The Deepwater Horizon Disaster Case Study Essay

The Deepwater Horizon Disaster Case Study Essay

C A S E STU DY 1 7 The Deepwater Horizon Disaster Challenges ;n Eth;cal Dedsfon Mak;ng Elaine M. Brown This case explores the complexities involved in ethical decision making in organizations. Using the British Petroleum (BP) oil spill as an example, the case suggests that complex interorganizational structures involved with oil drilling make accountability complicated. In such an environment, decision makers must consider a range of tensions, including people versus profits and short- versus long-term benefits in order to account for multiple decisions points and diverse stakeholders. We are committed to the safety and development of our people and the communities and societies in which we operate. We aim for no accidents, no harm to people and no damage to the environment. -BP (2009) In Revelations it says the water will turn to blood. That’s what it looks like out here-like the Gulf is bleeding. This is going to choke the life out of everything. -P. J. Hahn, director of coastal zone management for Louisiana’s Plaquemines Parish (quoted from NBC, MSNBC.com, and News Services, 2010) Companies today often proclaim to have their stakeholders’ best interests in mind. They may stress a “triple bottom line” of people, planet, and profits; emphasize being good corporate citizens within their communities; or accentuate the goal of sustainability by protecting long-term assets such as employees and the environment. However, the prom­ ising rhetoric, even if it is sincere, cannot be fulfilled without an accumulation of strategic and daily decisions that reflect this discourse of corporate social responsibility. Decisions 233 234 PART V ACCOUNTABILITY (including not only what is decided but also what issues are determined to be opportunities for decisions in the first place) are where the rubber meets the road-where rhetoric becomes reality, or not. Ethical decision making, however, is a complicated matter. Very few issues are clear-cut, organizational structures and routines often obfuscate who is responsible for a decision, and organizational culture may define certain actions as common sense and thus don’t require a decision. In addition, decisions are often between competing “goods” such as short-term versus long-term best interests, innovation versus tried-and-true status quo, or minimizing different types of risks. This case study, which explores the 2010 Deepwater Horizon oil rig explosion and Macondo well blowout, provides a clear example of the complexities involved in ethical decision making in organizations. Who, or what, was responsible for the worst oil spill in history? What decisions made the catastrophe inevitable? Why did those decisions make sense to the decision makers at the time? When were actions taken out of habit or “common sense” instead of as a result of conscious decisions? The sequence of actions (and inactions) that led to the disaster illustrate the challenges entailed in ethical decision making within the daily, time-pressured environment of a complex, multicompany organizational site. After a brief overview of the event and its impact, this case study will explore the disaster by explaining the key actors involved, highlighting problematic decisions that may have contributed to the catastrophe and considering important factors in how and why those decisions may have been made. THE BLOWOUT AND ITS AFTERMATH On April 20, 2010, soon after the completion of a cement job that was supposed to seal the Macondo exploratory well to prepare it for later use as a production well, leaking hydrocarbons (gas and oil) from the well reached the Deepwater Horizon oil drilling rig nearly a mile overhead and caused an explosion. The pressure of the escaping hydrocarbons, in addition to the loss of control of the drilling rig and its operations caused by the explosion, created a blowout of the well. The explosion killed 11 individuals, injured 16 others, and left the remaining 99 survivors traumatized. The “blowout,” the term used for the sudden and continuous surge of oil and gas from a well, resulted in nearly 5 million barrels of oil discharged over a period of 87 days. During those days, there were a variety of techniques attempted to stop the flow including the use of remotely operated vehicles (ROVs) to shut the well by closing the blowout preventer, placing a “cofferdam” over the end of the riser and using “kill mud” and “junk shot” to try to plug the hole. However, the flow was not stopped until July 15 when the riser was successfully capped. Later, a deepwater intercept, or relief, well, which had been started on May 2, was finally completed and ensured that the Macondo well was “dead.” BP (the official operator of the well). the U.S. Coast Guard, and a number of other public and private agencies were tasked with cleanup both during and after the spill. “At its peak, efforts to stem the spill and combat its effects included more than 47,000 personnel; 7,000 vessels; 120 aircraft; and the participation of scores of federal, state, and local agencies” (Mabus, 2010, p. 2). Millions of feet of boom were used to contain the oil CASE STUDY 17 The Deepwater Horizon Disaster 235 and keep it from shore. Private boats were recruited and outfitted to skim off the oil. Oil patches on the ocean’s surface were burned. Dispersants were used to break down and change the distribution of the oil. By August, these efforts, as well as the capture of oil from the insertion tube, accounted for the fate of just over one third of the escaped oil. An additional 40 % of the oil has evaporated, dissolved, or been dispersed naturally, leaving approximately one quarter of the oil remaining in the water and along the shore (National Commission, 2011b). The consequences of this disaster are tragic and extensive. The first cost of the accident, of course, was the immediate loss of life. Amidst the enormity of this catastrophe in which we heard numbers in the thousands and millions (millions of barrels of oil, millions of gallons of dispersants, millions of feet of boom, thousands of square miles of closed fishing waters, thousands of miles of coast, etc.), 11 may seem like an almost insignificant number. Yet, when we remember that Jason Anderson, Dale Burkeen, Donald Clark, Stephen Curtis, Roy Kemp, Gordon Jones, Karl Dale Kleppinger, Blair Manuel, Dewey Revette, Shane Roshto, and Adam Weise (National Commission, 2011a) each had loved ones and futures that can no longer be realized, we begin to appreciate how significant the loss of 11 human beings really is. Other, less immediate but equally troubling outcomes of the disaster have to do with the impact of the oil (and dispersants) on wildlife, human health, and the economy of the area. The oil that was discharged into the Gulf was “a combination of many different chemicals, a number of which are harmful to people” (Mabus, 2010, p. 50) and the environment. Pictures showed the immediate effects of the crude: oil-covered pelicans and sea turtles, dead dolphins and whales, gooey marshlands. But the effects of the spill on wildlife and the environment are more complex than pictures can show. “Rescue workers can clean and treat oiled birds and other relatively large animals that come ashore. But how do you deal with de-oiling plankton?” (Sylvia Earle, quoted in Dell’Amore, 2010). The food chain may be continuing the negative impacts of the oil as larger animals feed on smaller, affected organisms. In addition, although the 1.84 million gallons of dispersant used to break up the oil and keep it from coming ashore were not as toxic as the oil it treated, there is currently no dispersant available that is completely nontoxic (National Commission, 2011 c). Because dispersants had never been used on such a scale and in the same ways before, no one knows its long-term impact. It may be years before the full impact on wildlife of both oil and dispersant is identified. Negative effects on humans were both immediate and also more insidious through long-term consequences. Cleanup workers felt the first of the health effects because of direct contact with the oil and other toxins. “In Louisiana in the early months of the oil spill, more than 300 individuals, three-fourths of whom were cleanup workers, sought medical care for constitutional symptoms such as headaches, dizziness, nausea, vomiting, cough, respiratory distress, and chest pain” (Solomon &Janssen, 2010, p. 1118). Long-term effects may or may not be from direct contact. As an example of indirect effects, consider that just as the food chain may affect animals, there is also the possibility that humans who eat seafood from the Gulf may ingest “trace amounts of cadmium, mercury, and lead” (Solomon &Janssen, 2010, p. 1118). In addition, there are behavioral health issues involved. Past disasters, including oil spills, have been associated with a rise in mental health issues, 236 PART V ACCOUNTABILITY substance abuse, and family dysfunction (Mabus, 2010; Solomon & Janssen, 2010). This disaster brings with it the same problems. In addition to health effects, the spill brought with it negative economic consequences. The spill “caused the closure of 88,522 square miles of federal waters to fishing” (Mabus, 2010, p. 2). Both this closure and continuing concerns over the safety of Gulf seafood has severely interfered with commercial (and recreational) fishing. The loss in gross revenue to Louisiana’s fishing industry through 2013 is estimated to be $115 million to $1 72 million (White, 2010). The travel and tourism industry in the Gulf was hard hit as well. A recent study by Oxford Economics (2010) estimates the loss of visitor spending in Louisiana through 2013 to be $295 million. The economies of other Gulf states have been similarly affected with dollar losses translating into the loss of thousands of jobs. When put in terms of the consequences, especially consequences this severe, it is obvious that the decisions leading up to this catastrophe were ethical decisions-decisions that had considerable consequences for the organization, the community, and the environment. However, the ethical nature of individual decisions may or may not have been clear at the time those decisions were made. As we consider the key actors in this catastrophe as well as the decisions individuals faced, we must consider to what extent decision makers may or may not have felt that their decisions were ethical in nature (as opposed to simply technical) and how (or if) they took into account the possible consequences of their actions. WHO IS TO BLAME? Although many critics have argued that the blowout was ultimately BP’s responsibility, the complex interorganizational structure involved with oil drilling makes accountability much more complicated. The underwater canyon in which the Macondo oil well was located was leased through the Minerals Management Service (MMS) to a group of three companies: (1) BP (who owned 65% of the lease), (2) Anadarko Petroleum (25%), and (3) MOEX Offshore (10%). BP was designated as the lease operator and thus the primary actor in the drama that unfolded. BP determined it would drill an exploratory well (Macondo) to learn more about the geology of the canyon and to confirm that there was a large enough oil and gas reservoir to merit a full production well. In order to drill, they needed a partner: Transocean. Transocean’s drilling rig, the Deepwater Horizon (as well as its operations), was contracted by BP for approximately $500,000 per day. Although BP personnel were on board the rig for coordination and oversight, most of the rig personnel were Transocean. Within this contractual arrangement, liability (and accountability) has come into question. Tony Hayward (2010), CEO of BP, stated the following in an early interview with CNN: The responsibility for safety on the drilling rig is Transocean. It is their rig, their equipment, their people, their systems, their safety processes…. The systems processes on a drilling rig are the accountability of the drilling rig company. However, the contract between BP and Transocean indicates that, as the operator of the well, BP is ultimately responsible: CASE STUDY 1 7 The Deepwater Horizon Disaster 23 7 In the event any well being drilled hereunder shall blowout, crater or control be lost from any cause, company shall bear the entire cost and expense of killing the well or of otherwise bringing the well under control and shall protect, release, defend, indemnify, and hold harmless contractor from and against all claims, suits, demands, and causes of action for costs actually incurred in controlling the well. (quoted in Phillips, 2010) The question of who is liable is still being investigated and may be argued in courts for years. Contractors, hired for specialized jobs, were also part of the drill operations and as such were potential actors. Mud engineers, ROV technicians, tank cleaners, evaluation teams, and others were part of the operations required for the drilling project. As the cement contractor, Halliburton became a major figure in the Macondo disaster as well. As noted earlier, the exploratory stage of the Macondo well was wrapping up. In order to close the well, cement is pumped in to seal the space between the casing and the wellbore, preserving the drill shaft and prohibiting the escape of hydrocarbons. When a well is later reopened as a production well, crews punch holes in the casing and cement and allow oil and gas to flow into the well. Problems with the cement job are likely to have been a contributing factor in the catastrophe, making Halliburton a key actor. In addition to culpability within the oil industry, many critics have pointed to the U.S. government as partially to blame for the Deepwater catastrophe. Through its dual roles of leasing agent and regulator the MMS, a governmental agency, was also a key organizational actor. Critics maintain that oversight to ensure the safety of drilling operations was compromised by carelessness and even corruption within MMS. A final actor, pointed to by many as complicit in the disaster even without direct contact, is us. “Why was a corporation drilling for oil in mile-deep water 49 miles off the Louisiana coast? To begin, Americans today consume vast amounts of petroleum products-some 18.7 million barrels per day-to fuel our economy” (National Commission, 2011a, p. viii). How much of a factor is pressure from consumers? How much do our demands for (cheap) fuel drive potentially risky ventures? Can we in any way be held accountable for mistakes and shortcuts made by others? The actors previously listed (with the exception of the American people) are organizations. However, even though we may be able to point to organizations as responsible, the culture within those organizations may have led to certain decisions making more “sense” than others, and it was generally individuals who made the call at key decision points. Individuals, or small groups of people, within each of the previously listed organizations were faced with problems that needed solutions. Many of the choices that were made between possible alternatives contributed to the eventual catastrophe. WHAT WENT WRONG? Deepwater oil drilling is an extremely complex, often dangerous, enterprise. The technological advances needed for drilling miles below the ocean’s surface has been compared to those required for exploring outer space (National Commission, 2011 a, p. viii). Systems, processes, and materials must be coordinated perfectly for production and safety. In the 238 PART V ACCOUNTABILITY case of the Macondo well, problems in all three were present. However, it was the decision making involved in choosing to use certain processes or particular materials that has come under scrutiny as the key factor leading to the blowout. “Available evidence and testimony indicates that there were multiple (10 or more) major decisions and subsequent actions that developed in the days before the blowout that in hindsight (hindsight does not equal foresight) led to the blowout” (Deepwater Horizon Study Group, 2010, p. 7). Decisions about well design, materials selection, and determining how to evaluate job success marked some of the key choice points in the chain of events that followed. These decisions were made by various key actors and were typically not between “good” and “bad” alternatives but rather were made within complicated contexts in which an array of factors influenced choices. Because of the physical results of the explosion and blowout and the fact that the scene is a mile below the surface of the ocean, the evidence that would shine light on the exact cause of the accident is not available. We may never know exactly what happened to allow the flow of hydrocarbons. However, there are many factors that investigators have pointed to as problematic and that (may have) played at least some part in the disaster. One of these factors was the well design. There are alternatives involved in the selection of various aspects of well design. These selections are based on industry best practices as well as concerns about the surrounding environment. For the Macondo well, there were (at least) two design choices that have been implicated in the ensuing disaster. First, BP’s design team chose to use a “long-string” casing instead of a more complex “liner” that would have been “easier to cement into place at Macondo” (National Commission, 2011a, p. 95). Although a standard industry design, early computer models showed that the long-string casing was unreliable for the cementing job needed in the particular surroundings at Macondo. However, it was attractive because the alternative, a liner, “would result in a more complex-and theoretically more leak-prone-system over the life of the well” (National Commission, 2011a, p. 95). The dilemma for decision makers was one of short-term versus long-term reliability and the possible risks involved in sacrificing that reliability. To reconsider the risk involved with the long-string casing, the computer models (run by Halliburton with BP interaction) that showed the need for the liner system were questioned. An in-house BP expert was brought in, inputs were “corrected,” and the new calculations confirmed that the long-string system could be used after all. Although there is no evidence that this particular choice led to the instability that caused the blowout, it has been flagged in hindsight as problematic. Another key issue with well design was the decision of the number of “centralizers” used for the well. Centralizers hold the casing string in place and ensure that it hangs in the center of the well bore. This centering is necessary to make sure that cement flows evenly and there are no spaces where drilling mud is caught and ends up compromising the integrity of the cement. The original BP design called for 16 centralizers. Halliburton engineers advised at least that many be used. However, when the time came to implement the design, only six of the type called for in the design were available from the supplier. When substitute centralizers were sent to replace the missing centralizers, the onboard team believed that they were the “stop collar” slip-on type that had been responsible for recent problems in another Gulf of Mexico operation. These centralizers brought with ~’v’,,,1t,”,~’.'[._~————–CASE STUDY 17 The Deepwater Horizon Disaster 239 them the risk of slipping as they were put into place, thereby damaging components and adding debris to the mix (BP, 2010, p. 63). The BP on-rig engineer decided that, because the wellbore was nearly vertical, the risks involved with using the stop collar centralizers were greater than the risks of not using them. To confirm this decision, he e-mailed a drilling engineer on shore who disagreed about the number needed but told him, “but who cares, it’s done, end of stor…

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