by William Schoell and Jeremy Koulish, Main Street Insider
Surprise surprise, it took nearly seven hours for the Energy and Commerce Subcommittee on Oversight and Investigations to get next to nothing out of BP CEO Tony Hayward this past Thursday. Although the subcommittee presented a seemingly endless stream of questions of substance to Hayward, the embattled BP executive did a marvelous job of dancing around all the information-packed questions hurled at him.
Chairman Stupak (D-MI01) said the goal of this hearing was to find out what went wrong with the Deepwater Horizon explosion, but it seemed as if the committee had a fairly good grasp of what happened and they were really just looking for some admittance from BP.
Most of the questions asked of Heyward pertained to BP’s lack of best industry practices used in drilling the Deepwater Horizon well. Much of the committee’s evidence came from another Energy and Commerce hearing that took place on Tuesday. The subcommittee on Energy and Environment’s hearing "Drilling Down on America’s Future" featured four big oil CEOs as witnesses. During this hearing all four witnesses were unanimous when claiming that BP did not use best practices. They cited a few things that BP did (or did not do). One was BP’s use of the single string casing while the four CEOs (of Exxon, Conoco Phillips, Shell and Chevron) would have used a tie back liner. The CEOs of their respective companies also were unanimous that BP failed to reach industry best practices when they only used six centralizers. Halliburton, BP’s cement contractor, advised them to use 21. BP also failed to test the cement used at the high water pressure. These are just a sample of the many BP failures revealed Tuesday.
With all of this information, the Oversight and Investigation had ample ammunition to fire at Hayward when he served as the sole witness Thursday. Alas, that effort was in vain - Hayward did not crack, budge, lift a finger, or anything along the lines of admitting any BP wrongdoing. Indeed, before the third round of questioning Chairman Stupak mentioned that Hayward had responded with (paraphrasing), "I don’t know", "I am not comfortable answering until our investigation is complete" and "I did not/was not in the decision making process" over 65 times. It was truly a performance that would make Alberto Gonzales proud.
This begs the question, what if Tony Hayward was completely honest? Even on the few occasions that his answers were not token responses they carried little substance, but if we read between the lines, we might be able to translate his empty responses into faux honesty. One should assume that all of his answers were meant to best protect the short-term bottom-line interests of his company.
For example, Hayward championed himself on being a "safety first CEO" since day one of his appointment to the position, yet as Rep. Sullivan (R-OK1) and Rep. Braley (D-IA1) pointed out, BP’s 760 safety violations make up 97% of OSHA violations in the oil business. When asked by Braley if he saw the "disconnect" between the company’s message and its results, Hayward reluctantly responded "yes" and that he understands American’s anger with BP. At least he was honest on this point, but that doesn’t mean he cares. If we look at Hayward’s behavior outside the confines of a hostile congressional hearing room (Joe Barton excepted) that has betrayed a stunning amount of callousness, it is clear that Hayward has been speaking out of both sides of his mouth.
In the cold, calculating world of maximizing profits, Hayward’s stated policy of cutting corners is a smart business strategy. An honest Hayward would have said that BP’s cost benefit analysis showed that using these practices were cheaper and in the past have not blown up, so why change them for Deepwater Horizon? An honest Tony Hayward would say after assessing the risks, BP’s engineers felt that six centralizers would hold the well, even though 21 centralizers would be less risky. An honest Tony Hayward would have answered the tie back liner did indeed reduce risk but it was more costly and our cost/benefit analysis showed it be better for BP that we use the single string casing. Less clear but also possible would be a declaration that BP was counting on a friendly U.S. government to ensure they would be able to wriggle out of having to shoulder the liability for any major unforeseen circumstances. Such an expectation would help explain the now-infamous apology by Committee Ranking Republican Joe Barton (R-TX06), proclaiming the White House’s pressure upon BP to fulfill its obligations to the victims of its negligence to be a "shakedown".
Speaking of which, Hayward also continued his stock response on liability that BP would pay all "legitimate" claims from the new $20 billion relief fund. When Rep. DeGette (D-CO1) asked him if long term health problems stemming from the spill would be covered, Hayward boasted that the claims process will go through an independent adjudicator and he felt that if a "legitimate" claim were to be made he would hope that adjudicator would pay out damages for long term health problems. Sure, the $20 billion fund for damages is a lot of money but it lightens the negative image that is cast on BP and threatens its long-term prospects if left unchecked. Regardless of whether the fund was the result of a "shakedown" or not, it is clearly in the company’s interests to publicize their newly discovered generosity in helping the victims in the Gulf region.
It may technically be honest of him to say he was not part of the decision making process and that he did not receive emails about the "nightmare well" or was not aware of decisions being made on the rig. But he should also acknowledge that every business decision is decided on a cost benefit analysis; in fact most people do this all the time. Admitting to a "disconnect" is indeed a good business practice. It shows his audience that BP is willing to move forward, make corrections, and become safer in the future. Contrarily, admitting that BP knowingly used substandard business practices that lead to a blowout thus a natural disaster is not. This shows BP is willing to act risky to save a buck. One may still buy stock if they know the company does not always fall in line with its message yet still makes sound cost benefit analysis. On the other hand, one will most likely not buy stock if they know the company uses practices that (may have) caused a natural disaster of epic proportions and that lead to a 50% decline in stock value. So the problem is that Hayward is self interested more so than he is honest, especially in his current mode of damage control. That is why Congress did not hear an honest Tony Hayward admit to negligence despite plentiful evidence.