Bad Karma in the Gulf of Mexico Oil Disaster

Originally posted on May 7 at Dirt Digger's Digest.

British Petroleum is, rightfully, taking a lot of grief for the
massive oil spill in the Gulf of Mexico, but we should save some of our
vituperation for Transocean Ltd., the company that leased the ill-fated
Deepwater Horizon drilling rig to BP. Transocean is no innocent
bystander in this matter. It presumably has some responsibility for the
safety condition of the rig, which its employees helped operate (nine of
them died in the April 20 explosion).

Transocean also brings some bad karma to the situation. The company,
the world's largest offshore drilling contractor, is the result of a
long series of corporate mergers and acquisitions dating back decades.
One of the firms that went into that mix was Sedco, which was founded in
1947 as Southeastern Drilling Company by Bill Clements, who would
decades later become a conservative Republican governor of Texas.

In 1979 a Sedco rig in the Gulf of Mexico leased to a Mexican oil
company experienced a blowout, resulting in what was at the time the
worst oil spill the world had ever seen. As he surveyed the oil-fouled
beaches of the Texas coast, Gov. Clements made the memorable remarks:
"There's no use in crying over spilled milk. Let's don't get excited
about this thing" (Washington Post 9/11/1979).

At the time, Sedco was being run by Clements's son, and the family
controlled the company's stock. The federal government sued Sedco over
the spill, claiming that the rig was unseaworthy and its crew was not
properly trained. The feds sought about $12 million in damages, but
Sedco drove a hard bargain and got away with paying the government only
$2 million. It paid about the same amount to settle lawsuits filed by
fishermen, resorts and other Gulf businesses. Sedco was sold in 1984 to
oil services giant Schlumberger, which transferred its offshore drilling
operations to what was then known as Transocean Offshore in 1999.

In 2000 an eight-ton anchor that accidentally fell from a Transocean
rig in the Gulf of Mexico ruptured an underwater pipeline, causing a
spill of nearly 100,000 gallons of oil. In 2003 a fire broke out on a
company rig off the Texas coast, killing one worker and injuring several
others. As has been reported in recent days, a series of fatal accidents
at company operations last year prompted the company to cancel
executive bonuses.  It's also come out that in 2005 a Transocean rig in
the North Sea had been cited by the UK's Health and Safety Executive for a
problem similar to what apparently caused the Gulf accident.

Safety is not the only blemish on Transocean's record. It is one of
those companies that engaged in what is euphemistically called corporate
-moving one's legal headquarters overseas to avoid U.S.
taxes. Transocean first moved its registration to the Cayman Islands in
1999 and then to Switzerland in 2008. It kept its physical headquarters
in Houston, though last year it moved some of its top officers to
Switzerland to be able to claim that its principal executive offices
were there.

In addition to skirting U.S. taxes, Transocean has allegedly tried to
avoid paying its fair share in several countries where its subsidiaries
operate. The company's 10-K annual report admits that it has been assessed additional amounts
by tax authorities in Brazil and that it is the subject of civil and
criminal tax investigations in Norway.

In 2007 there were reports that Transocean was among a group of oil
services firms being investigated for violations of the Foreign Corrupt
Practices Act in connection with alleged payoffs to customs officials in
Nigeria. No charges have been filed.

An army of lawyers will be arguing over the relative responsibility
of the various parties in the Gulf spill for a long time to come. But
one thing is clear: Transocean, like BP, brought a dubious legacy to
this tragic situation.

AMP Section Name:Energy
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  • 183 Environment
  • 184 Labor
  • 190 Natural Resources
  • 208 Regulation

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