Sunday, April 20, 2014

Courtwatch, BP Edition, Part 3

Four years ago, what we'd come to call the Macondo blowout / Deepwater Horizon / the BP Oil Spill occurred. The Atlantic / 4 Years Ago, Photo Essay
Previous Edition: Part 2
First off, a quick conviction update: A BP manager who was in charge of spill response has plead guilty to insider trading charges. His was an obvious crime. You've got to be pretty blatant to get the SEC to come after you. He sold all of his shares very early on after the well blew out and all of his family's shares. That's a little too flagrant for the SEC to give you a pass.
Probably the phase with the most variability is the "how much spilled" phase (NY Times: In BP Trial, the Amount of Oil Lost Is at Issue - Nice summary). Note that many of the fines are on a per barrel basis, so, if more barrels were spilled, bigger fines. I believe it's $1,100/barrel under regular negligence and, if gross negligence is found, it's over $4,000/barrel. By fudging their estimates, it's argued BP can best limit their total liability. Here's more on the sparing over the spillrate estimates.
Before I go into what I viewed in the courtroom, I'll point out this very important factoid: Actually, they kinda DID have a meter. During the last stages of the blowout, a capping stack with 2 orifices of known size were fitted to the top of the well. One of the two orifices was fitted with a pressure gauge that discharged directly to the GoM while the other was routed to the collection system of the Disco Enterprise & Q4000. There was a pretty good gauge of how quickly the well was flowing at that point in time (~50,000 barrels/day).
The person (Dr. Tom Hunter) that noticed the lineup and made the initial calculations was actually a nuclear weapons engineer. He had a PhD from Wisconsin and held roughly the same position as Dr. Oppenheimer had. He worked for Sandia National Labs and was a part of a taskforce led by DOE to fix the blowout and monitor BP's actions. I actually got to sit in the courtroom for some of his testimony. He retired about midway through the blowout and decided to stick around to help make things right, despite being paid by nobody to do so. His testimony was pretty amazing. If a lawyer could sit down and dream up the most reputable witness possible, Dr. Hunter would be high on that list. He definitely spoke like an engineer (he wasn't very polished and kinda stuttered), but his command of the numbers was firm. His testimony cemented the government's position pretty well early on in the spillrate phase of the trial. BP didn't spend a lot of time cross examining him and was probably just glad he was off the stand. I would have liked to see BP try impugning his integrity, after all, Dr. Hunter was just in charge of making sure US Nuclear Weapons go boom. The best testimate to Dr. Hunter's integrity is that his calculation, which was made with not much more than a 4-function calculator in the field while the blowout was going on, was never questioned by anyone, even scientists and engineers on BP's dime.
Here's the final government report on the spillrate:
Federal Government Report on Oil Spill [PDF]
For reference: ~4.9 million barrels total
Note that the government narrowed in on a single number which was then subjected to peer review and was published far in advance of the trial. For a ballpark figure, it amounted to an average of ~50,000 barrels/day.
In the leadup to the spillrate portion of the trial, BP played a little dance with the numbers. They constantly complained that the government's figure was too high, but not saying by how much nor would they expose their own reports until just before the spillrate portion of the trial. Off the top of my head, it wasn't until about 3 weeks prior that they posted their number on their website.
BP Report on how much oil spilled
For reference: ~3.26 million barrels total
Note that BP actually had about 3 different numbers, all of which coalesced around ~40,000 barrels/day. Both the Feds and BP agreed on the total oil collected by the capping stack before the well was finally shut off.
The initial shock was, 'wow, BP's number isn't much different from the Feds.' Everyone expected a super-lowball estimate from BP, but actually (in large part because of Dr. Hunter) they were pretty hemmed in by that final flowrate measurement, which everyone agreed was about as accurate as possible under the circumstances. The biggest difference between is the Feds assumed a constant or decreasing flowrate; BP's report argues that the flow rate kept increasing over timer due to erosion. Since the endpoint is fixed, they were just arguing over the slope of the curve (pointing up or pointing down). The Feds claimed that reservoir depletion was the governing factor. BP argued that erosion of the partially-closed BOP rams was what governed the flowrate.
As I mentioned, I saw some of the Federal witnesses (the Feds went first). I also got to see a couple of the BP flowrate estimate witnesses. The later was using an OLGA model. He was pretty reputable. He had (as memory serves) the highest of the BP estimates.
The first BP witness, however, was a haughty British geology professor out of Imperial College of London. He had the lowest of the BP estimates and depended on reservoir modelling for his results. He used equations of his own derivation based upon first principles. I got to witness some of the cross examination which (I think) was done by the same young prosecutor that led Mix's prosecution. He tore into the Brit professor, going into how much money BP had donated to Imperial College, how he used to work for BP, how his flowrate estimate was only lately published and wasn't peer reviewed. The professor, who didn't handle the pressure well, retorted, 'well, it was posted on the internet and I've received some really nice comments from people.' Not exactly as impressive as a peer-review.
What will Barbier do? The levels of uncertainty on this measurement are far beyond what scientists are usually comfortable with. There's no question I think that the Federal estimate is more reliable, but if Barbier would just take the mean of the two estimates, I wouldn't have a big problem with that. How much oil spilled?
Billions of dollars are on the line (a $16 Billion dollar question). Many of those dollars are reserved for coastal restoration in Louisiana. What choices Barbier makes will be worth paying attention to for a number of reasons.
NOTE: Some minor edits after publishing.
UPDATE: The dates for the final phase of the main BP trial were just announced today:
Richard Thompson (@rthompsonMSY) tweeted -
"Mark your calendars: Phase 3 of #BP oil spill trial, the "penalty phase," to begin 1/20/15 and end 2/5, per order issued this morning."

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