BP P.L.C. FORMER EMPLOYEE CHARGED WITH INSIDER TRADING AFTER DEEPWATER HORIZON OIL SPILL

FROM:  SECURITIES AND EXCHANGE COMMISSION 

The Securities and Exchange Commission today charged a former 20-year employee of BP p.l.c. and a senior responder during the 2010 Deepwater Horizon oil spill with insider trading in BP securities based on confidential information about the magnitude of the disaster.  The price of BP securities fell significantly after the April 20, 2010 explosion on the Deepwater Horizon rig, and the subsequent oil spill in the Gulf of Mexico, resulted in an extensive clean-up effort.

According to the SEC’s complaint, filed in U.S. District Court for the Eastern District of Louisiana, BP tasked Keith A. Seilhan with coordinating BP’s oil collection and clean-up operations in the Gulf of Mexico and along the coast.  Seilhan, an experienced crisis manager, directed BP’s oil skimming operations and its efforts to contain the expansion of the oil spill.  The complaint alleges that within days, Seilhan received nonpublic information on the extent of the evolving disaster, including oil flow estimates and data on the volume of oil floating on the surface of the Gulf.

“Seilhan sold his family’s BP securities after he received confidential information about the severity of the spill that the public didn't know,” said Daniel M. Hawke, chief of the Division of Enforcement’s Market Abuse Unit.  “Corporate insiders must not misuse the material nonpublic information they receive while responding to unique or disastrous corporate events, even where they stand to suffer losses as a consequence of those events.”

The complaint alleges that by April 29, 2010, in filings to the SEC, BP estimated that the flow rate of the spill was up to 5,000 barrels of oil per day (bopd).  The company’s public estimate was significantly less than the actual flow rate, which was estimated later to be between 52,700 and 62,200 bopd.  The information that Seilhan obtained indicated that the magnitude of the oil spill and thus, BP’s potential liability and financial exposure, was likely to be greater than had been publicly disclosed.

According to the complaint, while in possession of this material, nonpublic information, and in breach of duties owed to BP and its shareholders, Seilhan directed the sale of his family’s entire $1 million portfolio of BP securities over the course of two days in late April 2010.  The trades allowed Seilhan to avoid losses and reap unjust profits as the price of BP securities dropped by approximately 48 percent after the sales on April 29 and April 30, 2010, reaching their lowest point in late June 2010.

Without admitting or denying the allegations, Seilhan consented to the entry of a final judgment permanently enjoining him from future violations of federal antifraud laws and SEC antifraud rules.  Seilhan, of Tomball, Texas, also agreed to return $105,409 of allegedly ill-gotten gains, plus $13,300 of prejudgment interest, and pay a civil penalty of $105,409.  The settlement is subject to court approval.

The SEC’s investigation was conducted by Matthew S. Raalf, Brian P. Thomas, John S. Rymas, Kelly L. Gibson, Brendan P. McGlynn, G. Jeffrey Boujoukos, Michael J. Rinaldi, and Christopher R. Kelly in the Philadelphia Regional Office.  The SEC appreciates the assistance of the U.S. Department of Justice’s Deepwater Horizon Task Force.

DEEPWATER HORIZON OIL SHEEN SOURCE IDENTIFIED

Oil Sheen.  Credit:  NOAA

FROM: NATIONAL SCIENCE FOUNDATION

Study Identifies Source of Oil Sheens Near Deepwater Horizon Site

A chemical analysis indicates that the source of oil sheens recently found floating at the ocean's surface near the site of the Gulf of Mexico Deepwater Horizon oil spill is pockets of oil trapped within the wreckage of the sunken rig.


First reported to the U.S. Coast Guard by multinational oil and gas company BP in September 2012, the oil sheens raised public concern that the Macondo well, which was capped in July 2010, might be leaking.

However, both the Macondo well and the natural oil seeps common to the Gulf of Mexico were confidently ruled out, according to researchers from the University of California Santa Barbara (UCSB) and the Woods Hole Oceanographic Institution (WHOI).

The results are published this week in the journal Environmental Science & Technology.

"Silver linings in the dark cloud of the Deepwater Horizon spill are very hard to come by," says Don Rice, program director in the National Science Foundation's (NSF) Division of Ocean Sciences, which funded the research.

"Among the precious few are the lessons we've learned about the marine biogeochemistry of petroleum mixtures. This team has demonstrated convincingly that we can also use what we have learned for forensic purposes."

The researchers used a recently patented method to fingerprint the chemical makeup of the oil sheens, and to estimate the location of the source based on the extent to which gasoline-like compounds evaporated from the sheens.

"The results demonstrate a recently developed geochemical analytical method and may have real-world implications in environmental management strategies for future contamination incidents," says Deborah Aruguete, program director in NSF's Division of Earth Sciences, which co-funded the research.

Because every oil sample contains chemical clues pointing to the reservoir it came from, scientists can compare it to other samples to determine if they share a common source.

"This appears to be a slow leak from the wreckage of the rig, not another catastrophic discharge from a deep oil reservoir," says geochemist David Valentine of UCSB.

"Continued oil discharge to the Gulf of Mexico from the wreckage of the Deepwater Horizon rig is not a good thing, but there is some comfort that the amount of leakage is limited to the pockets of oil trapped within the wreckage of the rig."

Valentine and WHOI's Chris Reddy have worked on Deepwater Horizon for much of the last three years, investigating a wide range of problems, including the composition of the oil, detection of subsurface plumes, the biodegradation of the oil, the fate of the dispersants and the chemical transition from floating oil slicks to sunken tar balls.

"Because of our ongoing funding from NSF, we were prepared to interrogate the source of mysterious oil sheens in the Gulf of Mexico," said Valentine.

"We've been exploring new ways to do this for several years in the context of natural seeps, and this event provided us an opportunity to apply our fundamental advances to a real-world problem."

The scientists analyzed 14 sheen samples skimmed from the sea surface during two trips to the Gulf of Mexico.

Using comprehensive two-dimensional gas chromatography, a technique developed in Reddy's lab, the researchers first confirmed that the sheens contained oil from the Macondo well.

But the sheen samples also contained trace amounts of olefins, industrial chemicals used in drilling operations. The presence of olefins provided a fingerprint for the sheens the scientists could compare to the samples they had analyzed during the last three years.

Olefins are not found in crude oil and their uniform distribution in the sheens indicated that the Macondo well was unlikely to be the source.

The team surmised that the sheens must be coming from equipment exposed to olefins during drilling operations.

"The occurrence of these man-made olefins in all our sheen samples points to a single main source, which contains both Macondo oil and lesser amounts of the drilling fluids that harbor the olefins," said Valentine.

"This pointed us to the wreckage of the rig, which was known to have both, as the most likely source for the sheens."

The researchers compared the sheen samples to other field samples, some of which they expected would contain olefins and some they thought would not.

The reference samples included two pieces of debris from the Deepwater Horizon found floating in May 2010, as well as oil collected by BP in October 2012, during an inspection of the 80-ton cofferdam that had been abandoned at the seafloor after its use in a failed attempt to cover the Macondo well in 2010.

The team's gas chromatography analysis of BP's cofferdam samples definitively showed that it was not the sole source of the leak as there were no olefins present.

Prior to the analysis the cofferdam had become the prime suspect as the source when BP found small amounts of oil leaking from its top.

BP scientists acquired oil samples from this leak point before sealing the leak, thinking they had resolved the problem. However, the sheens on the sea surface persisted, and the lack of olefins pointed to another source entirely.

When Valentine and Reddy compared the chemical makeup of the sheens with debris found floating in 2010, they found a match. That debris, which came from the rig itself, was coated with oil and was contaminated by drilling mud olefins.

"The ability to fingerprint synthetic hydrocarbons allowed us to crack this case," Valentine said. "We were able to exclude a number of suspects and match the olefin fingerprint in the new oil slicks to that of the wreckage from the sunken rig."

The chemical analysis also told researchers which sheens had surfaced more recently than others, allowing them to reconstruct a trajectory for local ocean currents that pointed back to the oil's source.

By looking for sheens that showed the least amount of evaporation, they determined that oil surfaced closer to Deepwater Horizon wreckage than to the cofferdam site.

To explain how the oil might be trapped and released from the wreckage, the scientists point out that when the Deepwater Horizon rig sank, it was holding tanks containing hundreds of barrels of a mixture of drilling mud and oil.

Over time, corrosive seawater can create small holes through which oil can slowly escape to the surface. The researchers suspect that the containers on the rig holding trapped oil may be the source of the recent oil sheen.

In addition to Valentine and Reddy, the research team consisted of Christoph Aeppli and Robert Nelson of WHOI, and Matthias Kellermann of UCSB.

The Gulf of Mexico Research Initiative, Woods Hole Oceanographic Institution and a Swiss National Science Foundation Postdoctoral Fellowship also funded the research.

-NSF-

U.S. SUES OIL AND GAS COMPANY FOR ALLEGED UNLAWFUL DISCHARGE OF OIL AND CHEMICAL DISPERSANTS

FROM: U.S. DEPARTMENT OF JUSTICE

Monday, February 11, 2013
US Files Lawsuit in Louisiana Against Oil and Gas Company Alleging Unlawful Discharge of Oil and Chemical Dispersants in the Gulf of Mexico

Today the United States filed a civil action against ATP Oil & Gas Corporation and ATP Infrastructure Partners, LP (ATP-IP) for civil penalties and injunctive relief under the Clean Water Act and the Outer Continental Shelf Lands Act. The complaint was filed on behalf of the U.S. Department of the Interior’s Bureau of Safety and Environmental Enforcement (BSEE) and the U.S. Environmental Protection Agency (EPA). The complaint addresses the defendants’ alleged unlawful discharges of oil and unpermitted chemical dispersants from the defendants’ floating oil and gas production platform, the ATP Innovator, into the Gulf of Mexico.

The ATP Innovator is a production facility operating at Lease Block 711 of Mississippi Canyon in the Gulf of Mexico, approximately 45 nautical miles offshore of southeastern Louisiana.

The violations were discovered during a BSEE inspection of the facility in March 2012. Following further investigation by BSEE, the violations were referred to the Department of Justice by BSEE and EPA. The case, United States v. ATP Oil & Gas Corporation et al., was filed in the District Court for the Eastern District of Louisiana.

As alleged in the complaint, ATP failed to properly operate and maintain its wastewater treatment system on the ATP Innovator. As a result, excess oil was discharged into the ocean, and an unauthorized chemical dispersant was added to the oily wastewater discharge to mask the presence of oil on the ocean’s surface. The dispersant was added to the outfall pipe by way of a concealed metal tube that connected a tank of dispersant to the outfall pipe. The connection of the metal tubing to the outfall pipe was located downstream of the sample collection point, making the addition of unauthorized dispersant undetectable in samples that are required to be collected to show compliance with ATP’s Clean Water Act discharge permit.

According to the complaint, the dispersant had been used from at least October 2010 to March 2012. In addition to civil penalties under the Clean Water Act, the complaint also seeks injunctive relief for violations of the Clean Water Act and the Outer Continental Shelf Lands Act.