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THE GULF OF MEXICO OIL SPILL: ENSURING 

A FINANCIALLY RESPONSIBLE RECOVERY 

PART I AND II 

HEARINGS 

BEFORE THE

FEDERAL FINANCIAL MANAGEMENT, GOVERNMENT 

INFORMATION, FEDERAL SERVICES, AND 

INTERNATIONAL SECURITY SUBCOMMITTEE 

OF THE

COMMITTEE ON 

HOMELAND SECURITY AND 

GOVERNMENTAL AFFAIRS 

UNITED STATES SENATE 

OF THE

ONE HUNDRED ELEVENTH CONGRESS 

SECOND SESSION 

JUNE 16 AND JULY 22, 2010 

Available via the World Wide Web: http://www.fdsys.gov 

Printed for the use of the 

Committee on Homeland Security and Governmental Affairs 

( 

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(II) 

COMMITTEE ON HOMELAND SECURITY AND GOVERNMENTAL AFFAIRS 

JOSEPH I. LIEBERMAN, Connecticut, Chairman 

CARL LEVIN, Michigan 

DANIEL K. AKAKA, Hawaii 

THOMAS R. CARPER, Delaware 

MARK L. PRYOR, Arkansas 

MARY L. LANDRIEU, Louisiana 

CLAIRE MCCASKILL, Missouri 

JON TESTER, Montana 

ROLAND W. BURRIS, Illinois 

EDWARD E. KAUFMAN, Delaware 

SUSAN M. COLLINS, Maine 

TOM COBURN, Oklahoma 

SCOTT P. BROWN, Massachusetts 

JOHN MCCAIN, Arizona 

GEORGE V. VOINOVICH, Ohio 

JOHN ENSIGN, Nevada 

LINDSEY GRAHAM, South Carolina 

MICHAEL L. ALEXANDER, Staff Director 

BRANDON L. MILHORN, Minority Staff Director and Chief Counsel 

TRINA DRIESSNACK TYRER, Chief Clerk 

PATRICIA R. HOGAN, Publications Clerk and GPO Detailee 

SUBCOMMITTEE ON FEDERAL FINANCIAL MANAGEMENT, GOVERNMENT 

INFORMATION, FEDERAL SERVICES, AND INTERNATIONAL SECURITY 

THOMAS R. CARPER, Delaware, Chairman 

CARL LEVIN, Michigan 

DANIEL K. AKAKA, Hawaii 

MARK L. PRYOR, Arkansas 

CLAIRE MCCASKILL, Missouri 

ROLAND W. BURRIS, Illinois 

JOHN MCCAIN, Arizona 

TOM COBURN, Oklahoma 

GEORGE V. VOINOVICH, Ohio 

JOHN ENSIGN, Nevada 

JOHN KILVINGTON, Staff Director 

BRYAN PARKER, Staff Director and General Counsel to the Minority 

DEIRDRE G. ARMSTRONG, Chief Clerk 

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(III) 

C O N T E N T S 

Opening statements: Page 

Senator Carper ................................................................................................. 1, 35 

Senator McCain ................................................................................................ 3 

Prepared statements: 

Senator Carper .................................................................................................61, 66 

Senator McCain ................................................................................................64, 68 

WITNESSES 

WEDNESDAY, JUNE 16, 2010 

Hon. Frank R. Lautenberg, a U.S. Senator from the State of New Jersey ........ 4 

Darryl Willis, Vice President for Resources, BP America, Inc. ............................ 6 

Steven Newman, Chief Executive Officer, Transocean Ltd. ................................ 8 

Craig Bennett, Director, National Pollution Funds Center, U.S. Coast Guard . 11 

Susan A. Fleming, Director, Physical Infrastructure, U.S. Government Accountability Office ................................................................................................ 12 

THURSDAY, JULY 22, 2010 

Kenneth R. Feinberg, Administrator, Gulf Coast Claims Facility ...................... 37 

James T. Hackett, Presdient and Chief Executive Officer, Anadarko 

Peteroleum Corporation ....................................................................................... 38 

Naoki Ishii, President, MOEX Offshore 2007 LLC, accompanied by Fujiko 

Sato, Interpreter ................................................................................................... 39 

ALPHABETICAL LIST OF WITNESSES

Bennett, Craig: 

Testimony .......................................................................................................... 11 

Prepared statement .......................................................................................... 83 

Feinberg, Kenneth R.: 

Testimony .......................................................................................................... 37 

Prepared statement .......................................................................................... 115 

Fleming, Susan A.: 

Testimony .......................................................................................................... 12 

Prepared statement .......................................................................................... 90 

Hackett, James T.: 

Testimony .......................................................................................................... 38 

Prepared statement .......................................................................................... 117 

Ishii, Naoki: 

Testimony .......................................................................................................... 39 

Prepared statement .......................................................................................... 120 

Lautenberg, Hon. Frank R.: 

Testimony .......................................................................................................... 4 

Prepared statement .......................................................................................... 70 

Newman, Steven: 

Testimony .......................................................................................................... 8 

Prepared statement .......................................................................................... 78 

Willis, Darryl: 

Testimony .......................................................................................................... 6 

Prepared statement .......................................................................................... 72 

APPENDIX 

Notes requested by Senator Tester appears in the appendix on page ................ 122 

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IV 

James W. Ferguson, Sr. Vice President and Deputy General Counsel, Halliburton, prepared statement for June 16, 2010 hearing .................................... 123 

Responses to Senator Carper’s letter of June 10, 2010 from David C. Nagel, 

Executive Vice President, BP America Inc., with attachments ....................... 126 

Questions and responses from the Congressional Research Service (CRS) for 

the June 16, 2010 hearing ................................................................................... 149 

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THE GULF OF MEXICO OIL SPILL: 

ENSURING A FINANCIALLY RESPONSIBLE 

RECOVERY—PART I 

WEDNESDAY, JUNE 16, 2010 

U.S. SENATE,

SUBCOMMITTEE ON FEDERAL FINANCIAL MANAGEMENT,

GOVERNMENT INFORMATION, FEDERAL SERVICES,

AND INTERNATIONAL SECURITY,

OF THE COMMITTEE ON HOMELAND SECURITY

AND GOVERNMENTAL AFFAIRS,

Washington, DC. 

The Subcommittee met, pursuant to notice, at 3:31 p.m., in room 

SD–342, Dirksen Senate Office Building, Hon. Thomas R. Carper, 

Chairman of the Subcommittee, presiding. 

Present: Senators Carper, McCaskill, and McCain. 

Also Present: Senator Pryor, McCaskill, and Tester. 

OPENING STATEMENT OF SENATOR CARPER 

Senator CARPER. The Subcommittee will come to order. I want to 

welcome our colleague, Senator Frank Lautenberg from New Jersey, my neighbor across the Delaware River. Before I call on him 

as the first witness to address us on the first panel, I would like 

to give an opening statement, and once we are joined by other colleagues, if Senator McCain joins us before I recognize Senator Lautenberg, Senator McCain will be asked to give his opening statement. I will then call on Senator Lautenberg, and then as other 

Members of our Subcommittee show up, if they show up before our 

second panel, they will have an opportunity to give opening statements. Otherwise, they can submit their statements for the record. 

Welcome, one and all. For 58 days, the American people have 

watched a tragedy unfold in slow motion before our eyes. It was 

nearly 2 months ago when we first heard the horrific news of an 

explosion on an oil rig in the Gulf of Mexico and the loss of 11 

American citizens. While today we will be discussing the financial 

costs of the oil spill to the American taxpayers, there is no value 

that one can place on the tremendous loss of human life in this catastrophe. These were sons, these were brothers, these were husbands and fathers, and for those who they left behind, my colleagues and I extend our most sincere and heartfelt prayers. 

While there is nothing we can do, unfortunately, to bring back 

these men to their families and friends who love them, we can 

make sure that the communities and industries that they helped 

to build survive and again thrive. 

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2 

As we all know, the coasts and wetlands, the bogs and fisheries 

of much of the Gulf have sustained enormous damages. These vital 

natural resources are the lifeblood of an economy and a way of life. 

They are national treasures that must be protected, and we will demand that they be fixed, if you will, by those who broke them. 

Today this Subcommittee will explore how we can ensure that 

America is made whole again without putting a hole in our pockets. 

From the beginning, President Obama and senior members of his 

Administration took this disaster seriously, as they should. The 

White House deployed Cabinet members to help manage the response, dispatched the Coast Guard and in some cases the National 

Guard, and brought together stakeholders and industry experts in 

an ongoing effort to get the damaged well plugged as quickly as 

possible and to coordinate the clean-up response. 

As I like to say, however, if it is not perfect, let us make it better. 

And it is clear that there is more that the Federal Government can 

do to make things right in the Gulf. There is also more that BP 

and others can do as well. 

I hope today that we will gain a better understanding of how 

much the BP Deepwater Horizon oil spill has cost and may continue to cost American taxpayers and how we intend to recover the 

money from those responsible for this disaster. 

Earlier today, the President and BP officials announced the es- tablishment of a $20 billion independent trust fund to ensure that 

BP continues to pay claims in the future as they have to date. This 

is something that my colleagues and I called for, and I look forward 

to exploring how such a fund might work today at this hearing. 

It is clear that the financial mechanisms we have in place, including the Oil Spill Liability Trust Fund, were simply not designed to handle something of this magnitude. I look forward to 

hearing from the Government Accountability Office (GAO), about 

the risks and vulnerabilities of the trust fund that they have found 

in the past and how this spill encompasses a perfect storm of factors that will easily make it the most expensive ever. 

In addition to the enormous financial burden the spill has placed 

on citizens and businesses in the Gulf, the Federal Government has 

been incurring costs in other government units, too. 

To date, over $120 million has been spent by the Federal Government on ships and personnel to respond to this incident, and much 

of it has been billed to BP and the other responsible parties. 

This past Friday, I understand that BP wired their second payment of over $69 million to the Federal Government. I also understand that the Coast Guard will be sending their third bill—this 

one for roughly $50 million—to BP and to the other responsible 

parties perhaps even today. I am sure that American taxpayers appreciate BP’s prompt notice and payment, and I hope we will continue to see similar responses as those costs mount. 

While we have seen several checks from BP and others, I hope 

to find out today how the other responsible parties view themselves—and one another—when it comes to paying for this disaster. 

We are pleased to see Mr. Newman of Transocean here today. I understand he has come all the way from Geneva, Switzerland, and 

we are grateful. I look forward to hearing about how he views 

Transocean’s role in these ongoing efforts. 

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3 

We also invited Anadarko Petroleum to today’s hearing, which 

owns a 25-percent stake in the Gulf well, and MOEX Offshore, 

which owns, I believe, a 10-percent stake in the well. Their names 

are also on the bill from the Federal Government. Unfortunately, 

they declined to send witnesses today. I am disappointed that they 

chose not to attend. It was my hope to have all the responsible parties at our table. We hope that they can find some time in the very 

near future to come to discuss these issues with us and with the 

American people. 

The hole we are trying to plug is, as you know, some 5,000 feet 

under the surface of the water, but men and women whose livelihoods and communities have been disrupted by this disaster live 

in many cases right down the street. Surely we can do a better job 

of protecting not only the Gulf, but our entire Nation from the costs 

and impacts of this spill. 

The spill has now lasted, as I said earlier, 58 days—nearly 3 

weeks longer than it rained during Noah’s flood in the Book of 

Genesis. If the story of Noah tells us anything, it tells us that with 

faith, a dedication to do what is right, and hard work, we too will 

find something akin to a rainbow at the end of this calamity. I do 

not know that we will find a rainbow, but my hope is that at the 

end of the day we will find the end, and my hope is that at the 

end of the day this sad chapter in our Nation’s history will somehow serve as a catalyst to convince us to change course as a Nation 

and to focus our energy maybe less on recovering petroleum and 

more on finding ways to become independent of petroleum, independent of foreign oil, independent of fossil fuels, to make ourselves 

more energy independent and enhance our security and maybe 

launch a whole new generation of technologies and innovations in 

business that will enable us to build a different kind of economy 

for our country as we go forward. 

We have been joined by our Ranking Member, Senator McCain. 

Senator, you are recognized, and after you have spoken, we will 

turn to Senator Lautenberg for his comments, and then we will recognize others on our Subcommittee. Thank you all for joining us. 

OPENING STATEMENT OF SENATOR MCCAIN 

Senator MCCAIN. Well, thank you, Mr. Chairman, and thank you 

for holding this hearing today. I do not need to repeat how outraged and saddened all of us are by the Deepwater Horizon rig explosion that killed 11 people and spewed millions of gallons of oil 

into the Gulf of Mexico. I think every American is aware of that 

situation now and the catastrophe. 

As of June 14, BP estimated that the cost of the oil spill had 

reached $1.6 billion, including the cost of the spill response, containment, relief well drilling, grants to Gulf States, claims paid, 

and Federal costs. The company’s CEO, Tony Hayward, has publicly assured the Federal Government and the American people 

that BP will fully meet its obligations from the spill and pay all 

legitimate claims even if aggregate claims exceed the $75 million 

legal liability limit. 

Despite the government’s unfortunate response at the outset of 

the oil spill, it has incurred substantial costs in recovery and response operations. Since the explosion, the Federal Government 

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4 

1The prepared statement of Senator Lautenberg appears in the Appendix on page 70. 

has sent two invoices totaling nearly $71 million for reimbursement 

to responsible parties. Another invoice of approximately $50 million 

is expected to be issued imminently. 

The disaster should provide many lessons for all of us, including 

the Administration and Congress, including a reminder that the 

Jones Act should be repealed. Within a week of the explosion, 13 

countries, including several European nations, offered assistance 

from vessels and crews with experience in removing oil spill debris. 

However, the Jones Act, a protectionist law enacted in the 1920s, 

prevents foreign-flagged vessels from operating and transporting 

merchandise between points abroad and the United States. The 

Administration may grant a waiver to any vessel, just as the previous Administration did during Hurricane Katrina so the international community could assist in recovery efforts. But they have 

not done so. 

There are other concerns. For example, U.S. Attorney General 

Eric Holder also made an unprecedented announcement 2 weeks 

ago that the Department of Justice (DOJ) has opened criminal and 

civil investigations on the Gulf of Mexico oil spill. However, if a 

civil settlement results from the investigations, the settlement 

charges may receive favorable tax treatment depending on how the 

settlement is drafted. Effectively, the Federal Government and the 

American taxpayers could indirectly pick up a portion of the tab for 

the responsible parties’ mess. Obviously, that is unacceptable. 

BP failed to prevent this catastrophic disaster from occurring 

while the Minerals Management Service failed to exercise robust 

enforcement of safety standards. We cannot allow the cost of their 

failures to be placed on the backs of American taxpayers. 

I am pleased—and I think you may have noted, Mr. Chairman, a recent wire story, ‘‘BP OKs $20 billion escrow fund.’’ That is certainly a step in the right direction. 

I thank you, Mr. Chairman. I thank you for holding this hearing. 

Senator CARPER. I am delighted that we could be here together, 

Senator McCain. 

Let me turn to our first witness, our colleague from New Jersey, 

someone who serves on the Environment and Public Works Committee, a senior member, and we are delighted to welcome him 

here today for his comments. Then we will turn to our other colleagues for their opening statements. 

Senator Lautenberg, please proceed. 

TESTIMONY OF THE HON. FRANK R. LAUTENBERG,1 A U.S. 

SENATOR FROM THE STATE OF NEW JERSEY 

Senator LAUTENBERG. Thanks, Mr. Chairman and Senator 

McCain. I join you to express my condolences to those families who 

lost loved ones in this horrendous catastrophe, and I thank you for 

giving me the opportunity to appear before the Subcommittee on 

this critical issue. 

Last night, the President spoke to the country, and he could not 

have been clearer. The needs of Gulf families, fishermen, business 

owners, must not and will not take a back seat to BP’s bottom line. 

That is why I am pleased that earlier today President Obama seH605-41331-79W7 with DISTILLER

5 

cured an agreement for BP to put $20 billion into an escrow account to pay for the damage from the spill and to remove BP from 

deciding which claims are valid. I commend the President for his 

strong leadership on this disaster, and I know he is determined to 

do everything in his power to hold BP accountable. 

The behavior of this company and its executives could not be 

more reprehensible. Their greed led them in the first place to gamble with the lives of workers on a rig, the marine life in the Gulf, 

and the economy and culture of the entire region. And when the 

inevitable happened and the Deepwater Horizon exploded, burned, 

and sank, BP’s leaders downplayed the true size of the spill, and 

we learned that they lied about their ability to contain it. 

Mr. Chairman, we have seen this kind of catastrophe before. It 

has been more than 20 years since the Exxon Valdez went 

aground, and oil is still contaminating the soil there. Now, I was 

in Alaska within 3 days of the Exxon Valdez crash, and I saw the 

destruction caused by that oil spill firsthand. 

When the press coverage was intense, Exxon issued a string of 

apologies. It promised to do the right thing by the communities, 

and it vowed to make sure that the way of life these Alaskans 

knew would resume. But as soon as the cameras were turned off, 

Exxon changed its tune, and it fought the communities, the families, and the fishermen over every penny. Instead of making those 

victims whole, Exxon chose to make its lawyer rich. Exxon drew 

things out for years and knocked down a punitive damage claim 

from $5 billion to $500 million, and we cannot let history repeat 

itself. And every 4 days—we are just reminded that the spill the 

size of the Exxon Valdez spill occurs every day—every 4 days. 

Every 4 days we are witnessing the size of a spill that took place 

at Exxon Valdez. 

And that is why I proposed an amendment to last month’s emergency supplemental bill to make it clear that companies responsible for the oil spill must reimburse the American taxpayer for 

every dollar the government spends on clean-up. And while the 

amendment was not considered on the floor, the Administration 

made it clear that BP will pay the bill. Americans are fed up with 

hollow words and false assurances and broken promises, and that 

is why we also must pass legislation to eliminate a measly $75 million liability cap on monetary damages from these spills. Big oil, 

with enormous profits every month, can afford to pay for their 

recklessness. 

I want to thank you, Mr. Chairman, and the rest of the Subcommittee for inviting me to speak today and, more importantly, 

for holding this critical hearing. I hope that we are going to hear 

honest and candid answers from BP and the other executives about 

how they are going to live up to their obligations. 

Thank you again, Mr. Chairman. 

Senator CARPER. Senator Lautenberg, thank you. Thanks for 

joining us. Thank you for lending your voice to this hearing as well. 

I think in terms of who should go first—Senator Tester? 

Senator TESTER. I will make it easy for you, Mr. Chairman. I am 

going to forgo opening remarks for the questions. I will defer to the 

good Senator from Arkansas. 

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6 

1The prepared statement of Mr. Willis appears in the Appendix on page 72. 

Senator CARPER. All right. Fair enough. Thanks so much. Thanks 

for coming. 

Senator PRYOR. Mr. Chairman, thank you. I do not have an opening statement. 

Senator CARPER. I think with that we can turn to our second 

panel, and if the witnesses will make their way to the table, that 

would be good. 

[Pause.] 

Senator CARPER. I have had a chance to already welcome the witnesses individually, and now I am pleased to welcome you collectively to testify. I will just provide a very brief introduction for each 

of you. Our lead-off witness will be Darryl Willis. Mr. Willis is Vice 

President for Resources for BP America. He has been with BP for 

18 years and is currently leading the claims process efforts for BP. 

Thank you for joining us. 

Steve Newman is our second witness. He is the President and 

Chief Executive Officer for Transocean, Ltd. Mr. Newman has 

worked, I am told, for Transocean for 14 years and first served in 

his current position as President and CEO in 2008. Welcome. 

Our third witness is Craig Bennett. Mr. Bennett is the Director 

of the U.S. Coast Guard’s National Pollution Funds Center. The 

National Pollution Funds Center oversees the Oil Spill Liability 

Trust fund and tracks the direct Federal costs of the oil spill. Mr. 

Bennett has served in the U.S. Coast Guard for over 20 years, and 

prior to his appointment as Director, he served as the Chief of the 

Financial Management Division of the National Pollution Funds 

Center. 

Finally, our final witness is Susan Fleming, Director of the Physical Infrastructure team at the Government Accountability Office. 

Before joining GAO, Ms. Fleming served as a financial analyst for 

General Electric. Good to see you. Thank you for joining us. 

Your entire statements will be made a part of the record. We invite you to proceed. I would ask you to try to stay fairly close to 

5 minutes. If you run a little bit over that, that is OK. If you run 

a lot over that, it is not OK. 

Mr. Willis, if you will just lead us off, please. Thank you. Thank 

you all for coming. 

TESTIMONY OF DARRYL WILLIS,1 VICE PRESIDENT FOR 

RESOURCES, BP AMERICA, INC. 

Mr. WILLIS. Thank you, Mr. Chairman. Chairman Carper, Ranking Member McCain, Members of the Subcommittee, I am Darryl 

Willis, Vice President of Resources for BP America. On April 29, 

I accepted the role of overseeing BP’s claims process, which was established in the wake of the explosion and fire aboard the Deepwater Horizon drilling rig and ensuing oil spill. I am here to share 

information with you about the claims process. 

This horrendous incident, which killed 11 workers and injured 17 

others, has profoundly touched all of us. There has been tremendous shock that such an accident could have happened and great 

sorrow for the lives lost and the injuries sustained. 

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7 

I would like to make one thing very clear. BP will not rest until 

the well is under control and we discover what happened and why 

in order to ensure that it never, ever happens again. As a responsible party under the Oil Pollution Act of 1990, we will carry out 

our obligations to mitigate the environmental damage and economic impact of this incident. 

I would also like to underscore that the causes of the accident remain under investigation, both by the Federal Government and by 

BP itself. So I am prepared today to answer your questions regarding the claims process and our reimbursement of Federal response 

costs. I cannot, however, respond to inquiries about the incident 

itself or the investigation. 

Above all, I want to emphasize that the BP claims process is integral to our commitment to do the right thing. We will be fair and 

expeditious in responding to claims. We have already paid out over 

$90 million in claims as of today, and we understand how important it is to get this right for the residents and businesses as well 

as for State and local governments. 

To that end, we have established 33 walk-in claims offices operating in Louisiana, Mississippi, Alabama, and Florida. And we 

have a call center that is operated 24 hours a day, 7 days a week. 

We have also established an online claims filing system to further 

expand and expedite our capacity to respond to potential claimants. 

Altogether we have approximately 1,000 people handling claims 

and over 660 experienced claims adjusters on the ground working 

in the impacted communities. We will continue adding people, offices, and resources as required and are committing the full resources of BP to making this process work for the people of the 

Gulf coast. 

Our early focus was on individuals and small businesses whose 

livelihoods have been directly impacted by the spill and who are 

temporarily unable to work. These are the fishermen, the crabbers, 

the oyster harvesters, and shrimpers with the greatest immediate 

financial need. BP is providing expedited interim payments to 

those whose income has been interrupted. Approximately 18,000 

claims have already been paid, as I said, totaling $90 million to 

date. And we have recently begun sending out second advance payments to individuals and businesses. 

We are also working hard to address business loss claims. Over 

the last few days, we have paid out over $16 million in business 

claims. 

The claims process was established to fulfill our obligations as a 

designated responsible party under the Oil Pollution Act of 1990 

(OPA). Thus, we are guided by the provisions of OPA 90 as well 

as the U.S. Coast Guard regulations when assessing claims. I am 

not an attorney and, therefore, cannot speak to the particular legal 

interpretations or applications of OPA 90. I can, however, reiterate 

that BP does not intend to use the $75 million cap in the OPA 90 

statute to limit our obligation to pay these claims. We have already 

exceeded it and will not seek reimbursement from the Oil Spill Liability Trust Fund. 

As an additional means of ensuring a fair and transparent process, today an independent mediator, Kenneth Feinberg, has been 

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8 

1The prepared statement of Mr. Newman appears in the Appendix on page 78. 

appointed to oversee the claims process, and BP has committed to 

setting aside $20 billion in an escrow fund to pay legitimate claims. 

I would also like to briefly discuss the reimbursement of the Federal Government response costs. To date, the Coast Guard has sent 

BP and other responsible parties two invoices for Federal Government costs totaling slightly more than $70 million. BP has paid 

these invoices promptly by wire transfer. 

In closing, I would like to add a personal note. My ties to the 

Gulf coast run deep. I was born and raised in Louisiana. I went to 

high school there, college there, and graduate school there. My 

family spent many summers on the Gulf coast. My mother lost her 

home of 45 years in Hurricane Katrina, and the recovery process 

was sometimes time-consuming, and at many times it was incredibly frustrating. I know firsthand that the people in this region 

cannot afford lengthy delays in addressing economic losses caused 

by this spill. 

I volunteered for this assignment because I am passionate about 

the Gulf coast. It is the place I call home, and I want to be a part 

of the solution. With that, I welcome your questions. 

Senator CARPER. Thank you for adding that to the close of your 

testimony. Thanks very much. 

Mr. Newman, welcome. Please proceed. 

TESTIMONY OF STEVEN NEWMAN,1 CHIEF EXECUTIVE 

OFFICER, TRANSOCEAN LTD. 

Mr. NEWMAN. Chairman Carper, Ranking Member McCain, and 

other Members of the Subcommittee, I want to thank you for the 

opportunity to speak with you today. My name is Steven Newman. 

I am the Chief Executive Officer of Transocean. Transocean is a 

leading offshore drilling contractor with more than 18,000 employees worldwide and more than 4,500 employees in the United 

States. I am a petroleum engineer by training, and I have spent 

considerable time working on and with drilling rigs. I have been 

with Transocean for more than 15 years. 

Since April 20, 2010, the heartache I and my company feel for 

the 11 crew members who died, including nine Transocean employees, and their families is with us constantly. The safety of our employees and crew members is of the utmost importance to us, and 

the loss of lives on the Deepwater Horizon is devastating to us and 

to their families. I also salute the courage of the 115 crew members 

who were rescued from the rig and the extensive response team 

that has worked tirelessly since the event. 

Transocean has been actively involved in the activities since 

April 20, including providing support and comfort to the families 

of the lost men, and I would like to provide the Subcommittee with 

more details about these efforts. 

Transocean is a people-focused company. Since the events of 

April 20, our human resource (HR) teams have focused on providing grief counseling and a range of benefits and employee services to those directly and indirectly affected. We are currently taking a number of steps, including providing the families of the nine 

Transocean men who were lost continued full pay and benefits, proH605-41331-79W7 with DISTILLER

9 

viding injured crew and those receiving ongoing counseling continued full pay and benefits. Compensation for personal possessions 

lost in the incident was offered to all crew and families and accepted by most. 

On May 25, we held a memorial service in honor of the men lost 

in the Horizon tragedy. It was attended by all 11 families, by many 

Transocean personnel, and by people from across the industry. It 

was a moving event and an opportunity for all of us to celebrate 

the lives of these exceptional men. Our goal is to continue our support of the families and our employees as we all move forward. 

As I have said many times in the past, we believe that we have 

the most advanced equipment in the offshore drilling industry, but 

our people are the real reason for the success of Transocean. This 

belief has been articulated through the guiding principles of our 

company which go by the acronym FIRST (Forum of Incident Response and Security Teams). My written testimony provides additional details about these principles, so today I will focus on the R, 

which stands for respect for employees, customers, and suppliers, 

and the S, which stands for safety. 

Our respect for our employees and our goal to be a responsible 

employer guided our actions before April 20, and will continue to 

do so in the future. This respect is borne out in a number of ways. 

For example, Transocean provides our employees with extensive 

training for all offshore and shore-based activities. We work with 

employees who seek supervisory positions and management roles 

and provide flexible work hours and monetary assistance for education to maintain or improve job skills, to increase competencies 

and qualifications for future opportunities. 

Our company’s culture of safety has long guided our actions. 

Transocean was a key partner in developing the U.K. North Sea’s 

Safety Case methodology and then in developing the IADC’s Safety 

Case guidelines. We subsequently applied what we learned to our 

operations around the world, even where no formal Safety Case is 

required. We have also implemented a Major Accident Hazard Risk 

Assessment across all Transocean operations. 

Transocean’s full commitment to environmental and social stewardship is demonstrated by our active participation in a range of 

scientific, social, and conservation research programs around the 

world, including the Gulf of Mexico. We have invested millions of 

dollars over the past few years in projects aimed at better understanding the environment in which we work and the communities 

that support our operations. 

One such example is our support of a global program addressing 

scientific and environmental issues associated with remote-operated vehicles. For over 7 years, we have been using our rigs as 

places of research to allow scientists to explore the deepwater environments with cutting-edge technology to better understand the 

largely underexplored deepwater area of the ocean. 

Another example is our membership in the Gulf of Mexico Foundation through which Transocean supports a range of coastal restoration projects and educational efforts across all five Gulf States, 

Mexico, and the U.S. Virgin Islands. Many of these projects are in 

collaboration with NOAA’s Coastal Restoration Program along with 

other federally funded programs. 

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10 

With respect to the events of April 20, immediately after the explosion Transocean began working with BP and the Unified Command in the effort to stop the flow of hydrocarbons. Our operations 

and engineering teams have been working around the clock under 

BP to identify and pursue options for stopping the flow as soon as 

possible. Our drilling rigs are actively engaged in drilling the relief 

wells at the site, and our drill ship is involved in crude oil recovery 

operations. We will continue to support BP and the Unified Command in all of these activities. 

Throughout this time we have also been working hard to get to 

the bottom of what happened on the night of April 20. There are 

critical questions that need to be answered in the coming weeks 

and months, but we simply do not have all of the data to know the 

answers at this point. To understand what led to the April 20th explosion, we must work together in a collaborative effort to collect 

information and to recommend any corrective measures. We remain 

committed to this effort. 

As the Subcommittee Members are likely aware, the Oil Pollution Act of 1990 makes clear that we are responsible for fluids originating from the rig above or below the waterline, but not for fluids 

emanating from the well. Once the extent of these liabilities for 

any materials or substances allocated to the rig are understood, 

Transocean will continue our cooperation with the National Pollution Funds Center to fulfill any OPA obligations applicable to our 

operations and to process any relevant claims. 

To support this effort, we have conducted sampling to determine 

the potential presence and any potential impacts that may have 

been caused by diesel released from the rig. At this time the presence of diesel released from the rig has not been detected. However, we will continue to work to verify this as well as to determine 

whether or not there is any diesel fuel still contained in the rig’s 

tanks on the bottom of the ocean. 

Additionally, as the National Resource Damage Assessment has 

barely begun, it is too early to ascertain the company’s responsibilities in that context. As that process advances, we will cooperate 

with the NRDA trustees and will stand ready to fulfill any potential obligations that may be found to originate from our duties 

under OPA. 

Regardless, Transocean will continue to lend our expertise to the 

spill containment and relief well drilling efforts currently underway. The foundation of our company’s strengths has always been 

the people who work at Transocean and the communities where we 

live and operate. Our commitment to both has been regularly demonstrated over the years, and I believe our continued commitment 

throughout this incident is evident. We remain ready and willing 

to assist the Subcommittee and all involved as the work progresses. 

Thank you for the opportunity to speak to you today, and I am 

happy to answer your questions. 

Senator CARPER. Thank you very much for coming today and for 

your testimony. 

Mr. Bennett, please proceed. 

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11 

1The prepared statement of Mr. Bennett appears in the Appendix on page 83. 

TESTIMONY OF CRAIG BENNETT,1 DIRECTOR, NATIONAL 

POLLUTION FUNDS CENTER, U.S. COAST GUARD 

Mr. BENNETT. Good afternoon, Chairman Carper and distinguished Members of the Subcommittee. I am grateful for the opportunity to testify today about the Oil Pollution Act of 1990 and financial responsibility. As someone who graduated from high school 

in southern Louisiana, who met his wife and was married in Houston, Texas, and who later raised two children for a while in St. Petersburg, Florida, I have a deep appreciation for the people and environment of the Gulf coast. 

My role as the Director of the National Pollution Funds Center 

(NPFC), in this response covers four areas: 

First, I fund Federal response using amounts Congress has made 

available from the Oil Spill Liability Trust Fund, the so-called 

emergency fund. 

Second, I ensure the responsible parties are advertising its availability to pay claims for removal costs and damages. If claimants 

are not fully compensated by a responsible party, they may present 

their claims to the NPFC for payment from the fund. 

Third, I recover Federal response costs and claims paid by the 

fund from any and all responsible parties. 

Finally, I administer the Certificate of Financial Responsibility 

Program which ensures that vessels operating in U.S. waters have 

demonstrated that they are financially able to pay their obligations 

under OPA. 

With respect to response costs, the cost of the Federal response 

to this event as of this morning was $217 million. These costs include the funding of over 27 Federal entities as well as over $12 

million that has been given to States for their response efforts. 

A key element of the OPA liability and compensation regime is 

that the polluter pays, not the taxpayer. All of the costs incurred 

against the fund will be billed to the responsible parties. As has 

been mentioned, two bills for a total of $70.9 million have been 

sent, and both have been paid by BP and both were paid in less 

than 5 days. A third bill for over $50 million is being sent this 

afternoon. At the end of the event, the fund balance will not be impacted because all response costs will have been reimbursed by the 

responsible parties. 

With respect to claims, the National Incident Commander, Admiral Thad Allen, met with BP executives at the National Pollution 

Funds Center last Wednesday to direct faster progress and more 

transportation regarding the claims process. I met with BP officials 

in Louisiana last Thursday, and my staff has worked with the BP 

claims people over this past weekend to oversee the progress on the 

expectations set forth by Admiral Allen. These expectations included getting more detail and context in the reports that we receive from BP, as well as acceleration of the payment for business 

claims. Progress has been made, and as Mr. Willis said, BP has in 

the last week paid $17 million in 337 checks to small businesses. 

Also, based on the operational concept of no wrong door, the National Incident Commander has established an integrated services 

team to monitor BP claims and coordinate delivery of Federal proH605-41331-79W7 with DISTILLER

12 

1The prepared statement of Ms. Fleming appears in the Appendix on page 90. 

grams that can provide social services and small business assistance to individuals, families, and small businesses affected by the 

oil spill. The team is made up of two parts: A national-level team 

located in Washington, DC, to coordinate strategic policy-level 

issues, as well as to provide support and issue resolution for the 

field-based teams. 

Field-based teams are established in each impacted Gulf coast 

State to identify gaps in the claims process for resolution by BP 

and to provide residents with full, streamlined access to all Federal 

assistance programs. Each field team is led by a Federal resource 

coordinator with a State point of contact identified by the governor. 

Individuals, communities, and businesses have suffered as a result of this spill. The OPA liability and compensation regime is 

working to ensure a robust Federal response that those damaged 

from the spill are compensated and that the polluter pays. The Department and the Administration are working to ensure a full recovery throughout the affected States. 

Thank you for the opportunity to testify today, and I look forward to your questions. 

Senator CARPER. Mr. Bennett, we thank you for joining us. 

Thanks for your work and for your comments. Ms. Fleming, please 

proceed. 

TESTIMONY OF SUSAN A. FLEMING,1 DIRECTOR, PHYSICAL INFRASTRUCTURE, U.S. GOVERNMENT ACCOUNTABILITY OFFICE 

Ms. FLEMING. Mr. Chairman and Members of the Subcommittee, 

thank you for the opportunity to discuss the costs of major oil 

spills. The recent disaster in the Gulf coast not only caused the 

tragic loss of 11 lives, but also untold economic and environmental 

damage to Gulf coast communities. This spill has reminded us that, 

despite the fact that major oil spills are infrequent, they can happen at any time across coastal and inland waters of the United 

States. It has also reminded us that vessels involved in the petroleum industry are not the only risk. Cargo, fishing, and other types 

of vessels also carry substantial fuel reserves, and as we are now 

keenly aware, mobile offshore drilling units like the Deepwater Horizon also represent a threat. Besides being potentially lethal and 

damaging the environment, spills can be expensive, with considerable costs to the Federal Government and the private sector. 

My testimony today has three parts: I will discuss the factors 

that affect major oil spill costs, how oil spills are paid for, and the 

implication of major oil spill costs on the Oil Spill Liability Trust 

Fund. 

First, there are a number of factors that combine in unique ways 

and affect the cost of spills: Location, time of year, and type of oil. 

Although we have not evaluated the current spill or the factors affecting its costs, some of these and the magnitude of the spill will 

likely drive costs. 

For example, the spill occurred in the spring in an area of the 

country, the Gulf coast, that relies heavily on tourism as well as 

commercial fishing industry revenues. One estimate puts the loss 

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13 

of revenue from suspended commercial and recreational fishing at 

about $144 million a year. In addition, spills that occur in proximity of tourism destinations, like beaches, can result in additional 

removal costs in order to expedite spill clean-up or because there 

are stricter standards for clean-up which increases the cost. 

Another factor affecting spill cost is the type of oil. The oil that 

continues to spill into the Gulf of Mexico is a light oil, specifically 

a light sweet crude oil, that is very toxic and can create long-term 

contamination of the shorelines and also, as we have seen, harm 

waterfowl and fur-bearing mammals. According to the U.S. Fish 

and Wildlife Service, many species of wildlife face grave risk from 

this spill as well as 36 wildlife refuges that may be affected. In recent testimony the EPA Deputy Administrator described the Deepwater Horizon spill as a ‘‘massive and potentially unprecedented 

environmental disaster.’’ 

I will now turn to my second point. The Oil Pollution Act established a ‘‘polluter pays’’ system that places the primary burden of 

liability and the cost of oil spills on the responsible party. Under 

this system, the responsible party assumes up to a specified limit 

the burden of paying for spill costs, which can include both removal 

costs and damage claims. Above the specified limit, the responsible 

party is no longer financially liable. The fund was established to 

pay the costs above this limit or potentially all costs a responsible 

party does not pay or cannot be identified. The fund, as you know, 

is financed primarily from a per barrel tax on petroleum products. 

Now I will move on to my final point, the implications of major 

oil spills for the trust fund. To date, the fund has been able to cover 

the costs not paid for by responsible parties, but the fund’s future 

viability may be at risk. In particular, the fund is at risk from 

claims that significantly exceed responsible parties’ liability limits. 

We reported, in 2007, that the current liability limits for certain 

vessel types, such as tank barges, are disproportionately low relative to costs associated with such spills. 

The fund faces other potential drains on its resources, including 

ongoing claims from existing spills, claims related to sunken vessels that could leak oil, and as in the case with the Deepwater Horizon, the threat of a catastrophic spill. As of early June, the response costs for this spill had already tolled over $1 billion, and to 

date, the spill has not been fully contained. As a result, the Gulf 

spill is likely to eclipse the Exxon Valdez, becoming the most costly 

offshore spill in U.S. history. 

The fund is currently authorized to pay up to $1 billion per spill 

with up to $500 million for damage claims. Its current balance of 

about $1.6 billion may not be sufficient to pay such costs for a spill 

that is likely to have catastrophic consequences. 

While BP has said—and we heard it today—that it intends to 

pay all legitimate claims associated with the spill, should the company decide it will not or cannot pay for these costs exceeding its 

limit of liability, the fund will have to bear these costs. Given the 

magnitude of the spill, the cost could result in a significant constraint on the fund. 

In closing, major oil spills are rare, but the risk of such spills exists daily. Further, spills are expensive, with significant costs to 

the Federal Government, the private sector, the environment, the 

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economy, and the public at large. Although the fund has been able 

to cover non-catastrophic liabilities, the uncertainties and unprecedented nature of the current spill and potential future spills could 

threaten the fund’s viability. 

Mr. Chairman, this concludes my statement. I look forward to 

our discussion and would be pleased to answer any questions you 

or Members of the Subcommittee have. 

Senator CARPER. Good. We look forward to it as well. Thank you 

so much for coming today. 

We will be providing each member 7 minutes for questions in 

this first round, and we will take it from there on a second round. 

I want to start off with a couple questions—or at least one question, if I could, for Mr. Willis and for Mr. Newman. And then my 

next question will probably be for you, Mr. Bennett, and then one 

for Ms. Fleming. 

Mr. Willis, as you and Mr. Newman, I think, know we invited 

representatives from Anadarko and from MOEX Offshore here 

today. They declined to join us. This is an invoice, a bill that the 

Federal Government sent to the responsible parties on June 2, asking for the reimbursement of some $69 million. Anadarko’s and 

MOEX’s names are right here on the front alongside of BP and 

Transocean. 

How do your companies view Anadarko’s and MOEX’s role in 

helping to pay for this disaster? That is the first part of my question. How do you view their role in helping to pay for this disaster? 

Have you communicated with these companies to clarify what they 

feel is their role in paying for this disaster? Mr. Willis, do you want 

to go first? 

Mr. WILLIS. Mr. Chairman, our commitment from the very beginning of this incident was to make sure that any legitimate claim 

or costs associated with this spill, that we honor that obligation 

and our commitment to make those payments. My focus since being 

involved in the claims process has been on making sure that when 

something is submitted to us and when it is substantiated, that we 

pay those bills quickly. The focus has not been at this point on 

working through any issues with partners, but making sure that 

we, as BP, do the right thing and live up to the commitment we 

have made, which is to honor our legitimate claims and to pay 

them quickly. 

Senator CARPER. That is commendable. Let me just go back to 

my question. How does your company view Anadarko’s and 

MOEX’s role in helping to pay for this disaster? Have you communicated with these companies to clarify what they believe to be 

their role in paying for it? 

Mr. WILLIS. Our view is that there will be plenty of time to sort 

that out, but in the meantime, when the bills come in and we look 

them over and they are legitimate and associated with the spill, 

they need to be paid, and we are going to pay those bills. 

Senator CARPER. Thank you. Mr. Newman. 

Mr. NEWMAN. Senator, my understanding of the framework that 

Congress has established would put the well owner and the well 

owner’s partners—in this case, Anadarko and MOEX—in line as responsible parties for damage resulting from fluids emanating from 

the well bore. And so if I apply that framework to BP, Anadarko, 

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15 

and MOEX, I think they are all in that comparable tier. 

Transocean is a member of the subcontractor community that BP 

hired to carry out the well construction process, and so we are subordinate to BP in their role as responsible party for the fluids emanating from the well bore. 

Senator CARPER. OK. And when you say ‘‘we,’’ that includes 

Anadarko and MOEX? 

Mr. NEWMAN. No. I put Anadarko and MOEX and BP all as well 

owners or partners of the well owner. Transocean is one of the 

many subcontractors that BP hired to carry out the well construction process. 

Senator CARPER. Before I turn to Mr. Bennett, Mr. Newman, let 

me just ask you a follow-up. Can you explain to us how does 

Transocean view itself in terms of responding financially to the 

costs associated with this oil spill? I think you alluded to that in 

your comments. What sort of discussions have you had between 

your company and BP to discuss what Transocean might or might 

not be liable for? 

Mr. NEWMAN. Transocean’s liability under the Oil Pollution Act, 

as I understand it, relates to fluids that emanate from the rig, either above or below the surface of the water. And so we continue 

to monitor the drilling rig on the seabed, and so far there has been 

no indication of any fluids escaping from the drilling rig. But we 

will continue to monitor the drilling rig, and we stand ready to 

meet our obligation for any fluids that emanate from the drilling 

rig. 

Senator CARPER. Mr. Willis, do you share that view with respect 

to Transocean’s liabilities? 

Mr. WILLIS. Mr. Chairman, honestly, we are focused on making 

sure that the costs associated with this clean-up and spill in the 

Gulf of Mexico are paid and that the people who have been hurt 

along the Gulf coast are compensated for their losses and any Federal costs that are associated with the clean-up are paid back to 

the American people. And that is what we are going to do. 

Senator CARPER. All right. Thank you. 

Mr. Bennett, the next question for you. Again, I hold up the invoice, the first one I believe to be sent to the responsible parties, 

including BP and Anadarko and MOEX all received this invoice. 

Let me just ask, how does your office view these two companies 

and what communications have you had with them to ensure that 

they understand their responsibility here? And perhaps a more important question is: What is their responsibility here? 

Mr. BENNETT. Mr. Chairman, I would be glad to answer that 

question. When we go to issue bills during a response or after a response to reimburse the fund for any costs that come out of the 

fund, we send the bill to any and all of the responsible parties that 

have been identified up to that point in time. As you know, it is 

joint and several liability, although in this case there is sort of 

tiered liability, as has been mentioned, and there could be different 

amounts of liability that different partners might have, depending 

on their relationship. The lessees are generally in this case responsible for the ocean floor release, which is clearly the biggest part 

of the release in this case, so that is why BP and the minority lessees would probably have the most liability. But early on we do not 

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worry about trying to sort it out. We send the bill to all responsible 

parties. It is not uncommon in a case like this for the majority responsible party or major insurance company to set up, pay the 

bills, and then they work it out behind the scenes amongst themselves, and we do not really typically have a lot of visibility on that 

as long as somebody is paying the bill. If one person pays it or if 

they all decide to split it up, as long as I get repaid, that is what 

we care about. 

Senator CARPER. All right. Thank you. 

Mr. Willis, one more quick question for you and then I will turn 

to Senator McCain. A little over an hour or two ago, the President 

and BP announced the creation of a $20 billion fund, an independent escrow fund, out of which claims would be paid to those 

damaged by the oil spill, and we commend you for that. This fund 

will be administered by Ken Feinberg, who oversaw the September 

11, 2001, victim compensation fund, and he has done a number of 

other things as well. It would seem that this new fund and claims 

process would replace the current BP claims process of which you 

are, I believe, in charge. 

What discussions, if any, have you had with your colleagues at 

BP and with the Federal Government about this proposal, how it 

might work, and how your team would transition to this new process? 

Mr. WILLIS. As you mentioned, Mr. Chairman, this was recently 

announced after conversations between our executive team and the 

Administration. There are lots of discussions that will be taking 

place over the next few days and weeks to determine how the transition will take place. But at this time, I do not have those details. 

Senator CARPER. I understand. All right. Senator McCain, thank 

you. 

Senator MCCAIN. Thank you, Mr. Chairman. 

Just to follow up on the Chairman’s question, Mr. Newman, you 

stated that you feel that your liability is only that may have been 

caused by diesel released from the rig, either above or below the 

surface. Is that correct? 

Mr. NEWMAN. Yes, sir, that is my understanding of the company’s responsibility under the OPA. 

Senator MCCAIN. Ms. Fleming, do you have a view of that? 

Ms. FLEMING. This is beyond my level of expertise, but it is our 

understanding that the Coast Guard interprets BP and Transocean 

to be responsible parties. However, there may be contractual relationships as well that come into play. But it is definitely beyond 

my level of expertise. 

Senator MCCAIN. Mr. Bennett. 

Mr. BENNETT. Senator, that is correct. They are all responsible 

parties, but ultimately how much each of them might be liable for 

will be determined as a result of really the investigations and how 

it all settles out. They might not all be equally responsible for all 

the damages, and it is too early to know what that might be. 

Senator MCCAIN. Well, since we are paying claims, it might be 

nice to try to start figuring that out pretty quick, because BP is 

paying all the bills right now. Is that right, Mr. Willis? 

Mr. WILLIS. That is correct. 

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Senator MCCAIN. So there are other entities, including two who 

refused to testify here today, that may have some liability. So what 

do we have to go through to find out who is responsible and the 

extent of their responsibility? Mr. Newman, if his position holds, 

then they really are not going to be liable for anything, so to speak. 

Mr. BENNETT. Senator, under OPA they are all joint and several 

liable, so if we get the payment, we do not typically look beyond 

that. Now, in this case—— 

Senator MCCAIN. Who is supposed to determine it then? 

Mr. BENNETT. I suspect the Administration and Department of 

Justice will be following up with the investigation on all those 

questions and looking at that. 

Senator MCCAIN. Well, Mr. Chairman, I think we ought to get 

some readout of the liability here. I am not holding any brief for 

BP, but if they are the only ones paying the bills and there are others who were involved, maybe some of them should be paying some 

of the bills, too. 

Do you share that view, Ms. Fleming? Or is that above your pay 

grade as well? 

Ms. FLEMING. Well, I mean, I think that the biggest concern is 

we do not know what the true costs of this spill are going to be. 

We are dealing with an unprecedented spill. 

Senator MCCAIN. That was my next question. 

Ms. FLEMING. And the impact of the spill on the fund, how it is 

going to affect the fund’s ability to pay for future spills, as well as 

some of the ongoing claims. So there is a lot at stake here. 

Senator MCCAIN. Well, you did not answer my question, but it 

does not matter. The Oil Spill Liability Fund, henceforth known as 

‘‘the fund,’’ that is clearly going to be exhausted. Right? 

Ms. FLEMING. Well, I think that this oil spill’s catastrophic consequences could have a severe strain to the fund. There are other 

risks that come into play as well. However, as we heard today, if 

BP honors its commitment to pay all those costs, even those above 

the liability limits, then the risk to the fund could be minimal. But 

if they will not or cannot pay, and/or if the other responsible parties will not or cannot pay, then that could threaten the fund’s viability, quite frankly. 

Senator MCCAIN. In your statement, you mentioned that in 2007 

you identified areas which further attention to the liability limits 

appear warranted and made recommendations to the Commandant 

of the Coast Guard regarding both to adjust limits periodically in 

the future to account for significant increases in inflation and the 

appropriateness of some current liability limits, but nothing was 

ever done on that? 

Ms. FLEMING. The limits were adjusted for inflation. However, in 

the Coast Guard’s recent report, which was very much in line with 

our findings as well, they note that for certain vessel types, notably 

tank barges and cargo vessels, the limits of liability are disproportionately low relative to their historic spill costs. But they stopped 

short of making recommendations as to how the limits should be 

adjusted. Obviously, having the limits out of whack costs tens of 

millions of dollars to the fund, and now we are dealing with an unprecedented spill on top of those additional risks. 

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Senator MCCAIN. Mr. Willis, I think you were asked this, but you 

do not know whether your company has the ability to deduct from 

taxable U.S. income payments resulting from civil claims? 

Mr. WILLIS. Senator McCain, I will preface my comments by saying that I am not a tax attorney. My understanding is that there 

are deductions that are available to us, and we will take them 

within the constraints of the law. 

Senator MCCAIN. Well, maybe you could have your legal department provide for the record what your corporation’s view is on the 

ability to deduct from taxable U.S. income payments that result 

from civil claims. Could you provide that for the record for us? 

Mr. WILLIS. I will definitely take that away as an action, sir. 

INFORMATION FOR THE RECORD 

Section 162 of the Internal Revenue Code (the ‘‘Code’’) provides that ordinary and 

necessary expenses that arise out of the conduct of a trade or business are currently 

deductible when paid or incurred, including payments made pursuant to a settlement or judgment relating to the conduct of such trade or business activities. See 

26 U.S.C. § 162(a). Exceptions to this general principle of immediate deductibility 

include expenses that are (1) disallowed as deductions, such as fines or penalties, 

or (2) capitalized, for example inventory costs, in which case they are deductible 

over time. See 26 U.S.C. § § 162(f), 263 and 263A. BP believes that payments of alleged costs and damages pursuant to Section 1002 of the Oil Pollution Act relate 

to the conduct of its trade or business activities and are thus deductible under the 

Code. Whether any particular expense must be capitalized is a separate, and extremely fact-specific, inquiry that BP will determine in accordance with applicable 

federal and state laws. 

Senator MCCAIN. So, obviously, even though this is the 57th or 

58th day, you still have not sorted out the liability issue of the various entities who were associated with the rig. Is that a correct 

statement? 

Mr. WILLIS. What I can tell you is that what we have been focused on over the last 50-plus days is making sure that we got a 

claims process that was up and running, making sure that we got 

money into the hands of the folks along the Gulf coast who needed 

it the most—the fishermen, the shrimpers, the folks who work in 

the restaurants, the seafood processors. That has been the primary 

focus. 

Senator MCCAIN. I understand that. The answer I guess is no. 

Mr. Bennett, have we made any progress in that area? 

Mr. BENNETT. Sir, I want to make sure I have the question right. 

Is it the area of identifying who is liable for what? 

Senator MCCAIN. Yes. 

Mr. BENNETT. No, sir. As I said, we bill them all, we get payment, and we expect them to sort it out in court if they do not 

agree on how those payments came. 

Senator MCCAIN. Ms. Fleming, do you have a view on that? 

Ms. LAUFE. We have done some preliminary research in this 

area— 

Senator CARPER. I am sorry. Would you identify yourself, please? 

Ms. Fleming, will you introduce her? 

Ms. FLEMING. She is general counsel at GAO, Hannah Laufe. 

Senator CARPER. Go ahead and just have a seat for a moment, 

please, and identify yourself again with your name. 

Ms. LAUFE. My name is Hannah Laufe. I am an assistant general counsel at GAO. 

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Senator CARPER. And the last name? 

Ms. LAUFE. Laufe. 

Senator CARPER. Thank you. 

Ms. LAUFE. We have been doing some investigations in this area, 

but it is preliminary to really say anything for certain because 

there are a lot of legal implications to this. And we have contacted 

MMS, and we are going to be looking at the lease to identify the 

names on the lease, and that will help us make some determinations about responsible parties. But it is very preliminary to say 

anything at this point. 

Senator MCCAIN. Do you have any preliminary conclusions? 

Ms. LAUFE. No, I do not. It is my understanding that Anadarko 

and MOEX are partners, but I really cannot say more at this point. 

Senator MCCAIN. Well, thank you. When you do, again, I hope 

you will provide the Subcommittee with that. 

Ms. LAUFE. We definitely are working on that and we will do 

that. 

Senator MCCAIN. When we are talking about the extent of the 

costs here, which, as we all know, are unprecedented, I think that 

should be sorted out fairly quickly so that we can expedite the 

claims for all the reasons that I do not have to explain. I thank you 

very much. Thank you, Mr. Chairman. 

Senator CARPER. Thank you to both witnesses from GAO. 

Senator Tester, welcome. 

Senator TESTER. Thank you, Mr. Chairman. I do not want to go 

back to this, but I have just got to—whose responsibility is it to determine liability? Is it the GAO’s responsibility? Whose responsibility is it? 

Ms. FLEMING. No, not GAO’s. 

Senator TESTER. It is not GAO’s? 

Ms. FLEMING. No. 

Senator TESTER. Is it the Coast Guard? 

Mr. BENNETT. I believe we do it. I mean, when there is a spill, 

my staff will—— 

Senator TESTER. Determine liability and the percentage that the 

liability applies to which company? 

Mr. BENNETT. I do not determine percentage. 

Senator TESTER. Who determines percentage? 

Mr. BENNETT. We will bill them all for all costs. 

Senator TESTER. I know. But if BP says, ‘‘Forget it, I am not paying anymore,’’ who determines percentage? 

Mr. BENNETT. A judge will. 

Senator TESTER. A judge will? 

Mr. BENNETT. If we do not get paid, then the Department of Justice takes them all to court, and a judge will decide. 

Senator TESTER. OK. Just for clarity. There are a couple of 

things I have to ask, and, Mr. Bennett, I will just ask you. 

Mr. BENNETT. Yes, sir. 

Senator TESTER. There are about 51,000-plus claims; 26,000 have 

been paid in regards to this event as of June 14. Are you familiar— 

does that sound about right? 

Mr. BENNETT. Yes. 

Senator TESTER. Now, those folks who got paid, is their legal recourse done? 

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Mr. BENNETT. No. Nobody that has been paid has been asked to 

do a release for any payments or give away any right. Most of 

those payments are interim payments for loss of wages or incomes, 

primarily to fishermen. They can continue to get interim payments, 

and they can continue to make other claims as it goes on. 

Senator TESTER. OK, thank you. 

Mr. Willis, there is a whole bunch of information out there on BP 

and violations with OSHA and previous incidences that have happened. Could you tell me if there were any shortcuts that were 

taken because this project was over budget? 

Mr. WILLIS. Senator Tester, I am actually over the claims process, and that has been my focus for the last 50 days, and I can answer any questions you might have about the claims process. 

Senator TESTER. But not about this issue? Mr. Newman, maybe 

you can answer the question. You were punching the hole, right? 

Ocean Energy was punching the hole? 

Mr. NEWMAN. Transocean was hired—— 

Senator TESTER. Transocean. I am sorry. 

Mr. NEWMAN. That is all right. Transocean was hired to provide 

the drilling rig and the people to operate the rig’s machinery. 

Senator TESTER. OK. Are you aware if this project was over 

budget? 

Mr. NEWMAN. I received a copy of a letter written by Congressman Waxman and Congressman Stupak that did make reference to 

a concern about the financial status of the project, yes. 

Senator TESTER. So it was over budget. 

Mr. NEWMAN. That was referenced in Chairman Waxman’s letter. 

Senator TESTER. OK. I am not asking whether Senator Waxman 

or Representative Waxman said it. 

Mr. NEWMAN. Senator, the budget is not Transocean’s. It is a BP 

budget. And so I cannot comment on what the original budget was, 

and I have no idea where they were with respect to that. 

Senator TESTER. OK. So that is a different issue for BP. 

Mr. Willis, can you tell me—I mean, there are all sorts of stuff 

out here that needs to be cleared up. For example—and this, by the 

way, it would not point a finger at you guys—well, it kind of would, 

but not in a real bad way. There were inspectors out there, and 

maybe pay attention to this, too, Mr. Newman, because it might 

end up in yours. But there were inspectors—or maybe even Mr. 

Bennett’s. I do not know. But there were inspectors out there that 

I have been told were on fishing trips, going to LSU games, college 

football games, that were not doing their job. Can you shed any 

light on that? 

Mr. WILLIS. Senator Tester, I am the claims guy, and I have been 

involved in—— 

Senator TESTER. That is OK. I understand. Mr. Newman, can 

you shed any light on that? Because if you are out there drilling 

a well if the inspectors are doing their job or not. Were they doing 

their job? 

Mr. NEWMAN. From Transocean’s perspective, the MMS regularly 

visits our drilling rigs. They conduct inspections of those drilling 

rigs. They leave notes with our people that result from those inH605-41331-79W7 with DISTILLER

21 

1 Notes requested by Senator Tester appears in the appendix on page 122. 

spections, and that is the nature of the relationship between 

Transocean and the MMS. 

Senator TESTER. Did they inspect your drilling rig? 

Mr. NEWMAN. They were last on the Deepwater Horizon on April 

1. 

Senator TESTER. Did they leave any notes? 

Mr. NEWMAN. I do not know whether they left a visit report from 

the April 1 visit. 

Senator TESTER. Who would know? 

Mr. NEWMAN. Certainly somebody in our operations group would 

know the answer to that question. We can certainly provide that 

information back to the Subcommittee. 

Senator TESTER. That would be great. Can you tell us what is on 

those notes?1 You can tell me when they get back to the contact—— 

Mr. NEWMAN. We will make the results of those visits available. 

Senator TESTER. That would be great. 

Ms. Fleming, we have $20 billion, which seems like a lot of 

dough, in an escrow account now, and you talked about we do not 

know what the damages are. I believe it was you who said ultimately we do not know what the extent of the damage is. In your 

expert opinion, do you think that is going to be adequate? 

Ms. FLEMING. I think it is going to take months or even years 

until we really have a good sense of the total economic and environmental impact to the gulf coast. So we do not know. Also, I 

think the devil is in the details, too, in terms of how this escrow 

account will work, and how it will be administered, and implemented. 

Senator TESTER. As long as you are going down that line, it is 

supposed to be implemented by a third-party administrator? 

Ms. FLEMING. Yes. 

Senator TESTER. Right now the money that is—with the question 

I asked Mr. Bennett, BP has claims processors on the ground now 

doing it. Is it going to be BP’s claims processors that deal with this 

$20 billion escrow account? 

Ms. FLEMING. I do not know. 

Senator TESTER. Does anybody know? 

Ms. FLEMING. We have not looked in great detail on this. 

Senator TESTER. Mr. Willis, maybe you know. 

Mr. WILLIS. Senator Tester, this information is hot off the press. 

These are the conversations that will be taking place over the next 

few days and weeks to work out the details of how the process is 

actually going to be run. 

Senator TESTER. OK. Are you going to advocate for BP to have 

their claims processors? Or is BP going to allow a third-party administrator to determine that? 

Mr. WILLIS. I would like to start by saying, Senator Tester, that 

the primary concern we have is making sure that the resources are 

available and that the people who need the money get the money 

as quickly as they can. 

Senator TESTER. Yes. 

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22 

Mr. WILLIS. And we will work with the details around how and 

who is going to do the actual on-the-ground management of the— 

how the on-the-ground management of the claims process is going 

to work. 

Senator TESTER. OK. One last question, because I have only 

about 15 seconds left. You talked about an investigation. You cannot talk about the investigation. You can talk about the claims 

process. Can you tell me where they are at in the investigation? 

Mr. WILLIS. I cannot. I am 100 percent focused on cutting checks 

for the folks of the Gulf Coast. 

Senator TESTER. OK. Sounds good. I appreciate your commitment 

to that. I appreciate all the people being here to testify today. This 

is one hell of a mess that we need to get our arms around, get 

cleaned up, and get the people held harmless as soon as possible. 

Thank you all for being here. 

Senator CARPER. Senator Tester, thank you very much for being 

here. 

Mr. Willis, in our business we like to say that you are on message. [Laughter.] 

That is not a bad thing. I spoke with the U.S. claims monitoring 

team this morning, the integrated services team. They were appointed by Admiral Allen, and this team has been working hard to 

oversee BP’s claims process on behalf of the Federal Government 

and the American people. 

I was concerned to find out, however, that BP still has not provided Admiral Allen and his team the entire claims databases they 

have requested. In fact, I am told that they requested this information over a week ago, and without this information we are told that 

they are unable to determine the extent of the claims or what the 

waiting period is for those who have asked for and who need assistance. 

Mr. Willis, can you just share with us, if you know, why hasn’t 

this data been provided to the government? And when can we expect it to be provided? 

Mr. WILLIS. Mr. Chairman, I can tell you that I actually attended 

that meeting last Wednesday with Admiral Allen and was a part 

of that conversation. And on Thursday, members from the integrated services team and from our claims team met via phone to 

talk about how and what data we needed to make sure was captured and incorporated into future claims reports. 

In addition, our software engineers worked over the weekend to 

reconfigure systems to make sure we can extract the appropriate 

data. Some of that date we are already capturing, but in many 

cases, based on a letter that the Admiral sent to our chairman, our 

CEO, the new data that will have to capture. 

On Monday of this week, I was in Biloxi, Mississippi, with members from the integrated services team, and our groups got together 

again to finalize the details, and I can tell you they are working 

hard to get that completed and into the hands of the appropriate 

people ASAP. That work is underway, and the teams are working 

closely together. 

Senator CARPER. OK. So I think you responded to the first half 

of the question, and I appreciate that. I think your response to the 

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23 

second half of the question—And when can we expect it to be provided?—you are saying ASAP. 

Mr. WILLIS. If that has not happened, I would expect it within 

this week. 

Senator CARPER. All right. Thank you. 

A question, if I could, both for you, Mr. Willis, and this one you 

can share with Mr. Bennett. I understand that any claims denied 

by BP or that have not been handled in, I think, 90 days can then 

be brought to the government’s Oil Spill Trust Fund. I believe no 

claims have been denied to date, which really I find hard to believe. Are you telling us that no one person has tried to take advantage of this system, that no one has put forth some sort of false 

claim? If they have, can you provide us with some examples and 

tell us why they have not been denied? 

Mr. WILLIS. What I can tell you is that we have not denied any 

claims to date. We have had thousands of claims put into the system. We have paid, as I mentioned in my testimony, $91 million 

worth of claims, and no claim has been denied. We have a variety 

of claims in the system, everything from a boat captain to a deckhand to a waitress to a lawn man, and we are looking at every 

claim we get carefully, and we are being fair and reasonable and 

practical in our evaluation of those claims. 

I also can tell you, Mr. Chairman, that you are right that we 

have up to 90 days to pay a claim, but so far, from the time a person calls our 1–800 number to the time they receive a check, once 

they have provided us with the documentation that substantiates 

their income or loss, for an individual it is running about 4 days 

on average, and for a business that has a claim less than $5,000, 

it is running about 6 days from phone call to actually walking out 

of the claims center with a check. 

So we are working hard to make sure the process is fair and expeditious, and I always preface my comments by saying that we 

have not denied any claims yet, because I suspect with the number 

of claims in our system that there will be some denials. But none 

have been denied to date. 

Senator CARPER. All right. Thanks. 

Ms. FLEMING. Mr. Chairman, may I add to that? 

Senator CARPER. Yes, Ms. Fleming, please do. 

Ms. FLEMING. I just wanted to note that for our ongoing work for 

you, we will be delving more deeply into the claims process. However, it is not unusual, when you are dealing with large catastrophes such as Hurricane Katrina, that the likelihood of improper 

payments and claims can occur. So it is really important that you 

have a framework in place so that you have reasonable assurance 

that an improper payment could be identified or detected. But at 

the same time, you also have to balance the need to have that 

structure with the need to try to make sure that your claims process is working effectively and efficiently. So you have to have that 

balance. We are going to delve deeply into this for you. 

Senator CARPER. Well, good. There is a tension—— 

Ms. FLEMING. There is a tension. 

Senator CARPER. One, trying to be responsive; second, trying not 

to be foolish. 

Ms. FLEMING. Yes. 

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24 

Senator CARPER. Mr. Bennett, could you respond to this question 

I have asked of Mr. Willis? 

Mr. BENNETT. Mr. Chairman, I would like to do that, because I 

have been asking BP as well—I would like to see some denials because I know that with 56,000 claims, there has got to be some. 

And what I found, my staff working with their staff and also information that comes in to us, we have a 1–800 number that is out 

there. Also, it is communicated to claimants when they get information from BP, if they have questions or concerns. 

Interesting to note, out of the 56,000 claims that have been submitted, we have had 256 calls in the last 5 weeks; 210 of those 

calls were really not about claims. They were about people’s opinions about how the response is going. The 40 of the calls that were 

about claims, we contacted BP or we followed up with the people 

that called. We have been able to reach about half of them, about 

20 of the 40 people, and then we worked with BP to find out what 

the situation is. What we are finding working with BP is that in 

most cases there is either an incomplete claim or not all the information is there, and it would appear to us that BP is trying to give 

the claimant every opportunity to get the right information and to 

understand how the process works before they deny. But I had a 

conversation this morning with some of Mr. Willis’ folks about I 

want to see some denials because I want to understand it, because 

certainly when we start getting claims, if we get any, we will have 

the internal controls to make sure there is no waste, fraud, or 

abuse. And I have encouraged BP to do the same thing. I know 

they are. 

So I do not think it is an indication that they are not acting on 

it. They are just bending over backwards to make sure that before 

they deny, the claimant really did understand and had all their 

ducks in the row. 

Senator CARPER. All right. Thank you. Thanks for that clarification. 

Mr. Willis, back to you, if I might. Going back to the conversation 

I had this morning with the folks in the U.S. claims monitoring 

team earlier today, they told me of some concerns they had involving the reported lack of denials, and we talked a little bit about 

this here. Specifically, there have been reports of individuals who 

come to BP with a claim that are being told that the claim—just 

are sort of told up front that the claim will not be covered, and so 

they never file it. In some of these, there might be claims that are 

actually coverable. And if so, maybe we are not really getting an 

accurate picture of the claims that are being accepted or denied, because ultimately people hearing that their claim is not coverable, 

they just do not make the claim. 

Have you heard of any such reports? And to what extent do you 

think this might be happening or not happening? And, Mr. Bennett, I would really appreciate it if you would sort of chime in on 

this as well. 

Mr. WILLIS. Mr. Chairman, I have not heard any reports like 

that, but I can tell you, given the fact that we have gone in the 

last 50 days from zero to 33 claims offices and from zero checks cut 

to thousands of checks cut and from zero to $90 million, that the 

process we have put in place is not perfect. And we have taken 

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25 

some steps to make sure people are aware in our offices that fraud 

is not going to be tolerated. We have posted signs in offices in 

English, Vietnamese, Spanish, and Khmer languages. And the 

process is not perfect, but I have not heard of any instances. 

I can also tell you that our process is an open claims process, and 

anyone who feels like they have been damaged, have property that 

has been damaged, or if they feel like they have lost income or 

wages as a result of the spill has a right to call our 1–800 number, 

go onto our Web site, or walk into one of those 33 offices and file 

a claim. And they should not be denied that right. 

Senator CARPER. All right. Thank you. 

Mr. Bennett, do you want to take a shot at this again? 

Mr. BENNETT. Yes, Mr. Chairman. One thing I would add, in addition to my earlier comments, is when we started asking about the 

number that was claimed, it is really cases opened, because you see 

this 56,000 number and then you see that there has only been 

27,000 that have been paid. And the question that jumps to your 

mind is that there must be a lot of claims that have not been acted 

on. What we are finding is—and I do not know the number, and 

that is why we are working with BP to get more transparency. But 

what we are finding is that a number of claims—and we are finding this from the people that call us—the claimants do not even— 

have not provided in some cases a dollar amount for what their 

damage is, so they filed the claim, but under OPA, if the claim 

were to come to us, there has to be a sum certain. You have to say 

what the dollar amount was, and you have to document what the 

loss was. 

So a certain number—and I do not know what the percent is— 

of those open claims are really—they are kind of tickets that somebody took, and a good example I know of is a hotel early on thought 

that you have to get in early because the $75 million is going to 

run out. So they took a ticket, they called the claims center to submit a claim. They are actually full from responders, so they have 

not suffered any loss yet. But they are holding, in case the response winds down and maybe later in the season they do suffer, 

then they can submit a claim for the actual demonstrated losses 

later in the season. But that ticket is sitting there open on the 

books, and that is why we are working really hard to try to get better transparency on what is happening with those claims and those 

tickets. 

Senator CARPER. OK. Thanks. 

A question, if I could, both for Ms. Fleming and for Mr. Bennett. 

I do not know if it was Mr. Bennett or Ms. Fleming, but in the testimony of one of you, you state that BP may also choose to pay a 

claim with less documentation than the government would be required to obtain. I would like you to both take a moment and explore that comment a bit further. If that statement is true that BP 

is providing payments for claims that the government would not 

pay, what might that mean for the independent trust fund? And 

could this third-party process, following your office’s guidelines, actually be maybe less liberal in its payments than BP? 

Mr. BENNETT. Mr. Chairman, I can first address that, and we do 

know that BP is paying for things that are not necessarily OPAcompensable. They are entertaining personal injury claims, which 

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26 

are specifically precluded, and also because it is a private entity, 

they are not bound to the same Federal laws and even OPA. If they 

want to pay a claim, they can pay a claim. So they are leaning forward very hard, and if people are harmed from the event, whether 

it is really strictly OPA or not, it would appear that BP is being 

liberal. And at least in some cases, I am sure there are people that 

are not happy and getting paid. So we know that there are claims 

that have been paid that we probably could not pay under OPA. 

Senator CARPER. All right. Ms. Fleming, do you want to comment 

on what Mr. Bennett has said in any way? 

Ms. FLEMING. Well, he certainly has more insight into the current claims process, but it is my understanding that it is certainly 

within BP’s prerogative to pay beyond the OPA-compensable costs. 

But as I highlighted earlier, BP has said that they will pay for all 

legitimate claims. But if for some reason that changes and they 

cannot or will not, then the trust fund could be threatened because 

we do not really know at this point the true costs of the spill. We 

will not know for many months or years to come. The spill has still 

not been contained, and we already know that the number keeps 

growing each day, in terms of the volume that is being spilled. So 

this is obviously an unprecedented spill, where the costs are already in the billions. 

Senator CARPER. OK. Another question just for you, Ms. Fleming. 

How does the Deepwater Horizon spill compare to prior spills in 

terms of its special circumstances and sheer magnitude? 

Ms. FLEMING. Well, I just highlighted a couple. It is my understanding that this has been the worst offshore platform spill in 

U.S. history. It still has not been contained. Exxon Valdez, by comparison, spilled about 11 million gallons and took a little over about 

$2.2 billion just to clean up. BP is at about $1.6 billion already, in 

terms of response costs as well as damage claims. It is going to 

take many months and years to really have a sense of the true 

costs of this spill and the impact to the environment and economy 

in those areas, as I do not think we have a good grasp on the full 

effects of this spill. However, but it is definitely unprecedented, and 

the magnitude will drive these costs. And as I said earlier in my 

opening remarks, there are so many factors besides the magnitude 

that come into play, including the location of the spill—which may 

have affected many species since it is the time of year when they 

migrate and breed. Additionally, the type of oil is a factor that affects costs. It is the type of oil that is very toxic and creates longterm contamination to the shores. So all these factors will influence 

and drive the costs of this spill. 

Senator CARPER. I think your statement discussed factors that 

can affect the cost of cleaning up an oil spill like this. How do these 

factors come into play in the Deepwater Horizon spill? 

Ms. FLEMING. Well, again, I think it is the location, along the 

Gulf Coast. It is an area that is in proximity to about 36 wildlife 

refuges. It is at a time of year when many birds migrate. Also, the 

location and the time of year are going to have and are already impacting the fishing and the tourism communities. Another factor is 

the type of oil that is being spilled, it is a light sweet crude oil, 

which is very highly toxic and long-term contamination effects. And 

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27 

top of it, you have just this unprecedented magnitude of oil and the 

fact that it still has not been contained. 

So all of these factors will interplay and will ultimately impact 

the final costs of the spill, which, again, may take us a long time 

to determine. 

Senator CARPER. How much did you say was spilled in the 

Valdez accident? 

Ms. FLEMING. It is my understanding that it was 11 million gallons, but—— 

Senator CARPER. Does that sound about right, Mr. Bennett? 

Ms. FLEMING. Mr. Bennett has confirmed—— 

Mr. BENNETT. That is correct. 

Senator CARPER. All right. And how much money was ultimately 

paid out? 

Ms. FLEMING. Well, my understanding is that it is about $2.2 billion for the clean-up costs. I am not sure what the claims amount 

is. Mr. Bennett may have a better handle on this, and I am not 

sure if it is fully settled, quite frankly. 

Mr. BENNETT. Yes, Mr. Chairman, Exxon has reported that they 

spent $3.5 billion for the response and claims and damages. And 

we would not know the details because since they paid the bill and 

did not submit a claim for any kind of limit, all we know is what 

they report. 

Senator CARPER. All right. So that was, I think you said, 11 million gallons. And do you know in terms of the amount of oil that 

has leaked to date—can anybody help me with how much we believe has actually leaked today? It seems like the amount of the 

leak has grown, as you know, over time. Now at least it looks pretty small from the first day, but now it is going to be enormous, and 

despite our efforts, despite BP’s and other efforts. But somebody 

help me out. In terms of comparing this to the Valdez, 11 million 

from Valdez, 11 million gallons, and where are we today, with the 

meter still running? Anybody know? No. All right. So $3.5 billion from Exxon Valdez. Was that everything all in? 

Mr. BENNETT. That is what has been reported by Exxon according to our records, yes, Senator. 

Senator CARPER. And they paid that? 

Mr. BENNETT. They paid that. 

Senator CARPER. They paid that. 

Mr. BENNETT. Yes, that was Federal response cost then, as now, 

and Exxon reimbursed the Federal Government for those costs. 

Senator CARPER. All right. That was about 20 years ago, and we 

are 20 years later with a different amount of oil, and most people 

are saying more this time than last time, maybe even in more fragile areas of our country. 

I would just ask Ms. Fleming—and others are welcome to respond, if they would like—do you find comfort in a $20 billion independent fund? That seems like a lot of money. Is your reaction that 

ought to be enough, that might be enough? Do you have any 

thoughts? 

Ms. FLEMING. Well, I think when we are dealing with such an 

unprecedented spill that it is likely to have catastrophic consequences, all options needs to be considered. And I think that anything that will both make the communities whole and at the same 

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28 

time to try to preserve the viability of the trust fund is certainly 

a step in the right direction. But I would say that it is going to be 

important with the details how it is implemented. I think the legal 

structure in terms of the laws and regulations and whether or not 

the liabilities are impacted, all these things are still questions that 

need to be addressed and answered. How this new process will 

interact with the existing process that is in place that BP and 

NPFC have established, I think these are all questions that probably need to be explored and addressed. 

Senator CARPER. All right. Anybody else want to take a shot at 

that one? 

Mr. BENNETT. Mr. Chairman, I would just say that over the last 

19 years since the National Pollution Funds Center was stood up 

after the Exxon Valdez, there has been over 11,000 spills that have 

accessed the fund. In every single one of those until now, there was 

a defined amount. A container, a ship can only hold so much oil. 

So in every single one of those, there was an event, there was a 

spill, and then we commenced the clean-up. 

This is unprecedented because we are still in the middle of the 

spill. It is still spilling. So this is really more than an event. This 

is a campaign. And that is what really makes this so different and 

so hard to anticipate and measure and forecast because it is unprecedented. And I would say the $20 billion that the President got 

in an agreement with BP last night is—I would say it is a very 

good assurance to the American people that BP intends to stay in 

this for the duration. Whether it is enough or not, I think it is too 

early to tell. 

Senator CARPER. Yes. All right. Thank you. 

Mr. Willis, BP has promised, I think since the beginning, that 

the $75 million liability cap that we have been talking about here 

would essentially be irrelevant. And with the discussions and negotiations at the White House, I guess yesterday and today, do you 

know if BP and the Federal Government entered into any kind of 

contractual agreement to this effect? 

Mr. WILLIS. Mr. Chairman, I do not know. 

Senator CARPER. All right. A question, if I could, for Mr. Newman. Last month, Mr. Newman, you filed a petition in Federal 

court under the Shipowners’ Limitation of Liability Act to limit 

your liability for the Deepwater Horizon accident to $27 million. As 

the owner of this facility, shouldn’t you bear some more, some additional responsibility greater for the cleaning up of the damage that 

is being caused by the oil spill? We talk, on the one hand, about 

a trust fund of as much as $20 billion, and that BP and the other 

owners of the well would be assuming. And your company has suggested that your liability is limited to $27 million. 

Mr. NEWMAN. If I could offer a couple of comments to clarify 

that, Mr. Chairman. 

Senator CARPER. Please. 

Mr. NEWMAN. First of all, the filing of the limitation of liability 

action was done as a result of two things: 

First of all, a direct instruction from our insurance underwriters 

to file that action; and in terms of the company’s ability to meet 

our obligations, the preservation of our insurance program is a 

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29 

vital asset of the company. And so we responded, we complied with 

our insurance underwriters’ directive to file that limitation action. 

The second reason we filed the action was to consolidate all of 

the non-environmental claims, all of the numerous personal injury 

lawsuits that are being lodged against the company in multiple 

venues, from States, Federal court. The limitation of liability action 

serves to consolidate all of those non-environmental claims into one 

venue. 

So there were two reasons we filed that. The number that the 

Chairman referred to, the $27 million, is a calculation, according 

to the statute, and so we applied the statute and we applied the 

methodology in the statute to calculate that number, and that $27 

million is an outcome of that calculation. 

Senator CARPER. All right. I am not quick enough on my feet to 

be able to figure out what percent of $20 billion $27 million would 

be, but it has got to be a small percentage. 

Mr. NEWMAN. The limitation of liability applies to non-environmental claims, so it is only in response to personal injury claims. 

The environmental claims are handled under the OPA process that 

Mr. Bennett has laid out. 

Senator CARPER. All right. Thank you. 

Mr. Bennett, another one for you, if I may. Your office is in 

charge of the government’s Oil Spill Liability Trust Fund and manages any claims made to that fund. I understand you have been in 

pretty much constant contact with BP claims officials since the 

whole process began. Is that a fair statement? 

Mr. BENNETT. That is a fair statement. 

Senator CARPER. What instructions has the White House given 

you about how this newly created independent trust fund might 

interact with your office and with the current claims process being 

led by BP? 

Mr. BENNETT. Mr. Chairman, we are still working the details of 

that out, so we do not have anything to say about that right now 

because that was done at a pretty high level and just in the last 

day or two. I think in the coming days we will be meeting and 

working out the details. 

Senator CARPER. OK. Do you expect that process to start right 

away? 

Mr. BENNETT. I cannot say. 

Senator CARPER. All right. Thank you. 

Mr. Newman, if I could for you, please. I understand that 

Transocean has rejected a claim of, I think it is called, force 

majeure from Anadarko yesterday. As I understand it, force 

majeure relieves a company from liability when it cannot fulfill 

contractual obligations because of natural and unavoidable catastrophes. Could you just go back and explain for us why Anadarko 

made this claim and why Transocean rejected it? 

Mr. NEWMAN. I believe, Chairman, that Anadarko’s claim of force 

majeure would be in response to the Administration’s moratorium 

on deepwater drilling activity in the Gulf of Mexico. And, because 

those are ongoing discussions between Transocean and Anadarko, 

I would prefer to let those conversations carry through to their conclusion, before I comment too freely on the current state of those 

conversations. 

H605-41331-79W7 with DISTILLER

30 

Senator CARPER. All right. Another question for you, and then I 

have one for Ms. Fleming, and then maybe a closing statement. 

You have heard your colleagues at this panel give their testimony. You have heard them respond to the questions that have 

been asked of them, and you have given an opening statement. I 

am going to ask you to give just a very brief closing statement and 

any reflections or any additional comments you would like to bring, 

particularly in response to what you have heard others say, or not 

say. But be thinking about that, please. 

Meanwhile, for Mr. Newman, I understand that State lawmakers 

both I think in Louisiana, I think in Mississippi have invited officials from Transocean to participate in hearings that they are holding to examine the spill’s effects on residents in those States. I also 

understand that Transocean has declined to send any representatives to those hearings. And while I understand how busy you and 

your team have to be right now and I appreciate very much your 

appearance before our Subcommittee today. Why has Transocean 

decided not to send representatives to those hearings? And could 

you commit for us today to work with local lawmakers to provide 

the answers that they are seeking from Transocean? 

Mr. NEWMAN. Mr. Chairman, we were unable to participate in 

the Mississippi hearing, and despite our inability to participate, we 

have been responsive to the Mississippi lawmakers’ request for information. We have provided them with all the same documentation that we have provided to the Federal Administration and to 

Congress. 

We have a representative who is attending the Louisiana hearing, which I believe is taking place tomorrow. So we are able to 

participate in the Louisiana hearing. We were unable to participate 

in Mississippi. 

Senator CARPER. Well, again, we appreciate your being here 

today. You said you have somebody at the Louisiana hearing? 

Mr. NEWMAN. We will have somebody at the Louisiana hearing 

tomorrow. 

Senator CARPER. We appreciate that, and I am sure they appreciate that in Louisiana. I would urge you to continue to work with 

the local folks down there to provide the answers that they are 

seeking. 

Finally, a question for Ms. Fleming. How does the Deepwater Horizon spill—no, I am not going to ask that. I think we have beaten 

that one enough. 

I would just ask you to think, reflect back on the conversation 

we have had here today, the questions that have been asked, some 

of the responses given, maybe some of the questions not asked, and 

just make some short closing thoughts for us before I close it out. 

Ms. FLEMING. I think we have covered the fact that we are dealing with a spill that is—— 

Senator CARPER. Let me just interrupt. For you especially, a 

question that my colleagues and I should have asked that we did 

not, if you can think of that before we adjourn here, that would be 

good, too. But go ahead. I am sorry I interrupted you. 

Ms. FLEMING. OK. Sure. I think we basically have covered the 

fact that we are dealing with a spill that is unprecedented in nature. It is clear that it is going to take many years until we have 

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a real good sense of the costs. We already have determined that it 

is probably going to be of greater magnitude than we have seen in 

history. 

The trust fund is in place to cover liability costs for parties, responsible parties that cannot be identified or cannot pay costs. We 

have heard and BP continues to say that it will honor and pay all 

legitimate claims, the $20 billion escrow account is certainly a step 

that can be a vehicle for that and to try to make the communities 

whole. If for some reason the costs just get to be a point where they 

cannot or will not, I think the trust fund is threatened or could be 

threatened, and that obviously comes into play in terms of future 

spills or even being able to pay the claims that we are still seeing 

from the 2007 San Francisco spill and others. 

Senator CARPER. All right. Thanks. Mr. Bennett, any closing 

thoughts you would like to leave us with? 

Mr. BENNETT. Mr. Chairman, I would just like to say that the 

Coast Guard and all of our Federal partners and State and county 

and parish partners on this response are unrelenting. I spent 4 

days down in the Gulf at the end of last week and through the 

weekend. The work is phenomenal. We know the American people 

are not happy. We know not everybody feels that they have been 

treated well and that the right thing is happening. The National 

Incident Commander, Admiral Allen, is moving heaven and earth 

to respond to these things, to be more transparent, to get answers 

to questions that people have. We know we owe it to the American 

public, and we are doing what we can to do that. 

Senator CARPER. All right. Thank you. 

Mr. Newman, a closing thought, please? 

Mr. NEWMAN. Thank you, Mr. Chairman. The closing thought I 

would like to leave is the way business is conducted on the outer 

continental shelf is pretty fundamental. And it is a result of the 

statutory framework that Congress has established, it is a result 

of historical industry practices, and it is a result of the contractual 

relationships between the parties. So if you think about the process 

that the well owner goes through in identifying and securing the 

lease through an arrangement with the Federal Government, in developing an exploration program for that lease, in designing a well 

or wells to carry out that exploration program, in hiring a number 

of subcontractors to help them execute that well design, and then 

benefiting from assessing the commercial quantity of hydrocarbons 

in those wells, and then benefiting from the production of those hydrocarbons—all of that creates a process of ownership and control 

for the well owner. And the well owner derives all the benefits from 

that ownership and control. 

So in terms of establishing that framework as it applies to liabilities, I think it is appropriate for the well owner who derives benefit from the production to also bear the risk if those hydrocarbons 

are released into the environment inadvertently. 

Senator CARPER. OK. Thank you. Mr. Willis. 

Mr. WILLIS. Mr. Chairman, what I would say is that I am here 

as a representative of BP, but I am also here as a representative 

of the Gulf Coast. And as much as BP is counting on me, the members and citizens of the Gulf Coast are counting on me as well. And 

we have said from the beginning that we would do the right thing, 

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and I am confident that we will. We have an obligation to pay for 

the damage that has been caused by this spill, and we will. And 

we are serious, and we have to continue to demonstrate a seriousness to the response that we have underway in the Gulf of Mexico. 

And hopefully through things like the block grants that were given 

to the States, for $175 million, the $70 million for tourism, the $90 

million in claims we paid to date, and today the announcement of 

the $20 billion escrow fund, we are demonstrating our seriousness 

to fixing the challenges that have been created as a result of this 

spill along the Gulf Coast. We will do the right thing. We will do 

the right thing not only because it is the right thing to do, but because the folks of the Gulf Coast are counting on us to do the right 

thing. And we realize at the end of the day our company will be 

judged by how we respond to this spill. 

Senator CARPER. I expect you are right. 

I will close with just reflecting, if I could, what you just said that 

caused me to think of this. The four core values that I have tried 

to instill in any organization I have been privileged to lead, whether it was in the U.S. Navy or State government or the Federal Government, really fourfold: One, figure out the right thing to do and 

just do it; Two is to treat other people the way we would want to 

be treated if we were in their place; the third is really to focus on 

excellence. I like to say if it is not perfect, make it better. I know 

everything I do I can do better. And, last, just do not give up. And 

I think those are actually four pretty good core values to bring to 

bear to this catastrophe that we face and are dealing with in the 

Gulf of Mexico today. 

We have, sadly, in this country an enormous dependence on foreign oil. We have, I guess, 60 percent or so of our oil that we consume in this country, use in this country, comes from other places 

around the world, some of it from unstable nations, undemocratic 

nations, and I fear as we fill up our gas tanks in our cars, trucks, 

and vans every week that we end up inadvertently sending money 

to some places, some people, leaders like Ahmadinejad in Iran and 

Chavez down in Venezuela. And I am convinced some of those 

countries use our money to hurt us. We have found in this country 

that some of the low-hanging fruit, some of the easier-to-recover oil, 

we have extracted that. And a lot of the oil that is available today 

is in hard-to-reach places, as we found out all too dearly here in 

the Deepwater Horizon spill and some places where we invite not 

just danger but calamity, disaster. 

We have to be smarter than this, and I realize that we are going 

to be dependent on petroleum in this country for some time, but 

I hope, if nothing else, that we will use this awful experience to do 

what Einstein encouraged when he said, ‘‘In adversity lies opportunity.’’ And in the midst of all this adversity, to find the opportunity not just to stand up and meet your obligations, as I think, 

Mr. Willis, you are attempting to do on behalf of BP, but that we 

will find a way to move away from our dependence on fossil fuels, 

on petroleum, especially the stuff that is in these unstable countries around the world and in place where it is hard to extract, and 

that we will find some opportunity and a way to move our economy 

in a new direction. I think there is that opportunity, and we just 

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have to be smart enough, as we like to say in Delaware, carpe 

diem, to seize the day. We need to seize the day. 

First, we have to get through this day, through these days and 

these weeks and these months in a way that gives not just the people in the Gulf of Mexico but the people of this country the satisfaction that our best has been done and will continue to be done on 

behalf of those who have been harmed and that we do our dead 

level best to make sure this just does not happen again. 

Our thanks to each of you for joining us today, for your testimony, and for your responses to our questions, and some other 

Members of our Subcommittee will want to ask questions for the 

record. They will have that opportunity. They have 2 weeks to submit those questions, and we would ask that you respond to them 

promptly. 

Again, our thanks, and with that this hearing is adjourned. 

Thank you. 

[Whereupon, at 5:12 p.m., the Subcommittee was adjourned.] 

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(35) 

THE GULF OF MEXICO OIL SPILL: 

ENSURING A FINANCIALLY RESPONSIBLE 

RECOVERY—PART II 

THURSDAY, JULY 22, 2010 

U.S. SENATE,

SUBCOMMITTEE ON FEDERAL FINANCIAL MANAGEMENT,

GOVERNMENT INFORMATION, FEDERAL SERVICES,

AND INTERNATIONAL SECURITY,

OF THE COMMITTEE ON HOMELAND SECURITY

AND GOVERNMENTAL AFFAIRS,

Washington, DC. 

The Subcommittee met, pursuant to notice, at 2:30 p.m., in room 

SD–342, Dirksen Senate Office Building, Hon. Thomas R. Carper, 

Chairman of the Subcommittee, presiding. 

Present: Senators Carper, McCaskill, McCain, and Ensign. 

OPENING STATEMENT OF SENATOR CARPER 

Senator CARPER. The Subcommittee will come to order, please. 

Well, good afternoon, or as we say in Delaware, konnichiwa. 

A week ago today, BP successfully placed a containment cap on 

the Gulf of Mexico oil well which had blown out nearly 86 days before. It is a welcome development and one which many in our Nation were probably beginning to doubt they would ever see. While 

this accomplishment brings us cautious hope, that cautious hope is 

tempered by the harsh reality of what is left in the wake of this 

disaster: The 11 men who lost their lives on the Deepwater Horizon 

rig and who leave behind families who are forever altered by this 

horrific accident; the over 185 million gallons of crude oil dumped 

into the Gulf of Mexico, which blackened beaches and damaged 

countless wildlife habitats; and the businesses and communities 

which some fear may not be fully rebuilt for a generation or more. 

Indeed, while we may have removed the bull from the china shop 

with the capping of this well, we have a lot of pieces left to pick 

up. Last month, our Subcommittee held a hearing to explore how 

we were ensuring America would be made whole again following 

this disaster—without putting a hole in our pockets. 

We learned that the U.S. Coast Guard has been tracking the 

Federal costs in responding to the oil spill and sending bills to the 

responsible parties for reimbursement. To date, the Federal Government has billed the responsible parties for over $222 million in 

incurred costs. The most recent bill—totaling over $99 million— 

was sent last week. At our hearing last month, we learned that BP 

had been cutting the checks for these invoices, and they promised 

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36 

us that they would continue to do so for as long as we continued 

to send them. 

While BP is the principal owner and operator of the oil well and 

is recognized by the government as the primary responsible party, 

there are other companies who have also received these bills and 

have obligations under Federal law—among them, Anadarko Petroleum Corporation, which owns a 25-percent stake in the oil well, 

and MOEX Offshore, which owns a 10-percent stake. But while the 

Federal Government has received payments from BP for taxpayers’ 

costs, we still have not heard back from Anadarko or MOEX. 

This Subcommittee has obtained invoices that BP sent these two 

companies asking them to share in the costs of responding to the 

spill so far. We have also received the companies’ responses to 

those bills, and it is clear that they have declined to date to pay 

them. In the event that BP is unwilling or unable to continue carrying the full weight of this spill’s costs, the American people will 

want to know who else is responsible. 

Under the law, Anadarko and MOEX are responsible and liable 

for this spill. Today I hope to hear more from them about how they 

view their relationship with BP and their roles in responding to 

and helping to pay for this disaster. Our hearing last month also 

featured testimony from the Government Accountability Office, 

which reported significant ongoing risks and vulnerabilities related 

to the Oil Spill Liability Trust Fund. This fund is responsible, as 

you know, for claims made by individuals and businesses who are 

denied or left unsatisfied by BP’s claims process. 

Since that time, President Obama and senior BP officials have 

announced a new independent claims process that would be created 

and funded by a $20 billion escrow fund established by BP. Kenneth Feinberg, who joins us here today—former Special Master of 

the 9/11 Victim Compensation Fund, among other distinctions— 

was named by the Administration to be the Administrator of this 

new claims regime. Today I look forward to hearing from Mr. 

Feinberg about his progress to date and how the fund he manages 

will interact with the statutory framework that already exists within the Oil Spill Liability Trust Fund. 

Our collective sigh of relief due to the good news coming from the 

Gulf in recent days should not distract us from the significant challenges that lie before us. And while the well may now be capped, 

this spill will continue to play out at the kitchen table of every 

American whose livelihoods and way of life have been affected by 

this calamity. My colleagues and I will do whatever it takes to get 

residents of the Gulf Coast back on their feet again, to protect our 

Nation from the costs and impacts of this spill, and to make sure 

that those who are responsible for this disaster are held to account. 

As my friends at the witness table may have noticed, we were 

joined briefly by Senator McCaskill, and my guess is she is going 

to be rejoining us here in just a moment. And rather than wait 

until that moment occurs, what I am going to do is begin the process of witness introduction, and this will not take too long, so hopefully she will beat the clock and be ready to make a statement, if 

she would like, before witness statements begin. 

On panel one our first witness today is Kenneth Feinberg, Administrator of the Gulf Coast Claims Facility. The Gulf Coast 

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37 

1The prepared statement of Mr. Feinberg appears in the Appendix on page 115. 

Claims Facility site the new independent claims process funded by 

a $20 billion escrow fund established by BP. Prior to his appointment as Administrator, Mr. Feinberg served as Special Master of 

the September 11th Victim Compensation Fund and Special Master 

for Compensation. Welcome. 

Mr. FEINBERG. Thank you, Mr. Chairman. 

Senator CARPER. Our next witness is James Hackett. Mr. Hackett is Chairman and Chief Executive Officer of Anadarko Petroleum Corporation. Anadarko, as many know, is one of the world’s 

largest independent oil and natural gas exploration and petroleum 

companies and owns a 25-percent interest in the Deepwater Horizon oil well. 

And our final witness today is Naoki Ishii, President of MOEX 

Offshore 2007. Mr. Ishii has worked with Mitsui Oil Exploration, 

MOEX’s parent company, for nearly 20 years. MOEX Oversight 

owns a 10-percent interest in the Deepwater Horizon oil well, and 

we welcome you to our country and particularly to this hearing 

today. Thank you for coming. Domo arigato. 

All right. Mr. Feinberg, and to our witnesses, I am going to ask 

you to lead off for us. Each of you will be given roughly 5 minutes. 

If you go a little bit beyond that, I will not complain, but I would 

ask you to try to stick fairly close to that. If you go way over that, 

we will have to rein you back in. But your entire statement will 

be made part of the record, and I would ask you to proceed at this 

time. 

TESTIMONY OF KENNETH R. FEINBERG,1 ADMINISTRATOR, 

GULF COAST CLAIMS FACILITY 

Mr. FEINBERG. Thank you, Mr. Chairman. I understand the rules 

governing the 5 minutes. As a former special counsel to the Senate 

Judiciary Committee and former chief of staff to a colleague of 

yours, Senator Edward Kennedy, it is good to return to the Senate 

to testify. 

I want to thank you for this opportunity to testify. Yes, I am the 

independent—and I want to emphasize ‘‘independent’’—Administrator of the Gulf Coast Claims Facility. Now, that was a facility 

established by agreement between the Administration and BP to 

set up a process, a voluntary process to invite any claimant in the 

Gulf, or elsewhere, that has an eligible claim arising out of the spill 

to voluntarily come in, have their claim evaluated, and if it is 

found eligible and calculated correctly, that individual or that business would be entitled to compensation out of a $20 billion escrow 

fund that was established by BP and the Administration. I am not 

part of that escrow fund. I did not create it. I have not negotiated 

it. I am strictly drawing on it, beginning next month, in order to 

pay all eligible claims. 

Now, hopefully the $20 billion will be sufficient to cover all 

claims not only from my facility but also government claims—Federal, State, local—which I have no jurisdiction over. Any government claim must be filed by that governmental entity against BP. 

The facility that I have been asked to administer will deal with individual claims—wages, etc.—small and large private businesses— 

H605-41331-79W7 with DISTILLER

38 

1The prepared statement of Mr. Hackett appears in the Appendix on page 117. 

business interruption, lost profits, etc. So I am in charge of a facility that will draw on the $20 billion, but I am not the exclusive distributee. Governments will also draw on it. 

Now BP has stated, as you know, Mr. Chairman, that if the $20 

billion is insufficient, it has stated publicly that it will honor any 

and all eligible financial obligations above the $20 billion. So it is 

not a capped amount in terms of BP’s financial obligation to pay 

claims. 

Now, as I get ready to transition from the BP claims process, I 

note with some degree of credit that BP has already paid over $200 

million in claims without my involvement, without this new facility. So they have set up 35 claims offices throughout the four-State 

Gulf region to process claims and have been doing so. I believe we 

will do better. I think we will accelerate the claims process, make 

it more efficient, allow people to file online on the Internet without 

ever even visiting a claims process. But I am confident that when 

the claims facility is up and running next month, it will have a 

seamless transition from BP, which will be out of the private 

claims business and will be part of this facility. 

There are difficult challenges ahead. What constitute eligible 

claims for damages? How are those damages going to be proven? 

I mean, you cannot just file a claim without any corroboration. But 

I will work with the people of the Gulf. I am not beholden to the 

Administration. I am not beholden to BP. I am working for the people and the businesses in the Gulf to try and make sure that equity 

is done, that justice is done, and that I distribute the funds that 

are available as soon as I can. 

I want to note with gratitude the staff of this Subcommittee. I 

have been working with the staff of this Subommittee over the past 

few weeks in trying to listen to concerns that have been expressed 

by you and other Members of the Subcommittee, by citizens of the 

Gulf. I have been coordinating with the staff and will continue to 

do so. 

So I am fairly confident that, despite the challenges ahead, we 

will be able to make this facility function the way it should independently so that the citizens of the Gulf are served by this program. 

Thank you, Mr. Chairman. 

Senator CARPER. Thanks very much, and I think I speak for my 

colleagues to say thank you for taking on this responsibility. 

Mr. Hackett, welcome. We are delighted that you are here. 

Please proceed. Thank you for joining us. 

Mr. HACKETT. Thank you, Mr. Chairman. 

Senator CARPER. Again, your full statement will be made part of 

the record, and feel free to summarize. 

TESTIMONY OF JAMES T. HACKETT,1 PRESIDENT AND CHIEF 

EXECUTIVE OFFICER, ANADARKO PETROLEUM CORPORATION 

Mr. HACKETT. Thank you. I am eager to be here to answer questions. I am Jim Hackett. I serve as Chairman and Chief Executive 

Officer of Anadarko Petroleum. I just wanted to make some brief 

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39 

1The prepared statement of Mr. Ishii appears in the Appendix on page 120. 

oral comments that are consistent with the written comments that 

we gave to your Subcommittee. 

The Deepwater Horizon explosion has been an unprecedented environmental disaster, as well as has impacted many families of the 

11 men lost. And our feeling is that this pain continues in terms 

of the Gulf Coast region and the communities in that region. And 

while BP’s capping of the well has, I think, brought guarded hope 

that the situation may soon be brought under control, we must continue to keep the people of the Gulf in our hearts and prayers until 

the environment and the economy there have recovered. 

We, along with others in the industry, have continued to support 

the response effort of the Unified Area Command, offering technical expertise, providing specialist equipment, and pledging to donate any net revenues from any oil we receive to local charities and 

civic organizations in the Gulf region. 

We share the desires of all Americans that we are arriving at a 

point where efforts can now turn to restoring the Gulf region as 

quickly as possible. The Gulf has already suffered significance 

losses, and the Subcommittee is rightly concerned that American 

taxpayers must not pay the costs associated with the spill. 

We appreciate BP’s recognition of its central role as operator of 

the well and its frequently stated public commitment to continue 

to pay all legitimate claims in order that the American taxpayers 

are not burdened. 

To prevent that from happening as well, we are committed to 

meeting our obligations under the Oil Pollution Act. Let me reemphasize the central point for the Members of the Subcommittee and 

you today. I strongly believe that the taxpayers of America should 

not be stuck with the bill for the tragedy in the Gulf. I am before 

you today because Anadarko was a non-operating investor in the 

Macondo well. According to longstanding industry practice and 

standard contractual arrangements, as a non-operator we are essentially a passive investor in the Macondo well. Although we receive some limited information regarding plans and progress, all 

day-to-day operational decisions were made by the operator, BP. 

Our company and our industry have many highly skilled and 

committed individuals that work hard every day to safely deliver 

the energy resources America needs. All energy resources must be 

found, developed, and produced safely and in a manner that protects the environment. We all agree the well must be plugged, 

those that have suffered related losses must be compensated, and 

the Gulf must be restored. I and the 4,300 employees of Anadarko 

are eager to help make that happen. 

I look forward to your questions. 

Senator CARPER. Good. Mr. Hackett, thanks for that testimony. 

Mr. Ishii, please proceed. 

TESTIMONY OF NAOKI ISHII,1 PRESIDENT, MOEX OFFSHORE 

2007 LLC, ACCOMPANIED BY FUJIKO SATO, INTERPRETER 

Mr. ISHII. Chairman Carper, Ranking Member McCain, thank 

you for the opportunity to testify at today’s hearing. I am Naoki 

Ishii, President of MOEX Offshore 2007 LLC, based in Houston, 

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40 

Texas. MOEX Offshore 2007 LLC has a 10-percent non-operating 

interest in the lease on which the Deepwater Horizon rig was drilling. 

We are deeply saddened by the tragedy of the Deepwater Horizon 

accident. Our thoughts and prayers go out to the families of those 

who were lost and to all of those who have been affected by this 

spill. We understand the significance of this matter to the people 

of the Gulf Coast. MOEX Offshore will continue to cooperate with 

all of the parties who are responding to and investigating this accident. 

MOEX Offshore does not conduct actual field operations or activities to develop oil and gas. MOEX Offshore had no role in the selection or operation of the Deepwater Horizon rig. We are a minority 

non-operating investor. 

MOEX Offshore shares the Subcommittee’s concerns about these 

tragic events. We are closely monitoring the ongoing investigations. 

We look forward to working in good faith with Congress. MOEX 

Offshore will work with all levels of government to assist in their 

efforts to restore the Gulf Coast. 

I have submitted written testimony to the Subcommittee that 

supplements this statement. I look forward to answering your questions. 

Thank you again for the opportunity to share MOEX Offshore’s 

view. Thank you very much. 

Senator CARPER. Thank you for your oral testimony and for your 

written testimony. I have been joined by Senator McCain and Senator Ensign. I have asked Senator McCain if he wanted to make 

any brief statements, and he has declined. And, Senator Ensign, 

would you like to as well? OK. 

Mark this day as an unusual day when we have my colleagues 

on either side declining that opportunity, but we will get right into 

the questions. I am glad my colleagues are here. I will just lead off 

with a question for Mr. Hackett and Mr. Ishii. Let us do 7 minutes 

for questions, if we could, for each Member. 

Mr. Hackett and Mr. Ishii, as you both know, your companies, 

Anadarko and MOEX, have received, I believe, four bills from the 

Federal Government for costs related to this spill. It appears under 

the law that your companies are liable for these costs. However, we 

have yet to see any reimbursement for these costs from your companies. 

Could you please tell the Subcommittee and the American taxpayers watching us today why Anadarko and why MOEX believe 

that you do not have to pay? Mr. Hackett, would you like to go 

first? 

Mr. HACKETT. I would be happy to, Senator Carper. The important thing to note is that the taxpayers are being paid, and this 

operates very similar to the Superfund legislation on which the Oil 

Pollution Act was based or formed from, and that is that the operator or the lessee is the primary payer, and then the allocation of 

liability occurs behind that payment. So we view this as a very 

good process, a very standard process in terms of billing, and the 

important thing is the American taxpayer is being kept whole. 

Senator CARPER. Let me ask you again: Why do you feel you do 

not have to pay? Just one more time explain it. Why do you feel 

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41 

that Anadarko does not have to pay in response to billings from the 

Federal Government? 

Mr. HACKETT. The Federal Government is being paid. BP is paying the Federal Government, has stated that they want to continue 

to do that. Should the American taxpayer be paid double? As long 

as there is a paying party—and this is the same way it works 

under the Superfund regulation as well, and the Administration. 

And I think even the testimony from the government witnesses to 

your Subcommittee in the earlier hearing ascribed to the same 

principle. As long as the American taxpayer is kept whole, that is 

the key. And then the allocation of reimbursement is done behind 

that payment between the parties involved. 

Senator CARPER. All right. Mr. Ishii, the same question, if I can. 

Can you please explain to our Subcommittee and to the American 

taxpayer watching us today why you feel that MOEX does not have 

to pay in response to the billings presented to it by the Federal 

Government? And we understand, to those who have joined us in 

person here or through the media, that Mr. Ishii gave his testimony orally in English. He will be working through an interpreter 

to respond to our questions. 

Mr. ISHII [through interpreter]. Mr. Chairman, regarding the invoice from the Coast Guard, there is a contract in place among the 

partners, and that contract states that BP, as the operator, would 

make the payments in the first instance. And, therefore, based on 

that contract provision, BP has been making the payments. 

Senator CARPER. All right. A question again to follow up, if I 

could, for you, Mr. Hackett, and for you, Mr. Ishii. Have either of 

your companies contacted the National Pollution Fund Center to 

contest what we describe or call a Notice of Designation? In other 

words, have you told the Federal Government really to stop sending you these bills? Mr. Hackett. 

Mr. HACKETT. We have not, Senator. 

Senator CARPER. Could you explain why or do you anticipate 

what your anticipation is in terms of contesting this notice or 

reaching out to the Federal Government to ask them to stop sending the bills? 

Mr. HACKETT. No. We actually have stated publicly that we view 

ourselves as being a responsible party under the Oil Pollution Act, 

so we do not see a need to send that note. 

Senator CARPER. All right. Mr. Ishii, if I may, the same question. 

Has your company, has MOEX contacted the National Pollution 

Fund Center to contest the Notice of Designation? And have you 

told the Federal Government to stop sending your company these 

billings? 

Mr. ISHII [through interpreter]. Mr. Chairman, I do not have any 

recollection that we have been contacted by them, nor of any response that we made to them. 

Senator CARPER. I see. May I ask you to go beyond your recollection and respond to us in writing for the record, please? 

Mr. ISHII [through interpreter]. Mr. Chairman, I understand. I 

will do that. 

Senator CARPER. Thank you. 

Next question, again for Mr. Hackett and Mr. Ishii. Our Subcommittee received documents, I am told, this week that show BP 

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has now sent your companies two bills for a share of the costs that 

have been incurred. I believe that the most recent bill to Anadarko 

totaled some $900 million and to MOEX I believe about $400 to 

$450 million. I think I know the answer to this question, but I will 

ask it anyway. Will either of your companies be paying these bills? 

Mr. Hackett. 

Mr. HACKETT. Senator Carper, as has been reported, we have 

withheld reimbursement to BP. Again, the taxpayer is being kept 

whole, which is the important thing. We have a dispute behind our 

own agreement between the parties that I think is better left to the 

parties, and that is where we stand, and we are in discussions with 

BP on that. 

Senator CARPER. All right. Mr. Ishii, same question, please. 

Mr. ISHII [through interpreter]. Mr. Chairman, regarding the invoice from BP, what we are most interested in is, first, to try to 

find out why this tragic accident occurred, and so we need to first 

clarify the cause of the accident. I think it is a little too early to 

talk about things that would follow because we have to wait for the 

cause to be clarified. 

However, we have properly stated that any proceeds that would 

be obtained from the recovered crude oil should be used for the people in the Gulf Coast impacted by this accident. And, therefore, we 

have relinquished our rights to those proceeds. 

Senator CARPER. All right. To my colleagues, I indicated we 

would go 7 minutes. I am going to go one more minute, and then 

everyone will have at least 10 minutes. 

Just to follow up, if I could, again, for Mr. Hackett and Mr. Ishii, 

as a responsible party under the Oil Pollution Act, your companies 

are joint and severally liable for damages relating to the Deepwater 

Horizon incident. If BP begins to pay only their share, what they 

believe to be their share of the bills received from the Federal Government, will Anadarko and MOEX pay their respective shares in 

the interim? Or will you wait to litigate this issue with BP? Mr. 

Hackett. 

Mr. HACKETT. Senator, I think that the arrangement that is currently underway, as I mentioned, is very typical and I think the 

right arrangement for the government to have with the operator. 

We expect, as BP has committed to and as the government has 

suggested they will do, that those arrangements will stay in place. 

We think it is the best thing for the American public. We think it 

is the best thing for the taxpayer. And I think that the contractual 

issues between the parties can be sorted out separately. 

Senator CARPER. Have there been communications between 

Anadarko and BP on this issue as to whether or not they intend 

to continue to pay 100 percent of the billing or if at some point in 

time they anticipate saying that is enough and to invite their partners to pay their share? 

Mr. HACKETT. We understand—we have not asked them for any 

modification of their public, frequently repeated commitment to pay 

all bills first. 

Senator CARPER. All right. I will stop there and yield, if I could, 

to Senator McCain. Thanks for joining us today, Senator McCain. 

Senator MCCAIN. I thank the witnesses. 

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43 

Mr. Hackett, BP has set aside $20 billion in an escrow fund. Has 

your company set aside any funds? 

Mr. HACKETT. We have not, Senator McCain. 

Senator MCCAIN. Why not? 

Mr. HACKETT. We do not think it is necessary to do so. 

Senator MCCAIN. Look, here are the following facts: The Federal 

Government has named four companies as ‘‘responsible parties’’: 

Deepwater Horizon/Transocean, BP, Anadarko, and MOEX. And 

under the Oil Pollution Act, responsible parties, which you have 

been named one of, are obligated to pay all cleanup costs and economic damages. So right now, my understanding of the law is that 

responsible parties have to pay. But you are not paying. Is that 

right? 

Mr. HACKETT. Senator McCain, if I can go back again, the issue 

is one—— 

Senator MCCAIN. Are you paying or not paying? 

Mr. HACKETT. We are not paying. 

Senator MCCAIN. And you have not set any money aside. 

Mr. HACKETT. We have not set any money aside, but we have 

substantial assets. 

Senator MCCAIN. You have been billed for $900 million. What 

would be wrong with going ahead and paying that, and then if you 

can prove gross negligence or willful misconduct from BP, you 

would then get that money back? Because right now the people 

who are in the Gulf need the money, not the litigation. 

Mr. HACKETT. Senator, as I understand it, nobody is being disadvantaged today from our lack of setting up that sort of fund. 

Senator MCCAIN. Because BP is paying the whole bill. 

Mr. HACKETT. BP is paying the bill, and they have committed to 

doing that, and—— 

Senator MCCAIN. Even though you are designated as a responsible party. 

Mr. HACKETT. We may be confusing two different issues. Under 

that Oil Pollution Act, I think that any proceedings there, as I 

mentioned, traditionally have occurred similar to the Superfund 

where the operator pays the bills first, and then they allocate the 

responsibility amongst the parties. 

Senator MCCAIN. Well, let me turn to Mr. Feinberg. By the way, 

thanks for all your good work. Your reward will be in heaven, not 

here on Earth, Mr. Feinberg. We thank you for all your great work. 

Mr. FEINBERG. Well, your praise helps heaven. Thanks. [Laughter.] 

Senator MCCAIN. Mr. Feinberg, do you agree with me that there 

are ‘‘responsible parties’’ here under the Oil Pollution Act? 

Mr. FEINBERG. I do not know. All I know is that the Administration and BP entered into an agreement to set up an escrow account 

for $20 billion, which I will draw on. I do not know. And it can be 

on that. 

Senator MCCAIN. You do not know anything—do you want to 

venture an opinion? 

Mr. FEINBERG. No, I am not an expert in the field, and I would 

not dare venture an opinion. 

Senator MCCAIN. Now, Mr. Feinberg, you have ventured many 

opinions of which you are—and so have I, on which we are not exH605-41331-79W7 with DISTILLER

44 

perts. But, anyway, let me, Mr. Feinberg, again thank you and 

thanks for going down and meeting with the people and talking 

with them. I think that is really vital, and I thank you for doing 

that. I have seen a lot of clips of you because they not only need 

support, financial support, but they need sympathy and understanding, so thank you for doing that. 

Mr. FEINBERG. Thank you. 

Senator MCCAIN. Do you believe that local government should be 

compensated for lost tax revenue and reimbursed for additional expenditures related to the response and cleanup efforts? 

Mr. FEINBERG. Yes. 

Senator MCCAIN. You do. 

Mr. FEINBERG. Yes, I do. 

Senator MCCAIN. And where should that come from? 

Mr. FEINBERG. Under the arrangement entered into on this Gulf 

Coast Claims Facility Center that I am setting up, any government 

claim—local, State, Federal—does not go to me. By agreement, it 

goes to BP. I have no jurisdiction yet—maybe it will change, but 

I have no jurisdiction over reviewing and authorizing payment for 

government claims, but they do come out of the $20 billion escrow 

account. 

Senator MCCAIN. OK. During one of your town hall meetings, 

you were asked about claimants who work or operate in all-cash 

businesses and do not necessarily have tax returns, profit and loss 

statements, and check stubs. You were quoted in a July 16 article 

as saying, ‘‘Well, tell the captain of the boat or your priest to vouch 

for you.’’ Does that maybe open the door for a little bit of fraud 

here? 

Mr. FEINBERG. I have reminded everybody down there I will bend 

over backwards to try and authorize emergency payments to people 

in need down there. Now, I agree with you, Senator, as I usually 

do, that it does raise a real serious question. I have told everybody 

in the Gulf that even if I authorize payments, I must send them 

by law a 1090, tax verification. Hopefully we will find a way to 

prove those claims without at the same time encouraging fraud. 

That is a challenge. 

Senator MCCAIN. And so do you have a policy or a way that you 

could preemptively take measures or steps to prevent fraud? 

Mr. FEINBERG. Yes. First, we have been in constant communication with the Department of Justice, Criminal Fraud Division. As 

you will recall, Senator, in the 9/11 Victim Compensation Fund, 

there were 7,300 applications, and there were only 35 fraudulent 

applications. It worked. With the help of the Department of Justice 

and with my own internal auditing program, I am confident that 

we will be able to prevent or deter fraudulent claims. We have to 

do that. 

Senator MCCAIN. Have you got a handle on yet or a rough estimate of what the costs are going to be here? 

Mr. FEINBERG. No, because the oil just stopped. We will have in 

the next 30 days for you, Senator, a budget as to what we think 

the infrastructure will cost to administer the program and how 

many claims there will be and how many eligible claims, whether 

the $20 billion will be sufficient—unclear as yet until we see the 

claims. 

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45 

Senator MCCAIN. Have you got a guess as to whether $20 billion 

is sufficient? You have no guess? 

Mr. FEINBERG. I have no guess. I would hope $20 billion would 

be sufficient. I would hope so. But, fortunately, as you know, BP 

has stated that if $20 billion is not sufficient, they will step up and 

honor all additional claims that may be eligible and compensable. 

Senator MCCAIN. Mr. Ishii, do you have a contingency fund, an 

escrow fund set aside for payment of damages as a result of the 

oil spill? 

Mr. ISHII [through interpreter]. Senator, MOEX has not established a fund. 

Senator MCCAIN. Well, look, let me just say, here we have a situation where at least the Federal Government has named both of 

you as ‘‘responsible parties.’’ Obviously, BP feels that you should 

pay a share of the repayments that are necessary to try to fix and 

repair the damages from this terrible disaster. You have not paid 

anything, and you have not even put any money aside. I do not 

think that is the right thing to do. It is pretty clear what you are 

going to do is litigate as to whether BP had gross negligence or 

willful misconduct caused by the accident. So I strongly recommend 

that you step forward, frankly, as BP has—I did not think very 

often I would be praising BP. But I strongly recommend that you 

set aside funds and that you start paying some bills so that the 

people will know that you are a responsible organization whose 

first obligation is—if indeed you are responsible parties, which is 

what you have been designated and you are going to have to prove 

that you are not—that you start paying some of these bills and set 

up an escrow fund. And I think it would be in the best interest of 

the people of this country and, frankly, the image of your corporations. 

I thank you, Mr. Chairman. 

Senator CARPER. Thank you, Senator McCain. Welcome, Senator 

McCaskill. 

Senator MCCASKILL. Thank you very much. 

Mr. Feinberg, I am curious about what is compensable and what 

is not, and it is not clear to me what is compensable and what is 

not in this situation. Let me draw on your experience, and I do 

think that you are a remarkable, talented lawyer. And lawyers 

hardly get any praise around these parts, so let me just tell you 

that I think you are a remarkable lawyer. 

Mr. FEINBERG. Thank you. 

Senator MCCASKILL. Tell me, after the tragedy of September 11, 

2001, as you administered that claim fund, were there non-pecuniary damages available to the surviving spouses? Were they able 

to access loss of consortium—which for lay people means the value 

of your loss of companionship, your inability to have more children, 

those kinds of damages—and punitive damages? Was that available to the surviving spouses of the tragedy in New York? 

Mr. FEINBERG. By statute, punitive damages, no, unless you 

opted out of the fund and wanted to litigate. 

Senator MCCASKILL. Right. 

Mr. FEINBERG. Virtually 97 percent came into the fund voluntarily. No punitive damages. 

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46 

Pain and suffering, emotional distress, yes, if and only if that 

pain and suffering and emotional distress was accompanied by either: A, death of a loved one; or, B, physical injury. You could not 

recover by statute just for loss of consortium, pain and suffering, 

emotional distress. It had to be part of a physical injury or death 

arising out of the attacks. 

Senator MCCASKILL. I am sure you are aware, because I am sure 

you have researched and had lots of folks help you get a handle on 

the law, that we have what I think is a terribly unfair situation 

here in that the Jones Act limits the liability for the surviving 

spouses of the men who lost their lives in this tragedy. And I think, 

if my research is correct, I think Senator McCain helped take the 

airplane exemption out after a tragedy air crash. This used to 

apply to the seas, the air, all kinds of methods of transportation 

that were not landlocked. But we did not remove this unfair limit 

for vessels, and so these women, many of them with small children, 

many of them who live day in and day out knowing that their 

spouses were engaged in—and, frankly, I think some of them even 

have some evidence that will come to light that some of their 

spouses were worried about this particular rig and the problems 

they were having. I am curious as to your take on that limit. And 

is it fair that, depending on where you lose your spouse, if it is on 

the water, you cannot recover, but if it was on land you could? 

Mr. FEINBERG. I would urge the survivors of those who lost their 

lives to first voluntarily come into this fund. They are eligible to 

come into the Gulf Coast Claims Facility. Deaths are included, as 

well as physical injury. I am not limited by the Jones Act or any 

other law in terms of my ability to at least calculate damage, if eligible, and to offer voluntarily some sort of compensation. No one 

is obligated to take that compensation, so it is sort of a free preview. 

So I am sure that all of these widows that you reference have 

excellent lawyers who are well regarded, but I would urge them to 

first consider voluntarily providing an application to me to review, 

which could take into account not only existing law but equity and 

what would be fair and just. 

Senator MCCASKILL. So you can do a complete equitable decision 

without any limitations of existing Federal law? 

Mr. FEINBERG. That is correct. 

Senator MCCASKILL. Well, would you think that if someone 

who—it is certainly their right. If they decide that they want to go 

into the courts and have justice the old-fashioned way that we do 

it in this country, is it fair that their limit on damages would be 

in place, whereas if there was an airplane crash or if there was a 

building that was blown up, they would not have that limitation, 

do you think? 

Mr. FEINBERG. I am not an expert in the Jones Act, but I would 

question the legitimacy of making that distinction. 

Senator MCCASKILL. And I question it also. I think it is something that we need to look at quickly in Congress just as a matter 

of pure fairness that these women should not have that limitation. 

I understand the point you are making about a free preview. It is 

almost like a non-binding dispute resolution—in fact, it is a nonbinding dispute resolution. That is exactly what it is, and I think 

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that would be something that is available to them. But at the same 

time, I think they should have every mechanism in the law that 

any other surviving spouse would have after this kind of problem, 

regardless of the location of the tragedy. 

Mr. FEINBERG. I would also say that under the facility as it currently is planned, anybody who is eligible can receive immediately 

from this facility up to 6 months of emergency payments without 

any obligation, without any requirement to waive any legal rights. 

If you are eligible and we calculate that loss and it is provable, we 

will immediately issue up to 6 months’ emergency compensation. 

Senator MCCASKILL. For businesses that have gone out of business as a result of this crisis, that have actually lost their businesses, are you able to do blue sky value also? 

Mr. FEINBERG. I would consider it. I am not sure how blue sky 

value exactly would apply here, but such businesses who are now 

defunct are certainly eligible. 

Senator MCCASKILL. OK. Mr. Hackett, I am curious. You had to 

know going into this hearing that you were going to get some tough 

questions, both you and Mr. Ishii, about the failure to set up a fund 

or to set aside any money to address whatever part of this you may 

have some responsibility for. And if you say you have plenty of resources to do that, and if it is never tapped into, I am just curious 

why, just from a public perception, would you resist this. I mean, 

you look like that you are not stepping up. It looks like you are not 

taking responsibility to the members of this panel and to the American people. Why would you suffer that kind of public relations disaster if it is not going to make a difference in terms of how much 

money you might be called upon to pony up for your share of any 

responsibility for this occurrence? 

Mr. HACKETT. Senator, I think we start with the fact that the 

American taxpayer is being kept whole, so we do not view it as a 

situation where they are not being kept whole. 

The second place we start is what legal position we should take. 

The third position is, frankly, to do what is right, and we feel 

very strongly about this, for our shareholders, our employees, and 

our industry. 

What we have learned in public testimony—and we withheld any 

opinions for 2 months—causes us grave concern. We have contractual dispute mechanisms within the joint operating agreement that 

we think we are entitled to exercise. We understand from many 

decades of practice that the Oil Pollution Act, modeled after the 

Superfund legislation, operates in a fashion where the operator 

pays the bills, and then we apportion liability. 

We do not feel it is right for us to have to pay first. We think 

it is right that BP pay first. They publicly stated they are committed to doing it. 

Senator MCCASKILL. Well, nobody is asking you to pay anything. 

I mean, I guess what I am saying is obviously the lawyer department won out over the public relation department. 

Mr. HACKETT. I think I said what is right, ma’am. I did not say 

that the lawyers won out. 

Senator MCCASKILL. Well, no one here is saying that you should 

have to be paying something right now. I understand that there 

are liability issues that have to be determined, and there are going 

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to be some real cat fights among lawyers, among all of the four 

parties, as to how that liability ultimately plays out. BP knows 

that they have primary liability. They have stepped up—after the 

President asked them to, I think, in a show of strong leadership— 

and they put $20 billion cash on the nose. I think that is appropriate, and I think frankly it has gone a long way with the American people that they understand this. 

I guess what I am saying is, if no one is asking you to pay anything, if all we are asking you to do is to acknowledge somewhere 

in your corporate accounting that there may be a day that you 

might have to pay something, and to show the American people 

and to show these Senators and to show the people in the Gulf 

that, if that day came, you are prepared to address it. If it is not 

going to make any difference in your bottom line right now, why 

on God’s green Earth wouldn’t you do it? 

Mr. HACKETT. Just as a piece of information on the Department 

of Justice, as you know, they had sent us a letter regarding any 

extraordinary transactions that would compromise that asset position. We have committed to them that we will fully inform them 

of that. We have a very strong balance sheet. There is cash on 

hand. We do not believe that an escrow fund is required for us to 

show bona fides with regard to our ability to pay. 

We are going to be very careful about not compromising that position because we understand the concern you have. 

Senator MCCASKILL. Well, I do not think you completely understand it because I think you are so focused on what it might signal 

in terms of liability that you are losing sight of what it might signal in terms of acknowledging that there may be a day that others 

might have to pay something besides BP. I think you have made 

a mistake. I think you have come to this hearing in a much weaker 

position because of it. I think both of your companies have. And I 

would certainly ask you to reconsider that. 

No one is going to make you pay anything unless you are liable 

for something. BP is paying because they know they would be liable, and they believe that what they are gaining in the short run 

by a cooperative agreement and by working with Mr. Feinberg in 

long run is going to serve their company, and I think they are spot 

on. And I think both of your companies have made a mistake, but 

we do appreciate you being here today. And, Mr. Feinberg, wherever that place is in heaven that you find, I hope there is someone 

there that has a dispute that you can negotiate. 

Mr. FEINBERG. Thank you. 

Senator CARPER. Senator Ensign. 

Senator ENSIGN. Thank you, Mr. Chairman. Thanks for holding 

this important hearing. I want to start with Mr. Feinberg. 

You mentioned before that the local governments and State governments do not have jurisdiction over those payments. Who has 

jurisdiction over those payments? It comes out of the $20 billion, 

correct? 

Mr. FEINBERG. It comes out of the $20 billion, but those claims 

should be submitted, right now at least, directly to BP. 

Senator ENSIGN. And then BP would draw from that money, and 

they would authorize the payments? The point of the question is, 

if we are getting down toward the end of that money and you have 

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governments over here claiming they are owed money and you 

have the private sector over here claiming they need the money, 

who gets that money? 

Mr. FEINBERG. Well, there is $20 billion to hopefully defer any 

argument. There is no priority. Whoever has a claim, first in, first 

considered. The claims have to be proven, of course. And finally, 

BP has, again, made it clear that if the $20 billion proves to be insufficient—and I hope it will not be insufficient. But if it is, BP has 

stated publicly it will honor any additional financial obligations 

that are proven. 

Senator ENSIGN. OK. Taxes will be owed, I would imagine, on 

those if they have State and local income taxes on that money to 

be paid. 

Mr. FEINBERG. Sales taxes—oh, I see. Yes, it is the equivalent of 

wages or lost income, yes. 

Senator ENSIGN. These are questions that probably need to be 

answered. What if you have a hotel and part of that lost revenue 

is from rooms, but now that local government does not get room 

tax? 

Mr. FEINBERG. I assume that local government is going to submit 

a claim for lost room taxes, sales taxes, ad valorem real estate 

taxes. I can see some innovative claims. 

Senator ENSIGN. Right. The reason for the question is, if they 

submit that to BP, then do you deduct that value because the hotel 

would have had to pay those taxes? In other words, are you just 

going to be looking at the net? 

Mr. FEINBERG. That is right. I think I have to mitigate if there 

are other sources of income, yes. 

Senator ENSIGN. OK. One of the concerns you always have during these times, when you have massive potential lawsuits and 

things like that—and I know you are a lawyer, so maybe you are 

going against your own interests here—but, how do we minimize 

fees going to lawyers so that the money actually gets to the victims? 

Mr. FEINBERG. Well, that is a controversial question. I am a lawyer. First of all, I want to remind—Senator McCain will recall that 

in the September 11, 2001 fund, we had over 1,500 lawyers who 

worked pro bono to help September 11, 2001 victims. I am committed to setting up in this program some sort of pro bono program 

so that lawyers can represent claimants without fee. 

When it comes to any private arrangement that a claimant has 

with a lawyer, that is not on my watch. That is a private contractual understanding. I would say that when I calculate awards under the $20 billion, 

those awards are the damage awards that are owed the claimant, 

and there will be no add-on or gross-up for lawyers’ fees. 

Senator ENSIGN. OK. Try to give us some idea how you determine who is eligible. This is very difficult, and I understand you 

have a monumental task ahead of you. There is no question, you 

are probably going to get criticized some day because there will be 

some fraud. 

Mr. FEINBERG. You say ‘‘some day’’? 

Senator ENSIGN. Yes. It is impossible not to have some fraud in 

there, and you have to try your best to minimize that. There are 

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going to be some shysters out there and people trying to take advantage, and there will be stories on cable news and the Internet 

and blogs and you will be made to look bad because you were not 

doing your job. I think it is impossible to not have that. 

But try to give this Subcommittee an idea of some of the criteria 

that you are going to be looking at for legitimate claims. 

Mr. FEINBERG. Let us start as a base point, what does the law 

of Louisiana, Alabama, Mississippi, Florida, and especially the Federal Pollution Control Act say about who is eligible? That is the 

first question. That is a base point. ‘‘Mr. Claimant, you are ineligible and, frankly if you litigate, you will be declared ineligible.’’ So 

I am trying to use as a base point what the law would say. Then, 

above that, I want to try and do better. I think equitably I want 

to try and do better. 

So the problem is going to come, there are the easy cases, Senator, the easy cases. Oil on the beach, I cannot fish in these waters, 

I cannot shrimp, I cannot harvest oysters—those claims are relatively straightforward, pay them 100 percent under any fair reading of law. 

Senator ENSIGN. Except that you do not know how long this is 

going to last. 

Mr. FEINBERG. Well, that is a separate question, which is there 

is no oil on the beach yet. Now, fortunately, the well is capped, so 

we are starting to get a handle on where that oil may be—— 

Senator ENSIGN. No, but what we do not understand is maybe 

the damage that was done by the dispersants and some of the 

other things on the oyster beds, on the shrimp, and we do not know 

2 years from now, 3 years from now, the potential damage that 

could be done to the industry. 

Mr. FEINBERG. I am going to have to get some expertise and 

some help on that. This program will be up and running for 3 

years. Hopefully we will have a pretty good handle on that. 

You have focused exactly on one of the big problems: The indirect 

claims: ‘‘Mr. Feinberg, I have a motel four blocks from the beach. 

There is no oil on the beach. None. But because of the publicity and 

the tourism, I am off 30 percent. Here are my records from the 

past. Here are my records post-spill. I have a claim. Pay me.’’ 

You are absolutely right, I am going to have to draw some lines 

and some distinctions, make those distinctions well known, and try 

and do equity as best I can. 

Senator ENSIGN. Are there types of businesses that you will not 

give claims to? 

Mr. FEINBERG. Well, I do not know off the top what those businesses might be. There are some types of businesses I obviously 

will pay: Fishermen, shrimpers, oyster harvesters, motels right on 

the beach. The problem is going to be—there may be a restaurant 

that is right on the beach that is dependent for its livelihood on 

the shrimp from the Gulf. What do I do with a restaurant in Las 

Vegas who writes a claim and says, ‘‘We have lost 30 percent of our 

business because here in Vegas we are the only restaurant that has 

that Gulf shrimp,’’ and now it is gone and people are not coming 

to that restaurant? Where the proximity is so far removed from the 

Gulf, where do you draw the line? And I am trying to figure that 

out now. 

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Senator ENSIGN. One of the reasons I ask, I actually just thought 

of this. Some people might have a problem with you because you 

have casinos in Gulfport and down in Biloxi and everything that 

can be affected by this. Do you have a problem with reimbursing 

if a casino is down 20 percent of their revenues? 

Mr. FEINBERG. Not if they can demonstrate that they are on the 

beach, that they are down 20 percent, that people come to gamble 

but they also use the beach, they go on fishing charters, they sightsee. I mean, I will look at each claim. But I do not have a problem 

with tourism being compensable under this program. The question 

is: What tourism? And exactly what you are saying, where do you 

draw that eligibility line? 

Senator ENSIGN. OK. Thank you, Mr. Chairman. 

Senator CARPER. I have one question, if I could, for Mr. Feinberg. 

Mr. Feinberg, I want to go back to a point by Senator McCain, 

if I could. The President signed in a signing ceremony today at the 

White House legislation that I had introduced with the support of 

a number of my colleagues, Democrat and Republican, on this Subcommittee, and that legislation is called the Improper Payments 

Act of 2010. Last year, we learned that almost $100 billion of Federal funds were improperly paid to payees—in some cases mistakes, honest mistakes; in other cases, fraud. And the legislation 

that the President just signed into law today says, Federal agencies 

across the board from A to Z, we want you to: One, report improper 

payments; two, we want you to stop making improper payments; 

and three, for the improper payments that have been made, we 

want you to go out and recover as much of that money as you can 

for the Treasury Department or in some cases for the Medicare 

Trust Fund. 

I just want to underline again the concern that we have, especially on the same day that this law has been signed into effect, 

that you be diligent. And there is a tension here between being diligent and trying to make sure that we protect ultimately the fund 

from which these monies are going to be paid, but at the same time 

trying to be fair. 

You spoke to this once before, but could you just respond to it 

again? 

Mr. FEINBERG. Mr. Chairman, nothing will undercut the credibility of this fund that I am administering more than fraud. Nothing. And if it gets around that $20 billion is being wasted, there 

are fraudulent payments, it will destroy the credibility of the program in the eyes of the public, and frankly, in the eyes of the 

claimant. 

So I am determined, as I was with the 9/11 Victim Compensation 

Fund, to make sure that fraud is addressed promptly, quickly, efficiently, that we deter any fraudulent payments. And I have the cooperation of the Department of Justice, Criminal Division—no better than them—and also we will have internally in the infrastructure that I am designing, we will have anti-fraud mechanisms to 

deal exactly with the problem you are raising. 

Senator CARPER. Good. Thanks. Eternal vigilance. Continue to be 

vigilant. Thank you. 

Mr. Hackett, again for you, please, you have said publicly that 

you believe BP may have acted with willful misconduct or with 

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gross negligence as the operator of the Deepwater Horizon rig. This 

has been Anadarko’s primary argument for withholding payments, 

I believe, to BP. Could you please take a moment and tell us what 

evidence or information you have that has led Anadarko to that 

conclusion? 

Mr. FEINBERG. Yes, Senator. The information we have gathered 

has been through testimony and investigations and through public 

disclosures, because we have not received any root causes directly 

from the operator. 

The majority of the things that we make that likely gross negligence statement surrounding were covered in Congressmen Waxman-Stupak letter to BP prior to Tony Hayward’s testimony. 

Senator CARPER. All right. A question again, if I could, for you 

and also for Mr. Ishii, please. The joint operating agreement between your companies and BP spells out, I believe, certain data, 

certain information about the well’s operation that Anadarko and 

MOEX were to be given access to on a regular basis. In fact, some 

information was to be provided, I am told, on a real-time basis. 

In addition to this information that your companies received or 

should have received, you also had to approve, I believe, certain expenditures for work on the well. It would seem that if BP had been 

doing something wrong, you would have known about it, and I 

would just ask am I correct in that assumption. 

Mr. HACKETT. Would you like me to answer, Senator? 

Senator CARPER. Please. 

Mr. HACKETT. The standard industry practice is that you do get 

a budget description of a model or template well design. That is 

then altered, depending on what the drilling results are. You also 

get real-time on the geological prognosis so that once you have 

TD’d a well, which occurred on April 9 in this case, you then have 

logging runs which occurred, I think, up to the middle of April, or 

around April 13. 

At that point the real-time data is not—we do not go to the realtime data because the geological prognosis is done, and it should 

be a fairly routine process at that point then to finish the well. 

What you then get up until they no longer give you reports is a 

daily drilling report which is generally very broad, very high level, 

about actual events as opposed to procedures used or designs that 

were used. The last one of those we received was on the morning 

of April 20 for the activities on April 19. 

Senator CARPER. All right. Mr. Ishii. 

Mr. ISHII [through interpreter]. Mr. Chairman, we receive daily 

reports from BP, and these reports are received with a 1-day delay. 

And in addition, we have the right to access some of the technical 

or detailed data. 

We are committed to complying with all of our legal obligations. 

When we made the decision to participate in this well, the drilling 

had already started at that time, and that drilling was started 

based on the government approving the drilling plan. We felt that 

BP, as the operator, would properly operate the well, and based on 

that information, we decided to participate in this project. And, 

therefore, we feel the same as all of the people who have suffered 

in this great tragedy in that we would like to know and determine 

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erly clarified. Until that is investigated and determined, we feel 

that it is too early to discuss anything further. 

Senator CARPER. All right. Mr. Ishii, in America we like to play 

baseball. As it turns out, in your country your people like to play 

baseball, too. Some of your best players actually end up playing 

here in this country, as you know. We have a term in baseball that 

we use outside of baseball, and it is called a pitch that is well 

telegraphed. The idea behind the concept of a pitch well 

telegraphed is that you kind of know what the pitch—fast ball, 

curve ball, split-fingered, change-up—you know what the pitchers 

are going to pitch because he has telegraphed that in the past. 

I want to kind of drill down, if I can, on the communications between BP with Anadarko and with MOEX in the days leading up 

to April 20. Were you taken by surprise on April 20 when the accident occurred? Was this a pitch well telegraphed? Had you been receiving updates from the primary operator of the well that there 

were problems? 

We have received, as you may know, communications between 

BP and I believe in this case Anadarko that indicate, according to 

one on April 9, ‘‘We have been aggressively fighting losses as the 

drilling has gone forward.’’ Another one: ‘‘I will try to post a well 

space shortly. We are troubleshooting some MDT issues this morning, having a difficult time getting a good seal around the well bore 

wall.’’ And, ‘‘It looks like LCM’’—what is LCM? 

Mr. HACKETT. Senator, it is loss circulation material. 

Senator CARPER. Loss circulation material ‘‘may be the culprit.’’ 

That was 8 days before the blowout. Just characterize for us, 

please, the kind of communications flowing back from BP, the primary operator of the well, to your companies as to how things were 

going in the days leading up to the incident. Mr. Hackett, do you 

want to go first? And then we will go to Mr. Ishii, please. 

Mr. HACKETT. Certainly. As you state in the dates on the documents, that is that period when we were talking real time about 

the well. None of those pressure issues are unique to this particular part of the Gulf of Mexico. Again, this was not an extraordinary well either in terms of depth or complexity. 

What then happens is the most critical—— 

Senator CARPER. You are saying a well at 5,000 feet below the 

surface of the water with this great distance under the sub-surface 

is not a unique or unusual circumstance? 

Mr. HACKETT. I apologize if I am underestimating that in the 

American people’s minds because it appears, as one person said, 

like NASA science to many people. But Anadarko itself is one of 

the most active deepwater drillers in the world. We have drilled in 

water depths twice this deep, wells that are nearly twice as deep, 

in terms of total depth. So this, again, is not an extraordinary well 

for the industry. 

The activities that occur after the period in which you spoke to 

are really the ones that are very critical, and that is, when you actually go to finish the well. Again, pressure response is not an 

issue with regard to our business. It is something you control and 

take care of when you go to finish that well. 

Senator CARPER. Mr. Ishii, please. 

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All right. Ms. Sato, if you got all that, you are pretty good. 

[Laughter.] 

Ms. SATO. Thank you. 

Mr. ISHII [through interpreter]. Mr. Chairman, when we decided 

to participate in this project, BP had already obtained government 

approval for the drilling plan and the drilling had already started 

based on this approved plan. 

About 1 week before April 20, BP sent an email, and in that 

email BP said that, based on some safety concerns, they thought 

it would be difficult to continue further drilling in this well, so they 

were going to stop the drilling. 

Now, this Deepwater Horizon project was the first Gulf of Mexico 

project that we were involved in; whereas, BP is the largest operator in that area and the largest producer. So they have a lot of 

experience and a track record in that area. And, therefore, since BP 

started the drilling based on the government-approved plan, we 

placed trust in that and in them when we participated. And then 

we received that notice about 1 week prior to the accident. And 

since we are a 10-percent minority interest investor, we were not 

involved in any direct decisionmaking with BP. So we relied on 

BP’s experience, and we trusted that they had been operating properly. 

Senator CARPER. All right. Thank you. Senator McCain, thank 

you for your patience. 

Senator MCCAIN. Thank you. 

Mr. Hackett, have you provided personnel to help clean up the 

shores? 

Mr. HACKETT. We have offered to do so, Senator. We have also 

provided technical expertise to the well control efforts. We have 

provided specialized equipment from other fields for the control efforts of the well as well. 

Senator MCCAIN. Those assets have been committed or offered? 

Mr. HACKETT. They have been offered and in some cases committed. 

Senator MCCAIN. Have you sent boats or skimmers to the affected waters? 

Mr. HACKETT. We have not been asked to do so. And we do not 

control those, Senator. Those would be provided by their people. 

They are usually contracted for. 

Senator MCCAIN. You have not been asked to send boats or skimmers? 

Mr. HACKETT. No, sir. 

Senator MCCAIN. Mr. Feinberg, you mentioned that you had 

1,500 lawyers volunteer their services in the compensation issue 

associated with September 11, 2001. And how much money was 

that? 

Mr. FEINBERG. For September 11, 2001, we expended, taxpayer 

money, a little over $7 billion. 

Senator MCCAIN. And here we are talking about considerably 

more. 

Mr. FEINBERG. Yes. 

Senator MCCAIN. Have you sent out the call yet for volunteers 

to come and assist you in this project? 

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Mr. FEINBERG. Yes. We are working right now with the ABA, 

with the Alliance of Trial Lawyers, with local bar associations, and 

law schools in the region in an effort to make sure there is plenty 

of pro bono assistance. 

Senator MCCAIN. And the response has been? 

Mr. FEINBERG. Positive. We are setting it up now. 

Senator MCCAIN. So you are confident that you will have sufficient legal assistance, because as you mentioned, fraud is always 

a very significant issue but not the most significant issue. So we 

thank you for your hard work. It is great to have the opportunity 

to see you again, and I am sorry we took you away from your very 

busy schedule. And we feel very confident, Mr. Feinberg, with this 

issue under your stewardship, and I think I speak for the American 

people when I say that. Thank you. 

Mr. FEINBERG. Thank you. 

Senator MCCAIN. Thank you, Mr. Chairman. 

Senator CARPER. Thank you, Senator McCain. 

Mr. Hackett, as I understood one of your earlier comments, 

Anadarko in this case is a partner with MOEX and also with BP. 

In this case, the primary operator is BP. And there are other instances where Anadarko is presumably the primary partner in 

some cases. I presume you drill these wells and you are the only 

participant in other cases. Did you ever partner with others, other 

companies? 

Mr. HACKETT. We do that as a normal course of business, Senator. It is actually very atypical to drill a well 100 percent in our 

business. It is a way of managing financial and technical risk. So 

most of the deepwater, there are partners. And there is a very distinct relationship with the operator being the decisionmaker. 

Senator CARPER. And are there other situations in these deep 

wells Anadarko has drilled where you may have a couple of other 

partners? 

Mr. HACKETT. Yes, sir. 

Senator CARPER. In most of those situations, would Anadarko be 

the majority partner, and you may have a couple of others, like we 

have here, with a 25-percent participant and a 10-percent participant? 

Mr. HACKETT. Yes. In fact, we might have less interest than BP 

had in this well, in fact, as an operator. 

Senator CARPER. Do you have many situations where you are the 

lead but you do so not as the majority but, if you will, in our terms 

here, a plurality, have a 45-percent stake or 40-percent stake rather than a 50- or 51-percent stake? 

Mr. HACKETT. Yes, we do have situations like that where we 

have multiple partners, but that 40 or 45 percent is usually determinant as being the primary interest. 

Senator CARPER. OK. In a situation—let us sort of put the shoe 

on the other foot here for a moment. Let us say in this case 

Anadarko was the lead and that you were the primary party, the 

primary responsible party. And we will just say you were a 65-percent participant. In a situation where they ran into trouble and 

had this kind of blowout and accident, and you were called upon 

to help set up a fund, a $20 billion fund in this case, to meet the 

demands by the government for reimbursement by individuals, by 

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families, by businesses, and you were being billed by the Federal 

Government, and so were your partners, and you were ponying up 

and they were not, sort of putting the shoe on the other foot and 

keeping in mind the Golden Rule—I know you are a person of 

faith, but treating other people the way we would want to be treated—how does that mesh with treating other people the way we 

would want to be treated? 

Mr. HACKETT. Senator, I think it is very consistent. I do not 

think my beliefs are at all compromised in this instance. We were 

not consulted on the escrow agreement that was set up. It was very 

particular to BP’s circumstances, I suspect both corporately and on 

this well. We stand ready to honor our obligations. If BP fails, we 

are a responsible party under the Oil Pollution Act. We do not 

want the taxpayers to be on the hook for this, and we stay committed to that, sir. 

Senator CARPER. All right. I do not pretend to understand well 

the financial condition or strength of both of your companies. I believe you are successful companies and profitable companies. Are 

you both publicly traded companies? 

Mr. HACKETT. We are a publicly traded company, yes, sir. 

Senator CARPER. Mr. Ishii. 

Mr. ISHII [through interpreter]. MOEX is not a publicly traded 

company. 

Senator CARPER. I see. Since you are a publicly traded company, 

Mr. Hackett, could I just follow up with this question? BP, looking 

at the prospect of if the full $20 billion were drawn down upon, 

looking for an—maybe the obligation to pay the whole bill, to foot 

the whole $20 billion, if this apportionment would occur, 25 percent 

to Anadarko and 10 percent to MOEX, their obligation would be— 

what?—$13 billion. Their thinking would say, well, Anadarko 

should handle $5 billion and MOEX would handle, I guess, about 

$2 billion. I think that is the way it would work out. 

Could you just talk with us about the ability of your company to 

meet that kind of demand for payment over a period of time? 

Mr. HACKETT. Yes, sir. Understanding that those payments, as 

you mentioned, would be over a period of time, we generate as a 

company somewhere around $5 billion a year. 

Senator CARPER. Is that gross revenue? 

Mr. HACKETT. No. That is cash flow, sir, that is available for 

spending, and what we generally do is put that right back into 

drilling for more resources for America. That is typical of the independents in this country. And we are doing so again this year. The 

cash on the balance sheet at the end of the first quarter was over 

$3 billion, and we also had an undrawn credit facility of over $1 

billion. We also have net book equity of about $20 billion. 

Senator CARPER. All right. Thank you. 

Mr. Ishii, could you respond as well, to the extent that you are 

able to, given the fact that you are not a publicly traded company? 

Mr. ISHII [through interpreter]. Mr. Chairman, first of all, I 

would like to say that we will honor all of our legal obligations. 

However, before we discuss that any further, it is important that 

we properly investigate and find out why this accident occurred. 

And, therefore, any discussion about that is, I think, a bit too early 

now. 

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Senator CARPER. All right. 

Mr. Hackett, can you just share with us how—what role does insurance play in this, and to what extent can your company or another company in a similar situation cover these kinds of expenses 

through insurance or reinsurance? 

Mr. HACKETT. I think it is a critical issue with regard to where 

we craft legislation going forward, Senator, that if, in fact, we have 

pilot error like this occur again, we have to make certain, obviously, for the American public and probably for global society that 

we are prepared to answer this in a better way than we were this 

time. So I think a number of us have learned lessons in that regard. 

The insurance market historically has not been terribly deep. 

You and I had a conversation about that not too long ago. We had 

probably per revenue unit for our company as much as anybody in 

our industry, and we might have been able to get another—more 

than that, as it turns out, maybe double that. But as we have publicly stated, that amounts to about $176 million per incident on a 

25-percent work interest, about $776 million gross. And what you 

have to do then is make certain that people have balance sheets 

to back it up beyond that, which we do. And so I think we have 

to be, crafting the oil spill legislation properly where we both have 

liability limits, properly determined contributions to the fund, and 

also an ability to get an insurance exchange working that makes 

this very important resource for domestic production available to 

all of us long term. 

Senator CARPER. I am going to come back on that point in just 

a moment, if I could. 

Mr. Feinberg, we are going to have the opportunity in the Senate 

to take up, perhaps next week, energy legislation that will attempt 

to conserve energy, will attempt to reduce somewhat our independence on petroleum and fossil fuels, especially on foreign oil. And we 

will attempt to do something with respect to addressing the cap, 

this cap for oil spill liabilities. 

Let me just ask you your recommendation or your advice, if you 

feel comfortable in giving it. As we take up looking at the current 

law on the oil spill liability cap, the actually rather modest liability 

that exists under the current law, then a larger fund contributed 

to by companies like Anadarko, like MOEX—I think it is about a 

billion and a half dollars where the fund is, and then beyond that 

it is basically, I think, on the taxpayer. BP, to their credit has 

stepped forward and said, ‘‘no, we are good for at least $20 billion,’’ 

and they certainly want to have other partners to share in that. 

But as we try to craft in the next week or two legislation revisiting 

the Oil Spill Liability Fund, what should we keep in mind? 

Mr. FEINBERG. Well, I cannot really speak to the legislation. I am 

not aware of it, so I do not know the language, I do not know the 

public policy. 

Senator CARPER. If you will, just keep in mind what the current 

law calls for in trying to say what is good or bad about that and 

what might we think about in changing it. Because I think it is 

pretty clear we are going to change it. 

Mr. FEINBERG. All I can say—and it probably is not very helpful, 

Senator—is that at least in this case the cap is sort of irrelevant 

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because BP on its own has stepped up to make the cap sort of an 

irrelevant consideration. Whether the cap ought to be raised—I remember I was on a commission that looked at Price-Anderson involving nuclear power years ago. That is for others to think about, 

but I think that at least in this case, fortunately, the cap has not 

been a barrier to compensation. 

Senator CARPER. Mr. Hackett, any advice for us as we revisit this 

issue legislatively? 

Mr. HACKETT. Again, I would just restate that—and I think Mr. 

Feinberg’s reference to the nuclear industry and perhaps the marine industry is relevant. We have to, for this very important 

American source of energy, come up with a workable plan that allows us to have liability caps that work for the public, that have 

insurance capability that works for the public, oil spill response capability that works for the public, and there is a lot of detail and 

complexity around that, but none of them should be dealt with in 

isolation, in my view. 

Senator CARPER. All right. Mr. Ishii, would you like to respond 

briefly to my question, please? 

Mr. ISHII [through interpreter]. Mr. Chairman, I am very sorry, 

but could I have you repeat your question? 

Senator CARPER. Yes. A number of years ago, legislation was enacted that established an Oil Spill Liability Fund that called for oil 

companies to pay into that fund and set a cap or a limit out of 

which monies could be paid from that fund, but said if there is a 

party that is primarily responsible, that they would have first responsibility to pay, and I am trying to remember what the amount 

was—yes, $75 million. In a situation like this, obviously $75 million does not go very far. Frankly, neither does one and a half billion. We are going to change that law, and we are going to start 

working on it very seriously probably on the Senate floor next 

week. And I was asking Mr. Feinberg and Mr. Hackett if they had 

any advice for us as we assume that legislative responsibility, and 

if you have a thought on that, we would welcome hearing it. And 

you may not. That is OK. 

Mr. ISHII [through interpreter]. Mr. Chairman, I believe that is 

a political issue, and so we are not in a position to comment on it. 

Senator CARPER. All right. Fair enough. 

I have referred to this already, but while there was some communication information exchanged between BP and Anadarko and 

MOEX related to the well drilling and the challenges that were 

being encountered in the days before the accident, there also appear to be some lapses on BP’s part. I am told on April 19—that 

is the day before the rig exploded—a geological adviser for 

Anadarko emailed a BP official asking why they were no longer receiving any drilling reports. In fact, they said that they had not received reports for 5 days. 

Mr. Ishii, I think you personally appeared to have had problems 

communicating with BP exactly what was going on with the well 

in the days leading up to this disaster. 

Let me ask both of you, Mr. Hackett and Mr. Ishii, to please give 

us a sense of the problems that your companies had in receiving 

information in the days prior to the accident. And if you do not 

mind starting off, Mr. Hackett, I would appreciate it. Thank you. 

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Mr. HACKETT. Senator, I am not aware of that particular issue, 

but in my review of the drilling reports myself, there is nothing 

that we would have received through that final report on April 19, 

that would have been a red flag for us to warn BP about. We did 

not have anybody on the rig, we were not consulted, and there was 

nothing in the materials that I have read all the way through April 

19, that would have been a red flag for us. 

Senator CARPER. Is it common or uncommon for a minority partner, in this case a 25-percent partner, not to have someone on the 

rig? Is that common practice? 

Mr. HACKETT. It is very common practice to not have someone on 

the rig. 

Senator CARPER. All right. 

Mr. HACKETT. It is rare that anybody has somebody on the rig. 

Senator CARPER. Fair enough. Mr. Ishii, would you care to respond to the same question, please? 

Mr. ISHII [through interpreter]. Mr. Chairman, we have the right 

to access the technical data from BP. However, I do not have an 

engineering background, and, therefore, we had a service agreement with our parent company whereby the engineers from our 

parent company would receive the reports from BP and monitor 

their progress. And, therefore, today I am not in a position to comment on that. 

Senator CARPER. All right. The last question I will have is this: 

I used a baseball analogy earlier, a pitch well telegraphed. I will 

use a football analogy. They do not play much football in Japan, 

I am told, but I will use a football analogy. The concept of being 

a Monday morning quarterback is something that we talk about 

here in this country. We play college football games usually on Saturdays, we play professional football games on Sundays, and we 

talk about being Monday morning quarterbacks. It is a lot easier 

to be a quarterback on Monday morning looking back than it was 

to be that quarterback on Saturday or Sunday. 

I want to ask you to put on your Monday morning quarterback 

hats for us, and knowing now what you know, what might you 

have done differently, what should have been done differently to 

have averted this disaster that we are facing and are going to be 

facing for some time? Mr. Hackett. 

Mr. HACKETT. Senator, I think proper procedures and practices 

need to be followed, and our view is that this accident was preventable, this tragic accident. Our answer to that is that you need to 

use the proper engineering practices and procedures, and it is clear 

that we have lessons learned from this for the industry, where if 

we do have, in fact, this series of bad engineering decisions ever 

happen again—and we hope to goodness we never do—is that we 

are in a position to assure the public that there is a better response 

capability. 

Senator CARPER. All right. Mr. Feinberg, do you want to venture 

anything on that one? 

Mr. FEINBERG. Just that what this tragedy has led to is one more 

example, fortunately rare, where policymakers and private individuals think out of the box and come up with a remedy, like this fund 

that I am administering, which will work in a way that hopefully 

will avoid protracted uncertainty and litigation and overhead costs 

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and will provide a quick, efficient remedy for people in need down 

in the Gulf. 

Senator CARPER. Mr. Ishii. 

Mr. ISHII [through interpreter]. Mr. Chairman, as I said before, 

when we participated in this project, the drilling had already been 

started based on the government-approved plan, and for us this 

was the first deepwater drilling project. However, BP is the largest 

player and had experience in this area, whereas we are only a 10- 

percent minority interest non-operator. Therefore, we were not involved in any of the decisionmaking. We relied on BP because BP 

has the experience and the drilling technology, so we placed trust 

in them and participated. 

Senator CARPER. All right. Any closing comments from our witnesses? Mr. Feinberg, just a brief closing comment? No? All right. 

Mr. Hackett, a brief closing comment? 

Mr. HACKETT. No, sir. Thank you. 

Senator CARPER. Mr. Ishii, a brief closing comment? All right. 

Well, let me close, if I may. First of all, thank you all for taking 

this much time in your day to travel here and to be with us today 

to testify. 

Mr. Feinberg, our thanks to you for taking on this responsibility. 

Mr. Hackett, we are somewhat comforted by the fact that you 

have the wherewithal to—your company appears to have the 

wherewithal, if called upon, to participate in providing the resources needed to help not in cleanup but pay damages. It sounds 

like you are in a position to do that. I know you probably do not 

want to, but it sounds like it is comforting to know that you do 

have that wherewithal. 

And, Mr. Ishii, it means a lot to us that you would travel this 

far and to participate today in this testimony. 

This challenge is not going to go away. A lot of lessons learned 

and legislation to be worked on next week and probably implemented in the months to come. 

Again, our thanks to each of you, and we look forward to working 

with you on this to make sure it does not happen again, and to try 

to make sure that the right thing is done to those who are affected 

by this disaster. 

Thank you very much, and with that, this hearing is concluded. 

[Whereupon, at 4:07 p.m., the Subcommittee was adjourned.] 

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PREPARED STATEMENT OF SENATOR LAUTENBERG 

Mr. Chairman, Thank you for giving me the opportunity to appear before this Subcommittee on this critical issue. 

Last night, the President spoke to the country, and he could not 

have been clearer: The needs of Gulf families, fishermen and business owners must not and will not take a backseat to BP’s bottom 

line. 

I commend the President for his strong leadership on this disaster, and I know he will do everything in his power to hold BP 

accountable. 

The behavior of this company and its executives could not be 

more reprehensible. 

Their greed and impudence led them to cut corners and gamble 

with the lives of workers on the rig, the marine life in the Gulf, 

and the economy of an entire region. 

And when the inevitable happened and the Deepwater Horizon 

exploded, burned, and sank, BP’s leaders downplayed the true size 

of the spill and lied about their ability to contain it. 

So we cannot trust them when they promise to pay for all the 

damage they have done. 

We cannot simply take their word—not when BP’s CEO has repeatedly said the spill isn’t that serious, calling the environmental 

impact ‘‘very, very modest.’’ 

Not when BP said before the spill that they had the tools to stop 

a leak at this well. 

and not when the company’s top executives promise to pay only 

for ‘‘legitimate claims.’’ 

Since the Deepwater Horizon rig exploded, as much as 50 million 

gallons of oil have poured into the Gulf of Mexico—it’s threatening 

to turn the beaches, marches and coastlines of the Gulf into toxic 

waste sites. 

We’ve seen this kind of catastrophe before. 

It’s been more than 20 years since the Exxon Valdez went 

aground, and oil is still contaminating the soil there. 

That contamination does not only continue to hurt the fishermen 

there—it is still damaging the area’s ground, water, and marine 

life to this very day. 

I was one of the first senators to visit Alaska after the Exxon 

Valdez crash, and I saw the destruction caused by that oil spill 

firsthand. 

When the press coverage was intense, Exxon issued a string of 

apologies, it promised to do right by the communities, and it vowed 

to make sure the way of life these Alaskans knew would resume. 

But as soon as the cameras were shut off—Exxon changed its 

tune. 

It fought the communities, the families, and the fishermen over 

every penny. 

Instead of making those victims whole, Exxon chose to make its 

lawyers rich. 

Exxon drew things out for years and knocked down claims from 

$5 billion to $500 million. 

We cannot let history repeat itself. 

That is why I proposed an amendment to last month’s emergency 

supplemental bill to make it clear that the companies responsible 

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for the oil spill must reimburse the American taxpayer for every 

dollar the government spends on cleanup. 

While the amendment was not considered on the floor, the 

Obama Administration has made it clear that it will send BP the 

bill. 

Pollutters—not taxpayers—should pay these government expenses. 

When you make a mess, you have to pay to clean it up—it’s that 

simple. 

I want to put the oil executives here on notice: We will not accept 

any answer from you that smacks of something like the check is 

in the mail. 

Americans are fed up with hollow words, false assurances and 

broken promises. 

That is why BP should start putting money into an escrow ac- count to pay for the damage from this spill—and not pay over $10 

billion in dividends to its shareholders. 

And that is why we’ve got to take the critical step of eliminating the measly $75 million liability cap on monetary damages from oil 

spills. 

I joined Senator Menendez right after the Deep Horizon rig exploded to lift that cap—and it’s time our colleagues on the other 

side of the aisle let us move that legislation forward. 

Big Oil makes so much in profit every month—they can afford 

to pay for their recklessness. 

I want to thank the Chairman and the rest of the Subcommittee 

for inviting me to speak today, and more importantly, for holding 

this critical hearing. 

And I hope we will hear honest and candid answers from BP and 

the other executives about what they are going to do to live up to 

their obligations. 

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H605-41331-79W7 with DISTILLER


58035.011
74 

H605-41331-79W7 with DISTILLER


58035.012
75 

H605-41331-79W7 with DISTILLER


58035.013
76 

H605-41331-79W7 with DISTILLER


58035.014
77 

H605-41331-79W7 with DISTILLER


58035.015
78 

H605-41331-79W7 with DISTILLER


58035.016
79 

H605-41331-79W7 with DISTILLER


58035.017
80 

H605-41331-79W7 with DISTILLER


58035.018
81 

H605-41331-79W7 with DISTILLER


58035.019
82 

H605-41331-79W7 with DISTILLER


58035.020
83 

H605-41331-79W7 with DISTILLER


58035.021
84 

H605-41331-79W7 with DISTILLER


58035.022
85 

H605-41331-79W7 with DISTILLER


58035.023
86 

H605-41331-79W7 with DISTILLER


58035.024
87 

H605-41331-79W7 with DISTILLER


58035.025
88 

H605-41331-79W7 with DISTILLER


58035.026
89 

H605-41331-79W7 with DISTILLER


58035.027
90 

H605-41331-79W7 with DISTILLER


58035.028
91 

H605-41331-79W7 with DISTILLER


58035.029
92 

H605-41331-79W7 with DISTILLER


58035.030
93 

H605-41331-79W7 with DISTILLER


58035.031
94 

H605-41331-79W7 with DISTILLER


58035.032
95 

H605-41331-79W7 with DISTILLER


58035.033
96 

H605-41331-79W7 with DISTILLER


58035.034
97 

H605-41331-79W7 with DISTILLER


58035.035
98 

H605-41331-79W7 with DISTILLER


58035.036
99 

H605-41331-79W7 with DISTILLER


58035.037
100 

H605-41331-79W7 with DISTILLER


58035.038
101 

H605-41331-79W7 with DISTILLER


58035.039
102 

H605-41331-79W7 with DISTILLER


58035.040
103 

H605-41331-79W7 with DISTILLER


58035.041
104 

H605-41331-79W7 with DISTILLER


58035.042
105 

H605-41331-79W7 with DISTILLER


58035.043
106 

H605-41331-79W7 with DISTILLER


58035.044
107 

H605-41331-79W7 with DISTILLER


58035.045
108 

H605-41331-79W7 with DISTILLER


58035.046
109 

H605-41331-79W7 with DISTILLER


58035.047
110 

H605-41331-79W7 with DISTILLER


58035.048
111 

H605-41331-79W7 with DISTILLER


58035.049
112 

H605-41331-79W7 with DISTILLER


58035.050
113 

H605-41331-79W7 with DISTILLER


58035.051
114 

H605-41331-79W7 with DISTILLER


58035.052
115 

H605-41331-79W7 with DISTILLER


58035.053
116 

H605-41331-79W7 with DISTILLER


58035.054
117 

H605-41331-79W7 with DISTILLER


58035.055
118 

H605-41331-79W7 with DISTILLER


58035.056
119 

H605-41331-79W7 with DISTILLER


58035.057
120 

H605-41331-79W7 with DISTILLER


58035.058
121 

H605-41331-79W7 with DISTILLER


58035.059
122 

H605-41331-79W7 with DISTILLER


58035.096
123 

H605-41331-79W7 with DISTILLER


58035.060
124 

H605-41331-79W7 with DISTILLER


58035.061
125 

H605-41331-79W7 with DISTILLER


58035.062
126 

H605-41331-79W7 with DISTILLER


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127 

H605-41331-79W7 with DISTILLER


58035.064
128 

H605-41331-79W7 with DISTILLER


58035.065
129 

H605-41331-79W7 with DISTILLER


58035.066
130 

H605-41331-79W7 with DISTILLER


58035.067
131 

H605-41331-79W7 with DISTILLER


58035.068
132 

H605-41331-79W7 with DISTILLER


58035.069
133 

H605-41331-79W7 with DISTILLER


58035.070
134 

H605-41331-79W7 with DISTILLER


58035.071
135 

H605-41331-79W7 with DISTILLER


58035.072
136 

H605-41331-79W7 with DISTILLER


58035.073
137 

H605-41331-79W7 with DISTILLER


58035.074
138 

H605-41331-79W7 with DISTILLER


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139 

H605-41331-79W7 with DISTILLER


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140 

H605-41331-79W7 with DISTILLER


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141 

H605-41331-79W7 with DISTILLER


58035.078
142 

H605-41331-79W7 with DISTILLER


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143 

H605-41331-79W7 with DISTILLER


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144 

H605-41331-79W7 with DISTILLER


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145 

H605-41331-79W7 with DISTILLER


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146 

H605-41331-79W7 with DISTILLER


58035.083
147 

H605-41331-79W7 with DISTILLER


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148 

H605-41331-79W7 with DISTILLER


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149 

H605-41331-79W7 with DISTILLER


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150 

H605-41331-79W7 with DISTILLER


58035.087
151 

H605-41331-79W7 with DISTILLER


58035.088
152 

H605-41331-79W7 with DISTILLER


58035.089
153 

H605-41331-79W7 with DISTILLER


58035.090
154 

H605-41331-79W7 with DISTILLER


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155 

H605-41331-79W7 with DISTILLER


58035.092
156 

H605-41331-79W7 with DISTILLER


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157 

H605-41331-79W7 with DISTILLER


58035.094
158 

Æ 

H605-41331-79W7 with DISTILLER


58035.095