“A recent incident involved a Chevron pipeline in Utah that leaked what officials estimated was hundreds of barrels of crude oil into a Salt Lake City creek and threatened to contaminate the Great Salt Lake.”
June 14, 2010
BUSINESS JUNE 14, 2010
By BEN CASSELMAN
Chevron Corp. has come out swinging in its fight to continue drilling in the deep waters of the Gulf of Mexico, arguing that not all oil firms should be tarred with the brush of BP PLC’s Deepwater Horizon disaster.
In an interview with The Wall Street Journal, Chevron chairman and CEO John Watson said he accepts the need for tighter drilling regulations in the wake of the spill, which since April has fouled the waters and coastline of the Gulf. But Mr. Watson, 52, called unnecessary the six-month moratorium on deep-water drilling imposed by the Obama administration.
The second-biggest U.S. oil firm by market capitalization after Exxon Mobil Corp., San Ramon, Calif.-based Chevron owns more Gulf of Mexico drilling leases than any other company and is the third-biggest oil producer there, after BP and Royal Dutch Shell PLC. It was considered a growth area for Chevron.
Now, access to deep water may be in jeopardy. In addition to the six-month moratorium on drilling in more than 500 feet of water in the Gulf, President Obama has put on hold plans to expand drilling off the coast of Alaska. Norway, too, has put a temporary halt to new deep-water exploration.
While Mr. Watson wouldn’t directly criticize BP, he said that even before the current disaster, Chevron had in place policies and procedures that might have avoided the oil-well blowout that caused the spill.
“This incident was preventable,” Mr. Watson said.
In the early days of the Gulf disaster, the oil industry mostly presented a united front. But as the crisis has dragged on, companies have begun to distance themselves from BP.
Mr. Watson and the CEOs of several other big oil companies are almost certain to try to draw distinctions when they face questions from a congressional panel on Tuesday.
Chevron shares have fallen nearly 10% since the Deepwater Horizon drilling rig caught fire April 20; though that drop is small compared with the drop in BP’s market valuation has declined 46%.
Mr. Watson said he understood the decision to halt drilling in the immediate aftermath of the disaster, which he called a “humbling experience for the industry.” But he said the industry’s overall safety record is strong, and that both industry and government panels have drawn up new safety recommendations in light of the spill.
“We favor rapid adoption of those recommendations,” Mr. Watson said.
Environmental groups, however, oppose a quick return to drilling.
David Goldston, director of government affairs for the Natural Resources Defense Council, said drilling shouldn’t resume until a presidential commission appointed to investigate the disaster completes its work.
“We don’t really understand a lot about what happened here,” Mr. Goldston said. “We don’t really understand how endemic the problems are, and that all needs to be sorted out before drilling is resumed.”
BP has been criticized by some industry experts for using a risky well design that could have made it easier for natural gas to get into the well and eventually cause the explosion.
Chevron uses a safer well design, said Gary Luquette, who heads North American exploration and production for Chevron.
“I think that if we’d have had best practices employed on this well, we wouldn’t have this situation that we have today,” Mr. Luquette said.
BP has said its well design wasn’t unusual and that its engineers evaluate many different factors in deciding how to drill.
BP spokesman David Nicholas said, “there are detailed investigations ongoing and these will determine the causes of the tragic Deepwater Horizon disaster.”
Many Gulf coast residents and politicians have also accused BP of being unprepared for the spill. Chevron has a “robust” system in place to deal with major spills, Mr. Watson and Mr. Luquette said, but they acknowledged that it, too, would have had difficulty dealing with a disaster of this magnitude.
Congress and President Obama have criticized BP for seeking to shift blame for the Deepwater Horizon disaster onto contractors. Mr. Watson pledged that Chevron wouldn’t do the same in a similar situation.
“These are our wells,” he said.
The Deepwater Horizon disaster has brought attention to industry’s safety record onshore, too. In recent weeks, there have been several accidents at oil and gas sites on shore, including natural-gas wells that blew out in Pennsylvania and West Virginia and two deadly pipeline explosions in Texas.
A recent incident involved a Chevron pipeline in Utah that leaked what officials estimated was hundreds of barrels of crude oil into a Salt Lake City creek and threatened to contaminate the Great Salt Lake.
Chevron said Sunday that the leak from a pipeline that ruptured two nights earlier has stopped, but clean-up operations continue. “The leak has been stopped,” Chevron spokesman Sean Comey said in an email.”We’re planning to excavate the area of the pipeline were we believe the leak began.”The company said it “takes full responsibility for the incident.”
Write to Ben Casselman at ben.casselman@wsj.com
Thanks to Richard Charter