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BP, Halliburton and the Difference between Being Lawful and Ethical

Thu, January 10, 2013 1:30 PM | Deleted user
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In his article for the New York Times on January 3, 2013, John Schwartz described the government settlement with Transocean concerning the Deep Water Gulf oil spill. Transocean publicly announced that they were partially responsible for the Gulf oil spill disaster and agreed to pay a $100 million fine in violation of the Clean Water Act and civil penalties of $1 billion over the next five years. Not only have they paid a penance for their violation of the public trust, but they have also gone further and on a number of occasions shown remorse. In the Transocean statement, they mentioned the tragic death of 11 people and called the settlements “important agreements and positive step forward.” Transocean will have to prove that they are able to fulfill their promises in the next five years but Transocean is taking the right steps to repair trust and its reputation. But what about the other culpable party, Halliburton?

Halliburton, as you may recall, was the cement expert under contract to BP. One of the contributing factors to the Deepwater Horizon explosion was the fact that a defective cement job on the well allowed gas to mix with oil. The actual cement that was used was not tested adequately to assure its stability and BP and Halliburton are each blaming (and suing) the other for negligence and fraud. To date Halliburton’s legal department seems to be driving its response and the company’s public relations department has been made irrelevant. In press reports announcing the Transocean settlement, Halliburton’s spokesperson told reporters: “We continue to believe that we have substantial legal arguments and defenses against any liability and that BP’s indemnity obligation protects us. Accordingly we will maintain our approach of taking all proper actions to protect our interests.” Halliburton may be taking a legitimate legal position and acting in the short-term interests of its shareholders, but what of their long-term reputation among industry partners and citizens at large? Does an indemnity provision in its drilling contract with BP mean that Halliburton bears no responsibility?

Following the law is not the same as acting ethically and doing the right thing. Does a drilling firm have some obligation for drilling safe wells? As experts, if they are asked to drill a well that they believe is unsafe, do they have an ethical responsibility to refuse? As one attorney said: “Saying you were following orders is not a legitimate defense to a criminal act.”

The Gulf oil spill was a perfect storm of risk, greed, error and negligence that violated the trust of the 11 people who died and scores of people and businesses that depend on this natural treasure. If all of the many players had been more concerned with doing the right thing and not how much money they had made or whether they had been protected by contracts, this disaster would never have happened. BP and now Transocean are at least standing up and owning their roles and taking steps to reform themselves and repair trust. Although BP made several early missteps, they have taken subsequent actions to begin to repair trust and pay compensatory damages. They originally set aside a fund of $20 billion with the U.S. government for damages and the company is reserving in excess of $40 billion for compensation. Only time will tell if BP has truly reformed enough to trust again but it is evident that they are taking serious steps unlike Halliburton.

Having trustworthy agents who care about doing the right thing makes us much safer than engaging armies of lawyers and regulators. A concerned public and responsible industry leaders need to help put the untrustworthy out of business. Perhaps in the long term, Halliburton will be held accountable and, if they survive, they will form a real public relations department. Let us hope that truth and accountability prevail because Halliburton is now trying to grow its gas fracking business and that requires trustworthy agents who will do the right thing rather than hide behind clever contracts.

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