the effective spacer? DR. SMITH: I haven't done any calculations on that, but my guess would be not more than a couple of hours. MR. GRIMSLEY: Now, we've talked about earlier, you've testified previously about your analysis of the negative pressure test. DR. SMITH: Yes, sir. MR. GRIMSLEY: You've actually written a report on that as well. DR. SMITH: Yes, sir. MR. GRIMSLEY: Your testimony on this is at least publicly available, correct? DR. SMITH: That's right. MR. GRIMSLEY: Okay. So I'm not going to go over that testimony again. If people want access
142

test? MR. LEWIS: Yes. MR. GRIMSLEY: Did the negative pressure at Macondo establish well integrity? MR. LEWIS: No, it did not. MR. GRIMSLEY: Did in fact the data obtained during the negative pressure test show that the well was flowing? MR. LEWIS: It showed (inaudible). MR. GRIMSLEY: In your opinion was the negative pressure test conducted properly? MR. LEWIS: No, it was not. It was not conducted in compliance with its written procedure, although that procedure was very brief. MR. GRIMSLEY: Okay. And I want to talk just a little bit about the procedure. Whose responsibility in your experience is it on a rig to design the negative pressure test procedure? MR. BOURGOYNE: Do you want me to answer that? MR. GRIMSLEY: Why don't we start with you, Mr. Lewis.

144
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

to instant analysis of negative pressure tests, I would suggest they consult his testimony from the joint investigation hearings before the BOEM and Coast Guard. Mr. Bourgoyne, have you developed any opinions on the negative pressure tests performed at Macondo? MR. BOURGOYNE: Yes, I have. MR. GRIMSLEY: Do you agree with the opinions that Professor Smith just gave? MR. BOURGOYNE: Yes, I do. MR. GRIMSLEY: Do you have anything to add? MR. BOURGOYNE: No, I don't. MR. GRIMSLEY: So you agree that this test was a failure and that it was not conducted properly, and that it showed in fact that the well was flowing? MR. BOURGOYNE: It demonstrated the well could flow, that is correct. MR. GRIMSLEY: Mr. Lewis, have you developed any opinions on the negative pressure

MR. LEWIS: I would expect the town engineering team (inaudible). MR. GRIMSLEY: Dr. Smith, what is your view? DR. SMITH: That the engineers that were responsible for the operating company to design that procedure. MR. GRIMSLEY: Mr. Bourgoyne, do you have an opinion? MR. BOURGOYNE: Yes, it would be the engineers (inaudible), that's correct. MR. GRIMSLEY: So it is the operating company that is responsible, at least as you understand it within the industry, to develop the negative pressure test (inaudible) put a crew on the rig? MR. BOURGOYNE: Yes. And of course the rig crew had some responsibility to report back. But yes, it was definitely the engineer working for the operator who designs and is responsible for it. MR. GRIMSLEY: Have you seen in your investigation in this matter any detailed procedures

PLANET DEPOS 888.433.3767 | WWW.PLANETDEPOS.COM

NATIONAL OIL SPILL COMISSION MEETING CONDUCTED ON TUESDAY, NOVEMBER 9, 2010
37 (Pages 145 to 148) 145
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

147
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

as to how to conduct or interpret the negative pressure test here at Macondo? MR. BOURGOYNE: Definitely I haven't seen anything on how to interpret it. Some limited procedures on how to conduct it, I have seen that. MR. GRIMSLEY: Okay. On the limited procedures on how to conduct it, I want to go back to the ops note from April 20th. MR. BOURGOYNE: Okay. MR. GRIMSLEY: It says right here, run into hole, displace the seawater from there to above the wellhead; with seawater in the kill line, close annular and do a negative test. Is that the procedure you've been talking about? MR. BOURGOYNE: Yes, that's it. MR. GRIMSLEY: So that's about it for the procedure? MR. BOURGOYNE: Right. MR. GRIMSLEY: Dr. Smith, have you seen any more detailed procedure that was provided by the operator to the rig crew? DR. SMITH: I've seen less detailed
146

practice, there would have been additional details about volumes to pump and steps that could be taken in monitoring a more detailed criteria for whether the test was successful. The kinds of things that then the rig personnel might check, but the kind of calculation that in general the people on the rig are not expected to be able to do or are not trained to do. MR. GRIMSLEY: Mr. Bourgoyne, what's your view as to the adequacy of the procedure set forth in this ops note regarding the negative test? MR. BOURGOYNE: It's definitely not a final procedure to set out the rig. It might be something to get started on the process, to seek input, as you finalize your procedure. But it's not -- it doesn't contain the detail. MR. GRIMSLEY: Do you have any additional views as to what other steps you believe the operator should, at least going forward, provide to the rig crew as to how to perform and interpret the negative pressure test? MR. BOURGOYNE: The, you know, primary
148

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

procedures. But this is the most detailed. MR. GRIMSLEY: Mr. Lewis, have you seen any? MR. LEWIS: Nothing more detailed, no. MR. GRIMSLEY: Is this in your opinion, Dr. Smith, a sufficiently detailed negative test procedure to be giving to the rig crew? DR. SMITH: No, sir. MR. GRIMSLEY: What additional type of detail would you expect to be included in a procedure describing how to perform and interpret a negative pressure test? DR. SMITH: I would certainly have expected that there would have been a calculation of what pressure to expect to have trapped at the beginning of the test that's not present here. There is a pressure here, but it is not that pressure. It's a pressure that the rig crew can't measure. And I would have expected there to be some statement of what to do if the test was not successful. And in general, my experience, my own

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

thing would be what you would expect a successful test to look like, perhaps how long to wait. Also do those calculations like Dr. Smith was outlining, the expected bleed back volumes, so the rig crew can actually evaluate if the test was going as planned. MR. GRIMSLEY: When you say "bleed back volumes," we talked a little about this yesterday, once the crew has displaced the mud to above the BOP, there's a certain amount of residual pressure that's left in the system at that point; is that right? MR. BOURGOYNE: That's correct. MR. GRIMSLEY: And so before starting the negative pressure test, the crew wants to bleed off that pressure by releasing any extra fluid onto -up at the rig, correct? MR. BOURGOYNE: The crew has to bleed off that compressible volume to reduce the pressure, that's right. MR. GRIMSLEY: There's a way to actually calculate how much fluid one would expect to get back when bleeding off that residual pressure?

PLANET DEPOS 888.433.3767 | WWW.PLANETDEPOS.COM

NATIONAL OIL SPILL COMISSION MEETING CONDUCTED ON TUESDAY, NOVEMBER 9, 2010
38 (Pages 149 to 152) 149
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

151
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

MR. BOURGOYNE: You can definitely estimate it. The primary error in the estimate would be determining how much -- measuring how much you've bled back. But that can be accounted for. MR. GRIMSLEY: Why would it be useful to know that information before conducting the negative pressure test? MR. BOURGOYNE: Well, if you start to get back a significant within-the-measure-of-an-error-volume greater than that, that indicates that there's additional fluid in the wellbore that is not accounted for by compressibility. If the well is indeed sealed, there would only be compressibility in the well to bleed off, if you will. So yes, that volume would actually represent perhaps an inflow into the well. MR. GRIMSLEY: Have you seen any indication as to whether those calculations were done at Macondo prior to the negative pressure test? MR. BOURGOYNE: I haven't seen any indications. There aren't any here on this

DR. SMITH: Not explicitly. MR. GRIMSLEY: So is there some regulation that the Deepwater Horizon would have violated had they decided to forego the negative pressure test altogether? DR. SMITH: Actually there is, there's a requirement in the Code of Federal Regulations. If you don't mind I'll just read it. It says -- this relates to a temporary abandonment or an abandonment. It says, "Before removing the marine riser you must displace the riser with seawater. You must maintain sufficient hydrostatic pressure or take other suitable precautions to compensate for the reduction in pressure and to maintain a safe and controlled well condition." So logically the negative test is a way to, beforehand, prove that the well will withstand that reduction of process as a means to satisfy this requirement. MR. GRIMSLEY: So if one does not perform a negative pressure test or performs one and it's a failure, then the regulation you've just read would
152

150

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

document. MR. GRIMSLEY: Mr. Lewis, do you have anything to add as to what procedures should be included along with the description of the negative pressure test? MR. LEWIS: No, I think it's been covered. MR. GRIMSLEY: Professor Smith, I understand that as part of your investigation into the negative pressure test at Macondo, you looked in to see whether there were any regulations or extant industry standards prior to this event governing how to perform or conduct a negative pressure test; is that correct? DR. SMITH: That's right. MR. GRIMSLEY: What did you find with regard to any regulations that might be out there? DR. SMITH: Certainly that apply to the Gulf of Mexico Federal waters, there's no regulations that I found. And I searched carefully. MR. GRIMSLEY: Did you find a regulation that even required negative pressure testing to be performed during a temporary abandonment phase?

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

not be satisfied? DR. SMITH: That's my interpretation, yes, sir. MR. GRIMSLEY: Did you also look to see whether there were any industry standard guidelines or procedures out there as to how to conduct or perform a negative pressure test? DR. SMITH: I did a cursory search, yes, sir. MR. GRIMSLEY: And what did you find? DR. SMITH: I could not find any standards or guidelines or recommended practices, anything that would be -- kind of have some official weight. MR. GRIMSLEY: Do you have any sense as to why, with regard to what all have acknowledged is a very important test at the end of the life of a well, there were no regulations or industry standards? DR. SMITH: I think this is because this is a relatively rare procedure to apply. This procedure is really important in deepwater wells where you're removing the riser, so you're removing

PLANET DEPOS 888.433.3767 | WWW.PLANETDEPOS.COM

NATIONAL OIL SPILL COMISSION MEETING CONDUCTED ON TUESDAY, NOVEMBER 9, 2010
39 (Pages 153 to 156) 153
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

155 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

the hydrostatic pressure that existed in the mud and the riser. But it's not something that's common for land operation or shelf operation when we're working with a surface wellhead. MR. GRIMSLEY: Just to get that straight, in deep water, when you're leaving and temporarily abandoning a well, you're removing, no matter what, all of that mud in the riser when you pick up and leave; is that right? DR. SMITH: That's correct. MR. GRIMSLEY: So it's in those circumstances where you're most likely to severely underbalance a well during a temporary abandonment procedure; is that right? DR. SMITH: That's right, unless you've taken these kinds of preemptive measures that we've discussed at length. MR. GRIMSLEY: There were regulations certainly on deepwater drilling, aren't there? DR. SMITH: For sure. MR. GRIMSLEY: Do you have any sense as to why those regulations didn't account for this
154

fashion. Then the next step would have been to try to diagnose where was this leak occurring so that we can define a way to go back and correct that. And so that begins to be a very intense process that I haven't thought through those steps. Eventually once you've done the test, defined where the problem is, then you now have to design a correction to that problem. MR. GRIMSLEY: So let's imagine that here the rig crew and both site leaders had decided there might be a problem with cement at the bottom. How long of a procedure would it have been to remediate the cement failure at the bottom? Roughly. DR. SMITH: Something between 24 hours absolute minimum to tripping the hole and setting one of these mechanical plugs like a bridge plug near the bottom of the well, to maybe several days, if they were going to do a more thorough remedial cement. MR. GRIMSLEY: Mr. Bourgoyne, is that consistent with your understanding of what steps need to be taken?
156

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

particular procedure? DR. SMITH: I think the regulation that I read is the regulation that would require the operator to, if they were going to remove the hydrostatic overbalance, to do something to prove that the well was safe to do that, and that the only practical, responsible approach to doing that would be to do a negative test, to remove that hydrostatic pressure in a controlled system, as was done with the BOP close, to verify that the well will hold back that external pressure that you're going to impose on it. MR. GRIMSLEY: Let's assume hypothetically that the men on the rig that night at 8:00 p.m. had concluded that this was a failed negative pressure test. What steps would the crew that had been on the rig have needed to take to diagnose what the problem was and potentially remediate the situation? DR. SMITH: A logical first step would have been to circulate the seawater out and regain hydrostatic control. That would have allowed them to open the BOP and go back and work in a normal

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

MR. BOURGOYNE: It is. MR. GRIMSLEY: And Mr. Lewis, you as well? MR. LEWIS: Yes, those are the basic steps that would be required. MR. GRIMSLEY: So at 8:00 p.m. that night, the choices were either a good negative pressure test, sign off on it, which we all have said we believe had been their thought, or to undertake what could be a substantial and lengthy diagnostic and remediation process; is that right? MR. BOURGOYNE: Yes, sir. MR. GRIMSLEY: Now, in your experience, Mr. Bourgoyne, as a company man at Chevron, if you had seen anomalous data like was seen that night during the negative pressure test, would you have called that back to shore? MR. BOURGOYNE: Most definitely, you know, probably in the process of getting the anomalous data, made a call back. If I didn't understand what was happening, I would seek counsel, seek help. And the engineer is tasked to provide that. MR. GRIMSLEY: Were there any policies in

PLANET DEPOS 888.433.3767 | WWW.PLANETDEPOS.COM

NATIONAL OIL SPILL COMISSION MEETING CONDUCTED ON TUESDAY, NOVEMBER 9, 2010
40 (Pages 157 to 160) 157
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

159 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

place at Chevron that instructs well site leaders when to call back to shore when they might (inaudible) these anomalous situations? MR. BOURGOYNE: I don't recall any policy. It was more of a, do you have confidence in your knowledge. I guess the burden is somewhat on the company rep to recognize when something is anomalous. But there was definitely no policy or prohibition to it. I would say it was more of a culpable thing, that varied as to who you were working for, as to whether you call back with an inkling of a problem versus nailing down that you really did have a problem. The personalities are personalities. Sometimes, you know, like if we take this case with the negative test, you might have tried to do the test twice, and even circulate seawater around before calling in to actually say that, yeah, I'm having a problem. Or you might have in another -for another, different engineer, call in much earlier to seek advice on perhaps there's another approach or something that I'm not seeing, on a more
158

that discretion is the better part of valor, however, and if I didn't understand something, the best possible thing I could do, both for myself, everyone on the rig, and the benefit of the company I was working for, was ask for help. So there is a large amount of interpersonal relationship that goes into the willingness to go pick up the phone. The old days, the company man was God, and he was supposed to know everything that went on all the time. We have evolved to an operational environment that is so complex and has technological elements in it that are beyond the ability of one man to be completely cognizant of, so that it's now required for your well site leader to communicate with more people, more frequently, and possibly even at an earlier level in the evolution of events than has historically traditionally been the case. MR. GRIMSLEY: Even if there's not a specific policy in place -- and I agree it would be odd if there was one that said, when you see weird negative pressure test readings, call. But you want a culture in which people are encouraged to go back
160

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

informal level. MR. GRIMSLEY: Mr. Lewis, what is your experience with regard to whether to call back onto shore when anomalous data readings like this are encountered? MR. LEWIS: I've not seen a written procedure in any of the companies that I've worked for as a well site leader that's so specific. I would echo and maybe even expand upon Mr. Bourgoyne's statements there about the relationship between the rig site personnel and the office engineering staff. I've worked for companies where basically the well site leader was instructed to do absolutely nothing that wasn't already included in that well plan. Those were very, very complete well plans, though, with, exactly as has been described here, pressures, volumes, procedural steps. I've also worked in organizations where the well site leader was left a significant degree of personal discretion. As a well site leader, I learned early on

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

to shore if there's an odd or anomalous reading or something one doesn't quite understand. How does one in a company create a culture whereby the instinct is in those situations to call back onshore? What has been your experience, Mr. Lewis, in that regard? MR. LEWIS: That sort of culture would have to start with the mandate from the top. But it would be something that would have to be nurtured by primarily the interface between your engineering management and your operation management in town. And the BP organization, they've actually got a separate group for engineering and a separate group for operation of the well. But they interface very closely. And that sort of communication would start there. Organizations that are smaller than that, you will find that the engineering and operations people are the same group. And it's actually somewhat easier in those contexts that have these conversations. Another thing that would engender that

PLANET DEPOS 888.433.3767 | WWW.PLANETDEPOS.COM

NATIONAL OIL SPILL COMISSION MEETING CONDUCTED ON TUESDAY, NOVEMBER 9, 2010
41 (Pages 161 to 164) 161 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 163
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

communication would be, as was indicated might be the practice at another major company here earlier today, the involvement of that field operational group, those drilling supervisors -- "well site leaders" is the new term, that's a BP term, by the way, that came to us courtesy of BP -- have them involved in the initial design and planning process. They may not have the technical skills to run an engineering program, to calculate the loads on a string of casing. But they definitely are the people who are going to be managing the installation of that casing. They're the people who are going to be confirming that they have the right equipment on location. They should be involved from the very beginning. And you have these people together in a room in the designing process. It's much easier for them to go, 3:00 in the morning, umm, Charlie, I need your help, as opposed to, I don't know Charlie, should I call him? That sort of decision financially plays in here. It's that personal in some cases.
162

counsel. I guess also a deep feeling of responsibility is a big driver. If you're that person who has to make the call, you have to know your limitations. And, you know, even if there are repercussions to call them back, it must be done. If you will, that personally was my strongest motivator, if it was a tough call to make, or something that I was concerned about bringing up, and how -- you know, exposing my ignorance, if you will, in seeking advice from somebody who might not appreciate that I'm learning or I'm confused and I need a hand. Instituting it company-wide can be a great challenge. It's actually pretty simple on a rig. There's two or three supervisory positions there. If those two or three people decide to make that environment or create that type of environment, you know, it's a very small group. So it can be either really good or really bad. I've worked on a lot of really good situations, never any really bad. But I could see
164

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

So that culture is -- as I said, has to start at the top, be built into the system, and be nurtured throughout the process off drilling the well. MR. GRIMSLEY: What about your experience, Mr. Bourgoyne, nurturing a culture in which people will be calling back to shore or involving other people in the discussion when these odd types of things are encountered? MR. BOURGOYNE: I guess I don't have a real good formal way to institute such a thing. I've found, since working for Chevron, I've worked as a supervisor, that it really is a matter of those in a supervisory position showing interest, and also fully exploring ideas that are brought to them. I know that as a junior company man, if I approached or was included in some planning, and I had an idea that perhaps didn't work or wouldn't work or was a brainstorming idea, to explore why it wouldn't work. It was very educational, but it also led to this interpersonal relationship, if you will, this feeling that that's somebody I can rely on for

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

the potential for this don't-communicate-unless-you-absolutely-have-to, or you have to be absolutely confident in your position before you go out on a limb and actually offer an opinion or an idea. MR. GRIMSLEY: I want to switch and just ask a couple of questions about well control and kick monitoring, because I know that's an important issue. And I know Mr. Bourgoyne and Dr. Smith, both of you teach well control at LSU. Mr. Bourgoyne, how are people typically trained, drillers, rig crew, in how to monitor for kicks and conduct well control? MR. BOURGOYNE: They typically go to a course, three- or five-day course. There are simulations included. At LSU we have a full scale well facility, we actually do exercises on. So there are both classroom, lecture materials, testing, and then even simulations. Most of the simulations I've been involved with are what we could characterize -- what I would characterize as routine well control operations;

PLANET DEPOS 888.433.3767 | WWW.PLANETDEPOS.COM

NATIONAL OIL SPILL COMISSION MEETING CONDUCTED ON TUESDAY, NOVEMBER 9, 2010
42 (Pages 165 to 168) 165
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

167
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

that is, most of the focus is on detecting a problem very early, when it's much easier to correct and there's much less risk involved if you detect it early, and then correcting it. So I would say they're not real high stress well control scenarios that are necessarily simulated, but to demonstrate competency and an understanding of the procedures. MR. GRIMSLEY: One thing that just jumped out at me, you said a three- to five-day well control course. Is that sufficient for somebody to then go out and be a driller on a rig? MR. BOURGOYNE: Not to be a driller. That course presupposes that that person has some on-the-job training, is familiar with rig operations, has, if you will, worked their way up through the ranks to drill. There's quite a few positions before achieving driller. And I don't recall the requirements on experience for one curriculum particular well cap. But it's on the order of years, not just a few weeks in that position.
166

well, you may never have a well control incident. Well control incidents are relatively rare in operational terms. And by far the most common are, you may call it -- they're not necessarily minor, but they're controllable, they're routine, if you will. They're not frequent. And those can evolve into a blowout. But it has been focused on, on this early phase, when reestablishing control is not near as -nearly as -- "panicked" isn't the right word, but when mud is flowing out of the riser at jet engine velocities, it is considerably different than detecting a 20-barrel kick and having 45 minutes to hours before that type of event would ever occur. MR. GRIMSLEY: Do you think it would make sense going forward to increase the training that individuals receive on how to deal with emergency situations like what we've seen now at the Macondo well? MR. BOURGOYNE: I definitely think an increase in training should be considered, particularly with a set of disaster scenarios, if
168

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

MR. GRIMSLEY: What type of certification requirement is there, if any, to be a driller? MR. BOURGOYNE: To be a driller? Just the well control cards, the only one I'm aware of that there may be internal policies within companies. But as far as some regulatory requirement to become a driller, I'm not aware of any. MR. GRIMSLEY: The well control card, does that come from completion of this well control course? MR. BOURGOYNE: Yes, it does. And we've converted to a system where each operator adopts or is in charge of this well control training system, if you will. And the well cap has kind of become a standard, at least here in the Gulf. MR. GRIMSLEY: Now, you had mentioned that well control courses you teach tend to focus on the typical situations during the life of the well where there's drilling going on, that type of thing. And there the emphasis is on detecting kicks early and dealing with them. MR. BOURGOYNE: Well, in the life of a

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

you will. I think it would probably be much more effective if drills were regularly conducted along these lines on the rigs that were doing the operations with the crews, because rigs are very unique. It's very difficult to set up a simulator, to simulate a specific rig, because they're custom-built things, and designed for different purposes. I would suggest that there may be a standard set of disaster drills, if you will, that would need to be conducted prior to beginning operations or immediately after beginning operations, or on a well, well by well basis, if you will, or perhaps on some other frequency determination. MR. GRIMSLEY: But in your understanding and currently in the industry, you have not seen regularly drills performed on rigs or even in classes to deal with these emergency type situations where somebody's faced with gas coming out of the riser and whether to hit that button?

PLANET DEPOS 888.433.3767 | WWW.PLANETDEPOS.COM

NATIONAL OIL SPILL COMISSION MEETING CONDUCTED ON TUESDAY, NOVEMBER 9, 2010
43 (Pages 169 to 172) 169
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

171
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

MR. BOURGOYNE: You know, it's talked about, it's covered kind of in the terms of the Transocean model manual. So discussion, yes. Actually put together a simulation that they had to take those and act those actions in sequence and make very rapid decisions, like whether to divert overboard or to a mud-gas separator, and the decision has to be made immediately to be successful, I've never seen any drills or exercises like that. MR. GRIMSLEY: One last thing on instrumentation. There's been a lot of discussion on whether the data that the driller or others on the rig is seeing is in this very modern age sufficient for those individuals to be able to actually identify kicks in the well and to do so early enough to take action. Do you have any views as to the nature of instrumentation and displays on rigs and what way they might be improved? MR. BOURGOYNE: For routine operations, I guess, for which they were designed, for instance
170

higher, I put in one barrel and got 40 barrels back at one point early in the progression. Some system that can do that analysis that was done in the report in realtime would be very advantageous, and display it, yes, that would be an advantage. Whether it's attainable -- there's a lot of logic that would have to be built into it. Tracking -you have to keep track of where fluid is going on the rig, among many different systems. And then of course it would have to be vetted. My suggestion would be another set of eyes, another human brain doing the same analysis would be beneficial. And then it might even have another benefit in that I always do things better if I think somebody's watching over my shoulder and will catch my mistakes, if you will. Perhaps transmitting the data back to shore and being monitored by somebody else, you can talk to the rig and actually build a realtime record of the operations, much more detailed than is currently done, would be a much more effective step. And that individual, that system might even be an

172 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

these routine kicks that I've described to you where the active system or the pit system is very controlled, there's not a lot of simultaneous operations. The system was actually designed to monitor for kicks in those routine situations, if you will. They're very adequate in my mind. And there's always the backup of, if there's something suspicious, you can stop circulating and do a flow check. I think you would find there's lots of rig crews that, if they expect the well can flow, they will take that backup verification much quicker. If there's anomalous readings, in this particular case they were pumping from one thing, if you will, they were taking seawater from one source, and then taking a return from the well back to another pit, with current displays and algorithms, it's very difficult in realtime to determine, I put in one barrel, did I get one barrel out or did I get 1.5 barrels out? I think the report that BP put together demonstrates that it could have been, you know, much

informal way to say hey, I'm confused, is this a serious problem, especially if the communication's in realtime and consistent. MR. GRIMSLEY: One last question, just on instrumentation and sensors. There's been some discussion here about how at some point during the displacement of the riser, the spacer was actually sent overboard from the rig, and at that point in time, when it was sent overboard, a flow-out sensor was bypassed. In your opinion, are there recommendations you would make as to whether and to what extent it's a good idea to have sensors that are bypassed during critical periods of the well? MR. BOURGOYNE: It's not a good idea to not measure flow rate out, not monitor flow rate out at any time. To be accurate with your question, Transocean actually did have a sensor in place. We just don't have a record of whether it was functioning or not or any indication from it. The Sperry-Sun was not in line, but there was a flow sensor on the discharge.

PLANET DEPOS 888.433.3767 | WWW.PLANETDEPOS.COM

NATIONAL OIL SPILL COMISSION MEETING CONDUCTED ON TUESDAY, NOVEMBER 9, 2010
44 (Pages 173 to 176) 173
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

175
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

MR. GRIMSLEY: So, Commissioners, with that, I would just like to open up the floor to any questions that you have. MR. BARTLIT: Before we start, (inaudible). I didn't want a free for all, but if somebody had a question, we would ask -- one question while you were out. We have another one. You can ask it, or someone else can. CO-CHAIR REILLY: Why don't you. MR. BARTLIT: The question is, we request that you inquire of this panel what entity is responsible for making the decision to move forward or not after a test. In other words, the operator, TO, whoever. The test is run, the question is, we all know what happened. Whose responsibility was it to say, let's go forward? CO-CHAIR REILLY: Would the person who answers the question repeat it too, because Fred wasn't miked. MR. BOURGOYNE: So the question was what the entity for -- the wording again? MR. GRIMSLEY: My understanding of the

lives on board. But as far as that -- if you want to boil it down to one person, it is the well site supervisor. But I can't conceive of not consulting with the rig crew, and then of course getting the consent back from whoever was in charge of that well. MR. GRIMSLEY: Mr. Smith? DR. SMITH: I think it's just crystal clear that legally the operator has the responsibility. MR. GRIMSLEY: And I understand that answer certainly, but just in your experience, who is the one that's generally signing off on this thing? DR. SMITH: For this kind of thing, the culture that I worked in, it was actually a company that BP has absorbed, the company man would have had the first step; and for almost any pressure test of any well component, would have called in and discussed that with the engineer in the offices. MR. GRIMSLEY: How about you, Mr. Lewis?

174 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

176 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

question is, what in your experience, having worked on these rigs, who or what entity, in your experience having worked on these rigs, is the one responsible for signing off on the test results such that the crew can then go on to the next phase of operation? MR. BOURGOYNE: I would say, my experience, the company man would be the one who, quote unquote, signed off on it. But there's no ready policy. But I can't conceive of signing off on one without consulting with -- as a matter of fact, the drilling engineer is expecting me to consult back to the office, or the operator drilling with the engineer's consent would be involved in that signing off. MR. GRIMSLEY: What about the rig crew? MR. BOURGOYNE: The rig crew would definitely be advised and have an opportunity to evaluate it independently. I would think that a rig crew would be interested, at least the tool pusher, the person responsible for the rig. After all, Transocean is responsible for that vessel and the

MR. LEWIS: That's consistent with my experience. It's the operating company that's responsible for the design and execution of the well. The well site leader is the operating company's representative on location. Quality control and confirmation is one of his primary responsibilities. The actual decision to go ahead on a test of any great significance would normally be discussed with the engineering staff in town. You would take your test results, either graphically or digitally, they would be transmitted to town. The engineer would look at them and go, yeah, I agree, or the engineer would go, boy, that looks flaky, what do you think? But it's -- definitely on-site, the first call on that is the operator's representative. MR. GRIMSLEY: Any questions from the Commission? CO-CHAIR GRAHAM: Co-Chairman Reilly. CO-CHAIR REILLY: I have a related question on that. You've said that it makes sense

PLANET DEPOS 888.433.3767 | WWW.PLANETDEPOS.COM

NATIONAL OIL SPILL COMISSION MEETING CONDUCTED ON TUESDAY, NOVEMBER 9, 2010
45 (Pages 177 to 180) 177
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

179

to call back when you are uncertain or see information that you don't understand. Is it always clear that there is someone to call back to? I know that some of the companies have -I've been in one, in fact, for Shell, have rooms where people monitor full-time each rig. I suppose not all do. What percentage of them would have that? And if they did not have that, you would be getting someone at home, presumably, who would then do what? Go on to his computer and look at the same data? How is that all done? MR. BOURGOYNE: In my experience it's usually one person that's assigned -- you know, it will be the person who primarily designed the well, or somebody who assisted if that person is not available. There's always somebody on call, if you will. It wasn't necessarily a room that you called in. It was 24 hours. If it was something of significance, particularly if it was significant to the success of the well or the safety of the well. CO-CHAIR REILLY: Is it company procedure? Is it Federal law, regulation?

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

information is likely to be available to how many people. Say, if there were others who might have detected or noticed the gauge that indicated a kick, is it likely there would have been, possibly, or is that information confined to one person specifically, typically? MR. BOURGOYNE: Just about anybody involved with the rig operations, that had, you know, an understanding of something that may have indicated a well control event, would have called back to the driller, most likely, and informed him. Because he's the one -- or he or she has the most information about current -- that immediate -- that second, what's going on on the rig. And that person also has the ability to react. If it is a well control event, you want to act quickly and shut in the well to reestablish control. So I wouldn't consider a well control event a stop work. It almost doesn't fall into that category. It's more like, we're having a well control event, the drillers are informed, that person evaluates whether it's a real kick event,
180

178
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

MR. BOURGOYNE: I'm not aware of any Federal law or even written company procedure. I definitely did read the procedure when I was working as a company man that said that. It was just the way it was done there, to call in and describe the problems you were having. Usually you had a well plan available. They were up to date on the operations. So it wasn't like there was a lot of graphical interface needed. If there would have been, we could have faxed back reports, you know, the engineer goes into the office. The well site supervisor is responsible to make sure the well is secure. So that kind of prolonged discussion, whatever activities are going on does not present an imminent threat. But if you're evaluating something, yes, that interaction happens anytime, day or night. CO-CHAIR REILLY: Some companies make a lot of stop work capability and say that everybody has it. I guess I would be interested to know how often that is exercised, and when it is, how much

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

most likely by doing a flow check. And if it is an event, shutting down, how frequently a stop work happens? It never happened in my experience. It seemed like it was never that formal. If somebody brought something to my attention that was of concern to them, it didn't necessarily have to be of concern to me, but of concern to them, we would address it, even if it required pausing operations. CO-CHAIR REILLY: One last quick one. The decision to use a diverter, would that decision be exercised by one person, or would more than one person have the power to do that or be consulted or not? MR. BOURGOYNE: All the policies I'm familiar with, that's one person, because it has to be done quickly. CO-CHAIR REILLY: That's the driller? MR. BOURGOYNE: That's the driller. CO-CHAIR REILLY: Thank you. MR. BOURGOYNE: Others can act if they see the event. But the driller is the one it's focused

PLANET DEPOS 888.433.3767 | WWW.PLANETDEPOS.COM

NATIONAL OIL SPILL COMISSION MEETING CONDUCTED ON TUESDAY, NOVEMBER 9, 2010
46 (Pages 181 to 184) 181
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

183
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

on. CO-CHAIR GRAHAM: I have a question that is similar to the ones Bill has just asked, but in a different context, and that is responsibility for decisionmaking. I'm going to mention a few decisions that we've talked about this morning. And at what level of the organization would the driller on the rig make this decision? Would someone back at the home office notify the situation, make the decision? Or would it go higher up in the organizational structure? For instance, the decision to set the surface lockdown at 3,000 feet, would that have been a -- where would that decision have been made in the chain of command? MR. BOURGOYNE: It wouldn't have been a rig site decision. DR. SMITH: If that had typically been a responsibility of someone in the engineering team, to determine what the proper plugging method was for a temporary abandonment, and it may or may not have been reviewed at a higher level of management within
182

supervisory level. But it would have been reviewed by an engineer. CO-CHAIR GRAHAM: Mr. Lewis, are those comments consistent with your experience? MR. LEWIS: Yes, it's consistent with my experience. That decision, particularly given the implications that it had, would have been one that had been reviewed jointly between the drilling supervisor at the well site, the design engineers. And then the organizations I've been with in the last several years, that information of a failure of that magnitude would have been immediately taken up the chain to drilling manager level at the very lowest, if not above that. CO-CHAIR GRAHAM: Any other questions? Gentlemen, this has been an extremely informative and helpful discussion, as the panel is ready to proceed. I appreciate your candor and contribution that you've made to a public understanding of what happened in this tragic event. Thank you very much. We will recess until 1:30.
184

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

the operating company, but presumably -- you know, the engineers who were responsible for the well would have laid out that plan. CO-CHAIR GRAHAM: Okay. Another of the shift from mud to salt water, which had the effect of reducing the pressure. DR. SMITH: Same thing. CO-CHAIR GRAHAM: The options to utilize after the negative pressure test failed, or to make the decision as to, first, that it did fail, and then second, what to do about it. DR. SMITH: Well, I think that relates to what we've been talking about. The environments that we've worked in, that decision would have not been a decision that was solely made at the rig. It would have been a decision that would have always involved a discussion with somebody who had been involved in designing the procedure and doing the -- you know, doing the calculations for designing the procedure within the operating company. It very well might, if it remained at the engineering level and not gone up to some

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

(Recess.) PANEL III REGULATION OF OFFSHORE DRILLING CO-CHAIR REILLY: May I ask you all to please take your seats. We're going to begin the afternoon with a discussion of regulation. We've spent a great deal of time hearing from industry and inquiring into industry practices. Now we're going to turn to the government, to partner in regulation. And to begin with, Dr. Walter Cruickshank, who is the Deputy Director of Bureau of Ocean Energy Management Regulation & Enforcement, an eight-year veteran of the agency, I understand, from whom we are looking forward to a presentation. Mr. Cruickshank -- Dr. Cruickshank. I will now turn it over to our deputy counsel, Sambhav Sankar. MR. SANKAR: Good afternoon, Mr. Cruickshank. I'm going to ask you a few questions today about the regulatory structure that was in place at the time of the Macondo incident. Let me switch over to my feed here. I'm going to start by

PLANET DEPOS 888.433.3767 | WWW.PLANETDEPOS.COM

NATIONAL OIL SPILL COMISSION MEETING CONDUCTED ON TUESDAY, NOVEMBER 9, 2010
47 (Pages 185 to 188) 185
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

187
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

talking a little bit about the New Orleans office. Is it your understanding that that was the office that had jurisdiction over the Macondo well? DR. CRUICKSHANK: Yes, that's correct. MR. SANKAR: Hang on one second here. Here's the organizational chart for the Gulf of Mexico region here, and the regional supervisor with the field operation. It's a little hard to read. And then the New Orleans district office, if I'm right, is down here under the deputy regional supervisor for district operations. So about -- do you have any idea about how many rigs of any kind that office is called upon to regulate and supervise? DR. CRUICKSHANK: The district office? MR. SANKAR: Yes, district office in New Orleans. DR. CRUICKSHANK: I don't know the exact number off the top of my head, but I believe that the number of rigs prior to Macondo was on the order of 30, 35 percent. MR. SANKAR: About how many people work in

year? DR. CRUICKSHANK: It's a large number. I don't know the precise number. But again, the New Orleans office does have on the order of 25 to 30 percent of all the permits that come in at the Gulf of Mexico. MR. SANKAR: Does that functionally mean that it's that drilling engineer in the New Orleans office through whom that work is being channeled? DR. CRUICKSHANK: It depends on the type of permit that comes in for the applications for permits to drill and the applications (inaudible), that would be correct. But there are other sorts of permits that come in that might be handled by some of the other engineers. MR. SANKAR: Most of the drilling permits would be handled by that drilling engineer? DR. CRUICKSHANK: That's correct. MR. SANKAR: And about what is the budget of the salary for employees down here at the New Orleans district? DR. CRUICKSHANK: The total salaries for
188

186
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

that office? DR. CRUICKSHANK: There's about two dozen people working in the different offices. MR. SANKAR: Of those, how many are engineers? DR. CRUICKSHANK: I believe there's on the order of seven engineers, and a dozen or so inspectors. MR. SANKAR: Are there different kinds of engineers in the office? DR. CRUICKSHANK: There are. There's the drilling engineer, production engineer, and some field engineers. MR. SANKAR: When a permit comes in to drill a well like Macondo, which is the particular (inaudible) to review that permit? DR. CRUICKSHANK: If it's an application for a permit to drill a well, it would be reviewed by the drilling engineer. MR. SANKAR: Do you have a sense about how many applications for permits to drill the New Orleans office (inaudible) in the course of last

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

that district office in fiscal year 2010 is about $2.3 million. MR. SANKAR: And about how much of that is engineer salaries? DR. CRUICKSHANK: Roughly half, I believe, a little less. MR. SANKAR: So, I'm sorry, remind me of the total number. It is $2.3 million? DR. CRUICKSHANK: Yes. MR. SANKAR: So about a million of that is engineers' salaries. About how much of that office is spent on helicopter travel during the course of the year? DR. CRUICKSHANK: About $3.5 million. MR. SANKAR: So it's a relatively small fraction of the cost of helicopter travel -- I'm sorry, the cost of paying your engineers is a relatively small fraction compared to the cost of helicopters? DR. CRUICKSHANK: The helicopter budget is more than half the entire budget for the district office.

PLANET DEPOS 888.433.3767 | WWW.PLANETDEPOS.COM

NATIONAL OIL SPILL COMISSION MEETING CONDUCTED ON TUESDAY, NOVEMBER 9, 2010
48 (Pages 189 to 192) 189
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

191
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

MR. SANKAR: Now, I should tell the Commission, we spoke with two individuals who were more directly involved in the permitting of the Macondo well. They very graciously cooperated by providing written answers. But given the stress of the situation, they preferred to submit written answers. And Mr. Cruickshank has agreed very graciously on his part to speak to some of the specific permitting issues at the Macondo well. If he's unfamiliar with some of those issues, he should be forgiven on those points. I am going to put up the very first permit for the Macondo well, or permit application, should say. So this is what an application for a permit to drill actually looks like. You can see here, it costs about $2,000. And it describes where you are. It doesn't say Macondo anywhere on this, but it is in fact the first APD for the Macondo well. I'm going to turn to one of the pages for this. The whole thing, I'll show you, is about 28 pages with all the attachments. I'm going to skip ahead to one of the last

maybe you've heard some of the experts we talked about describe this pore pressure gradient chart here as a crucial piece of data telling you how you should be drilling this well. When your drilling engineer looks at this kind of chart, what is he looking for on this chart, do you know? DR. CRUICKSHANK: My understanding, he's making sure that you're keeping the pressures in between the pore pressure and the fracture gradient. MR. SANKAR: So this dashed line in the middle here which represents the casing program and the mud program, you want to keep that there. Is there ever a case when you get one of these submitted where those lines aren't actually in the middle? DR. CRUICKSHANK: Not that I'm aware of. MR. SANKAR: Does the engineer actually check to see whether (inaudible) narrow pore pressure/fracture gradient window at all? DR. CRUICKSHANK: They would look at the data that comes in, and they would be looking to make sure that the well design was going to stay

190
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

192 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

pages, what I hope by now will be a familiar sort of chart for you. This is a pore pressure/fracture gradient chart. Have you seen these sorts of charts before, Mr. Cruickshank? DR. CRUICKSHANK: I just want to take a moment to let the Commission know about my background. I'm trained as a mineral economist and have worked at the Department of the Interior for 25 years, mostly in policy jobs. I've been deputy director of the Bureau since 2002. My job has largely been one on policy and management issues. So my familiarity with these sorts of issues, from a management perspective, from that as an engineer (inaudible). MR. SANKAR: I apologize, I should have given you a chance to clarify that at the outset. Having said that, this is a core pressure gradient chart for the Macondo well. Are you familiar at all with this particular chart? DR. CRUICKSHANK: I'm aware with what it is. MR. SANKAR: You've heard some of the --

within that interval. MR. SANKAR: Is there any reason, though, that they would say, well, this is a narrow pore pressure/fracture gradient window, and maybe some special requirements would apply for this kind of a well? DR. CRUICKSHANK: (Inaudible) MR. SANKAR: I'm going to put up the schematic now, the well program schematic that was attached to the very same application for permission to drill. You see here that there is -- the well, it says, is going to be drilled to 20,000 feet, but there's no casing all the way down to 20,000 feet. Instead, it terminates a little earlier than that. Would you agree that this shows that it's an exploration well rather than a production well? DR. CRUICKSHANK: Yes. MR. SANKAR: I'm also going to show you -let's see if I can get it here. On this well there are indications about rupture disks and burst disks in here. Is it your understanding that the inspector -- or I should say the engineer who

PLANET DEPOS 888.433.3767 | WWW.PLANETDEPOS.COM

NATIONAL OIL SPILL COMISSION MEETING CONDUCTED ON TUESDAY, NOVEMBER 9, 2010
49 (Pages 193 to 196) 193
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

195
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

reviewed this would have considered the rupture disk and burst disk in the course his review? DR. CRUICKSHANK: Yes, they look at the entire schematic. MR. SANKAR: Is there any MMS regulation that covers whether there should be a burst disk in the well? DR. CRUICKSHANK: There's nothing specific about burst disks, no. MR. SANKAR: So the engineer wouldn't have a basis to say it was okay or not okay? DR. CRUICKSHANK: He would have a basis, if there was something in the well design that he felt was inappropriate, he could raise the issue. MR. SANKAR: So this is the original application for permission to drill back in May of 2009. I'm going to skip ahead now to another later application, submitted sometime later. It again shows a similar schematic here, with -- I think the agreement is for an exploration type well, showing the casings terminate before the end of the cap of the well, you agree?

decision about whether you would be putting in production casing or not. So you would wait until you were far enough along to make that decision before you submitted that (inaudible). MR. SANKAR: You would permit it in stages, only as much as you needed to have approved at that time? DR. CRUICKSHANK: You would not necessarily come in with the design for the production casing before (inaudible) turn it into a producing well. MR. SANKAR: This also shows the now-famous long string in place here. Are there any MMS regulations allowing or disallowing the long string production casing design? DR. CRUICKSHANK: Nothing specific. These are well-designed to meet standards. But it doesn't require that you use a long string or a liner. MR. SANKAR: Are you familiar at all with some of the regulations contained within 30 CFR 250? DR. CRUICKSHANK: Again, from a general perspective, not from an engineering one.

194
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

196
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

DR. CRUICKSHANK: Yes. MR. SANKAR: Would it surprise you to know the internal BP designs at this point included a full casing program that would have gone down to a production well? DR. CRUICKSHANK: I would expect if they had definite plans on how to (inaudible) the well, they would have submitted that. MR. SANKAR: I can show you and show the Commission what BP -- I have to do this again, I'm sorry. This is a contemporary drawing from BP's internal documents from prior to this time frame, showing a long string production casing, and showing that this was at least planned as a possible producer well. Is there any reason, do you think, that an operator would choose not to submit a full casing program with an APB at this point? DR. CRUICKSHANK: My understanding is when you have an exploration well, until you've confirmed whether or not you have a dry hole or potential commercial discovery, you wouldn't be making a final

MR. SANKAR: Several of those regulations cover cementing in particular. I'm going to discuss a few of them with you, and if you like I can put them up on the screen as necessary. I'm going to start with one that generally speaks to the purpose of the cement in the well. So this regulation, which is 30 CFR 250.420, says that cement has to properly control formation pressures and fluids, and has to prevent the direct or indirect release of fluids from any stratum through the wellbore into offshore waters. Is this something that a drilling engineer can determine, whether these BP requirements will be met by looking at (inaudible)? DR. CRUICKSHANK: I don't have training in engineering. But they are supposed to be able to come up with the design of the well and cementing program and determine whether or not it's adequate (inaudible). MR. SANKAR: Has anyone to your knowledge ever violated this regulation or been cited for violating this regulation?

PLANET DEPOS 888.433.3767 | WWW.PLANETDEPOS.COM

NATIONAL OIL SPILL COMISSION MEETING CONDUCTED ON TUESDAY, NOVEMBER 9, 2010
50 (Pages 197 to 200) 197
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

199
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

DR. CRUICKSHANK: Not to my knowledge. But, you know, there have been incidents in the past related to cementing, and I would imagine there would have been some violations that may have gone along with those incidents. MR. SANKAR: You're just not aware of any -DR. CRUICKSHANK: In terms of (inaudible) of the design, I'm not aware of violations. MR. SANKAR: Moving ahead now to another regulation, 250 -- CFR 250.428, this is another regulation about cementing. It says, if you have indication, if an operator has indication of an inadequate cement job such as lost returns, cement challenge, or a failure of equipment, you should pressure test the casing to run a temperature survey, run a cement bond log, or use a combination of these techniques. Are you aware now that the cement job at Macondo failed? DR. CRUICKSHANK: I've certainly heard some discussion of that, yes.
198

DR. CRUICKSHANK: Under our regulations, yes. Under our regulations as they existed in April. MR. SANKAR: I'm going to turn now to the final -- actually I want to show you one more regulation, I apologize. This is the regulation that specifies you have to cement the annular space at least 500 feet above the casing shoe (inaudible) and 500 feet above the uppermost hydrocarbon-bearing zone. Would you agree this is an important regulation for the safety of the cement program of the well? DR. CRUICKSHANK: Yes. MR. SANKAR: So I'm going to turn now again to the APD. I'll put two pages of it up side by side, which unfortunately is necessary, and call out a small thing here. So this, to our knowledge, we understand that this is describing the cementing program at the Macondo well. And this bottom area right here, which extends over to that one couple of words on the next page, is the full description as we understand it of the cementing program of the

200
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

MR. SANKAR: And are you also aware that there were no lost returns at the Macondo job, or at least as we know right now there were no lost returns? DR. CRUICKSHANK: Okay. MR. SANKAR: Cement channeling, is that something that an operator can know ahead of time while pumping a cement job? DR. CRUICKSHANK: I don't know. MR. SANKAR: So would you agree it's hard, this is a hard regulation for MMS to actually enforce at the time of the cementing job? DR. CRUICKSHANK: Right. These are things you wouldn't know until you're actually doing the cementing job. MR. SANKAR: And even if there are some of these indications, it would be a complete satisfaction of the regulation to do -- to pressure test the casing? DR. CRUICKSHANK: Yes. MR. SANKAR: So would a positive pressure test do the trick on a pressure tested casing?

Macondo well. So it talks about the diameters of the casing, it talks about the ratings of the casing, the size of the hole, mud type of hole, a number of things. Having reviewed this, the only indication we can find of any discussion of cement is the volume of cement, which is 150 cubic feet. I don't know if you've reviewed this document in detail, but I will represent to you that this is the only place that I've seen on this where it talks about cement. I won't ask you to agree. But my question is, 1500 cubic feet of cement, if you do the math, works out to roughly 26 barrels of cement in volume. Do you have any idea whether that's a low amount of cement for cementing a production casing? DR. CRUICKSHANK: I don't know. MR. SANKAR: Are you aware they actually pumped 60 barrels of cement down the well? DR. CRUICKSHANK: I was aware they used more than was in the application. MR. SANKAR: And are you aware that even

PLANET DEPOS 888.433.3767 | WWW.PLANETDEPOS.COM

NATIONAL OIL SPILL COMISSION MEETING CONDUCTED ON TUESDAY, NOVEMBER 9, 2010
51 (Pages 201 to 204) 201
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

203 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

BP agreed that 60 barrels of cement was a very small amount of cement pumping down that well at that point? DR. CRUICKSHANK: I wasn't aware of that. MR. SANKAR: This certainly suggests that in the APD it says 150, hopefully filling (inaudible) there was a low amount of cement in the well, given the requirements of cement in the casing? DR. CRUICKSHANK: That is -- certainly the drilling engineer would have seen that number during his review. MR. SANKAR: Did MMS know whether BP was planning on using any centralizers at this well? DR. CRUICKSHANK: I don't know whether the drilling engineer knew about that at the time. MR. SANKAR: Are there any regulations that require information (inaudible)? DR. CRUICKSHANK: Not at the time of these applications. There are now. MR. SANKAR: Are there any -- was there anything in the safety (inaudible) that you know of

failures as one of the leading causes of blowouts? DR. CRUICKSHANK: Yes. MR. SANKAR: Was there any move to react to that by increasing the amount of cementing regulations? DR. CRUICKSHANK: The reaction to that was, MMS at the time spoke with industry about the fact that a disproportionate number of loss of control incidents were relating to cementing failures, and discussed the need for some better standards around that. As a result, American Petroleum Institute formed a committee under a standard setting role to develop standards for cementing. Some of our engineers participated in that committee. It resulted in the publication of Recommended Practice 65 part 2 in May of this year, which we have now incorporated into our regulations as of last month. MR. SANKAR: That wasn't in place, of course, at the time of the Macondo. DR. CRUICKSHANK: That's right.
204

202
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

that discussed the flow rate of the cement, how fast it was going to be pumping out the well? DR. CRUICKSHANK: Again, I don't believe that was required at the time of this application. It is required under the regulations now. MR. SANKAR: How about the type of cement, is there any requirement about the type of cement used? DR. CRUICKSHANK: No. MR. SANKAR: No indication whether they were going to use that (inaudible)? DR. CRUICKSHANK: There was nothing in the regulations that required them at that time to tell us. MR. SANKAR: Are there any MMS regulations or were there any MMS regulations -- I apologize for using the old acronym from the time. Were there any regulations that required laboratory testing of cement before (inaudible) the well? DR. CRUICKSHANK: No. MR. SANKAR: Are you aware that there was a 2007 MMS study that identified the cementing

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

MR. SANKAR: So now I'm focusing on BP's application to -- focusing too much on BP's application to modify its temporary abandonment procedures at the well. These are the procedures that we discussed that changed quite frequently, and it turned out in many ways to be crucial to the final safety of the well. I apologize, I'm actually showing you the wrong page of this. Here we go. This is the attachment to that first page that shows the particular procedure that we've been focusing on, and the depth of the plug. Here it talks about setting a 300-foot plug. It talks about setting it quite deep, as we discussed. And it discusses the reasons why. It says it's for minimizing the chance of damaging the LDS sealing area for future completion operations. Mr. Cruickshank, do you know what "the LDS sealing area" refers to? DR. CRUICKSHANK: It's the lockdown mechanism. MR. SANKAR: Lockdown sleeve. So is it fair to say that what BP was saying here was that

PLANET DEPOS 888.433.3767 | WWW.PLANETDEPOS.COM

NATIONAL OIL SPILL COMISSION MEETING CONDUCTED ON TUESDAY, NOVEMBER 9, 2010
52 (Pages 205 to 208) 205
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

207 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

because of the lockdown sleeve operations, they wanted to test the plug significantly lower than the regulations otherwise require? DR. CRUICKSHANK: Yes. MR. SANKAR: What do you think prompted the engineer or what would have prompted an engineer to grant this (inaudible)? DR. CRUICKSHANK: What the engineer would have looked at is whether they felt, under the description given of what they wanted to do, whether that would satisfactorily plug the well or not. In this particular case, the engineer was relying on the negative pressure test that was going to be done as part of this procedure to determine whether or not that plug was going to do its job. And if it's not, then they would have revisited where that surface plug needs to be set. MR. SANKAR: So he was relying on a negative test of the plug? DR. CRUICKSHANK: Yes, part of the procedure, as I understand it, for putting the service plug was to do some tests of that plug.

what must I do to keep wells under control. You must take necessary precautions to keep wells under control at all times. You must for example use the best available and safest drilling technology to monitor and evaluate well conditions and minimize the potential for the well to flow or kick. What is MMS's view of what best available and safest technology means? DR. CRUICKSHANK: There's a definition in the regulations for best available, safest technology. I believe it refers to the technology that's economically feasible and that would protect the environment. MR. SANKAR: Does that test available, the safest technology, vary depending on the depth of the water or the well that's being drilled? DR. CRUICKSHANK: It could. I mean, I don't think our regulations necessarily specify what best available and safest technology is all of the time. MR. SANKAR: I want to actually close with just a few questions about the ethics of your
208

206
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

MR. SANKAR: I don't mean to quarrel. I believe the negative test was up here, the plug was afterwards in the procedure. Would you agree the negative test procedure appears to be -- and even the well monitoring program appears to be before the plug was set? DR. CRUICKSHANK: That's what it looks like. I did speak with the engineer at this point earlier, and he did say he was relying on the negative test to inform whether or not it would be appropriate to have the surface plug set at that depth. MR. SANKAR: Would you have expected one of your drilling engineers to understand the normal course of lockdown sleeve setting procedures? DR. CRUICKSHANK: I can't speak to the depth of knowledge on lockdown sleeves. MR. SANKAR: I want to look at one more regulation now. This is a regulation about well control, and in particular there's a few phrases in here I would like to focus on. Again, the regulation here generally says,

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

inspectors. It's worth noting to the Commission that, having interviewed the engineer who worked on this project, the supervisor, we found absolutely no indication, none at all, that there was any bias, corruption, or undue influence of these people. These were people doing their jobs, trying to do them well under the circumstances. We found none of that at the level of the line employees who were doing this. Do you have any reason to believe, Mr. Cruickshank, there were ethical lapses in anyone else beyond the two or three individuals we spoke with in the New Orleans district office? DR. CRUICKSHANK: I have no reason to believe so. MR. SANKAR: What impact have the accusations of improper influence and bias on the part of your Gulf of Mexico region folks had on morale of those folks down there? DR. CRUICKSHANK: I think it's really had a negative effect. There have been a lot of stories, a lot of public attention on that

PLANET DEPOS 888.433.3767 | WWW.PLANETDEPOS.COM

NATIONAL OIL SPILL COMISSION MEETING CONDUCTED ON TUESDAY, NOVEMBER 9, 2010
53 (Pages 209 to 212) 209
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

211
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

possibility. And for a set of professional engineers and other staff that have taken their job very seriously for a long time, it's just I think very frustrating and demoralizing. (Inaudible) MR. SANKAR: With that, I'll ask you to direct your questions to Mr. Cruickshank. CO-CHAIR REILLY: Dr. Cruickshank, Ms. Birnbaum has testified before the Commission to the effect that she fully supported the expansion of offshore oil and gas leasing areas proposed by President Obama with the agency that she had essentially -- she considered they had adequate resources to cause her to support that. Would you agree? DR. CRUICKSHANK: I think at the time that was certainly what we believed, recognizing that if the program moved into new areas, there would be an increase in staff to deal with operations in those areas. CO-CHAIR REILLY: Do you think you have adequate staff and resources to carry out your responsibilities in the areas you're presently
210

DR. CRUICKSHANK: There is no de facto moratorium. We have moved resources around to try and address the workload issues that come with the new permitting requirements, and we are focusing on resources, on trying to design our processes to be able to deal with those. But they are new requirements, we are requiring new information. The process is different than it was a year ago, and properly so. And I don't think we should expect to see processing return to exactly what it was a year ago. Nevertheless, the steps we're taking to try and address the workload issues right now involve moving folks from other offices, which we can do for a while, but I think (inaudible) additional resources in the Bureau, so that we can have a more permanent fix to this. CO-CHAIR REILLY: The Commissioners agree with you on that, and perhaps we can have action that can help establish your sense of the kind of resources you do need. And perhaps we can weigh in on that issue as well.

212
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

responsible for? DR. CRUICKSHANK: As a bureau and a department, we are seeking substantially more resources to beef up our inspection functions and our engineering functions, environmental science. We feel that we've been doing a more complete job. We do a lot of things we would have liked to do in a non-resource-constrained world. If we had more resources, there are a number of additional things we would like to do. CO-CHAIR REILLY: There's a concern in the industry that although many of the industries will be able to comply with the new regulations that have been proposed and in fact are being implemented, that the agency itself will have difficulty responding to the permits and making the judgments on the certification of equipment and the rest in the near term. (Inaudible) it would help delaying development further with a kind of de facto moratorium consequence in the Gulf. You have no doubt heard some of those concerns. Do you have any response to them?

Mr. Garcia? MR. GARCIA: Thank you. Dr. Cruickshank, we don't have a lot of time, so I'll ask you to be as concise as you can, and you can submit information for the record if you feel you need to supplement your answers. My understanding is that over the years the agency has attempted to add a requirement for proactive risk management, but has not been successful, in fact has repeatedly tried those. Why is that? And has industry supported those efforts? DR. CRUICKSHANK: I'm not sure specifically what you're referring to. We do some risk basis in our inspection program. There is some risk basis in the safety and environmental management system that was put forward. Beyond that, I'm not sure of anything specific. MR. GARCIA: So there's been no attempt to enhance the safety regulations over the last several years? DR. CRUICKSHANK: There have been a number of changes in our safety regulations over the years.

PLANET DEPOS 888.433.3767 | WWW.PLANETDEPOS.COM

NATIONAL OIL SPILL COMISSION MEETING CONDUCTED ON TUESDAY, NOVEMBER 9, 2010
54 (Pages 213 to 216) 213
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

215
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

MR. GARCIA: Based on what you know now, is there anything that the agency's engineers and inspectors could have done, given the authority under the regulations, to prevent or limit the blowout? DR. CRUICKSHANK: I don't know that one can ever say you can prevent a blowout through these mechanisms. We're still waiting for the root cause analyses to understand exactly what happened here. But certainly I don't think there is a regulatory regime you can possibly design that could eliminate the possibility of there being these sorts of incidents. MR. GARCIA: We've heard over the last day and a half about the unique challenges that deepwater drilling presents. Do you think there should be a specialist office within the agency that oversees this drilling? DR. CRUICKSHANK: Well, we are taking a look at organizational issues right now as part of the reorganization of the Bureau concerning all sorts of issues like that. We certainly want to
214

that we saw with Macondo. Was there any information transfer between regulators or within the industry as to the circumstances of that blowout? DR. CRUICKSHANK: There's been some between the regulators, recognizing that the investigative report on that incident has not been released yet, so we don't have all the information. But there has been some discussion between the safety regulators in the two countries. MR. GARCIA: And are you aware of any sharing of information within the industry? DR. CRUICKSHANK: Within the industry, not that I'm aware of. MR. GARCIA: Let me read a quote from the Wall Street Journal and get your reaction. This is from the May 7th, 2010 edition. And I'm quoting, "Steven Allred, who as Assistant Secretary of the Interior oversaw MMS from 2006 to 2009, said the agency does conduct spot inspections of oil rigs and checks operators' compliance for safety procedures. However, their role is not to babysit the operators, he said. The

216
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

make sure that our staff is overseeing the operations and the personnel requests to have the expertise -MR. GARCIA: But are you looking at that specific issue? DR. CRUICKSHANK: That's part of what we're looking at, yes. MR. GARCIA: You are looking at that. Okay. And are you planning on developing specialists in areas like deepwater drilling? DR. CRUICKSHANK: We're still considering our options under the reorganization, how we're going to structure, whether it's going to be around functional areas or whether we're going to do more cross training. These are issues that are under discussion. At this point I don't think we've reached a conclusion exactly how we're going to structure. MR. GARCIA: Let me ask you about an event that occurred a year ago. There was a blowout in Australian waters. It lasted for over two months. Was there -- and very similar to the circumstances

agency's primary task during inspections is to verify how much oil is being pumped, which is key to another MMS duty, maximizing payments the government receives for oil and gas rights from energy producers." Do you think that quote accurately reflected the political expectations at the time, prior to the blowout, at the agency? DR. CRUICKSHANK: I do not. Certainly one of the tasks of inspectors is to look at the meters that measure production. But we consider that to be a secondary inspection. The prior inspections have to do with inspecting the drilling rigs, production facilities, safety inspections. Those are the primary job of the inspectors when they go out in the field. MR. GARCIA: Why do you think he said that? DR. CRUICKSHANK: I don't know. MR. GARCIA: How did the regulatory approach of MMS compare with other foreign regulators?

PLANET DEPOS 888.433.3767 | WWW.PLANETDEPOS.COM

NATIONAL OIL SPILL COMISSION MEETING CONDUCTED ON TUESDAY, NOVEMBER 9, 2010
55 (Pages 217 to 220) 217
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

219 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

DR. CRUICKSHANK: There's a variety of systems out there. But I think what we see in a lot of the other countries is they have a performance-based system of regulation where they have less in the way of prescriptive requirements and put more of the responsibility on the company to meet goals for having safe operations. Rather than approving permits as we do, they get the submissions from the companies and will review them, perhaps challenge them, and decide whether to accept or object, but not necessarily a formal approval process. MR. GARCIA: Thank you, Mr. Chairman. CO-CHAIR REILLY: Other questions from the Commission? Thank you, Dr. Cruickshank. PANEL IV PLANS FOR REGULATION CO-CHAIR REILLY: Mr. Bromwich, a pleasure to see you here again. Do you have any opening remarks? MR. BROMWICH: Yes, I do. I have a brief

the American people confidence that drilling in our oceans will be conducted in a safe and environmentally responsible way. Since then, we aggressively pursue a reform agenda that's designed to substantially raise the standards of safety for industry and accountability for my agency. These reforms are ongoing and will continue for some time. And they are I think in many respects familiar to the Commission. But let me walk through them very quickly. First, we launched an aggressive and far-reaching reorganization of the former MMS. Second, we formed an investigations and review unit that steps up our internal investigations, but also our external investigations and our enforcement efforts. Third, we've issued various notices to lessees clarifying what we expect from companies relating to worst case discharges, access to containment capabilities, and certifications of compliance, the most recent of which was issued yesterday.
220

218
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

statement I would like to share with you. First of all, thank you for inviting me again, Co-Chairs Reilly and Graham, and other distinguished Commissioners. As you know, this is my third appearance before the Commission, although this is at a greater remove. I can barely see you from here. But I'm delighted to be able to take this opportunity to continue our discussions, both about the changes we've already made and our future plans for drilling on the nation's outer continental shelf. This Commission and my agency, the Bureau of Ocean Energy Management, Regulation & Enforcement, share the same goal, which is to reform the way that offshore drilling and gas production is conducted and regulated in U.S. waters. As you know, in late June the President and Secretary Salazar asked me to become the nation's chief regulator of offshore development. And their direction to me was both sweeping and clear; that is, to review the agency from the top to the bottom and make the changes necessary to give

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

We have developed a recusal policy to deal with real and apparent conflicts of interest. We've begun a full review of categorical exclusions, which will no longer be used to approve deepwater drilling projects. We've issued for the first time guidance for what's called "idle iron," requiring companies to set permanent plugs on approximately 3,000 non-producing wells and dismantling approximately 650. We've developed and published an interim final rule that, as you know, enhances rules relating to casing, cementing, BOP certifications, and other matters. We've developed and published a rule requiring oil and gas operators to develop for the first time their own safety and environmental management programs, the so-called SEMS rule. And we've begun new environmental analyses both in the Gulf of Mexico and in the Arctic. Now, we've pursued these changes while managing hundreds of loyal and committed public servants, many of whom have been with the agency for

PLANET DEPOS 888.433.3767 | WWW.PLANETDEPOS.COM

NATIONAL OIL SPILL COMISSION MEETING CONDUCTED ON TUESDAY, NOVEMBER 9, 2010
56 (Pages 221 to 224) 221 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 223 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

20 years or more, through a crisis the likes of which none of them had ever experienced before, and who, it's fair to say, have been deeply and profoundly shaken by the unrelenting and in many ways unfair criticism that they've received. Now, there are great challenges that face the country with respect to offshore oil and gas drilling. And those challenges can't be minimized, because they are substantial and they are difficult. Let me summarize briefly several of the most significant challenges that I see for the development and regulation of oil and gas resources, issues that we confront every day and are the context for your work as well as for our reform agenda: First, to achieve the appropriate balance between ensuring that new safety environment standards are strictly adhered to by industry, and at the same time expediting the prompt processing of permits for drilling operations in both deep and shallow water. This balance is critical and must be topmost in our minds as we impose and enforce
222

namely the people at my agency. That has to be addressed in new tools and training for government personnel. I'm deeply concerned that without the resources we requested, the justification for which could not be more compelling, the changes and reforms that we have pursued and we continue to pursue will not be realized. Third, there is a grave need for innovation and technological development with respect to the safety of drilling operations, subsea blowout containment, and spill response. There is a tremendous opportunity here and a desperate need for technological development offshore. I believe some if not all of you have actually gone on rigs and platforms, and in many ways they are engineering marvels to be sure. Yet the technological development that relates to safety has lagged behind the development of the rigs themselves. And so there are some questions that have come up and that we need to address. What features should the next generation of blowout preventers
224

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

regulations and make structural and process changes as we reform my agency. Second, providing appropriate funding. You talked about this a little bit with Dr. Cruickshank. Funding and resources for the management and regulation of offshore energy development. It's clear, and I've seen statements from Members of this Commission, that the agency for decades was starved for resources and was not able to review drilling operations, conduct inspections, and enforce environmental standards adequately, even though the agency's personnel tried very hard to do so. I've been asked by the President and the Secretary to fix these problems. But that will, to put it starkly, require a substantial infusion of resources to accomplish. We have requested substantial resources from Congress, the hiring of personnel to review drilling permits to inspect rigs and platforms to monitor drilling activities, and to ensure compliance with environmental standards. There is a substantial technological gap between industry and the people who oversee it,

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

have? What types of sensors and safety monitor devices should be installed as a matter of course on drilling rigs? What realtime and electronic and metering systems should be required in order to get realtime and important data both to the companies who operate the rigs and to the regulators who oversee them? How will versatile and effective subsea blowout containment equipment be designed and be built? Now, the department recently announced -Secretary Salazar announced last week the creation of an institute called the Ocean Energy Safety Institute that we hope will draw on the resources and thinking of government, industry, academia, and NGOs to spur the development of technology to help address these and many other questions. Fourth, we need to optimize a safety and environmental compliance regime for offshore operations. We are thinking very hard and we continue to think very hard about our safety and environmental regulatory regime. It is clear to me that we will require a

PLANET DEPOS 888.433.3767 | WWW.PLANETDEPOS.COM

NATIONAL OIL SPILL COMISSION MEETING CONDUCTED ON TUESDAY, NOVEMBER 9, 2010
57 (Pages 225 to 228) 225 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 227
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

combination of enhancing our prescriptive regulations, which is obviously the system we currently have, and increasingly holding industry to performance standards that we'll develop. But those must be appropriate for the reality and scale of the United States' current offshore oil and gas industry in our economy. We can't simply import more models into our current model. Then too, the model that we adopt has to be consistent with the existing relationships between government and private sector. Finally, we must develop a strategy for offshore energy development in the Arctic. As you know, the resource potential there is substantial, but the Arctic environment presents a broad range of and challenges for responsible oil and gas development. Just to tick through them, they are weather conditions, development of necessary infrastructure, employing realistic and effective spill response resources, and last but certainly not least, protecting sensitive Arctic habitats and
226

for Nuclear Power Operations, and encouraged you to consider that as a way to supplement your regulatory effort and raise the bar within industry by defining best practice and working closely with the regulators to bring up the game, also possibly taking some of the resource load off. Have you had a chance to consider that? Do you have an opinion on it? MR. BROMWICH: We have considered it, and we will continue to consider it. I think your questions and your suggestions have stimulated thinking within our agency, and I hope to some extent within industry. I don't think it can be an immediate substitute for the current system we have now. But is there the possibility and the potential for a self-regulating mechanism to exist that would enhance the regulatory system that we currently have and to increase oversight? I think there is that possibility, and I would look forward to exploring it. I do think we need to be realistic about

228

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

marine mammals on which many people depend for subsistence. These are all terribly important issues, and we are considering all of them. Final word. This Commission is in a unique position to collect and analyze information relating to these issues and to draw upon a broad range of expertise and perspective. I know your work is coming to a close. But the challenges for industry and for our agency to develop practical and effective solutions will continue. Therefore, as we've done already, I truly look forward to working with the Commission. I look forward to its report, and I look forward to the recommendations. And I want to thank the Commission for its work. CO-CHAIR REILLY: Thank you, Director Bromwich. That's a good statement and a fine record of energetic policy reforms. We certainly want to be helpful to you in the task that you have set. When you first appeared some four months ago in New Orleans, I raised the question of the experience of the nuclear industry and the Institute

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

differences that exist between the oil and gas industry on the one hand and the nuclear industry on the other. And one is that oil and gas has been historically extremely competitive. And my sense is that the kind of information that would be handled in the oil and gas industry if one company inspected another or participated in inspections of another, there would be issues about technical and proprietary and confidential information that companies may be reluctant to share with one another. I also think there are larger, far larger number of participants in the oil and gas industry in the deepwater drilling and the shallow water aspects of the industry than there are in the nuclear industry. So I think we have to look at those differences square in the face and try to figure out whether there are aspects of the INPO model that can be adapted to the oil and gas field. But I don't think, and I'm sure you're not suggesting, that one can simply take one model and import it into a very different industry with a very

PLANET DEPOS 888.433.3767 | WWW.PLANETDEPOS.COM

NATIONAL OIL SPILL COMISSION MEETING CONDUCTED ON TUESDAY, NOVEMBER 9, 2010
58 (Pages 229 to 232) 229
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

231 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

different structure. CO-CHAIR REILLY: Thank you. Senator Graham? CO-CHAIR GRAHAM: Thank you very much, Bill. My questions are going to largely follow the comments that you have just made, Mr. Bromwich. You stated that one of your priorities was appropriate funding to carry out your responsibilities. In many areas in which private business is going to be inspected by government, there are fees or other means by which that inspection service is funded. If you take out a building permit, the funds that you pay for the permit end up going to finance the inspector, who is supposed to be sure that the building is built to code and standards of safety, etc. Why couldn't a system like that be utilized between the agency and the industry, rather than relying on appropriated taxpayer funds to support the inspection function? MR. BROMWICH: It's a very good question,

MR. BROMWICH: It's an interesting suggestion. I don't know whether it's been previously explored or not. I would be intrigued and interested in pursuing it. I don't know whether it's ever been considered before, and if so what the reasons were for not going forward with it. But it certainly is a way to go forward and to get additional monies from the industry that has use of public lands. CO-CHAIR GRAHAM: Another of your priorities is innovation, R&D, relative to offshore drilling. It seems to me it's a constant challenge for government to stay current, much less ahead of, entrepreneurial, aggressive private sector entities. And that's -- we want entrepreneurial, aggressive private sector entities to move the economy forward. How would you see the new entity that you described giving government some greater ability to at least stay competitive in terms of its ability to provide effective regulatory standards and enforcement of those standards in a rapidly changing technical environment?
232

230

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

Senator Graham. My understanding is that was a significant element of what the administration was proposing to get us, 100 million additional dollars in fiscal year 2011. There was a significant proposed increase in inspections fees. My recollection is that the reaction on Capitol Hill was decidedly mixed, and there was substantial opposition from industry to raising the fees. That's not a surprising reaction. But to the extent that we are banking on or hoping that an enhancement of fees will help to fund the needed augmentations to our resources, I think we need to see what the reaction is going to be. So far it's not been incredibly positive. CO-CHAIR GRAHAM: There would be a potential alternative approach, and that is, all of this drilling is done on public lands subject to lease arrangements. Why couldn't you include in the lease a fee that would be sufficient to cover the cost of inspecting the activities that the lessee is going to undertake on you, the tenant, on behalf of the U.S. people's own land?

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

MR. BROMWICH: I think we don't have a fully developed proposal yet. I think Secretary Salazar made the announcement last week because he wanted to get the reaction both of industry, the academic world, and NGOs. But it is in recognition of a very significant deficit that exists between the technical knowledge that exists in the industry, as they guide them into deeper and deeper water, and the technological know-how and research and development capacity that exists in the government. We are at a severe handicap, and have always been, in terms of the know-how that exists as people drill in deeper and deeper water. We're hopeful that one of the things that may happen is that we will create this institute and we will get the circulation of personnel, and so we will get the benefits of people in industry or involved in R&D programs who can share that information with the government which will allow us to enhance the way we go about regulating offshore oil and gas.

PLANET DEPOS 888.433.3767 | WWW.PLANETDEPOS.COM

NATIONAL OIL SPILL COMISSION MEETING CONDUCTED ON TUESDAY, NOVEMBER 9, 2010
59 (Pages 233 to 236) 233
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

235 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

So the proposal, which is still very much in an outline form, is to try to develop that capacity in government so that we can stay more abreast of the industry than we have in the past. But I'm also concerned about something else which relates to the level of R&D that exists within industry. I went on a tour, a recruitment tour, a couple of weeks ago, of various engineering schools in the southwest, and I dealt with the chairs of petroleum engineering schools in Louisiana and Texas. And they expressed great concern about the level of R&D in the private sector into drilling and drilling safety. So I think we're really talking about two different but important things. One is to make sure that drilling safety R&D goes on at an adequate level within the industry, but then also that that knowledge in R&D gets shared with the government so that the regulator is better equipped to do its job. CO-CHAIR GRAHAM: A couple of final questions, which were not on your list. One of the

hands. I think that coordination and collaboration problems, when you go across cabinet agencies or cabinet departments, tend to be far greater than they are within a cabinet department. So I would be concerned that if we not only have our agency involved in a significant number of offshore drilling regulatory function but the Coast Guard as well, then you add OSHA, you start to create I think an unmanageable environment where things will begin to break down across agency lines. I think we are capable of enhancing our current capabilities. I don't believe that we ought to sort of loop components in and out willy-nilly. And I know you're not suggesting that is the case, but I think we can do that job adequately. I've actually had meetings with the Assistant Secretary for OSHA and look forward to continued meetings with him and his staff to learn what we can about being more effective regulators of safety on offshore drilling rigs and platforms. I think that's preferable to moving some of our
236

234
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

things that we are probably going to be talking about is a governmental restructuring. Are there some changes that would match responsibility with skill sets more effectively? One of those that's been suggested, currently the OSHA responsibility for worker safety is technically invested in the Coast Guard for offshore riggings. But it's my understanding that by memorandum of understanding, the Coast Guard transferred that to MMS. Is that continuing to be one of your responsibilities? MR. BROMWICH: Yes, it is. CO-CHAIR GRAHAM: What would be, if the alternative were that this should be placed in the hands of OSHA as onshore worker safety is, what would be your reaction to that and comments as to maybe why it should continue to stay in your hands? MR. BROMWICH: I am always concerned about proposals that further diffuse responsibility for one set of activities, in this case offshore drilling, and to put them in a larger number of

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

functions to OSHA or anyplace else. CO-CHAIR GRAHAM: Could you possibly supplement your comments today with an analysis of what you think should be the criteria to evaluate the effectiveness of workers' safety in an offshore environment, and then why you think your agency, based on its actual performance, has delivered at an acceptable level against those criteria? MR. BROMWICH: Sure, we can do that. I also want to remind you what I'm sure you know, which is that we have just within the last two months put out I think a landmark new rule, safety and environmental management systems rule. And that's a rule that will be effective in October of '11, meaning we will begin doing inspections and rules to ensure compliance. That rule was in the works for a year before Deepwater Horizon, in recognition that a more holistic approach to workplace and drilling safety needed to be conducted. So I think our recognition that this is an issue and that we can do better predates Deepwater Horizon. And I think we will

PLANET DEPOS 888.433.3767 | WWW.PLANETDEPOS.COM

NATIONAL OIL SPILL COMISSION MEETING CONDUCTED ON TUESDAY, NOVEMBER 9, 2010
60 (Pages 237 to 240) 237
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

239 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

make that work. CO-CHAIR GRAHAM: My final question relates to what we've been hearing in the last day and a half, and that is the consequences of having an industrial model which is built upon a lead company, where much of the most important and frequently dangerous activity is actually then in the hands of a third or even a fourth parties. We've had BP, Transocean, Halliburton, sitting exactly where you're sitting, in some cases laying the blame off on each other for particular circumstances. How do you -- what do you see as the role of your agency in more effectively overseeing these multiple multi-corporate relationships which constitute the actual team that goes out onto those rigs to execute their responsibility? MR. BROMWICH: Unfortunately I haven't had a chance to listen to the evidence that you've had presented to you over the last day and a half. But certainly, if it does appear that the involvement of multiple companies seems to be a barrier to effective regulation, we will see what we can do to

prescriptive regulatory model, and looking more at a safety case model. This morning in the testimony we've been looking at MMS's regulations, and I realize they've changed, they weren't that prescriptive, they were very general, and the industry, because it is highly competitive and very protective, doesn't have sort of uniform standards either. It appeared that in each operation it's pretty much, we're designing it for this case, and, you know, learn from doing, in many respects, with the deep expertise in a company. So -- and in the interests of moving towards more of a combination of the two, I'm just curious as to whether, since the Macondo blowout, with your dealings with industry, you found a receptivity towards moving to more of a safety case model, and having a culture of sharing best standards, best operations, and a more cooperative approach certainly than we've heard about earlier today. MR. BROMWICH: Well, I think Deepwater Horizon has not only been a wake-up call to my
240

238
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

clarify what our expectations are with respect to each of the players who participate in a particular operation. I don't know whether that's an issue that's been focused on in the past. We obviously have an industrial model that we had no role in shaping. But we clearly have to effectively regulate that. So I'll be looking with interest at what you conclude in your report as well as what the other investigations conclude, to determine whether we need to do things differently given the number of players that are involved in a particular project. CO-CHAIR GRAHAM: Thank you. CO-CHAIR REILLY: Commissioner Beinecke? MS. BEINECKE: Thank you, Co-Chairman Reilly. Mr. Bromwich, nice to see you again. MR. BROMWICH: I can barely see you, but it's nice to see you over there. MS. BEINECKE: If you could elaborate a little more, you've been talking about the

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

agency, but it's been a wake-up call to the industry as well. And I've certainly, over the four months that I've been in this job, had a lot of meetings with a lot of companies that tell me that they've really taken to heart what happened with Deepwater Horizon, and they are redoubling their efforts to improve their safety programs. I don't know whether over the long term there will be substantial changes and enhancements to companies' safety programs. I have been told by executives with companies who operate both in countries where there is more of a safety case regime that it is very risky to quickly move from one to the other, that in fact chaos would ensue if we flipped over to a safety case model any quicker than over a three- to five-year period. I think, with that learning in mind, I think what we're going to try to do is to move towards more of a hybrid model over time. I think that our SEMS rule is a first and important step in that direction. And we'll have to evaluate whether there are other performance-based standards that we

PLANET DEPOS 888.433.3767 | WWW.PLANETDEPOS.COM

NATIONAL OIL SPILL COMISSION MEETING CONDUCTED ON TUESDAY, NOVEMBER 9, 2010
61 (Pages 241 to 244) 241 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 243
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

feel comfortable creating in order to build more of a hybrid system. I can't tell, frankly, whether companies prefer the safety case system or the prescriptive regulations. I think if you ask the company representatives, I think it depends on what their own experience has been. And I think there are many differences that exist between the various countries that use more of a safety case model than this one. About two weeks ago I had the occasion to meet with my foreign counterparts at the international regulators forum in Vancouver. And I met with my counterparts from Canada, in UK, from Australia, and from a Norway. And it became starkly clear to me that they face very different and, to my mind, less significant challenges than we do. It's a far less competitive industry in those countries. There are many fewer participants in the industry. There are many fewer rigs and platforms than exist here. And so I think we really are talking, if not apples and oranges, we're talking about operations on a completely different
242

won't name him, but an executive from one of the major companies who had experience in the UK said that he went through three to four years of chaos there, moving from one system to the other, and he actually didn't want to go through that again. So that was -- those were the words of one executive who made it fairly clear that he didn't think transferring the experience in one place was that easy. MS. BEINECKE: Thank you. On another point, you made the statement that you were looking much more carefully at the Arctic, and identified four different areas that you were looking at. We've gotten many comments into the Commission on the challenges in the Arctic, and particularly the different gaps, response gaps, research gaps, gaps in equipment and the location of equipment, etc., etc. Can you just talk a little bit about what timeline you're under to complete the reviews that you identified and over what period of time you will be making decisions relative to the Arctic?

244

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

scale in those countries than from what we have here. Now, my very purpose in meeting with those regulators was to see what we could learn from them. And this afternoon I'm meeting with one of them again. So I think there are things we can learn from them. But we have to be mindful that the industry structure here, and the traditional historical way of doing business here, is very different from the way it's been conducted anyplace else. MS. BEINECKE: Although many of the same companies that are operating here are also operating there, aren't they? MR. BROMWICH: Yes, they are. That's true. MS. BEINECKE: So you would assume that they would have had experience in both cases; if they have participated in the systems in those other countries, they would be prepared to participate in a somewhat different system here. MR. BROMWICH: I can tell you that -- I

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

MR. BROMWICH: It's going to be in the very near future. We've had meetings in the Department of the Interior very recently, and we have additional discussions that are going to be held in the very near future. I think people understand that there is a desire for and a need for clarity. And we'll try to provide that as quickly as we can. But this is not a back burner issue for us. It's very much a front burner issue that's currently under discussion. MS. BEINECKE: One of the issues that we've been looking at is the scale of the area-wide leases, particularly in an area such as the Arctic, the areas that are so vast. Are you contemplating narrowing the scale from area-wide to more defined areas with more analysis of particular resources of those -- I mean, marine, ecological resources in those areas? MR. BROMWICH: I have not yet been involved in discussions of that kind. But we may well have them in the near future. But so far in my

PLANET DEPOS 888.433.3767 | WWW.PLANETDEPOS.COM

NATIONAL OIL SPILL COMISSION MEETING CONDUCTED ON TUESDAY, NOVEMBER 9, 2010
62 (Pages 245 to 248) 245
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

247 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

four months here I have not been involved in those discussions. MS. BEINECKE: Thank you. CO-CHAIR REILLY: Other questions for Director Bromwich? We appreciate very much your appearing here and wish you very well in your work, and hope we can play a constructive and helpful role in your success. MR. BROMWICH: Thank you very much. Thanks to all of you. CO-CHAIR REILLY: We will take a break until 3:00. (Recess.) PANEL V INDUSTRY SAFETY CULTURE CO-CHAIR REILLY: We will resume. We are very pleased to have here now Rex Tillerson and Marvin Odum for this afternoon's panel. And I will begin by introducing Mr. Tillerson, who assumed his current position as Chief Executive Officer of ExxonMobil on January 1st, 2006.

I am confident that the Commission's findings will help advance our goal, which is to assure all our nation's facilities are operated at the highest standards of safety. So I am grateful for the chance to come before the Commission today to share ExxonMobile's approach to safety, operational integrity, and risk management. Many would say, especially now, that energy companies must make safety a top priority. But I believe that a commitment to safety must run much deeper than simply being a priority. A company's priorities can and do evolve over time, depending on business conditions and other factors. The commitment to safety therefore should not be a priority but a value, a value that shapes decisionmaking all the time, at every level. Every company desires safe operations. But the challenge is to translate this desire into action. The answer is not found only in written rules, standards, and procedures. While these are important and necessary, they alone are not enough. The answer is ultimately found in a company's
248

246

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

He has a long and serious history within the oil industry within his company. From my point of view, given my experiences with the Prince William Sound/Exxon Valdez experience in 1989, it has been fascinating for me to watch the evolution of this company, which as Fred Bartlit commented yesterday, is the gold standard in the eyes of a lot of people for safety and environment, to see the kinds of initiatives it has taken and the safety culture it has created, and in the eyes of most observers is effective at observing. It's a pleasure to welcome you here, and we look forward to your presentation, Mr. Tillerson. MR. TILLERSON: Thank you for the opportunity to be with you today. America's oil and natural gas resources are the foundation of our nation's economy and our standard of living. And it is essential that we ensure the safe production of these resources. This country as well as the global energy industry will benefit from a full understanding of the causes of the Deepwater Horizon incident.

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

culture, the unwritten standards and norms that shape mindsets, attitudes, and behaviors. Companies must develop a culture in which the value of safety is embedded in every level of the workforce, reinforced at every turn, and upheld above all other considerations. I've been asked today to explain how ExxonMobil approaches these critically important areas of systems and culture when it comes to safe operations and risk management. Some date the evolution of ExxonMobile's safety culture back to 1989 Valdez oil spill. And as I said before, Valdez was a low point in our history. It was a traumatic event with consequences for all involved. But it also served as a catalyst, a turning point which prompted our management to completely reevaluate how ExxonMobil understands and manages risk. That's not to say that prior to Valdez we did not take safety seriously. ExxonMobil had been in business for more than 100 years. And we had always taken steps to maintain safe operations. And

PLANET DEPOS 888.433.3767 | WWW.PLANETDEPOS.COM

NATIONAL OIL SPILL COMISSION MEETING CONDUCTED ON TUESDAY, NOVEMBER 9, 2010
63 (Pages 249 to 252) 249 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 251
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

as risks changed and energy technologies evolved, we were proud of our safety record. We believed, as our safety credo at the time stated, that all accidents and injuries are preventible. Like many companies, we worked to meet or exceed safety standards, trained our employees in safety procedures, and tracked certain measures that measured our success. But we did not have the comprehensive, systematic view of this aspect of our business that we have today. And so in the early 1990s ExxonMobil's management undertook what I considered to be a visionary approach. The goal was to wholly reorganize the company to make safety of people, facilities, and the environment the center of everything we do. Safety would come first, period. It was the beginning of a long journey for our company. And I should make it very clear this is a journey that we have not completed. We know that we cannot rest or waver from the goal of driving accidents and incidents to zero. And we're not there. But we have made significant
250

preparedness; management of change; assessment of performance; and, of course, thorough inquiries into accidents and incidents. OIMS guides the activities of each of ExxonMobil's more than 80,000 employees as well as our third party contractors around the world. Over time it has become embedded into everyday work processes at all levels. Through OIMS, ExxonMobil monitors, benchmarks, and measures all aspects of our safety performance. Its structure and standards are shared and communicated the world over. One of the greatest benefits of all IMS is that it has enabled ExxonMobil, a large organization that operates across diverse cultures and geographies, to be of one mind when it comes to safety and risk management. I can visit a refinery, a lab, or an offshore platform anywhere in the world and immediately be on the same page as the local employees and contractors regarding safety practices and expectations. And I want to stress, the contractors that we work with are embedded within our OIMS processes

252
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

progress, and we have learned, for this progress to be achieved, its impetus had to come from within the company. We could not have government impose a safety culture on us or hire someone to do it for us. Experts and consultants do provide a valuable service. But for an organization to change its culture, change must come from the inside out, not the outside in. You cannot buy a culture of safety off the shelf. You have to craft it yourself. So we began. We began by creating a framework that puts our safety commitment into action. Today that framework is called the Operations Integrity Management System, or OIMS for short. Because OIMS is multi-facetted, it can be hard to describe briefly. Here are the bases. OIMS is a rigorous 11-point set of elements designed to identify management and hazard risks. Its framework covers all aspects of safety, including management leadership and accountability; design, construction and maintenance of facilities; emergency

as well. We expect our contractors to be as knowledgeable and conversant with our OIMS processes as our own employees. Not every company has this expectation. But we have found that when everyone in the workplace speaks the same language of safety, employees and contractors alike, everyone can work collaboratively, safely, and effectively. You may have heard the phrase, if you can't measure, you can't manage. And it's true. And that is why ExxonMobil measures and analyses its safety performance, all the time, all the way down to every business level. We record not just our injuries, but we record our near misses and our close calls. Our goal is not just to analyze safety incidents after they happen, but to identify risk and risky behaviors before they lead to a safety incident. The more elements of risk to be managed in an activity, the more frequently we test, measure, and analyze the safety approach in that activity. Moore broadly, OIMS requires us to audit the health of the overall safety approach in all of our

PLANET DEPOS 888.433.3767 | WWW.PLANETDEPOS.COM

NATIONAL OIL SPILL COMISSION MEETING CONDUCTED ON TUESDAY, NOVEMBER 9, 2010
64 (Pages 253 to 256) 253 255
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

operating environments on a regular basis. Importantly, these audits at ExxonMobil are performed not only by trained safety personnel but by cross-functional, cross-regional teams drawn from all over our global organization. In this way all employees are responsible for each other's safety. Also, the knowledge employees gain by participating in these audits is taken home to their jobs and spread throughout the organization. And yet OIMS by itself is only one part of they equation. Even the best safety systems are not fully effective unless they exist as part of a broader culture of safety within the people of the organization. While ExxonMobil and other energy companies use a lot of equipment, everything from steel pipe to supercomputers, it is people who bring this equipment to life. And people's behavior is heavily influenced by their culture. By instilling the value of safety in our employees from the first day of hire, ExxonMobil strives to create a working
254

must be embedded throughout the organization. Therefore safety leadership at ExxonMobil comes not just from supervisors and managers but from employees and contractors, and through channels both formal and informal. ExxonMobil's goal is not simply to have employees comply to safety procedures. A culture of compliance alone can lead to complacency. We seek to go beyond compliance, to create a culture where employees are not only meeting safety procedures, but they are challenging them so they can be improved where needed. I do not want anyone to think inside or outside our company that pride in our safety systems means we relax our commitment. The exact opposite is true. To get where we need to be on safety, continuous improvement is essential. In an industry such as ours, which operates 24 hours a day around the world, the need to manage risk never ends. Even the best safety framework should be viewed as a work in progress. Developing a culture of safety therefore
256

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

environment in which safe behaviors are internalized, they're reinforced, and they're rewarded. The culture of safety starts with leadership, because leadership drives behavior and behavior drives culture. Leaders influence culture by setting expectations, building structure, teaching others, and demonstrating stewardship. And that is why the first element of OIMS is management leadership and accountability. ExxonMobil managers are expected to lead the OIMS process by demonstrating a visible commitment to safety and operations integrity. In addition, safety leadership is a significant part of how a manager's overall performance is evaluated. As chairman and chief executive, I know that a commitment to safety and operation with integrity begins with me and the rest of ExxonMobil's management team. But management alone cannot and should not drive the entire culture. For a culture's safety to flourish, it

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

is not an event, but a journey. For ExxonMobil, that journey began more than 20 years ago, when we put our global safety framework in place. Once that framework became embedded in our organization, we saw the culture start to change, and the results became evident in improved performance. In turn, this allowed us to move from implementing the system to improving it. That's when ExxonMobil's culture was really transformed. Over the years I have seen people at all levels understand that our safety systems are put in place for them, that they are about protecting them and their co-workers and the public, and not about catching people doing things wrong. Part of that transformation is recognizing that every employee's job involves some degree of risk management, even those employees who work in office settings. That is why OIMS extends even to administrative locations. When an organization reaches the point where everyone owns the system and believes in it, only then, at that point, a culture of safety and operational integrity has been

PLANET DEPOS 888.433.3767 | WWW.PLANETDEPOS.COM

NATIONAL OIL SPILL COMISSION MEETING CONDUCTED ON TUESDAY, NOVEMBER 9, 2010
65 (Pages 257 to 260) 257 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 259
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

established that can be sustained, and it enters the hearts and minds of the people at the organization and becomes a very part of who we are. We often use the phrase at ExxonMobil, "Nobody Gets Hurt," to describe our safety objectives. Some observers of our company question this. They say it can't be done. Well, it can be done. We have operating units today that have gone years without any injuries. Our challenge is to sustain their performance where it has been achieved and to replicate and grow that record of performance across the organization. I have no doubt that every single employee shares this goal. Considering that many of ExxonMobil's energy projects can span decades achieving the goal of a self-supporting sustaining energy culture means we must be flexible and adaptable to changes in the operating environment. As a result, management of change is a key component of our OIMS system. Our management of change processes are designed to ensure that with any change in our
258

operational integrity is not just the right thing to do, a phrase which sometimes we associate with an act of selflessness. It is also in a company's self-interest, because it makes for more competent, more productive employees and organizations. The rigor, discipline, and degree of accountability required to improve safety performance are the same qualities that produce successful business results, operationally and fiscally. Safety is not proprietary. And for this reason ExxonMobil shares its best practices within our industry and across other industries. We seek to learn from others. After the 2003 Columbia space shuttle explosion, ExxonMobil assembled a team of engineers, scientists, and safety experts to study the technological and organizational factors that may have led to that disaster, and whether there were any lessons for ExxonMobil's operations. It is by constantly learning and analyzing, by looking to best practices in other organizations, and by examining incidents and near

260 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

business or operations, we recognize the changed conditions and we actively identify the new or changed risk. And we apply our discipline processes for managing the risk and their potential consequences. Risks are addressed, and the change is managed, typically through either technological solutions or operating changes in response to the potential risk. But most importantly, it is clear who owns the management of change, and the subsequent risk management in every employee and contractor is important to that process. These very deliberate, well-established processes embedded in OIMS have enabled ExxonMobil to pursue challenging new resources and new development projects with the confidence that we will do so safely and responsibly. Such an approach is not only in the interest of employees and resource owners, but clearly is also in the interests of our shareholders, which leads me to my next point: upholding the high standards of safety and

misses in our own, that we continually improve our own performance. I know this Commission has heard a lot about the importance of deepwater energy supplies, but it bears repeating, the technology that has enabled our industry to reach the oil and gas found in deepwater fields is one of the most significant energy security developments of the last 20 years. Deepwater production, which did not exist prior to 1989, today makes up 15 percent of all non-OPEC production. By the year 2030 it will grow to nearly 20 percent. Along with Brazil and West Africa, the Gulf of Mexico is one of the most important deepwater provinces in the world. In 2008 there was more oil and gas discovered in deepwater than in onshore and shallow water combined. For the sake of our energy security and the economic growth and jobs that depend on the product of these supplies, we simply cannot afford to turn our backs on this resource. Neither can we miss the opportunity to improve safety in the Gulf of Mexico. The Macondo blowout cost 11 lives and

PLANET DEPOS 888.433.3767 | WWW.PLANETDEPOS.COM

NATIONAL OIL SPILL COMISSION MEETING CONDUCTED ON TUESDAY, NOVEMBER 9, 2010
66 (Pages 261 to 264) 261 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 263

billions of dollars in economic and environmental damage. If we don't learn lessons from this disaster, it will have been a double tragedy. As Chairman Reilly said at this Commission's first meeting back in July, we must come to grips with this disaster so we can never see its like again. I spoke earlier about risk management being a constant challenge. Well, ExxonMobil believes that incidents like the Deepwater Horizon spill should not happen if industry best practices are followed. The spill did expose that our nation and the energy industry could have been better prepared for the possibility, however remote, of a deepwater well blowout. That is why ExxonMobil is leading a multi-company effort, along with my colleague today, to build a new rapid response wall containment system in the Gulf of Mexico. This system, involving a $1 billion additional commitment from the four sponsor companies, is unprecedented in our industry. It will provide pre-engineered,
262

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

harshest environments. How we continue to progress technologically while dealing with significant risk is that advancing human progress does not mean avoiding risk. It means managing risk by identifying it, taking steps to mitigate it. No company, including my own, can lay claim to a 100 percent success rate in this endeavor. Yet that remains our clear goal. In closing, there are three points that I hope the Commission will consider in its deliberations. First, a culture of safety has to be born within the organization. You cannot buy culture. You have to make it yourself. Second, make no mistake: creating a strong, sustainable safety culture is a long process. If an organization is truly going to overhaul its approach to safety, it has to be committed from day one. But you can't start until you stop -- until you start, and you're never going to finish. Finally, I want to return to OIMS. I
264

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

constructed, and tested containment technology and equipment to be deployed within 24 hours of a deepwater spill in the Gulf. In addition, ExxonMobil and other operators in the Gulf of Mexico, in conjunction with the Department of Interior, have instituted new requirements regarding inspection and certification of blowout preventers, well casing designs, and cementing procedures. I believe that these steps, in addition to the inspections performed on all deepwater rigs in the months following the Deepwater Horizon incident, will enable the Gulf region and the entire country to continue to develop our nation's energy resources with confidence. In concluding, I would like to share this thought: ExxonMobil is sometimes viewed as a cautious company. We're sometimes criticized for being too cautious. And yet meeting the world's growing demand for energy involves a high degree of risk. Our employees operate some of the world's most complex technologies and some of the world's

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

mentioned that there are 11 elements, all of which are fundamental to safe and responsibility operations at ExxonMobil. But the first and last elements, the bookends of OIMS, are the most critical. These are management leadership and accountability, and operations integrity assessment and improvement. Without leadership by example, and without thoughtful, honest, and objective self-assessment, no system is sustainable. Our nation and our world continues to face challenges. Meeting the world's growing demand for energy safely and with minimal impact on the environment is one of our biggest. Examining the causes of the Deepwater Horizon incident will help advance our progress toward this goal. ExxonMobil strongly supports your inquiry and remains committed to supporting the cause of safety within our company and beyond. Thank you. CO-CHAIR REILLY: Thank you, Mr. Tillerson. I would like to ask you a couple of

PLANET DEPOS 888.433.3767 | WWW.PLANETDEPOS.COM

NATIONAL OIL SPILL COMISSION MEETING CONDUCTED ON TUESDAY, NOVEMBER 9, 2010
67 (Pages 265 to 268) 265
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

267

questions that go fundamentally to the issue of whether or not your approach to safety can be replicated by other companies, and ask you to look back at the period before and then the period after the Exxon Valdez tanker spill. And go into a little detail, if you would, about just what exactly you did and whether you made any false steps, how fast you were able to raise the game and go beyond compliance and get best practices, and what you think that may mean for others in the industry that aspire to do likewise. MR. TILLERSON: Well, as I indicated in my prepared remarks, up to the time of the Valdez incident, we thought we were pretty effective. And the traditional measures that are used to measure that effectiveness certainly led us to believe we were. What we have come to understand is the traditional metrics are all lagging indicators. All they really told you about is the problems you have had. They don't tell you anything about how to prevent those problems. And so that was I think an
266

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

And evolving to that realization, there were a lot of -- I think there were a lot of missteps, if I can say that, or learning. Maybe they were just part of that process of us learning and part of the process of our organization learning how to do this. But I think clearly the thing that I give enormous credit to the leadership of the corporation at that time was the recognition that you weren't going to go out and bring a consultant in to do this, that the problem -- the problems were ours. The problems were inside. And we're the only ones that could really understand them and address them if we were going to make transformative change. So I think that was an important learning later on. And then just the relentless stick-to-it-iveness and recognition that we had to get on with it, but that it would be an ever-greening process. And this system has been through three updates since it was first created, and it is reviewed now every five years, it's reviewed and updated again.
268

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

important recognition early on. Being an engineering and science-based company, it was natural then, as we set about to understand how do we really want to change the way we manage risk, to take a very systems and process approach. And that's in fact what was undertaken. In some of the early days there were some false starts in terms of how we went about understanding accountability and responsibility in particular in terms of who actually -- who actually owns which piece of the system in the process. And that has been something that has continued to evolve with time. As I said, we've been at this 20 years now. But we have now evolved and arrived at the point where, throughout the organization, everyone understands they own it. They own the risk that surrounds their personal activities, and they own the risk for those around them, and that the only way we manage those are by integrating all of the elements of risk so that no one element, if it's overseen, is going to cause a problem for us.

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

So it's a never-ending process. CO-CHAIR REILLY: Commission staff has spent several hours studying your OIMS system, and Shell's and Chevron's. And I would be interested if you would describe your cold eyes inspections and some of the practical and specific things that are part of daily life in the company. MR. TILLERSON: There are two aspects of that assessment that I mentioned as one of the elements. There are internal assessments, where the operating unit looks at its own processes and makes judgments about how effective they are. They do testing of how effective they are, and they report out on gaps they've identified, just through their own self-assessment. And then they steward the closure of those gaps. But every three to five years, depending on what the risk profile of the business unit is, there will be an external assessment. And the external assessment is comprised of people who have particular expertise in those types of operations that they're going to examine. And they are

PLANET DEPOS 888.433.3767 | WWW.PLANETDEPOS.COM

NATIONAL OIL SPILL COMISSION MEETING CONDUCTED ON TUESDAY, NOVEMBER 9, 2010
68 (Pages 269 to 272) 269 271

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

generally comprised of people from all over the world who did come in and undertake an exhaustive review of that unit's implementation of OIMS. They test the effectiveness of that through various means, and then they identify gaps that need to be closed. They give the unit an overall assessment. Then those gaps are stewarded up-line through the management team as well for closure. As I mentioned, the real value of that, there's really multiple values, one, it strengthens the system and ensures that it is dynamic and evolving, and recognizing changes within that operating unit. But also that is how we share the learning and best practices globally. Because those teams that are on those assessments, they go back and share what they've seen in similar operating units elsewhere. Whether it's refineries or drilling rigs or producing platforms or office environments, all those are assessed on a routine basis. And it is that assessment process that is really crucial to
270

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

looked at INPO, we've looked at responsible care from the chemical industry. We've looked at a number of other models; when I say "we," as part of the API Joint Industry Task Force. And I think there are elements of all of those that are useful for us as an industry to consider. There are distinct differences between the nature of the nuclear power industry and the oil and gas industry, and in particular deepwater. The nuclear power industry, the facilities are -- you know, they're fixed sites. Their conditions don't change significantly around those sites. There's a lot of similarities. Most of them were regulated utilities, so they operated in a different type of environment. Most of the technology is well-known, so there's no proprietary involved in those sites, as opposed to our industry, which is moving to different locations, different environments, evolving, all kinds of technologies being introduced. And so I think we look at the principles
272

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

the improvement process. Again, assessments are not about binding people that are doing things wrong. The assessments are, how do we continue the improvement process. Now, if a unit gives a poor assessment because the gaps are huge, and they certainly are well behind where they should be, then we have to deal with the local management. But that rarely if ever happens. CO-CHAIR REILLY: What you describe within your own company has a lot in common with the nuclear industry's Institute for Nuclear Power Operations. That's what they try to do for the whole industry. And they aim not just at compliance but at best practice definition. They provide a grade. They work with the regulator. Have you had a chance to consider whether that kind of initiative could be valuable in the industry as a whole in order to -- in order really, I suppose, from your point of view more than anything, to protect against someone else causing your rigs to be shut down for their misbehavior? MR. TILLERSON: Well, you know, we have

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

around INPO in terms of how do you share best practices, how do you assess where the companies are operating at certain levels of competency. And we like the elements of that. And so what we are evaluating within the industry is how can we capture the best elements of that, make it responsive to the fact that in our industry there is a lot of management of change going on all the time. And that's just the nature of the technology evolution that has been underway now for quite some time. How do we protect the proprietary aspects of what each of our companies do, yet still share the best practices around safety and operating practice? So I think that -- I think the approach is one that's important. It's one that the industry is actively engaged in seeing if they can't construct something similar that would meet our objectives yet protect everybody's competitive interests as well. CO-CHAIR REILLY: Do you have an opinion about how to address what has been a real disparity

PLANET DEPOS 888.433.3767 | WWW.PLANETDEPOS.COM

NATIONAL OIL SPILL COMISSION MEETING CONDUCTED ON TUESDAY, NOVEMBER 9, 2010
69 (Pages 273 to 276) 273 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 275

between the sophistication technologically of the industry, particularly as it's gotten into very deep water, versus both the expertise level, specialization level, and resources, the number of people who are actually charged with regulating that industry? Do you have a sense of how one should deal -- one possible advantage of something like INPO, it can supplement the expertise of the regulator and relieve them somewhat of this burden, which seems to us as very often one that leaves them ill-equipped to understand a lot of the new technologies. MR. TILLERSON: Well, I think the elements of self-regulation, which a lot of people kind of draw back when you use that term, but I think elements of self-regulation have been proven effective in other parts of the world, and have been proven effective even here. So I think that to the extent that when we structure the approach, we accommodate the fact that it is in the company's self-interest to improve in
274

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

invest a lot in their training after they come work for us. And most of the technologies are being developed within our industry. The stepouts, pushing the envelopes ever further, are all happening inside our industry. So you can't go into the academic world and find it, because the academic world's a few years behind us. And so it's a difficult challenge for the regulator to have people who have that same level of competency. I think it is realistic, though, to provide some help in training people within the regulatory agencies to a level of understanding, and it's going to require engineers and geoscientists to really be able to achieve a level of understanding, that they at least recognize when there is a risk of exposure, and are at least able to ask the questions of how is that risk being addressed. They may not be capable of formulating the precise response, and that may not be necessary. But they need to be capable enough to say, I see a risk, it's not clear how it's being managed, and say
276

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

this area, and what we really want to do is provide systems and processes and frameworks for them to do that. But as was evident in my remarks, at the end of day you can give people procedures, you can give them tools, you can give them all kinds of technological capability, but it's in the hands of human beings. And human beings have to make decisions, they have to take actions in response to events. And that involves getting at the culture of human behavior. And why -- you know, why do people fail to act, why do people make poor decisions, that's the baffling challenge that all of us who work in this part of risk management struggle with all the time. As to the regulator, it is a significant challenge for the regulator to have people at competency levels commensurate with where the industry is technologically. We in the industry are very competitively hiring the very best and brightest people out there. And we pay them so they'll come work for us. And we

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

to us, how are you addressing that? And that's enormously important to us as an industry. In my view, we want a constant regulator. They are part of risk management system. They are part of redundancy in the system that can test, are the risks being managed. So they don't have to be capable necessarily of designing all the elements of the deepwater drill program. But they do have to have significant technical competency to recognize that there is a risk exposure in this operation. We're going to make sure the risk has been addressed by asking the right questions. CO-CHAIR REILLY: Thank you, Mr. Tillerson. This has been very helpful. We would like to continue to keep the conversation open. If you have thoughts for us as we complete the last phase of our work, we would welcome them. We appreciate very much your being here today. MR. TILLERSON: My pleasure. CO-CHAIR REILLY: Mr. Odum, you've given a lot to the Commission. We've had Richard Sears,

PLANET DEPOS 888.433.3767 | WWW.PLANETDEPOS.COM

NATIONAL OIL SPILL COMISSION MEETING CONDUCTED ON TUESDAY, NOVEMBER 9, 2010
70 (Pages 277 to 280) 277
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

279

long experienced with Shell, and know by name many of your colleagues, and appreciate very much that we've had the opportunity to sit down and look at your resources both in New Orleans, which I did just ten days ago, along with Senator Graham and Mr. Boesch, to get an understanding of your own safety system. We're very pleased to have you here, and I invite you to make your presentation. MR. ODUM: Very good. Thank you. Chairman Reilly and Chairman Graham, and of course all the Members of the Commission, I do appreciate the opportunity to speak to you today and tell you a little bit about safety and Shell. Now, no one company can claim to have all the answers, and certainly I don't make that claim. But I hope these remarks are useful to you. At Shell we believe in relentlessly pursuing no harm to people and no significant incidents. We call that journey Gold Zero. We expect everyone who works for us, both employees and contractors, to firmly believe that it is possible

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

safety and integrity of our operations and our assets. A personal safety system includes clear and firm rules. At Shell we have 12 lifesaving rules. And these are the do's and the don't's covering activities with the highest potential risk. For example, getting proper authorization before disabling safety and critical equipment, or protecting yourself against falls when working at heights. Our employees and contractors must comply with these rules. Failure to do so is a choice not to work for Shell. This has been fundamental to reducing accidents. Personal safety systems are fairly easy to track through mechanisms such as incident rates and participation in processes such as job and safety analysis. Process safety is also managed through a variety of tools, such as well and facility design standards, established operating envelopes that are not to be exceeded, maintenance and inspection intervals for safety-critical equipment, and an
280

278
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

to work without incident, and we have examples to demonstrate this is true. We support this by expecting three overarching behaviors: complying with the rules, intervening when it feels wrong, and respecting people, the environment, and our neighbors. Now, this provides a clear statement about the culture we aim to build. Our health, safety, and environment management system, or HSE management system, has eight elements, each with a specific role in ensure that HSE risks are identified and managed. Now, among these elements are defined procedures, audits, clear responsibilities and competencies for critical staff, hazards management, and a focus on leadership and culture. In my comments today I'll address how we manage safety through a combination of rigorous systems and the culture required to make those systems effective. Safety systems essentially fall into two categories: those designed to protect the personal safety of our employees and contractors, and those focused on process safety for ensuring the

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

effective management change process. Our approach also requires that our drilling contractors develop a safety case to demonstrate major risks are properly managed. The safety case in deepwater drilling shows how we identify and assess the hazards on a rig; how we establish the barriers to prevent and control those hazards; how we assign the critical activities needed to maintain the integrity of these barriers. Further, it guides the rigs and crews in risk management and ensures staff competency, especially for those that may be new to a rig. The safety case is owned by the drilling contractor, but it is closely reviewed by Shell before we place the contractor at the company. It is assured in practice before the rig operations begin, and it is audited at regular intervals while the rig is under contract to us. The case also includes bridging documents to our own HSE management system. Through these drilling contractor works closely with Shell as the operator to ensure the well plan and operations

PLANET DEPOS 888.433.3767 | WWW.PLANETDEPOS.COM

NATIONAL OIL SPILL COMISSION MEETING CONDUCTED ON TUESDAY, NOVEMBER 9, 2010
71 (Pages 281 to 284) 281
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

283
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

procedures are understood by both parties and provide assurance that top hazards and risks are properly managed. An example: at Shell our pressure control manual requires at least two barriers in place at all times to control each hazard. Last year, while abandoning a well in deepwater, we found a secondary mechanical barrier that did not pass our tests. Therefore the work was stopped and we installed a second redundant mechanical barrier before proceeding with the job. Defined rules such as these are clearly important. But I believe that an organization with all the right systems and tools in place to manage or reduce risk to people and process will fall short if it does not have a culture for safety, seen and felt in every aspect of the organization. The systems, processes, and culture must all work together. Building a safety culture starts with leadership. This is actually the first element of the Shell's HSE management system; to create and sustain a culture, to drive our commitment of no

need for a shut-in, but that wasn't the point. The staff involved made the right decision, and they received a Gold Zero Hero award as a result. The second example occurred just a few days ago at Perdido, our newest deepwater production (inaudible) in the Gulf of Mexico. An operator noticed a small gas leak around the production separator. The leak was too small to be picked up by the gas detectors. Nonetheless the operator quickly followed the protocol of getting out of the area, notifying the control room, and initiating emergency shutdown procedures. The problem wasn't significant, as it turned out, and it was resolved without incident. Still, the entire team was recognized for the proper response. And these are not isolated examples. They're among hundreds of recognitions we see every year of employees and contractors who intervened or stopped work in potentially unsafe situations. While most interventions involve stopping an individual work desk as opposed to an entire facility shutdown, they do create a safety culture
284

282 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

harm to people, the environment, or assets. Leaders must visibly and tangibly engage in promoting and recognizing safe behaviors, to clearly communicate to all employees and contractors that safety is not a priority but a core value. Priorities can change with the business environment. Core values do not. At Shell, intervention or the stop work rule is another overarching principle. Every employee and contractor in the Shell site has the right and the obligation to intervene and stop work if it feels unsafe. We ensure everyone knows about it, and we reward those who do it. It's a key part of our job planning, and it works. I'll offer two recent examples. Our British platform in the Gulf of Mexico was shut in after an anomaly was noted in a vessel integrity inspection. While the operators could have simply run followup inspections to confirm the initial finding, they instead decided to partially shut in this producing platform. Later we found the additional inspections would have indeed avoided the

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

at the rig level. Audits are another key part of the story, providing critical information about whether we are doing what we say we do in the areas of operations, compliance, and leadership. In 2009, DuPont administered its safety and culture survey in our drilling organization, comparing us to the world's best across a range of industries. While we ranked world class overall, improvement areas were identified. For example, we received feedback that the structure of our systems and our tools tended to be too complicated. As a result we've condensed the key points for each of our most critical well site safety systems. Audits such as these are an important part of not only compliance but also continuous improvement. The mindset must be one of always seeking feedback and identifying gaps, with the ultimate goal of ensuring safety is built into every aspect of the way we do work. I do believe we are seeing this way of thinking take hold in the industry

PLANET DEPOS 888.433.3767 | WWW.PLANETDEPOS.COM

NATIONAL OIL SPILL COMISSION MEETING CONDUCTED ON TUESDAY, NOVEMBER 9, 2010
72 (Pages 285 to 288) 285 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 287 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

today, and it points to a path forward. This has been most visible in recent months as both industry and government have taken steps to enhance the capability and performance in three tiers: prevention, subsea containment, and spill response. For example, we at Shell have applied Macondo learning in realtime in our Alaska program. Although the limited program will occur in shallow water with low formation pressures, our spill response assets will now have enhanced containment capability. You're aware of the marine well containment company forum, and Rex mentioned that earlier, and the companies involved. And we hope that everyone that operates in the Gulf of Mexico will now ultimately be involved in that system to improve our preparedness and goal. Industry members have also created a task force which is evaluating programs in the chemical and nuclear industries to identify best practices for a simple program for deepwater drilling completion.
286

recent experience: Shell's Perdido spar in the ultra-deepwater in the Gulf of Mexico. This is in 8,000 feet of water, 200 miles offshore. The project was started up in 2010. It holds numerous records and is a premier example of offshore innovation and technology. However, I am most proud of the fact that this project went from its initial design on paper all the way through to construction, to drilling of the wells, the installation of the facilities, and the startup of production. It's almost four years and many millions of hours worked, with no lost time incidents to personnel, to Shell, or contractors, and no environmental incidents. We see this being repeated around the world. Most importantly, this demonstrates that it can be done, and it helps Shell staff and contractors carry this belief to all of our operations. So yes, we've seen an improvement in our safety and environmental performance at Shell as a result of the systems and the culture that I've discussed. But we clearly do not claim victory, not
288

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

An industry safety initiative with independent third party auditing that can bring about real change. Crucially, the Department of Interior has begun to bolster its workforce as it seeks to implement several rigorous regulatory changes intended to prevent the occurrence of another Macondo. It is essential that they continue to improve. The industry needs a robust, expertly staffed, and well-funded regulator that can keep pace with and augment industry's technical expertise. The competent and nimble regulator will be able to establish and enforce the rules of the road to assure safety without stifling innovation and commercial success. Moving forward, we must strive for a process that goes beyond simple compliance and achieves a strong safety culture. At the end of the day, an operation will not be the safest it can be unless the people doing the work share the same beliefs and behaviors about safety. I'll share one final example from my

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

by any stretch. This journey never ends. There is no room for complacency. You don't fix safety, and you cannot put a price on the value of the safety culture. Thank you for the opportunity to share these thoughts, and I welcome any questions. CO-CHAIR REILLY: Senator Graham. CO-CHAIR GRAHAM: Thank you, Mr. Odum. Let me also join Mr. Reilly in our appreciation for Mr. Sears, who has been an outstanding addition to our team, and to the many courtesies that Shell has extended to us, particularly in our visits to New Orleans and the Gulf. We have been very much benefitted by your assistance. MR. ODUM: Thank you. CO-CHAIR GRAHAM: You are one of the great international corporations of the world and do business in almost every significant oil production region. What is your process, both within your company and then across companies, to share information on incidents, best practices, new

PLANET DEPOS 888.433.3767 | WWW.PLANETDEPOS.COM

NATIONAL OIL SPILL COMISSION MEETING CONDUCTED ON TUESDAY, NOVEMBER 9, 2010
73 (Pages 289 to 292) 289 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 291
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

learning? Earlier today we had the deputy director of the former MMS talk about an incident in Australia which he suggested was quite close to what then happened here in the Gulf on April the 20th. And it was his sense that there had not been much learning transferred from the Australian incident to U.S. firms, and therefore there was not an advancement of the understanding of risk and how to respond to it. Could you comment as to that level of international cooperation on safety? MR. ODUM: I will, and I'll do it in the context of drilling, and even deepwater drilling, but my comments apply to all aspects of our business. We've organized ourselves in a way that we always look at this business globally. So when we think of deepwater drilling, for example, we have a deepwater drilling set of standards for the company that are no different in the U.S. than they are off the coast of Africa or somewhere else in the world.
290

something registers, and we keep this to the few very significant events, because it's like an alarm, it's going off all the time, people don't pay much attention to it, but if there's something significant to be learned on drilling operations, for example, around the world, and we want them to know it today, this will come in the form of an alert of all the applicable people then to cause immediate change. CO-CHAIR GRAHAM: I would like to talk about what in military terms is referred to as a layer of defense, where you have defences backing up defences, backing up other defences. In the industry it would seem to me that one place to start might be with the individual employee. I was impressed with what you said in your prepared remarks about the employees who were willing to shut down the production rig if they suspected that something seriously bad was going on. I would think that's a difficult culture to develop, because in some companies, the employees' reaction might be, well, if I do this and

292
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

They're the Shell global standards, and those always meet or exceed the regulatory standards in any of the countries where we operate. But what we have in that organization then because of that design is a connected organization worldwide. This drilling group, global drilling group, one of its main obligations is to share examples, incidents, learnings, best practices across the world. Those are implemented immediately, and they always result in, again, this same set of standards across the world. So it is -- there are many mechanisms to do this, but this is one. When it comes to a particular incident, let's say something particularly notable happens, the process I just described of having a global group and having that be incorporated across the globe, it happens quickly because of that organization, but not necessarily quickly enough, if you learn something very significant and you want immediate action. And so we have a system of what we call alerts. They go out across the company. And if

cost the company a lot of money because they're shutting down production, that's not going to be very good for my career advancement. You mentioned that you have recognized employees who come forward. Are there other aspects to the way in which you have dealt with what would appear to many to be the reticence of employees to be actively and proactively engaged in safety? MR. ODUM: I think it's a critical topic, which is why I spent so much time on it in my prepared remarks. And the other reason I spent so much time on it is, and I think I can hear that in your question, it's not the natural bias necessarily of people to act this way, particularly contractors that come in and work for us as a company and who want to make sure they're working there the next day. So we really do have to go the extra lengths. And that's from a lot of repetition, that's through saying it loudly and saying it in ways that have real impact, to really make people believe and understand, this is what we want you to

PLANET DEPOS 888.433.3767 | WWW.PLANETDEPOS.COM

NATIONAL OIL SPILL COMISSION MEETING CONDUCTED ON TUESDAY, NOVEMBER 9, 2010
74 (Pages 293 to 296) 293
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

295

do. Now, I focused on the recognition part, because we found over time that is actually the most effective way to make people really understand and believe this. When someone on a rig pushes that button and shuts down a rig, that's an expensive process. It takes time and a lot of money to get that back up and running in a very safe fashion. It's important that somebody like me or somebody in my organization actually take a trip out there, recognize that person in front of other individuals, and make sure they're clear on what we want. And those stories get around, and really do make a difference. So there are a number of ways that we try to have that impact. If we see somebody who can't convert to that kind of culture, we do remove them from our operation. So there are other avenues. But that's the main one we've been able to (inaudible). CO-CHAIR GRAHAM: Another layer is the way in which this business typically does its business,

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

because there's more than one way to get there. The way we use that is, a safety case (inaudible) would rely on the contractor initially to identify all of the potential major hazards associated with the rig and drilling operations. And then the obligation is to ensure that the barriers and mitigations for each of those risks are in place and they're effective. And so they put that together initially. We work that then in an iterative approach with them, so we both have a very good understanding of that, as they build that, and they do that for Shell, they have to understand exactly what the Shell standards are. They have to understand our well plans. There's a tremendous amount of interaction as they're putting the safety case together. We take that one step further. It's only an effective system -- this is what we look for to validate the system, is once these critical elements and hazards are identified, the mitigations are identified, is it absolutely clear who does what in all these
296

294

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

which is kind of single site, multiple contractors and subcontractors, as well as the company, are all engaged in accomplishing the mission. We heard a day and a half of BP, Transocean, and Halliburton out on Deepwater Horizon. As strong as Shell's individual culture is to safety, how do you convey that to the multiple parties with which you are doing business, and bring them up to that same level, and then integrate all of that into a common safety culture at the site? MR. ODUM: It's a great question. And actually I think it begins with understanding that if a contractor on our site doesn't have exactly what we're looking for from the Shell people, then it's not working. So we do need this from everyone. I'll just describe one of the tools which has a strong cultural element that we use to get there, particularly, again, as we're talking about a drilling type operation; and that is we take a safety case approach. Let me describe what that means to me when I say "a safety case approach,"

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

potentially risky or hazardous situations. So roles are extremely important, and having those clear is critical. It needs to be clear because a contractor on its own may have their own protocol. So in a certain situation, they may be following the contractor's protocol or the Shell protocol. So clarifying all this ahead of time is critical to that. Then I think what you would see, the kind of thing you would see on the Shell side on a day to day basis is, how are we taking that safety case, the way I described that hazard mitigation, and making sure that the Shell and the contractor crews in that location are applying that on a day to day basis. The way that would work is, you don't do a piece of work on a rig without having a job safety analysis and what we call a permit to work. This is all part of the multi-layers that you talked about to prevent an accident. Well, we ensure that the contractor is able to relay that back to the safety

PLANET DEPOS 888.433.3767 | WWW.PLANETDEPOS.COM

NATIONAL OIL SPILL COMISSION MEETING CONDUCTED ON TUESDAY, NOVEMBER 9, 2010
75 (Pages 297 to 300) 297 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 299
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

case, that it starts with the thinking of what, if anything, are the major hazards. And that flows all the way through the work they do on a day to bay basis. It wouldn't be unusual for anybody in our organization, I'll use myself, for myself to go visit a platform, go to an individual, say do you understand what the safety case is, what your role is, do you know what to do in certain situations, which are the hazards you're most directly related to, be that a Shell person or a contractor. I think keeping it live like that is actually the most critical element to make sure it works. CO-CHAIR GRAHAM: In that discussion (inaudible) and particularly between BP and Halliburton, one of the most glaring instances was -- surrounded the cement pore at the bottom of the well. There was some disagreement as to who knew what about the laboratory samples of the concrete that was going to be poured. There were questions
298

safety culture. Mr. Reilly has been particularly interested in the example of INPO, and what it has meant to safety in the nuclear power industry. How would you assess the current status of industrywide safety practices in the deepwater drilling enterprise, and what do you think in five years the industry might strive to accomplish within itself? MR. ODUM: Well, I think -- I appreciate your putting some time frame on it, because I heard it in somebody's earlier testimony, as I came in a little earlier this afternoon, these sort of changes take time, these changes don't happen overnight. I think particularly the safety initiative the industry is now working on together, we have a joint task force type approach to developing something where it is, as Rex said, building on the best things that we can take away, that are applicable from INPO and from Responsible Care and other elements. I think that what we can expect to see over time is that it will make a difference. The elements of that that stand out for me is that
300

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

about the testing that was done after the pore about who was supposed to interpret it and how would you evaluate the results of that interpretation. How would you, your company, have dealt with a specific incident like that, that in this case may have played a fundamental role in the ultimate explosion? MR. ODUM: Well, I didn't have the opportunity to hear all the comments and testimony around that. But let me -- if I understand your question, let me try to relate it to the area of who's responsible for those type activities on a rig in Shell as I see it, or in a drilling operation. Basically, everything you just mentioned, the person that I hold responsible, that we through this safety case development hold responsible explicitly, is the Shell person in charge, responsible for all of those others. Just to keep it very brief, that's my interpretation. CO-CHAIR GRAHAM: Another layer in the layered defense is the industrywide commitment to a

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

having this safety initiative up and running and having it look different for the industry means there's a commitment there from the members of this, these will be largely industry members, that says we're committing to a certain set of principles around operating at the highest level of safety, around sharing best practices, around continuous improvement. So I see that as a step up from where we are today necessarily. I think the idea that this would involve third party auditing and independent assessments of how operators in the Gulf of Mexico are doing, I use the deepwater example, but in terms of how we're doing, do we really have effective safety management systems, is a new and different piece that I think, as I said in my prepared comments, can cause real change, because it's important that we're all operating at that level. One of the points I want to make is that API as an industry body, and the technical design, regimented practices, the technical standards elements of API, I think is unmatched anywhere in

PLANET DEPOS 888.433.3767 | WWW.PLANETDEPOS.COM

NATIONAL OIL SPILL COMISSION MEETING CONDUCTED ON TUESDAY, NOVEMBER 9, 2010
76 (Pages 301 to 304) 301
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

303
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

the world. We need to leverage that piece of capability. So I would see something like this directly tied into that standard-setting process, which already, by the way, and I think it probably needs to be taken more seriously and emphasized a little more, that already has an avenue for participation by the regulator and others in setting those standards. I think being sure that we leverage that capability in this safety initiative is absolutely critical and, again, will lead to improvements. CO-CHAIR GRAHAM: And finally, the role of government in this layered defense on safe practices. What recommendations would you have from your experience, including your international experience, in terms of how should the Federal government organize itself to be an effective overseer of this industry and protect -- in the protection of the safety of our people and the safety of the environment, and what do you think the role of industry should be in its relationship with

using avenues like I talked about with the API standards committees, where there can be regulatory -- there's already a system to regulatory participation. I think really stepping up the game in those areas and getting very serious about this element of collaboration is a key piece of that. CO-CHAIR GRAHAM: On your second point about the industry being willing to financially contribute towards more effective regulation, Mr. Michael Bromwich, the current head of BOHM [sic], said earlier this afternoon that the President had recommended I believe $100 million in additional funding for his agency, and that that had been opposed by industry, and either not adopted or adopted in a substantially smaller amount. Do you see industry -- is that an accurate reflection of industry's position vis-à-vis funding of the new BOHM, and if not, how do you see API's future position relative to the industry as funder or regulator? MR. ODUM: I think -- whether or not -- a
304

302 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

that government entity or entities? MR. ODUM: A couple of things that I would like to say about that. These are not necessarily in priority order, but I think it has to start, when we look at the system in the U.S., it has to begin with a well funded and supported regulatory agency. And I don't think that's always been the case. I'm not sure the funding has always been there, that the support has always been there to do what it needs to do. So I think that's an important element in all of this. You know, as some of this was unfolding over the last couple of months, I did actually hear a fair amount of conversation that said, you know, this interaction between the regulatory body and the industry is a concern. And I understand where that point was coming from. But I think what we actually mean and what we see in other parts of the world may be even better than what we see here, is there needs to be actually more collaboration between the regulator and the industry around setting those standards,

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

couple of aspects. Whether or not $100 million or -- is the right number, what is the right number, I don't know that I have a strong view on that. I mean, I think the goal is around -- having an effective and strong regulator are the right goals to have. You know, I'm not feeling like now is the right time to, because it's such a big picture, to say what's the best funding mechanism for that. I do think the funding should come from the Federal government. I mean, I think, to be fairly blunt, there's a very strong stream of resources that come from the industry to the government that I think part of that should be directed towards supporting agencies like the BOEM. And I think that's the first place where we need to look, through the bonus payments, through the royalty structures that we already paid on these activities. Surely that should be the funding source for the regulator. CO-CHAIR GRAHAM: I thank you for that answer, and also thank you for correcting that

PLANET DEPOS 888.433.3767 | WWW.PLANETDEPOS.COM

NATIONAL OIL SPILL COMISSION MEETING CONDUCTED ON TUESDAY, NOVEMBER 9, 2010
77 (Pages 305 to 308) 305 307
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

acronym. I'm still getting used to the change. It is BOEM. I have a final question, and that relates to the safety culture and other goals of the industry and Shell specifically. Some have said that the commitment to a safety culture is contrary to corporate responsibilities such as profitability towards its shareholders, overall international competitiveness. How do you see safety affecting those other corporate objectives? MR. ODUM: I think -- first of all I want to say I think Rex said this extremely well, but as I look at health, safety, and environmental aspects of our business, I know to my core that without being very strong in each of those, we cannot be a sustainable, strong, profitable company, period. So I know to my core that that is critical. I think it then goes into some of the comments you heard earlier, which is, what we find, not only do you have to perform well at each of those areas, but what we find is, a company with the discipline to perform well in each of those areas
306

well in a particular way because it adds the safety margin that you need is absolutely the right decision, even if it's a more expensive item as a single element. CO-CHAIR REILLY: Thank you, both of you, for the very important statements. I think one cannot emphasize enough that you have made clear that the safety commitments and records that you have achieved have also in your views made both your companies more profitable and successful. That's a message I think that's powerful and that needs to be heard. That's one reason we wanted to invite you here today, and you represented those views very well. As I think about the challenges facing the industry and the government, the regulators, they're large, I think, with respect to both. And as I reflect on Director Bromwich's challenges and think about what the nuclear industry did after Three Mile Island, I'm reminded that a lot of oil company executives retire at 60. And INPO uses people who have been in the nuclear industry, who actually run

308
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

almost naturally performs better in virtually every aspect of being a business, making a profit for its shareholders. So I see them, we as a company see them as completely interrelated and completely part of the foundation for building a successful company. CO-CHAIR GRAHAM: So you don't see funds for all those layers of safety as being a diversion away from your other corporate goals, but a contributor to the chief of those goals? MR. ODUM: Absolutely. It's part of -while I'm not sure it was quite that conscious in my thinking at the time, it's part of why I've used the examples that I've used in here. Most of the examples I've used around stop work, for example, were things that cost us more money than it maybe would have necessarily needed to cost us, but it was the right thing to do. And it demonstrates what we want people doing, and it's the kind of thing that would prevent a significant and expensive accident sometime in the future. So, you know, spending more money to grow

reactors. That's one reason they're so respected by the people whose reactor practices they inspect and evaluate. And he has said he's doing recruiting at engineering schools. And it strikes me that you might encourage some of your own graduates to -- who are well fixed in retirement and can join the enterprise to try to (inaudible), because we're really going to have to do that, I think, to keep pace with the evolving technology and the oil industry in deep water. Many thanks to both of you for being here today, and thank you for the cooperation we've had from both your companies. I think that Fred Bartlit has the last word today, except for Senator Graham's and my closing statements. MR. BARTLIT: As somebody with two great-grandchildren, I don't like the idea of retiring at 60 very well. I think that's something we need to stay away from. There's one thing, while Richard is getting squared away, I need to correct. Mr. Lewis

PLANET DEPOS 888.433.3767 | WWW.PLANETDEPOS.COM

NATIONAL OIL SPILL COMISSION MEETING CONDUCTED ON TUESDAY, NOVEMBER 9, 2010
78 (Pages 309 to 312) 309
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

311
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

said today that -- I don't remember the words he used, but he said maybe there was a rush, there was a question, the panel has been very interested in why get out of there on the 20th. People have asked that. Mr. Lewis said, gee, he had the feeling maybe the rig had been heading to another area to keep from losing the leaks. It turns out we have more information than Mr. Lewis does on that. We are all over that particular issue. We -- as it stands today, it does not appear to us that there was a rush to get to another lease. But we're pursuing it, driving it to earth, boring in on these guys, getting all the answers we can, and if we will have, we can report before our final report. But we're all over it. We have more facts than Mr. Lewis had. We were surprised to hear him say it, frankly. (Inaudible) CO-CHAIR GRAHAM: Maybe I'm being the one that's been asking that question. I'm looking to get the verdict as to a specific and what may be an erroneous suggestion as to why it happened. The

more information yesterday than would normally come out in a four-month -- four-week Federal District Court trial. There's a lot of information. We welcome comments. I particularly -- and maybe the panel might feel the same way, I was intrigued by Shell Oil saying they never, never leave a well underbalanced when they temporarily abandon it. And so we would welcome comments from the industry and from anybody in the audience, or any experts that are watching this on television, as to the pros and cons of a rule saying let's never temporarily abandon a well underbalanced. That just seems like something we should invite comments on, if that's all right with the Commission. Now, what we're going to do now is that Richard Sears and I are going to discuss some overarching sort of safety type considerations that we have observed during the three or four months of very detailed work on this. We are not safety experts, Richard and I. But also we collect the comments of our whole team of people, and we've had

310
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

312
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

fact is, it happened. MR. BARTLIT: Yes, sir. CO-CHAIR GRAHAM: There was a whole series of events which a prudent person might easily have said, let's call time out here until we get this matter resolved before we go further. That didn't happen. So was there anything that was causing all the decisionmakers on that rig and back onshore to make judgments that -- not to defer -- increase knowledge and then make wiser judgments, but rather to try to get this thing wrapped up on the 20th of April? MR. BARTLIT: That is such an important and obvious point. We've been all over it, we've pursued it, we have a lot of information on it which we can provide. So far we don't have an answer to that. So the next thing I want to say is that we have -- I want to make clear we have welcomed comments on all of the information that we've developed in the last two days. I told one of my partners, we produced

a team of very smart, dedicated young men and women boring into this. As you can imagine, we sit up at night saying, how could this have happened, what could we have done. We want the Commission to have the benefit of these late night discussions with all the young men and women you've met and with our staff, for what they're worth. We do not claim to be somebody who would be teaching graduate level safety. But we do have some common sense, at least we think we do. So that's what we're going to do. Mr. Richard Sears, two physics degrees from Stanford, 30 years at Shell, vice president deepwater services, has been retired for 18 months, is a visiting scientist at MIT, has been the leader of our technical work. He has achieved cooperation by all the major -- Chevron, Shell of course, Exxon. He has educated us on things we didn't know. We've turned to him every day. We've gone to dinner. What is this stuff, how do these casings work, everything. He's traveled all over the Gulf with us. If there was an indispensable team member

PLANET DEPOS 888.433.3767 | WWW.PLANETDEPOS.COM

NATIONAL OIL SPILL COMISSION MEETING CONDUCTED ON TUESDAY, NOVEMBER 9, 2010
79 (Pages 313 to 316) 313
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

315
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

here -- a lot of people in our team could do what Sean and I and Sam do. Nobody could have done what Richard has done. And we thank him for it. He's been a great -- I'll miss him. I hate to say that, but I'll miss him. MR. SEARS: You haven't seen the last of me. MR. BARTLIT: What we're going to do is, now we're going to go over, we've culled these down, and again, you know, they come from all of our discussions, because one of our jobs is just to look at the spectrum of things and give you advice from everything we know. So let's turn to number 1. Individuals should be trained to repeatedly question data, raise concerns, and double-check assumptions. So, Richard, can you sort of hold forth on that a little bit, summarize the discussions we've had, and then give us some examples? MR. SEARS: I will do that. Let me start by saying, as we go through these examples and

use it to make an important point. Here's Macondo. The companies that are operating in the deepwater Gulf of Mexico are headquartered in New Orleans, oftentimes in Houston, somewhere along the Gulf coast. Geographically, wherever the rig is in the deepwater Gulf of Mexico, it's geographically a remote operation, and it's important. So things that are being done out there are being done remotely, geographically. Now, as is even more important than that, if you go to the next slide, this is Macondo sitting in Mississippi Canyon Block 252. And remember what Macondo is. It's not a dot, a platform on the surface of the ocean. We start the animation, which I can do with my laser by pointing there. Macondo, as a well, and all of these deepwater wells are like that, it's 5,000 feet of water, and the stuff that we're really interested in is right down there. We talk about drilling. Geologists and geophysicists aren't interesting in drilling. Geologists and

314 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

316
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

conclusions, I'm going to be pulling together things you've heard the last two days; my own experience and ideas, comments from other members. It's going to be a mix of facts and testimony and thoughts and ideas. And Fred, if you ever kind of want to know in what space I am, just ask. CO-CHAIR REILLY: I'll ask you to make copies of these conclusions for us, if you would. MR. BARTLIT: Yes, sir. MR. SEARS: Also, I'm trying to reflect my own and I think the Commission staff's instincts about things, and what we've learned and the judgments we've made. So we start with this one: the idea that there's a lot of data, we have to be in an environment where concerns are raised. Data, however good, is questioned. And we think about the assumptions that are being made, implicit and explicit. For example, go to the first slide, which really just -- it's what we use when we set the stage for this one. We began -- and I'm going to

geophysicists are interested in having a hole in the ground that accesses resources that in this case are 8,000 feet below the surface. And this is what's constructed in order to do that. Everything that matters from a science perspective, from a resource perspective, is way down here. Now, back to the assumption, to the point at the beginning, that we're in a world here where there's a lot of data. But a lot of the data is very indirect data. And this is a world that I have described many times as one of selective and partial knowledge. This is a very complex engineered system in a very complex natural system. And we don't know everything about it. And the data that we have and the presumptions that we make and the conclusions that we draw about what's happening down here are full of assumptions, and particularly when an operation is going on down this hole. Again, it's 18,000 feet long. At the bottom it's about 7 inches -- less than 7 inches in diameter. The degree of freedom you have from the

PLANET DEPOS 888.433.3767 | WWW.PLANETDEPOS.COM

NATIONAL OIL SPILL COMISSION MEETING CONDUCTED ON TUESDAY, NOVEMBER 9, 2010
80 (Pages 317 to 320) 317
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

319 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

surface is, you can put things down, you can pull things up, you can rotate them clockwise or counterclockwise, and you can pump fluids. That's what you can do. And in doing that, the industry is able to do and make happen a lot of things. We've seen some of the ingenious kit that they've designed to do it. And there's a lot of instruments down there to measure what's going on. But the point is, it's rife with assumptions. They're important assumptions. And everybody involved in these operations has to be attuned to questioning those assumptions and thinking about what's actually happening. Again, not to pick on or hammer anybody about things, but just to bring a few of the points that we've seen from the previous few days, a couple of examples. The next slide, please. This is a comment from one of the BP team members. And this was after the float equipment had (inaudible) converted and the pressure was lower, the circulating pressure was lower than imagined that it

MR. SEARS: There are a couple of more examples. The next slide, we heard a discussion of the bladder effect. Again, we don't know what actual conversations went on concerning the bladder effect. And the next slide I think -MR. BARTLIT: We say here, we don't know if a bladder effect exists or not. BP claims, and Transocean disagrees, that they were told there was a bladder effect. But maybe, accepting that from one person on the rig if that conversation took place, which we don't know, maybe it ought to be questioned. Maybe somebody should call shoreside when you've got 1400 pounds on the drill pipe and say, has anybody there ever heard of the bladder effect. This is the point we keep trying to make here. Richard? MR. SEARS: And what we do know from testimony at the joint hearings, from one of the BP well site team members, in the next slide, and this was something we showed earlier -- go back one. There we are. Did anyone say anything or disagree
320

318
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

should be, the model that it should be. And at the end of the day they decided the rig standpipe pressure gauge was incorrect. Now, again, we don't know what they actually did discuss and talked about. What we've seen is this memo. What we haven't seen is, was there a long and healthy debate about that gauge and its accuracy and the data that went into this assumption and what other possibilities -MR. BARTLIT: Did they put a new gauge in? MR. SEARS: We have no knowledge whether they did or not. MR. BARTLIT: Again, the purpose of these is not to -- we're not even thinking about cause now. We're serving to illustrate to the Commission our proposition that you've got to question, question, check assumptions, not accept propositions like this. People have to get that through their heads. And it sounded like Mr. Odum and Mr. Tillerson are pretty far down the road on that to us. I was impressed. Richard?

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

with Mr. Anderson's explanation? I don't recall anything disagreeing or agreeing with his explanation. So it suggests there wasn't a lot of debate and discussion. And it could have been an interesting discussion. Well, how do you do that, how do you get 1400 PSI, what would it look like? MR. BARTLIT: What's the math? MR. SEARS: Yes, let's do the math, let's think about it. And at least that's the kind of questioning that leads to ultimately, I think, better solutions and a better path forward. One final example, here in the same case, of looking at assumptions. The surface plug, surface cement plug being set 8300 feet below sea level, a little over 3,000 feet below the sea bed. A lot of discussion and testimony here from various hearings, and also from the five experts we had here today, saying this is unusual, it's very unusual, and varying degrees of feeling today and yesterday about how risky it is. I'm not going to judge how risky it was. I heard a lot of

PLANET DEPOS 888.433.3767 | WWW.PLANETDEPOS.COM

NATIONAL OIL SPILL COMISSION MEETING CONDUCTED ON TUESDAY, NOVEMBER 9, 2010
81 (Pages 321 to 324) 321 323 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

experts say they thought it was pretty risky. But I heard somebody else say, well, maybe not necessarily so. The important point is there's no evidence that all of the assumptions that went into -- is there a better way to set that lockdown ring, can we get 100,000 pounds, many others. We heard examples, we don't have evidence that that kind of healthy debate was taken on. And again, in this world, that's the kind of discussion and debate that leads to fundamentally better solutions. MR. BARTLIT: There was a fundamental proposition. We don't like to set cement in mud. People apparently set cement in mud. There needed to be a discussion there as to what's wrong with setting cement in mud. If you set it in mud, you don't have to displace, and we go around in circles. It looks like some of these assumptions were accepted without digging deeper into the artichoke. Let's go to number 2. Greater attention should be paid to the magnitude of consequences of all anomalies, even seemingly minor ones, because,
322

It's a matter of leadership and setting the right tone from the top. It's a matter of training, in terms of making sure that the people involved have the technical skills to know what it is they should be thinking about and how things develop in this environment of deep water. It's about behaviors. It's about company culture. And it's about developing within the company instinctual behaviors around these two points, about questioning assumptions in a constructive way, and considering the consequences of various things. And two examples that we saw here particularly yesterday and spent quite a lot of time on, because we believe they might have had some consequences for this well. Here is a picture that we drew up for the float collar conversion, just before the pressure dropped from 3142 PSI down to a few hundred PSI, and mud started circulating. Now, we don't know why it happened. Just before it happened we're pretty sure that the tube -- and you've seen the equipment, the tube, the
324

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

as we've learned under these circumstances, minor anomalies can become major problems in a short order. Richard, what can you tell us about -- and Richard is giving the views of our entire team, as we've had bull sessions about this into the evening. What can you tell us about that? MR. SEARS: Well, as you just said, minor anomalies have a way in this environment of magnifying and becoming major problems very quickly. And we'll see more examples of that as we go through this list. Yes, any anomaly, particularly those that are recognized as anomalous, need to be investigated, they need to be discussed, and they need to be understood. What could be causing that? What are the various reasons that could be happening? Why is it happening? And this is really important, that the making sure that happens is not just saying, okay, everybody, do it. You heard Mr. Tillerson and Mr. Odum talk about how you accomplish that and how hard it is.

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

ball, were up in the valves. When the pressure dropped, we don't know what happened. The tube liner dropped, the valves closed. The ball might have popped out of the bottom, because there's a retaining ring in there that failed. We don't know. Or perhaps the flow was never great enough to convert it; when junk flew out of the bottom of the reamer chute, it just established circulation, and what might actually be reasonable pressure in that circumstance, about 340 PSI or something like that, we don't know. But here's a case that when this happened, and even with the comment I brought up in the previous point, okay, the circulating pressure is a little bit low, okay, well, the gauge is wrong, the flow is finally converted, let's move on. And there wasn't apparently a healthy discussion of what else might have happened down hole and what the consequences of that might have been. And then we saw one other example, and it was a negative pressure test. And it was a long period of time, three hours. There were a lot of

PLANET DEPOS 888.433.3767 | WWW.PLANETDEPOS.COM

NATIONAL OIL SPILL COMISSION MEETING CONDUCTED ON TUESDAY, NOVEMBER 9, 2010
82 (Pages 325 to 328) 325 327
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

tests done, a lot of pressure measurements taken, a lot of fluids were bled off from various places, gauges in various places. But the bottom line is, a successful negative pressure test in this situation would look like this. In the situation at Macondo, and the pressure test was declared successful, was that 1400 pounds per square inch on the drill pipe, zero on the kill line. And it seems, based on all of the data that we have, that there was agreement of those in position to have seen the data and worked with the data on the rig that night, there was agreement that this test was successful, let's move on. MR. BARTLIT: And tying us into our proposition, if the Commissioners please, that greater attention has to be paid to every single anomaly. I wonder if when people saw that, they realized that that may mean that the cement job is kaput, and we're going to have an explosion on this rig within an hour and a half. I doubt that. I mean, I don't think these guys -- I've been all over
326

MR. SEARS: I'll start with something I said a few minutes ago. What is a deepwater well? A deepwater well is a very complex engineered system embedded in a very complex natural system, about which we don't know nearly enough. And we don't know nearly enough about the natural system. And even complex engineering systems can behave in seemingly unpredictable ways. We saw that perhaps in the previous two examples. All of that has been dealt with in the business of deep water. And you've seen over two days a lot of the engineering complexity that has been developed by the industry in order to do this. And it is really impressive. And it has always been a fun business to work in. We also heard today from the experts here this morning how long a time period it is that goes into developing a deepwater drilling plan and the number of skills and disciplines that go into it. It can be a year or more. Certainly if you back up to the geophysical work that led to making the maps, that led to buying the lease, that led to then

328 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

these rigs, I've met these guys. They're wonderful people, they work like crazy, they have families. So when I say we have to teach people more about anomalies, I don't think they sat there and said, well, maybe this rig will be on fire in two hours. They just didn't. It was an anomaly. They didn't explain it. They did not clearly appreciate what that could mean. Okay, let's look at our next sort of overarching -- I guess you don't have to be a safety expert to reach some of these conclusions. Individual risk factors cannot be considered in isolation, but as an overall matrix. Personnel cannot ignore anomalies after believing they have addressed them. As we'll see, there was -- we all believe there was a tendency here to say, okay, we've got that behind us, forget about it and go on to the next issue, without realizing that maybe that wasn't fully resolved before. So what can you tell us about that, Richard, please.

programming the well and developing the plan, this is a process that plays out over years. And then the drilling of the well. And ultimately this is heading towards, in the success case, production of oil and gas, which in deepwater environments can last for decades. So we're dealing with big scales, complex scales, long time frames. All along there, you're developing a system, a very complicated system. And the point of this is that you cannot extract an individual item from that system and look at it. No matter how smart you are, you deal with it, you involve it, that's good. But then you can't put it on the shelf never to be considered again. It's part of the system, and it has to be thought of as part of a system. And the complexity and a systematic thinking of the risks and all of the components of risk need to be considered. And you can't get away with it. I'll give you a good example. Yesterday, in the next slide, I think the next slide -- yes. Here's the last two hours before the explosion.

PLANET DEPOS 888.433.3767 | WWW.PLANETDEPOS.COM

NATIONAL OIL SPILL COMISSION MEETING CONDUCTED ON TUESDAY, NOVEMBER 9, 2010
83 (Pages 329 to 332) 329 331 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

This is something we heard yesterday. MR. BARTLIT: Let me stop for a second, Richard. We don't have a transcript of what Mr. Ambrose said yesterday, so this is our best recollection, and if we get it wrong, of course we'll correct it. But yesterday Mr. Ambrose said that sometime in this period, 20:31 to 21:40, right in here, the TO crew again saw the anomaly, and again saw 1400 PSI. And I remember earlier, at the time of the negative test, they had seen that and sorta-kinda resolved it. So let's pick up from there, please, Richard. MR. SEARS: Well, it's exactly that. Here we are, about the time that hydrocarbons are entering the riser, by BP's calculation that they've put out in their post-incident report. So before hydrocarbons are in the riser, or about the time hydrocarbons are in the riser, the crew on the rig notices something, something anomalous, that there is -- if I remember hearing it correctly, the difference in pressure between the
330

when hydrocarbons first enter the riser, to three minutes later, BP's calculations report a thousand barrel gain. A thousand barrels, that's half the volume, more than half the volume of the 5,000 foot riser. And that is what that influx, seemingly minor, has now turned into. It's come up in the riser and is expanding because of decreasing pressure. And just a few minutes later, 21:49, the time of the first explosion, BP calculates 2,000 barrel gain. Now, we don't know where that all went. But 2,000 barrels is the entire volume of the 5,000 foot riser plus about half the volume of the production casing. MR. BARTLIT: A million questions come up from this, that I think listening to Mr. Tillerson and Mr. Odum, I think I know what their answers would be. Should the crew have known that 1400 maybe was reservoir pressure, that they were seeing reservoir pressure up at the surface? Should the significance of that number have been clear? That's why we say that there's a tendency
332

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

drill pipe and the kill line of about 1400 pounds per square inch. And they looked at it, they stopped, they bled off some pressure, they considered what could this be. Now, I don't remember hearing what it was resolved as. What I do remember thinking when I heard this yesterday was, wait, the negative test also saw 1400 pounds per square inch difference between the drill pipe and the kill line. And I'm wondering, was the negative test put on the shelf, and now this comes off the shelf, wait, what about the -- nobody's thinking about the negative test, we've passed the negative test, here we are. And you can see what happens next in this timeline, that just a few minutes later, mud begins to overflow on the rig floor. MR. BARTLIT: There's a difference between the parties as to when it came up. MR. SEARS: When mud came up, fine. I'll just state, I'm looking at BP's calculations from their reports. This is how fast something anomalous turns into something rather serious. From 21:38,

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

to put an issue behind people and then go on, and when another event happens, not go back and say, holy cats, now we understand what happened back there, but to basically deal with it almost from scratch. That's the point. And there are a couple of more points. MR. SEARS: Indeed. If we look at the next slide, it's a list we put up yesterday of what we described as the situation at the time of the cement job on April 19th. Now, we can argue a lot about is this list three items long or six or seven or 11 or 13. Frankly, I don't care how many it is. It could be five. You can add these together in complicated ways, and that's fine. The point is that there was a lot happening that people with knowledge of the system, people with knowledge of cementing should have been thinking about in terms of each of these. However you want to aggregate or disaggregate them, each of these have an impact on the cement job, potential impact on the cement job. Now, any one alone, even several alone,

PLANET DEPOS 888.433.3767 | WWW.PLANETDEPOS.COM

NATIONAL OIL SPILL COMISSION MEETING CONDUCTED ON TUESDAY, NOVEMBER 9, 2010
84 (Pages 333 to 336) 333 335 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

perhaps not a big deal. All of these, we said, the industry faces these every day and has developed methods for dealing with them. The physical impact of these isn't what aggregates and isn't what is cumulative, in my thinking. What's cumulative is the risk regime that they're operating in, as one after another after another of these becomes an issue that somebody should be thinking of, that should, as we've put it, heighten awareness as to what comes next. What comes next is part of the test, negative pressure test, that would confirm the quality, the robustness, the integrity of the cement job. And these together, again, whether the list is seven items long or 13 doesn't much matter. These items and these concepts should have heightened awareness of the importance of that negative pressure test and caused people to think a lot. Let me just take one in particular. The next slide. MR. BARTLIT: Let me go back.
334

that might move around or come off as they're put on this drill pipe that's being run in the hole. I'm going to be the first to say that the risk environment here is very complex. And it is changing. And you can't just willy-nilly say, well, put all those centralizers on and ignore what you might do in terms of adding risk. But in my case, what I'm going to focus on here is, who (inaudible) end of story. No, this should have been at the beginning of the story. This should have been at the beginning of the story of more discussion of how -- the complexities of the cement job and where it was leading them. MR. BARTLIT: And it's -- again, again, it's left by a smart engineer, okay, "probably be fine." "Probably be fine"? It was the only barrier that existed when the well was underbalanced, and the people on the rig thought it would probably be fine. Next, "I would rather have to squeeze." Squeezing of course is repairing it. There's an awareness in the mind of this good engineer that
336

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

MR. SEARS: Okay, go back. MR. BARTLIT: I have a bad habit of trying to be very specific and not general. Take centralization. Some thought that had been resolved. Others might disagree. But maybe when they started seeing 1400 on the drill line, on the drill pipe in the negative pressure test, maybe somebody should have said, let's go back. Maybe that centralization issue was more of an issue than we thought it was, maybe we ought to stop, maybe we ought to see what's going on down there. We had a dispute with Halliburton, we had a lot of runs. Maybe we shouldn't have just put this behind us, but we should keep reevaluating the premises. Richard? MR. SEARS: Well, and the next line is about centralization. It was these slides that we showed yesterday. We highlighted, "I would rather have to squeeze than get stuck above the wellhead." By the way, that is a perfectly reasonable, rational response to this notion of all of these centralizers

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

they might have to repair it. Again, there's a tendency to say, that's behind us. You start seeing 1400, maybe somebody should have said, aha, we should have squeezed it and stopped it. That's the specific point we're trying to make. MR. SEARS: And this point was raised also in BP's post-incident report. As we look at this next slide, and we showed this I believe yesterday, a formal risk assessment might have enabled the Macondo team to identify further mitigation options. This is specifically speaking of some aspects of the cement job. A formal risk assessment would have at least elevated the level of discussion and thinking about the cement job and the implications for going forward. And it may have actually -- I can't say, I don't know, but it might actually have had more impact than just whether to run the cement evaluation log. It might have also had something to do with just the kind of thinking that was going on.

PLANET DEPOS 888.433.3767 | WWW.PLANETDEPOS.COM

NATIONAL OIL SPILL COMISSION MEETING CONDUCTED ON TUESDAY, NOVEMBER 9, 2010
85 (Pages 337 to 340) 337 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 339

Now, I want to say, we're talking here about systems thinking. And I don't have this on a slide, but I was thinking about it as we were preparing the (inaudible). I do want to add, we saw one slide, I'll repeat the slide to you, and you may remember it or just take my word for it, it was in the deck yesterday, of many. There was a slide from a member of the BP staff, Billy Bodek I think was his name. And it was a slide where it was a long e-mail, and we excerpted, highlighted one line out of it where he was highlighting two parts, why they had decided to call TD at this well at 18 three instead of the original program depth of 20,000 feet. That slide, that letter is an excellent example of systems thinking, in my mind. It's a good example in this well, where individuals on the engineering team looked at what was happening, they looked at the geology, they looked at the well as it had been constructed to that point. They thought carefully about the risks of
338

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

I've never actually done it. So it gets to be kind of a big deal. And when you're dealing with events, how do you know it's bad enough to act fast? That's my way of saying that there has to be more emphasis, that it's okay to cut the drill pump, it's okay to bump overboard this stuff, when you're in a tough situation. And now what we're going to do is, I read the Transocean handbook cover to cover. I thought when I read it, I thought, this is a brilliant document, these guys have killed themselves to get it right. And I gave it to Richard, and we looked at it again. Yes, it's all there. Every possible aspect of the kinds of things you can face were there. So we compliment TO for doing that. But as we read it as normal people, it seemed like there were -- it was all there, but maybe, and I know Mr. Odum said today it could be too complicated, it can be too complicated. And Richard is going to go through the manual.
340

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

going forward, the risks not only to that well and what had been done so far, but also its future purpose as a producing oil and gas well. And they made a very sound -- what looked to me a very sound decision to, let's call this TD, we're going to have to stop here, and the line I believe is, we can't go on without jeopardizing this well. That is a good example of systems thinking, where a lot of data is brought together from the past looking into the future. And the decision is made. MR. BARTLIT: Let's go on to our next point, number 4. There ought to be greater focus and training in how to respond to low frequency, high risk events. Richard and I were talking last night, we said, we've gone all around the industry, we've said to everybody, how often do you actually go overboard with your diverter with these things happening? People say, gee, I've never done it. Or they say, how often have you triggered the Blanchard ramp and actually cut through the drill pipe. They say, gee,

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

And this is not by way of criticism. Both Mr. Tillerson -- Mr. Tillerson said he learned from that other experience. So what we want to do is learn. And when somebody does a job like TO did on their manual, we don't want to take them down for it, but we want to give our observations on what we saw about what somebody reading it, would they be able to know how to -- it was bad enough to act fast. That's the point. MR. SEARS: And this is the manual. And Fred read it, so I felt shamed into reading it myself. I never thought when I started (inaudible) read a well control handbook. But it is very good, and it's comprehensive, and it tells you a lot, and it tells you they thought a lot about the circumstances that they operate in and in some of the specific environments. And the next chart -MR. BARTLIT: This is not meant to be a thorough-going analysis of every page. But it's supposed to be illustrative of some things we observed, okay?

PLANET DEPOS 888.433.3767 | WWW.PLANETDEPOS.COM

NATIONAL OIL SPILL COMISSION MEETING CONDUCTED ON TUESDAY, NOVEMBER 9, 2010
86 (Pages 341 to 344) 341
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

343 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

MR. SEARS: And this is not meant -- this is one of these terrible slides where the person talking says you don't have to read everything on it, because of course you can't. What we see is a lot of boxes. This is a section on kick detection, and specifically how to manage gas once it enters the riser, the shut-in procedures for the well. We've already said many times, from our experts and all that, once gas enters the riser, this is a potentially serious situation. So Transocean in their wisdom and experience has put together the picture here of how -- what the driller needs to do, what the staff on the rig needs to do in order to shut in the well and manage gas once it's in the -MR. BARTLIT: Again, I have to say to TO, we do not know about the specific training that's given in addition to the manual. We have no idea about that. We looked at the manual and we imagined ourselves as somebody on a rig that's been handed the manual, and it says, when you get a kick, you go through this sequence.
342

pilots handling events. So there might be room, I'm just going to say, there might be room for improving how people on rigs are trained to recognize this. Because again, we talked to thousands of years of experience, from drill sites, rigs, platform installation managers. And really, you can count on one hand from all of that how many times people have actually diverted flow overboard, used a Blanchard ramp to cut drill pipes, or operated the emergency disconnect system because of a well control problem. MR. BARTLIT: And if you never do something, it gets to be the expected. I don't know if you want to (inaudible) the drill pipe, that's not my business. But when you never, ever do something, and it's viewed as the be-all and end-all. You probably wait maybe sometimes too long. And how do you train people to have a state of mind that they're alert to these things happening fast? "That's not my job." But this is something we observed that maybe there's not -- hasn't been
344

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

MR. SEARS: And the important point here, and this really references the talks from Mr. Odum and Mr. Tillerson, there are a lot of actions on this chart from watching flows, closing annulars, closing Blanchard ramps, hanging off pipe. There's a lot of things that go on that make up the consequence of events. All of this -- and you saw in a few slides previously how quickly things happen once gas enters into the riser. So all of these things have to be instinctual for the drilling staff. I'm going to say that the drilling staff are probably very well trained, it probably is instinctual for them. But this highlights the complexity of the business they're operating in, and how quickly they have to act. And in their mind, they don't have time to refer to this chart. What do I do next? It has to be a habit for them. That means they have to be trained in it. We talked earlier today about the ability to simulate these things. And it's not like the simulations that go on in the airline industry with

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

created, at least in the paperwork, the sense of urgency, you better move, because once it gets in the riser, bad. Richard? You have another point. MR. SEARS: The next slide, a couple of pages from the manual, I'll blow up a couple of -one sentence on the left there. Now, this is very good. In this manual there is 15 or 16 pages specific to deep water environment, and how to manage a kick in a deep water environment. It's very, very important, because deep water environment has its own unique characteristics. And from this manual, it clearly says -and this is consistent with what we heard yesterday, at any time if there's a rapid expansion of gas in the riser, the diverter must be closed and the flow diverted overboard. It's very clear. Now, it would stay very clear -- now, again, I'm maybe making an unfair interpretation. But I will say it would stay very clear were it not for the very next sentence. The very next sentence says, this is true for water based mud as well as for oil based mud.

PLANET DEPOS 888.433.3767 | WWW.PLANETDEPOS.COM

NATIONAL OIL SPILL COMISSION MEETING CONDUCTED ON TUESDAY, NOVEMBER 9, 2010
87 (Pages 345 to 348) 345 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 347 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

An alternate system is using the mud-gas separator to remove gas from the mud, as in figure 8.4.12, which is on the very next page. And then the next few pages go on to give the very detailed instructions of how to circulate gas out of the mud column and the riser using the mud-gas separator. By the way, none of it -- it's probably right, it's probably all very good. And these techniques probably save lives. I'm going to suggest that it might be a little less clear to the operating personnel that -- in helping them understand when an event is bad enough to be called bad. Because what we saw in Macondo is they did go to the mud-gas separator. It did overwhelm that system. And we've had conversations with explosion experts from other oil companies who have said it might have made a difference, it might have delayed the explosion for at least a short period of time to have immediately taken that gas flow not to the mud-gas separator, but overboard. It's complex. But I think there's probably room here for helping
346

you know the well is underbalanced. Maybe it's not enough, maybe if the culture of the company is that somebody might think the driller would look at this line and turn away and do something else, maybe that's a symptom of something that needs to be addressed. MR. SEARS: I think that really describes it well. In this particular case, and if we take the second pressure rise, and the pumps were turned off, as even more diagnostic of an influx into the well, it's a period of about six minutes. And we heard that, well, for the first minute and a half or so, minute, minute and a half, the bad behavior is actually pretty reasonable and consistent with all of the actions going on on the rig. And by the way, the last minute, minute and a half or so, is also a pretty reasonable behavior of pressure, given various actions that were going on on the rig as pumps were being turned back on. So here we have a situation where -- it's not really six minutes. It's sort of the four minutes or three minutes in the middle, where the
348

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

the drillers make some of these decisions. And also, the starting point on this, if at any time there's rapid expansion of gas in the riser, it might be nice to know that, before mud is coming out on the deck of the rig. MR. BARTLIT: Let's look at the next slide in that regard. People will remember this. This is the Sperry-Sun data, turned sideways so you can see it better, flipped around and expanded so you can see these trends. We've discussed drill pipe pressure increasing with constant pump rate. Pump's off, pressure continues to rise. Mr. Ambrose yesterday -- and again, we don't have a transcript, so this is my memory of this -- Mr. Ambrose said something like, maybe the driller looked at the first part of this for a minute and it looked okay, and then he looked away to do another task. Now, he doesn't know that. Nobody knows what happened. But the point is that it seems there's a possibility, we think that there may be one of these low frequency, high risk events. And

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

right person with the right knowledge has to be looking at the data at the right time, thinking the right thought. And as the comment was, you might have looked at it, saw it was behaving as expected, and then went off to line up pumps for the next activity. That's probably a reasonable thing to be doing, except that in this case it might have made the difference between seeing something serious that was happening down the well and not seeing it. MR. BARTLIT: Now let's look, please, at our sixth point. Failure to develop or adopt clear procedures for crucial end of the well activities. MR. SEARS: We talked a lot about this. And our judgment is that there's a body of evidence that suggests that the end of well, once the negative pressure test had been passed, which meant the job had been done, negative pressure test passed, it's into the temporary abandonment procedure, it was perceived to be a very routine, low risk operation. And there didn't appear to be, based on

PLANET DEPOS 888.433.3767 | WWW.PLANETDEPOS.COM

NATIONAL OIL SPILL COMISSION MEETING CONDUCTED ON TUESDAY, NOVEMBER 9, 2010
88 (Pages 349 to 352) 349
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

351 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

the changes that were going on and how this evolved over time, there didn't seem to be a lot of rigor around how this end of well -- these end of well processes were managed. This is dangerous, fundamentally dangerous. I think that the first Commission meeting hearings here in Washington, D.C., you had a well delivery manager from a major operator tell you specifically, accidents happen during routine operations, because people take their eye off the ball, they're less vigilant, less careful. Accidents happen. In my own life, I think of this as if I could distinguish between risky and really and truly routine, which I guess by definition is not risky. Then, well, fine, I'm only going to drive my car if I'm doing routine things, not risky things, and therefore I don't ever have to worry about getting into an automobile accident. It's kind of nutty. You take this by extension, and it leads down a path which makes no sense. So you can't distinguish beforehand what
350

go back in the slides, but think back to the list of all of those situations during the cement job. Some of those are known to one party, not others. A few are known to all parties. Most of the list is known to one party. There need to be better models for how to share information, not partition this data into, well, this is part of the cement job. We heard in some of the conversation today about monitoring flow. Well, they wouldn't have known that, because the flow out was going through the cement unit. That's perfectly reasonable. That's how operations happen. But here again is partitioning of data, so that possibly some possibly critical data isn't available to the right person at the right time and maybe isn't being shared, because there's not an awareness that it needs to be shared. And a lot of those aspects of the nature of the cement job, it might be reasonable to look at them and say, well, gee, the cementer wouldn't necessarily have known about a well planning decision that was made months earlier to manage
352

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

is truly risky. In fact all of these events, all of these actions on these deepwater rigs are fundamentally risky. It's a fundamentally risky environment. As that well delivery manager said to you, those risks never go away. You manage them carefully so that you keep them under control. MR. BARTLIT: Let's turn to number 6. To me, as we work on this case, this was one of the most important problems. And as I listened to Mr. Tillerson today describe how Exxon insists, absolutely insists that the contractors and all their personnel are on the same page, that drove it home to me. Poor communication between operator and subcontractors deprived otherwise capable personnel of information necessary to recognize and address risks. Let's elaborate on that, please, Richard. MR. SEARS: There's a lot that goes on on these rigs, in -- most all the time there's a lot going on. And there's a lot of information that needs to be shared, there's a lot of information that is shared. When we look at the list -- don't

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

trapped annular pressure. No reason to tell the cementer about trapped annular pressure. Wouldn't understand it anyway. That's fine. But here you've partitioned data and partitioned risk as if they are truly independent. And they're not truly independent, because the risks are (inaudible). MR. BARTLIT: A classic example was the centralizer issue. MR. SEARS: In fact yesterday, in the conversation, in the discussion at this table, the question was about the OptiCem model that Halliburton runs for the operator to model the risk of gas influx into the well. And the centralizers are an important aspect of that. Flow rate is an important aspect to that. Bottom hole pressure is an important aspect of that. Sam developed this story very carefully to draw out the parameters, some of the parameters at least that go into this, and then asked, was that model rerun with the right bottom hole parameters, with the right accurate flow rates, with the number

PLANET DEPOS 888.433.3767 | WWW.PLANETDEPOS.COM

NATIONAL OIL SPILL COMISSION MEETING CONDUCTED ON TUESDAY, NOVEMBER 9, 2010
89 (Pages 353 to 356) 353 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 355
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

of centralizers, where they were actually going to be, six of them, where BP was actually going to run them on that long string casing. Again, we don't have a transcript, but I believe the answer was from the cementing expert, it wouldn't have mattered, there would have still been severe gas influx. MR. BARTLIT: BP candidly admitted in its report that they didn't put the extra 15 centralizers on that the Halliburton model had recommended, because they thought that the wrong centralizers had been delivered. The centralizers are made by Weatherford. There was a Weatherford man on the rig that night. They could have gone down a deck, knocked on his door and said, are these the right centralizers? They didn't do that. The Weatherford man was a little concerned, called shoreside. But there was no communication between the man on the rig that understood it and the BP engineers who apparently, according to BT, made a mistake in identifying the centralizers.
354

What I heard him say was, you have stacked up a number of parameters which frankly won't matter. There is going to be channeling in the cement job. This is going to be a very difficult cement job to get right. Now, the industry has tools to fix that, and they're good at fixing it. And while these primary cement jobs can be problematic, once evaluated and repaired, cementing is a very safe and reliable operation. But... MR. BARTLIT: Yesterday we heard Mr. Vargo of Halliburton, a very impressive man, look us in the eye and say, we believed there would be challenging in our Halliburton cement job, and there would not be isolation of hydrocarbons. Now, to me, I bet my bottom dollar, had Shell and -- and I'm not kissing you guys' butts. At Exxon or Shell you would expect there to be a collaboration with the contractors and the people on the rig, that if the cement guys absolutely believed that the hydrocarbon zone was not sealed off, and they were underbalancing the well, you would expect the guy to raise holy hell, a ruckus.

356
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

MR. SEARS: And in the next slide is a statement or two, if I have it right, from BP's incident report. And you can read it, but it really speaks to the quality of interaction between senior BP staff, senior Halliburton staff, technical BP staff, technical Halliburton staff, was data being shared. This comment here, well, it wouldn't have mattered if I put the right data in, if I put the centralizers in the right place, if I had the right pressure. There still would have been channeling. There still would have been the risk of severe gas influx. That's actually a very important insight. We heard from somebody who has a lot of experience, a lot of instinctual knowledge about cement and pumping cement jobs in this situation. And what he shared with us, I'm afraid, was never shared with the operator, that you have stacked up a bunch of parameters, whether it's the long string length, whether it's the pressure at the bottom hole fracture, whether it's (inaudible) small volume, small pump rate, whatever they all may be.

And to me, you can dispute about how it was pointed out or not, you've heard all the evidence, but to me, you don't have the right team developed if somebody doesn't say, stop, now we're calling shoreside, we're calling the cops. He said, we knew, we knew there would not be isolation of hydrocarbons reported. Talk about a failure of communication. Finally, last point. MR. SEARS: And no expectation apparently that this is something that needed to be shared. MR. BARTLIT: Finally, there were muddled, clearly muddled lines of authority within BP and between BP and its contractors. And Richard, you know, we all heard the arguments about who did what to who and when. MR. SEARS: There was a lot of that. Here it was all very polite, we heard a lot of it in our own interviews with various companies' staff. And it was clearly confusing to -- well, it was confusing to us about where responsibilities lay, and in what the expectations were for making

PLANET DEPOS 888.433.3767 | WWW.PLANETDEPOS.COM

NATIONAL OIL SPILL COMISSION MEETING CONDUCTED ON TUESDAY, NOVEMBER 9, 2010
90 (Pages 357 to 360) 357 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 359
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

decisions and sharing information and sharing the basis of those decisions. I find it's one thing to say, well, the operator is responsible. But the operator is getting expert advice from a number of other people, and sharing the advice and the basis for that advice is rather important. And there were muddled lines of authority between BP and the contractors. And I think there is a comment from, again, BP's post-job report. MR. BARTLIT: Megan, please. MR. SEARS: Or was it the previous slide? It might have been the previous slide. But again, I'll read it. It is in the report. The report states that -- oh, there we are. Unaware of the extent if any that Halliburton supervised or provided technical support to Halliburton in-house cementing engineer on the Macondo well site and the investigation team was unaware of any direct engagement between BP -- between Halliburton supervisory personnel and the Macondo well team in the design of the Macondo well job.
358

I don't know how to do all of that well. There are a lot of people that need to be engaged in changing what needs to be changed. What I believe I have seen and I believe our team has seen for the last four months is that leading up to April 20th -- and this is not an April 20th event, this is something that it built over certainly hours, if not days, weeks, months -- the companies involved each had data. They each had data, they were each responsible for operations. And if data had been shared differently, and if operations had been carried out differently, I believe this disaster could have been prevented. I think we have seen that. And for whatever reason, I don't know all the reasons, we don't know all the reasons, but for a number of reasons stemming from the complexity of the well, the complexity of the geologic environment, the nature, complex nature of the operations, partitioning of data, responsibilities on the rig, for whatever reason, it didn't happen
360

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

So in retrospect, there's a clear statement from BP saying it didn't work as well as it should have. MR. BARTLIT: Thank you, Richard. That finishes that segment. MR. SEARS: No, it doesn't, actually. I want to finish -- I'm taking a page out of your book, Fred. If we go back -- I do want to make an important statement. I think it's important. It really builds on this list. This is a very -- to me this is a very significant list. It says quite a lot. And what we've done over the last four months, we've learned quite a lot. We've learned about what happened. And in the Chairs' opening statements, closing statements yesterday and opening statements today, you made some very strong comments. I'm going to echo some of that. I don't pretend to know how all of this can be made better. It is very complicated. It's a very exciting, complicated business, huge opportunity. That opportunity carries risks, they need to be managed.

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

that way. And it sat. MR. BARTLIT: If the Commission will indulge me for about five minutes, I want to make one more effort to get across to the press the point I made yesterday, if I may. Some smart person told me when I was a young man, never get in an argument with people who buy ink by the barrel. And that's you guys in the press. And now you buy zeros and ones for nothing. Let me try one more time. This is our preliminary conclusion number 13, okay? I said yesterday at least eight times, we have seen no evidence of any decision in which a person or a group of people put safety on one side of the scale and money on the other side and consciously in their head chose money over safety. This is a relatively modest observation. A bunch of newspapers said, "Commission says BP didn't ever do anything for money." I never said that, guys. So I'm going to try one more time. We are continuing to and we have steadily investigated the extent to which there were a series of decisions at Macondo that, looking at them, saved

PLANET DEPOS 888.433.3767 | WWW.PLANETDEPOS.COM

NATIONAL OIL SPILL COMISSION MEETING CONDUCTED ON TUESDAY, NOVEMBER 9, 2010
91 (Pages 361 to 364) 361
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

363
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

time or money and may have increased risks for safety. We've got a list of those. We've been working on it all along. The Commission asked us to do it. It's in process now. I could show it if you wanted to, but that's not the point. Inferences can be drawn from that information by the Commission. If there is a long series of decisions that were always made in a way that would save time, the Commission, like any court, can draw inferences from that. That issue is still open. Now, we have asked BP, TO, and Halliburton to provide us with examples of the decisions they made that increased safety, decreased risk, but cost them more time and money. We've got some information. We're waiting for more. We want to be sure we do a balanced job. We don't want to put up a long list when we haven't gotten all the information on ways they might have spent more money to increase safety. They've got until November 19th to give us whatever additional examples they have. The fact

time. Thank you. CO-CHAIR REILLY: Thank you, Fred. Thank you, Richard. Thank you for drawing it all together. So we're (inaudible) at the end. And as I mentioned, we will look forward to having the written summary to make reference to that, if we don't even actually (inaudible) the verbatim report. I'm going to turn now to Senator Graham for closing comments. CO-CHAIR GRAHAM: Thank you, Bill. I wish to extend my thanks, and I'm sure on behalf of all the Commissioners, to all those who have participated over the last couple of days, and to those of you who have had the tenacity to stick it out and absorb this information. I think what we have learned among other things is that learning by going to actual experiences, and then drawing judgments from those actual experiences, can be very valuable. The challenge that we have now as the Commission is to take these conclusions drawn from actual experience and convert them into policy

362 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

364

is, we have a list. The list shows there are occasions where a decision was made, it was a choice of ways to make the decision, and the decision was made in a way that saved time. We know that under these circumstances time can be money. So my point is not that this issue is resolved. All I said is that the men on the rig that night, these guys did not sit there and say, well, we'll blow up the rig but we'll make the guys in London some money. So please, and I'll talk to you until the cows come home, that is very important distinction and seems one that we ought to be able to get straight. If the Commission wants to put up that slide, we can do it. You've asked me to do it, we've been working on it, it's a work in progress. Do you want to put it up there? CO-CHAIR REILLY: I don't think so. MR. BARTLIT: Okay, fine. I say never get in an argument with guys that buy ink by the barrel. I'm not trying to lecture. I'm just saying there is a distinction. Please try to get it straight this

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

recommendations. Among other things, that's going to include decisions as to at which component of the multiple entities that are part of this, individuals, individual corporations, conglomerates of entities that are operating at the same site, the industry writ large, and then the relationships between the industry and the government, to which one of those do we assign these various judgments that have been made. Of the seven judgments that we've just heard, I've assigned one to individual behavior, two to individual corporate behavior, and four of them to this interplay between multiple entities at the same physical site. And I believe that the fact that so many of them came into that category reinforces what we heard earlier from Mr. Odum, that this issue of how to achieve safety when you have entities that aren't under the same leadership, may not have the same culture of safety, may have different objectives that they are seeking to accomplish, is going to be a critical area for our final report.

PLANET DEPOS 888.433.3767 | WWW.PLANETDEPOS.COM

NATIONAL OIL SPILL COMISSION MEETING CONDUCTED ON TUESDAY, NOVEMBER 9, 2010
92 (Pages 365 to 368) 365 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 367
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

It is the way in which this business operates. If this business operated as a vertically integrated one, it would be a much simpler process than the reality of what we do face. But I think it's been a valuable couple of days. I thank Fred and his team for the outstanding job that they've done in surfacing this information; again, Mr. Sears for his many ways in which he has been a valuable contributor to our effort. We are soon going to hear from some members of the public. And I'm looking forward to what they drew from the exposure to this discussion that we've had yesterday and today. Thank you very much. CO-CHAIR REILLY: Thank you, Bob. I would simply say that I would echo the expressions of thanks to Fred, Sam, Sean, and Richard. The fundamental obligation and expectation of this Commission was to determine what happened, what the proximate cause was on the rig on April 20th. And I think we have made a great deal -- a
366

Mr. Odum, that we know exists at Chevron or Amoco Phillips, and one or two other places, or maybe more. That I hope will -- the expressions we have heard about the intention to have third party audits and to begin to take some of the lessons from Responsible Care and some other industry initiatives, including INPO, and from the nuclear industry, I hope that will result in the kind of strong and independent organization that actually seriously polices activities and does in fact define best practice and call people out when they don't exemplify it. The government challenge I think is really serious. I think the present climate with respect to the availability, the likelihood of public resources -- and I really wonder how Director Bromwich is going to fulfill his commitments and his expectations, which I totally agree we must help him do. It would be very helpful if the industry itself cooperated in that enterprise. And maybe they will. I think it is actually true, based on my
368

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

great contribution to the public's understanding of that event. And more than anyplace else, I have seen the loose ends, the indeterminate kinds of effects and decisions, and the specific mistakes that were made, and pretty much who made them. I think it's a lot clearer, a lot more comprehensive and compelling now than it was 24 hours ago. I think the question that I had mentioned this morning of whether or not this was a unique event or suggested a systemic problem, to me now is more -- especially given the role of the three companies, respected companies, very active throughout the Gulf, and the decisions that we know now were so egregiously wrong, several of them, suggest to me that it is a systemic problem, a much more systemic problem than I had believed; and that being the case, requires a systemic solution. And that's why I press so hard on the need for some kind of industry entity which can raise the game, particularly of those companies who are not exemplars, who do not have the kind of safety culture that we heard described by Mr. Tillerson and

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

own experience, the serious companies do in fact require competent regulators. And we heard Mr. Odum particularly say that he very much hopes that those resources that will be required to raise the game among the inspectors and the engineers at BOEM are provided. He said that they should probably come from lease revenues or tariffs, I suppose. And I think we can make a case for that. We've concluded several times that it did seem to us totally irrational that a program which last year produced $18 billion has to go hat in hand to raise money for environmental studies and the like. Finally, I guess I would just say that I think that transforming a culture does require leadership, and long and consistent priority. But there is nothing like a crisis to focus the mind and to compel reform. Some of the best successes achieved in American industry have occurred after they have gone face to face with possible bankruptcy or with a major recall or an accident. So one has to hope that that will be the

PLANET DEPOS 888.433.3767 | WWW.PLANETDEPOS.COM

NATIONAL OIL SPILL COMISSION MEETING CONDUCTED ON TUESDAY, NOVEMBER 9, 2010
93 (Pages 369 to 372) 369
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

371 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

experience drawn from this tragedy, this encounter, and that the companies that are exemplars of a safety culture can help reform those which are not, and provide an example to suggest that there is really hope here. This is a hugely successful industry, absolutely vital to the economy, and to the success of the United States. And safety has been shown to be possible, in even the largest and most successful companies. We have to hope that that lesson is compelling to the rest. And we'll certainly do our part to recommend how that might be done. Thank you all for spending these two days with us. We come back on the 2nd and 3rd of December in a deliberating session. And somebody's pointing at something. I'm aware. So we're going to take five minutes now, and then come back. And I would ask Mr. Clemens (phonetic) and Mr. Hendricks (phonetic), Ms. Gowan, Ms. Polsenberg, and Mr. Gravitz to be prepared to come up, and I guess sit up on that dais there, and we will try to (inaudible). And we look forward to
370

decreased. Opening a business for us was a very calculated risk. And we took very calculated decisions in opening our business. You calculate your competition, the industry being slow, your cost. There are so many things in fact that you have to calculate. The one thing that we did not calculate was the Federal government shutting down an entire industry and effectively shutting down our business. That's something that I don't know of any business owner can (inaudible). It is my understanding there's 50,000 oil wells in the Gulf that have been drilled safely. Oil rigs have been drilling for decades. And historically it's one of the safest industries America has produced. What the community decides will set the tone for the future disasters and how they are handled in the future. We had a couple of employees that we laid off. Currently we just brought them back at a reduced wage. It's only temporary, until January.
372

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

listening to your comments. First we'll take a five-minute break. (Recess.) COMMENTS FROM THE PUBLIC MR. CLEMENS: My name is Thomas Clemens. My wife Melissa and I own a (inaudible) in Broussard, Louisiana. We are surrounded by the oil and gas industry of 70,000 strong. I would like to thank -- this oil spill was a tragedy, especially in the rules and regulations that were already in place. But a moratorium I believe is not an answer. And now the Federal government is not issuing drilling permits, which is having a job loss effect as well. Many small businesses are affected, and thousands of jobs have been lost across all the Gulf states. We sold a successful rental business and refinanced our home to open this business. The business is our future. Our business income has decreased 54 percent because of the moratorium. More rigs have left the Gulf. That means more job loss and more percentage of our business being

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

If things are not changed dramatically and quickly, they'll probably be laid off again. Our goals, visionary goals for the future has been just shattered. We have no short term goals, no long term goals, until this matter is resolved. To make it worse was a moratorium. And not issuing permits is our main concern. The three points I would like the Commission to see, to take back with you is, our hope is you find the facts of the matter of this entire incident is isolated. It's not a whole industry. I believe that the industry is safe and will be safer from this incident. And I would ask (inaudible) the issuing and drilling permits, because my job matters. Thank you. CO-CHAIR REILLY: Thank you, sir. Thank you for coming from Louisiana to make this statement. Mr. Hendricks? MR. HENDRICKS: Fortunately Fred Bartlit made a lot of my points in his remarks recently, so I'm not going to go into details. But basically I

PLANET DEPOS 888.433.3767 | WWW.PLANETDEPOS.COM

NATIONAL OIL SPILL COMISSION MEETING CONDUCTED ON TUESDAY, NOVEMBER 9, 2010
94 (Pages 373 to 376) 373 375

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

was going to say that the last few days have dramatized the complexity, the series of events that led to this tragic event. And the question that came up in my mind as I had looked at it was why people didn't connect the dots. We had the great resources, professional experience, the technical skills, backed up by R&D departments and labs and computer models and knowledgeable management systems. And yet they didn't get motivated to do the analysis to unmask these risks and trigger some actions that might have prevented this accident. In sort of looking at that question, I tried to approach it from a couple of different viewpoints. One is a historical viewpoint, in looking at some other relevant risk events that happened. And we looked at TMI, the Three Mile Island incident, the Piper Alpha incident, and some other energy incidents. But probably the most interesting one from the point of view of illuminating this event I think might be the loss of the two space shuttles.
374

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

years or so, a lot of it revolves around incentives and information and how they play into decisions. And one of the factors that you can suffer for is moral hazard, basically private information that some people have and you want it to be shared and to be factored into a decision. And if incentives aren't in place to make that happen, it doesn't happen, you get suboptimal results. And I think that's one of the things that may be going on in this case. And one factor that might be contributing to it and making it worse is some of the contracting. As I understand it, contracts between some of the major service contractors, BP in this case provided full indemnification of contractors even if they -- if their work was (inaudible) and caused damages. I think you might want to think about trying to put some limitations on that sort of contracting, because it takes away a lot of the incentives that you would want subcontractors to have. Thank you.
376

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

Interestingly enough, Mr. Tillerson mentioned that as one of the examples that they looked at. If you look at the two space shuttle accidents, perhaps Sally Ride put it best. She was the first woman astronaut for the U.S. that was a member of the accident investigation board for the Columbia disaster. And she said it was echoes of Challenger. Essentially the same problems that had -they had identified in the Challenger investigation and thought they had fixed, and sort of crept back in four years later that caused the accident. And there were things like differences between the government officials and NASA facilities, the contractors, and essentially the lack of communication. And the engineers were unable to make their points clearly enough to get investigations done. I think the other perspective that's helpful here is information in economics. One of the things that you can glean if you look at the recent work that's been going on in economics of the last 20

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

CO-CHAIR REILLY: Thank you, Mr. Hendricks, for coming from Sarasota for that presentation. Ms. Gowan from Washington. MS. GOWAN: I'm speaking on behalf of Oceana, one of the world's largest international organizations focused solely on ocean conservation. I thank you for the opportunity to speak again this afternoon. Based on the information presented in the last two days, I would like to make the following points, which demonstrate that offshore drilling is inherently dangerous, both to the environment and to human life, and that the best course of action is to prohibit further offshore drilling. First, we warn that even when testing is successful, there is a huge amount of uncertainty as to whether or not the well is actually safe. Words like "imperfect," "course estimate," "limitations," "anything but clear," and "subjective" were all used to describe the tests on the integrity of offshore oil and gas wells, including the evaluation of the

PLANET DEPOS 888.433.3767 | WWW.PLANETDEPOS.COM

NATIONAL OIL SPILL COMISSION MEETING CONDUCTED ON TUESDAY, NOVEMBER 9, 2010
95 (Pages 377 to 380) 377
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

379
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

cement. If the best confidence we can have in a company's ability to prevent blowouts and other accidents is described in such terms, it's clear this is not an industry we can trust with our natural assets. Second, while the Commission staff seem to have drawn the conclusion that there was no conscious decision to sacrifice safety concerns to save money, the statement is in direct contrast with much of the evidence that was presented. Choosing profits other safety may not have been discussed explicitly, but it clearly happened systematically, leading up to the disaster. Training costs were not sufficient in numerous areas and prevented crews from interpreting critical tests. Nor was there investment in sufficient contingency plans for what to do when signs such as mud coming onto the decks suggested that soon gas would follow. The list goes on, and each of these are examples of how companies shortchange safety in ways

The laundry list of hazards we've learned about over the past two days would never have been elucidated were it not for this disaster, and we cannot wait for the next accident to find out what the risks are. The Commission should make recommendations on ways to better regulate existing offshore drilling production. But it's imperative that it also recommend a ban on new drilling. That's the only way to prevent this disaster from happening again. Thank you. CO-CHAIR REILLY: Thank you, Ms. Gowan. Ms. Polsenberg, Gulf Restoration Network, from New Orleans. MS. POLSENBERG: Thank you. I am Johanna Polsenberg with the Gulf Restoration Network, or GRN. GRN is a 15-year-old environmental organization exclusively focused on the health of the Gulf of Mexico. Our mission is to unite and empower people to restore the natural resources of the Gulf for future generations. I'll make brief

378

380
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

that also happen to cut costs. It is unconscionable that in the case of the Deepwater Horizon, the standard tests did succeed in alerting operators there were serious problems with the well, yet there was no one on the rig capable of interpreting the alarming data. Transocean did not spend the necessary money needed to train its crew how to interpret the critical negative pressure test. We heard that BP ignored the results of the cement test, they ignored the results of the negative pressure test, and they made a series of equally bad decisions throughout the abandonment process. Whether this is a case of greed or a case of negligence, or both, is irrelevant. The facts show us that offshore drilling is an increasingly dirty and dangerous business, one that is not going to be made safe by a new set of standards. Each step in the process provides countless opportunities for human and technical error, many of which cannot be identified until it's too late. It is impossible to safeguard or legislate against that which we don't understand.

remarks, and I would like to ask if I can submit a written six-page testimony into the record. CO-CHAIR REILLY: Please do. MS. POLSENBERG: Thank you. And thank you all for your work and the work of your staff, who have always been open and clearly dedicated to this work. For our entire history, GRN has expressed concerns that there was a potential for major spills and blowouts, concerns that were refuted by both the industry and the government. And they were wrong. The GRN takes the position that there are two causes of the BP Horizon disaster. First, the oil industry lacks sufficient vigilance. And despite today's headlines, it is clear there is a willingness to cut corners and reduce costs. And second, the Federal agency in charge failed to exercise needed oversight and enforcement of existing laws and regulations. In terms of response, once the BP Horizon disaster began, it became painfully obvious that neither BP nor the Federal agencies were prepared

PLANET DEPOS 888.433.3767 | WWW.PLANETDEPOS.COM

NATIONAL OIL SPILL COMISSION MEETING CONDUCTED ON TUESDAY, NOVEMBER 9, 2010
96 (Pages 381 to 384) 381 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 383 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

for a blowout of this magnitude. Our written testimony goes into detail on these points. While a lot was undoubtedly learned during the spill, our concern remains that the industry will continue to push the margins, and the government will continue to lag in its oversight and regulation. A mechanism is needed to ensure that the government and the industry remain vigilant of all the risks and potential repercussions associated with oil and gas development, and are fully prepared to respond to a worst case scenario. After the Exxon Valdez spill, Regional Citizen Advisory Councils were formed for both the Prince William Sound and the Cook Inlet. These councils significantly increased both trust and communication among citizens, the oil industry, and the government, and have resulted in improved environmental safeguards and substantially safer and more reliable performance of petroleum operations. Gulf communities face significant continued risks from oil and gas operations.
382

the lay people among us. I'm here to talk about the future of offshore drilling, but not the future that you've all worked so hard and is your staff has worked so hard to improve, because I believe that the legitimate future for offshore drilling is less and less and in fewer and fewer places, not more and more in additional places. Why I do say this? I have four reasons for saying this. First, in purely economic terms, our oceans in dollars and cents are worth more for the sustainable activities like tourism and fishing, recreational, commercial fishing, than they are for the oil and gas that lie beneath them. When I studied the issue using only jobs and dollars of business in coastal counties, and only tourism and fishing, and using government data, what I discovered is that outside of the Gulf of Mexico, tourism and fishing account for a $200 billion per year industry. The oil and gas that lie offshore those areas might be worth 50 billion or $55 billion per
384

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

A Gulf Regional Citizens Advisory Council would provide citizens the ability to monitor and to call into question potentially problematic decisions and approaches. A Gulf RCAC with an annual budget roughly equivalent to a few days' expenses on a single drilling rig would provide proven (inaudible) to improving spill prevention and response, and allow representatives of groups disproportionately impacted by energy product a proper say in its conduct. Thank you very much. CO-CHAIR REILLY: Thank you very much. Mr. Gravitz from Environment America, from Washington. MR. GRAVITZ: Thank you for bearing through a very long day. I'll try to make my remarks brief. I will say at the outset, I was very impressed with the work that this Commission has done, particularly the investigative staff. You really got to the bottom of a lot of issues without the formal legal powers to do so, and you've communicated them beautifully and very clearly to

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

year, about a four to one ratio. So just in dollars and cents terms, sustainable, renewable activities that we do today are worth much more than exploration for oil and gas offshore. 4.1 million people work in those jobs every day in those coastal counties alone. Second reason, there is a huge potential for renewable energy development in the oceans, one that we have not explored, but the Europeans have. A recent study showed there were about a thousand gigawatts of offshore wind available just in shallow water, less than a hundred feet deep off all of our coasts. A gigawatt by comparison is about two average sized power plants. So you can see there's a huge potential for electricity generation, very close to our shores, and in the ocean. And it's renewable. For example, just to give you an idea of the vast scale, if you just look at the Atlantic coast, there is more offshore electricity in wind electricity available than all the oil and gas, that

PLANET DEPOS 888.433.3767 | WWW.PLANETDEPOS.COM

NATIONAL OIL SPILL COMISSION MEETING CONDUCTED ON TUESDAY, NOVEMBER 9, 2010
97 (Pages 385 to 387) 385 387
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

could be used to power our cars. You could power twice as many cars with electricity generated offshore in the Atlantic than you could with the oil and gas that's likely to be found there. Third reason, there is really so little oil and gas off most of the lower 48 states. The government estimates that there are 12 to 13 billion barrels of oil off the Atlantic and Pacific shores. That's probably about eight or nine months' worth of our annual consumption. So in closing, what I would say is the risks are great, the benefits -- the risks are great from offshore drilling. It's hard to imagine improving the safety by more than a couple of factors, certainly not by an order of magnitude. Therefore I would humbly make a recommendation to this committee, I know it's not in your sort of brief from the President, but I believe you should recommend that offshore drilling should not be spread to coasts where it is not currently occurring. Thank you.
386

CERTIFICATE OF SHORTHAND REPORTER-NOTARY PUBLIC I, Lee Bursten, the officer before whom the foregoing proceedings were taken, do hereby certify that the foregoing transcript is a true and correct record of the proceedings; that said proceedings were taken by me stenographically and thereafter reduced to typewriting under my direction; and that I am neither counsel for, related to, nor employed by any of the parties to this case and have no interest, financial or otherwise, in its outcome. IN WITNESS WHEREOF, I have hereunto set my hand and affixed my notarial seal this 11th day of November, 2010.

My commission expires June 30, 2014.

________________________ NOTARY PUBLIC IN AND FOR THE DISTRICT OF COLUMBIA

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

CO-CHAIR REILLY: Thank you, Mr. Gravitz. Thanks to all of you. We will accept whatever papers, materials you have, want to leave with us, and make sure that our staff gets them. With that, I think we're prepared to conclude. Thank you all very much. (The proceedings were adjourned at 5:43 p.m.)

PLANET DEPOS 888.433.3767 | WWW.PLANETDEPOS.COM

National Commission on the

BP DEEPWATER HORIZON OIL SPILL AND OFFSHORE DRILLING

Attachment 3
Opening Statements of Robert Graham Commission Co-Chair (taken .from transcript)

The following statement of Senator Robert Graham was taken from the transcript of the Commission meeting on September 27, 2010 and is not a written statement from Senator Graham:
Thank you, Ms. Melchert. I appreciate your presence and the leadership which we have received from the Department of Energy throughout this commission’s work. Winston Churchill described a signal event in World War II as being not the end, not the beginning of the end, but perhaps the end of the beginning. Today I would describe the commission as ending the first phase of our work. We have been in an information-gathering mode, hearing from people of the Gulf, government officials, scholars, and experts from industry, nonprofit organizations, and academia. Next we will turn to presenting our findings and beginning our deliberations. In early November our chief counsel, Fred Bartlett, will give a detailed presentation about what happened on the Deepwater Horizon rig and provide us what we trust will be the most comprehensive, clear, and impartial accounting that the American people have received. But for today and tomorrow, the end of the beginning. We will be learning about very crucial issues that will inform future offshore drilling efforts, the response to spills, and the restoration of damaged ecosystems. In the course of our investigation we have learned about the tremendous transformation in how we exploit our domestic energy resources. The growth of drilling in the deep water off our coast has been rapid and with profound implications for our energy supply and the integrity of the fragile environments in which that exploitation occurs. In our meetings last month it was clear that our regulatory approach did not adapt to the new reality. I remain concerned that science still does not have an appropriate place at the table. We live in a world of rapidly changing technology. Not just in terms of energy, but in many other areas; in finance, in cybersecurity, in food production, in weapons of mass destruction, and many others. If we are not vigilant, our laws and response capabilities will not keep pace with changes in technology. We ignore science and what it can tell us about how to manage risk and respond to it, at our peril. Just five years ago, just five years after the Gulf suffered the devastation of Hurricane Katrina, many have the same question about whether the government moved quickly enough and was effective enough in its activities, its communication, and its partnership with state and local governments. We need to look at this response in the broader context of how our federal, state, and local government mobilize against disasters. Much was done well in responding to this spill. Other things, not so. I look forward to hearing from our panelists today, getting their thoughts on what they have learned and where we go from here, the end of the beginning to the end. Thank you.

The following statement of Senator Robert Graham was taken from the transcript of the Commission meeting on September 28, 2010 and is not a written statement from Senator Graham:
Thank you, Mr. Reilly. Theodore Roosevelt said that it was each generation of Americans’ responsibility to transfer a better America to successor generations. During the 20th century this was largely done by adding to our marvelous treasure of national parks, wildlife refuges, wilderness areas, recreational areas, other lands that are preserved for public use and enjoyment. And as the country grew by two-and-a-half times during the 20th century, this legacy serves us well. I suggest that in the 21 century, where again the estimate is that our population will grow by two-and-a-half times, that rather than the 20th century plan of meeting our legacy responsibilities by additions to our public inventory, that it will be significantly met by restoring lands that have been damaged by previous actions. The tragedy that occurred on April 21st has put the Gulf in a premiere position in terms of that potential of meeting our heritage obligation through restoration. The people of the Gulf are foremost in our minds as we do our work today. Of course we are aware of the human tragedy at the center of this disaster, the livelihoods that have been imperiled and, most profoundly, the loss of 11 lives. The Gulf is one of the most treasured regions in our country. It is enormously productive; productive in terms of its natural wealth, productive in terms of the energy that we extract, productive in terms of the 40 percent of our seafood which is provided from the Gulf. Americans have enjoyed the benefits of these natural treasures, but in the course of that enjoyment have inflicted considerable pain and damage on the Gulf. The question today is will we use this tragedy as an opportunity to begin a serious effort at restoration, and thus leave the Gulf a better place for future generations of Americans. There are some significant questions. Chairman Reilly has mentioned the threshold question, which is, what is restoration in the Gulf? Is it to restore to the condition that existed on the 19th of April, 2010; or is it an opportunity to restore to a condition that is more like what nature had intended and more like what will be a sustaining circumstance for the future. The second question is, is there a plan or how to craft a plan that will accomplish these objectives. Another is how much will it cost, and how will it be funded. Finally, how will the effort for restoration be organized, particularly given the fact that this area covers five of our states, and two of the three largest states and population in the country are among those five. Recently, Commissioner Terry Garcia and I were in Louisiana. We met with the Governor and others. One message that we heard loud and clear was the importance of assuring the long-term viability of the seafood industry in the Gulf. It is an industry

which has now been damaged by a bad brand. Restoring confidence is absolutely essential not only for the region’s recovery, but also so that Americans can continue to enjoy this special nutritional product. We will be addressing this specific issue as part of our consideration today. We have the opportunity to begin healing the Gulf’s economy and natural enviromnent so that it will be stronger than before, but we also have a time to make America stronger than before. We were in a period in which many Americans are concerned about things like the gridlock of excessive partisanship and insularity. We believe that the Gulf may be a laboratory for national unity and a legacy that we will be proud to transfer to our children. Our first panel today gives us an opportunity to see these issues in a broader context; the spill, the recovery and the legacy of Mississippi delta management. We are honored today to have two distinguished Americans and students of this region, Mr. Chris John, editor-in-chief of National Geographic -- and Mr. Jol~ns, I was wanting to commend you for the current issue of National Geographic, it is a beautiful and moving statement to the Gulf, and I’m certain will play a significant role in public awareness of what we are about -- and Mr. John Barry who in his book Rising Tide, has given us the history of a critical period of this region, which history helps us better understand what is happening today. In addition to his scholarship, Mr. Barry is also a member of the Louisiana Coastal Protection and Restoration Authority. We look forward to your
comments.

Our lead questioner, and I’m afraid that means a five-minute period, will be Mr. Don Boesch, who also is a Louisianan, and understands these from his own life. Mr. Johns.

National Commission on the

BP DEEPWATER HORIZON OIL SPILL AND OFFSHORE DRILLING

Attachment 4
Opening Statements of William Reilly

Commission Co-Chair
(taken from transcript).

The following statement of Mr. William Reilly was taken from the transcript of the Commission meeting on September 28, 2010 and is not a written statement from Mr. Reilly:
Thank you, Chris. Good morning. It appears that thanks to accommodation of good fortune and hard work, the most immediate and damaging gusher has been contained, and the catastrophic destruction that many had feared would result from the Deepwater Horizon spill has been tempered. Questions remain about the extent of the harm that is not visible. The honest answer is there is still simply much that we do not know. It might have taken this spill to remind some of us of how much we value the natural heritage of the Gulf, a unique national treasure. While we’re focused on this precious land and waterscape, it’s worth noting that it remains in peril, both from the oil that spilled, and other forces. Louisiana continues to face catastrophic wetland loss, threatening delta communities, navigation, oil and gas infrastructure, fishing, conservation, and many other economic, social, and environmental priorities. The land at the foot of the Mississippi River is different because, simply, it is not like its neighbors. It is physically different. A fact that is at the core of catastrophic wetland loss. And I am astonished, no matter how frequently I see the numbers of wetland losses, by their magnitude. The underlying rock in that physical environment is hundreds of feet below the surface, buried by centuries of Mississippi mud. River sediment creates the land, the sea takes it away. Over the years this natural process has been compromised by projects designed for flood control and improved navigation of the Mississippi River. The oil and gas industry has had a role in this as well. Industry has dredged thousands of miles of canals through wetlands, leaving narrow, straight shoots, often at unnatural perpendiculars for navigation or for pipelines. Their artificial banks change water flow and prevent sediment from renourishing the land. Water pools up behind them, submerging the marsh. The channels also let saltwater flow into freshwater enviro~rnents, further jeopardizing the ecosystem. The oil and gas industry has a part to play in the wetlands’ revitalization, as revenues from offshore drilling are dedicated by law in Louisiana to restoration efforts. Ironically, one consequence of the drilling moratorium is to reduce the flow of money for improving wetland health. As the commission considers the question of restoration, we must therefore ask, What should be the goal? Is it simply to return the ecosystem to where it was prior to April 20th? Speaking only for myself, I submit that it is not. Instead, I think we should focus on beginning down the path of creating a resilient and healthy Gulf. The Deepwater Horizon disaster unifies these three conversations about restoration into one. How to clean up the oil, how to make the wetlands and marshes

whole again, and how to keep the Gulf of Mexico healthy so that future generations can prosper by it. I understand that later this morning Secretary Mabus will release his report on restoration of the Gulf, something to which we look forward with great excitement. Senator Graham and I have met with Secretary Mabus on several occasions and believe that the efforts that he is making and those that we will take into account should contribute toward a much energized sense of urgency and policy priority for restoration of this treasure which is the Gulf of Mexico and the Gulf region. We will begin our part with respect to restoration today. Thank you.

The following statement of Mr. William Reilly was taken yg’om the transcript of the Commission meeting on September 27, 2010 and is not a written statement from Mr. Reilly:

Thank you, Bob. Good morning. Since our inception, this commission has been very intensely engaged in examining the causes, including the root cause, of the catastrophe of the Macondo well and blowout. We have interviewed experts, we have met with government officials at the highest levels, we have had extensive interviews and briefings from industry. We have completed one phase of information-gathering, though we will continue to gather information in the weeks ahead. We have, as many of you know, a very abbreviated schedule. It’s probably the shortest of any commission that has had the mission of investigating a disaster. And in this case we suffered the peculiar consequence of investigating a disaster that was ongoing even as we researched it. We spent a good deal of time at the last hearings examining the role of industry, and particularly reflecting on the way in which the experience and the research that we had developed suggested a profound need for reform of the culture of industry, and for better attention to process safety, particularly as industry explores in what is the most promising area for the future of offshore oil and gas development, the very deep water. That, of course, poses more risks, more challenges, than previous drilling in shallow water ever did. But we have considered industry culture and attention to process safety. And so today we turn to the government itself, to its priorities and processes, the quality of its primary regulatory entity for overseeing safety, enforcement’of environmental laws in the offshore environment, which is the Department of the Interior. The effectiveness of the response to the spill affects more than the interior department; that involves many agencies of the government, several of which will be represented in the presentations this morning, and many of whose officials we have talked to already. I have to say that as someone intimately familiar with the experience in Prince William Sound after Exxon Valdez, that I continue to be amazed and disappointed at the failure of the technology of response to evolve more than it has, particularly in view of the tremendous advances made in the technology of drilling itself. The skimmers we are informed by NOAA of --I saw a flotilla of them when I flew out to the rig -- succeeded in gathering up 3 percent of the total amount of the spill. Burning accounted for 5 percent more, and I think dispersants got that up to about 13. Given the enormous effort, it seems to me a very disappointing result, frankly. It’s the consequence of a lot of things; one of which is the failure of technology, the skimmers, the booms, the dispersants themselves, I think, to evolve and to be developed. We will raise some of those questions today.

We will also consider the use of dispersants. And we will discuss how and why they were employed in the Gulf and in such quantities and at such depths, both of which represent novel uses of dispersants and suggest that there was enormous confidence placed in dispersants, more confidence than certainly I allowed in Prince William Sound when the dispersants arguably were more troublesome and possibly more toxic than they are today. We will learn more about that. I guess looking at the quality of specific decisions, while I think it is very important, misses what I think is a fundamental question: How did we get here? How did we get into a situation where the need to improvise was so great? In many cases the response demonstrated a tremendous dedication and ingenuity that is a credit to the many thousands, the tens of thousands of people who participated in this cleanup. But from where I sit, it’s very, very difficult to make the case that we were well-prepared. Oil exploration continues in frontier environments, and these areas offer enormous promise for returns, as well as the risk of catastrophe. How would we respond if a similar disaster occurred under the sea ice in the Arctic today or tomorrow? The Macondo blowout and its consequences created a situation where the party responsible for the spill had by necessity to play an important, even a central role, in responding to it. And we should be happy that they did and have and are. This uneasy partnership between the government and the responsible party raises important questions about decision-making power, about the flow of information, and about proper oversight. And in our political system there is also partnership, sometimes uneasy, between the federal government and the states and communities. We are all aware of the issues that arose in the aftermath of the spill, concerns about the speed of the response and about some efforts that were not pursued. While overall looking back I think - I think we need to learn from this spill. And that’s part of what this commission is about. We learned from the Exxon Valdez disaster, too. Tanker operations are much safer than they were 20 years ago. But the Oil Pollution Act of 1990 has been criticized for having us really respond to the last war. And it’s my hope that the lessons we learn from the response this time did not just fix what went wrong in the past, but created culture that eliminates complacency in industry and also in government. Thank you.