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QUEST MEANS BUSINESS

BP's CEO Testifies Before Congress

Aired June 17, 2010 - 14:00:00   ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.


JOHN DEFTERIOS, HOST, QUEST MEANS BUSINESS: A grilling by Congress. Lawmakers take BP's CEO to task over the oil disaster.

Down but not out, U.S. stocks take a breather after nearly two weeks of gains.

And a win for Greece in the World Cup, but in the Economic World Cup, the odds look even longer.

I'm John Defterios in for Richard Quest. This, of course, QUEST MEANS BUSINESS.

It was a disaster that should never have happened, that is how BP's boss Tony Hayward described the explosion that destroyed the Deepwater Horizon rig, and the resulting oil spill. Fifty-eight days on from the catastrophe Hayward faced a barrage of tough questions from U.S. lawmakers investigating what went wrong.

Just as Hayward began to testify, however, this happened.

(BEGIN VIDEO CLIP)

UNIDENTIFIED FEMALE: SHOUTING (UNINTELLIGIBLE)

(END VIDEO CLIP)

DEFTERIOS: The protestor had painted her face with an oil-like substance and was quickly ejected from the room. Hayward continued by saying he was deeply sorry for the disaster.

(BEGIN VIDEO CLIP)

TONY HAYWARD, CEO, BP: I know that this incident has had a profound impact on your lives and caused great turmoil and I deeply regret that. I also deeply regret the impact the spill has had on the environment, the wildlife and the ecosystem of the Gulf.

I want to acknowledge the questions that you and the public are rightly asking. How could this happen? How damaging is the spill to the environment? Why is it taking so long to stop the flow of oil and gas into the Gulf. We don't yet have all the answers to these important questions, but I hear and understand the concerns, frustrations and anger being voiced across the country. And I know that these sentiments will continue until the leak is stopped and until we prove through out actions that we are doing the right thing.

(END VIDEO CLIP)

DEFTERIOS: That hearing before a House Energy Committee is just getting going again in Washington after a break for lunch, and another break for a vote. Let's go now to Capitol Hill and bring in Brianna Keilar who has been watching the hearings and the toing and froing.

Brianna, this is an effort to clear the slate, of course. It is just gathering momentum, what is your analysis so far?

BRIANNA KEILAR, CNN CONGRESSIONAL CORRESPONDENT: Well, certainly Tony Hayward is on the hot seat. And what we are seeing watching Democrats-as well as Republicans, who sometimes have certainly been more sympathetic to BP, and to the efforts to continue oil drilling-is they have been very frustrated with Tony Hayward. He has said many times, I don't know. I wasn't there. I don't have the answer. And so we have seen Democrats and Republicans pushing back on him. We have seen that he has been pretty removed, it certainly seems, compared to some of the other executives from BP that have testified in the past few weeks.

But part of that has to do with the fact that he is also-he has to protect the company. At this point in time the U.S. Department of Justice is looking into criminal negligence, the possibility of charges, against BP, or perhaps some of the people involved in this accident. So, just a sampling of what we have been seeing going on and what we are certainly expecting to continue as Tony Hayward begins questions again. This is between the chairman of the full Energy Committee there in the House, Henry Waxman of California, and Hayward.

(BEGIN VIDEO CLIP)

REP. HENRY WAXMAN (D-CA.), HOUSE ENERGY CTME.: Why were the safety recommendations of you own engineers ignored?

HAYWARD: I wasn't involved in any of the decision making. It is clear that there was some discussion amongst the engineering team and an engineering judgment was taken.

WAXMAN: But it is clear to me that you don't want to answer our questions. Because isn't it true that you have served your life in BP, you have only recently become the CEO, but haven't you been in this business most of your professional life?

HAYWARD: I've been in this business 28 years.

WAXMAN: 28 years, so you should have some knowledge about these issues.

(END VIDEO CLIP)

KEILAR: Now, the especially tough grilling, as you can see, coming there, from Democrats like Henry Waxman. They are Democrats who support a movement toward more renewable energy. They aren't big fans of oil drilling in the first place, let alone deep water drilling, even before this accident in the Gulf and this accident in the Gulf they have only used to kind of energize their position on the type of energy policy that should be taking-I guess, really hold here in the U.S. But even Republicans, who do want to see more domestic oil production, have been very frustrated with Tony Hayward. There was one, in questioning him, a Republican from Texas, one of the Gulf states. Tony Hayward, he asked him a question, some sort of specific about what happened in this accident and Hayward said he didn't know. And he said, you know, we drill hundreds of wells all over the world, every year. And this lawmaker said, "I know, that is what scares me."-John.

DEFTERIOS: OK, we'll leave it there for now. Brianna Keilar following the action there on Capitol Hill.

Well, shares of BP are falling in New York, right now. In London they closed up 6.5 percent, even after BP put dividend payments on ice for the rest of the year. Fadel Gheit is a managing director and senior oil analyst at Oppenheimer & Company, the investment bank, and he joins me now from his office in New York.

Fadel, it is nice to have you on QUEST MEANS BUSINESS. I want to jump right in here. You are somebody who has followed this industry for 25 years; been in the business nearly as long as Tony Hayward. Do you think this sets the floor of $20 billion escrow account, a testimony before Congress. Now saying by the end of the month they can probably absorb 40,000 barrels a day. Is this a floor to build up from, for BP?

FADEL GHEIT, OPPENHEIMER & COMPANY: Well, you know, step by step, the negotiations that lasted four hours yesterday with the White House, basically tried to establish a trust fund, if you will, with the escrow account.

Capping the well is a priority, but also BP has to make sure that there is financial flexibility to meet the future obligation of the clean up, as well compensating the people who are affected by this oil spill. So, this thing is going to take years. It is not going to end in weeks or months. But I think the decision to suspend the dividend, sell assets, will put BP in a much stronger financial position next year. And I would not be surprised if BP reinstated the dividend next year at half the rate where it is paying it right now.

DEFTERIOS: Let's talk about what really cleans the slate here. Is this the reality of being a CEO, although in that job for only four years, that Tony Hayward is going to need to go after the disaster, to clean up shop here? So BP can rebuild the reputation in America, or not?

GHEIT: I'm not sure. It is very hard. He's in a very tough situation. I don't think that the company handled the first couple of weeks, after the spill, right, they made a lot of mistakes and were a lot of statements that were made by BP and by Tony Hayward that they would like to take back. And unfortunately the press focused on some of the statements that he made and BP's statements, you know, starting with 1,000 barrels, then went to 5,000, went to 20,000 and now we know it is 60,000. So there is an element of distrust, and unfortunately that was exacerbated by the company's handling of the situation.

So, I hope it will not go down any further. But building up trust is a very, very slow and very painful process.

DEFTERIOS: At this price, and I'm going back to the global financial crisis, you saw the Middle Eastern funds, and Russian sovereign funds, Chinese sovereign funds, going into to seek value and Credit Suisse and Barclays when the stock was down. Do you think that is going to happen with BP here and that is going to be the cash injection they need to get through this crisis?

GHEIT: Absolutely. I would not rule out some of the sovereign funds. Once the dust settles it will likely take long positions in BP. You have to remember 20 years ago when BP was being privatized by the British government, it was during the financial collapse, the stock market crash in 1987, and there was no deal to be done, and the Kuwaiti government stepped in and bought 20 percent of BP shares. And the Kuwaiti government was the owner-the largest owner of BP shares for many years.

So, I would not rule out some of the sovereign funds in the Middle East or elsewhere around the world to take advantage of BP. I do believe it is a window of opportunity, short of driving BP out of business, I think it is a value to be had here. I sense that BP is going smooth-going through this crisis, it is going to be painful, it is going to take time. But we are analysts. We look at numbers, we look at facts, we cannot act on emotion. I'm not a politician. And I can tell you, even if I assume $1 billion per month, in clean up costs, and compensation for the next 10 years. That is $120 billion, BP still has the financial flexibility to fund its capital spending of $20 billion a year and restore its dividend or reinstate its dividend to half its level, which is $5 billion a year. And still have about $35 billion after 20 years in cash. So, BP has an enormous financial flexibility and the demise of BP is highly exaggerated.

DEFTERIOS: Bankruptcy is not there yet. Fadel Gheit, joining us from Oppenheimer, once again, in New York.

But let's dip into the hearing here. Back into the House Energy Committee, we mentioned that Tony Hayward was on the stand taking questions from Chairman Henry Waxman a little bit earlier. Let's listen into the hearing now and see what his answers are to the questioning that is taking place on Capitol Hill.

(BEGIN LIVE FEED, IN PROGRESS)

UNIDENTIFIED MALE: I sent you a 14-page letter outlining five issues you should be prepared to address in today's hearing. You did not address any of those issues in your opening statement. And thus far, you have responded t our questions with little substance and many claims of not knowing, or not being part of the decision making processes. You preached accepting responsibility for actions to your staff in town hall meetings. And yet, you have not yet provided us with direct answers or taken responsibility thus far today.

I sincerely hope that you will reconsider your approach to these questions. I hope you will be more forthcoming and less evasive with your answers for the remainder of this hearing. We are done with votes so we should be able to get through the rest of the this hearing and we will probably go a second round, because members do want to push you on some of these issues.

You are the CEO. Great experience. You have a Ph.D., you have been head of exploration. You know what is going on. We would hope that we would have more candid responses to our questions. And with that, let me turn it to Ms. Blackburn for questions, five minutes please.

REP. MARSHA BLACKBURN (R-TN), HOUSE CMTE. ON ENERGY, COMMERCE: Thank you, Mr. Chairman.

And, indeed, Mr. Hayward, we are a little bit frustrated with hearing you say you were not a party to certain decisions or were not in that chain of command, or that you can't comment because of ongoing investigations. So, I'm going to try a little bit different tact, because I do want to get some answers and get some items on the-get some of these questions answered.

I want to go back to the safety issues. I mentioned that in my opening statement to you. I'm one of those individuals that grew up down on the Gulf Coast, and then moved away. I'm familiar with people working offshore, if you will. And what I would like to know from you, have you been briefed on the safety issues and the safety concerns. And then, if you were a part of the decision making process on what would be considered the best operating practices? Were you a part of the chain of command. And what is the chain of command for dispute resolution when there is a difference about how to approach safety?

Go ahead, I'd love your response.

HAYWARD: Well, I clearly am the ultimate in the chain of command, but as I have said, I wasn't involved in the decision making of the day.

BLACKBURN: OK, let's do this then. If you were not involved in the decision making of how safety is approached, on these rigs and platforms, would you submit to us in writing, for the record, a description of what that chain of command is. And what the process is when there is a difference of opinion on how you approach rig safety. Would you be willing to submit that? And I will ask you and your team to submit that to us for the record.

In addition, since becoming CEO, have you been briefed on the significant safety incidents that have occurred in BP's explorations, Alaskan production facilities over the past year? Have you been briefed?

HAYWARD: I have discussed those issues at the group operating risk meeting (ph).

BLACKBURN: As a result of these briefings did you authorize any changes to BP policies and practices for dealing with the safety?

HAYWARD: We took actions in Alaska to change-

BLACKBURN: OK.

HAYWARD: -both the organization and some of the processes.

BLACKBURN: Thank you.

Since the Deepwater Horizon incident, have you made changes and what are those? Will you submit those to us for the record?

HAYWARD: We have made changes to our testing procedures on BOPs. We have made changes to the intensity with which wells site leaders are aware of our control procedures and a variety of other interventions that are predicated on what we have learned from the incident so far. And as we learn more we will make more changes as we deem appropriate. And I'd be very happy to submit to you, Congresswoman, the details of the changes that we have made.

BLACKBURN: Thank you.

Have you-did you ask other companies for help in cleaning up the BP oil spill. You know last week for the hearing we had several different companies. Did you all other companies or either other countries and ask for their help and their expertise in plugging that leak, and in participating in the clean up?

HAYWARD: We sought help from both our immediate peers and competitors in the Gulf of Mexico, and globally from around the world, and across America. There are several hundred entities involved in the effort. All of the major operators in this country, major operators from elsewhere in the world, such as Petro Gas, many of the major academic institutions in this country, some of the greatest minds in the country are involved in trying to deal with this problem.

BLACKBURN: Did they participate at your invitation or the government's invitation?

HAYWARD: They participated in the first incidence at our invitation, and subsequently, the federal authorities brought some of the great academic institutions in this country to bear.

BLACKBURN: OK, are you currently-is BP currently working on industry wide efforts to look at rig safety?

HAYWARD: We have made recommendations to the MMS, with respect to the things that we have learned so far, particularly with respect to blow out preventers. And we will continue, as we learn, what the realities of this accident are, to make our recommendations to the relevant authorities. And I believe that in the course of the coming months the industry will work together to determine what is the best way forward.

BLACKBURN: We hope that you are working together because I hope you understand our frustration. When you have stated before, safety would be a priority for BP. And we expect you all to take action on lessons learned. And when you tell us that you are taking that action and then you return because of what has occurred, Mr. Hayward, I cannot even begin to tell you how disappointing it is to us that you are saying-and you mentioned actions and words in your testimony. But, Sir, you are giving the rhetoric. What we want to see, going forward, is the action that indeed you have learned these lessons, that BP has learned these lessons, and that you are going to share these best practices with the industry. That would be very helpful.

Thank you for being before us today. I yield back.

UNIDENTIFIED MALE: Thank the gentle lady.

Mr. Hayward, you indicated that you made commendations on the blow out preventer, your company has. Would you provide those this committee?

HAYWARD: We certainly can, Chairman.

UNIDENTIFIED MALE: Next, I'd like to turn to Mr. Markey for questions.

REP. EDWARD MARKEY (D-MASS), HOUSE CMTE. ON ENERGY, COMMERCE: Thank you, Mr. Chairman.

Mr. Hayward, the existence of large clouds of plumes of oil, suspended deep beneath the ocean surface are of concern because the toxic oil and dispersants can poison the aquatic plants and animals and they also consume oxygen, potentially asphyxiating marine life.

On May 30, you stated that your samples showed no evidence of such plumes. On June 7, in response to my letter, BP again denied the plumes existed, citing a BP document saying that there is no coherent body of hydrocarbons below the surface. Even after NOAA Administrator Jane Lubchenco confirmed the plumes existence on June 8, your COO Jeff Suttles went on national television and continued to deny their existence.

These are photographs presented to us on the committee, by Doctor Samantha Joy of the University of Georgia, who has sampled the deep water of the Gulf and found such plumes. On the right there is a filter with oil clearly present from water, from within a plume as it passed by. Now, it isn't just university scientists' data. I have up here on screen as well from EPA's Web site, entitled Subsurface Plume Detected. It was prepared using BP's data. There are 17 red dots indicating that your own data shows evidence of subsurface plumes. This is your data, Mr. Hayward.

Are you now, once and for all, prepared to concede that there are plumes or clouds of oil suspended deep beneath the surface of the ocean. Yes, or no, Mr. Hayward?

HAYWARD: As I understand the data, Chairman, it indicates that there are, there oil in very light concentrations, 0.5 parts per million, distributed through the column. The detail analysis that NOAA had conducted, in three locations around the spill, show that in one location 0.5 parts per million, clearly attributed to this spill.

UNIDENTIFIED MALE: Are there plumes of oil beneath the ocean's surface?

HAYWARD: There are concentrations of oil of about 0.5 parts per million in the water fall out. Some of it is related to this spill, other samples have been typed to other oil.

UNIDENTIFIED MALE: So, you do not define that as a plume?

HAYWARD: I think, I'm not an oceanographic scientists, but what we know is that there is low concentrations of-

UNIDENTIFIED MALE: I'm going to take it as a continuing "no" from you. And your testimony continues to be at odds and against all independent scientists.

Yesterday, at the Energy and Commerce Subcommittee on Health, during the hearing the director of the National Institute of Occupational Health and Safety, told me, in answer to my question, that he has asked BP for a roster of all workers, multiple times, and BP has failed to give him that information, information that is critical to tracking chemical exposure.

Representative Eshoo and I were both outraged at BP's failure to take such a straight forward step to protect the health of their workers.

Mr. Hayward, will you commit to immediately provide the National Institute of Occupational Health and Safety, and the Centers for Disease Control, with all of the information that they need to evaluate health impacts and to protect these workers?

HAYWARD: We have endeavored to provide all information requests as quickly as possible. And we will endeavor to do that as well.

UNIDENTIFIED MALE: The head of the National Institute of Occupational Health and Safety, testified yesterday that you are not doing that. Will you provide all of the information that they have requested of you?

HAYWARD: We are endeavoring to provide all of the information requests that we receive and we will certainly do it with that one.

UNIDENTIFIED MALE: Again, the equivocation in your answer is something that is not reassuring to those workers who potentially have been exposed to these chemicals in ways that can impact on their health.

BP has dumped 30,000 gallons of drilling mud in the ocean. Drilling mud is often made using synthetic oils and other chemicals. And in this case also may have used significant quantities of anti-freeze, which is toxic. Mr. Hayward, will you commit to disclosing the ingredients of the drilling mud?

HAYWARD: Yes, we will. I believe that all of the mud that has gone into the ocean is water-based mud with no toxicity whatsoever.

UNIDENTIFIED MALE: Will you also commit to disclosing all other measurements you have made related to chemical, oil, and methane concentrations in the water, immediately?

HAYWARD: Those are being published as we make them on a variety of Web sites and we will continue to do that. And we'll make them available whatever form is appropriate to all of you.

UNIDENTIFIED MALE: And you will give us all the measurements that you have made, is that correct?

HAYWARD: All of the measurements we have made have been made available and we will continue to do that.

UNIDENTIFIED MALE: Thank you, Mr. Chairman.

UNIDENTIFIED MALE: Thank you.

Mr. Gingrey for questions, please.

UNIDENTIFIED MALE: Mr. Hayward, as demonstrated by the number of cameras in this room, interest in this hearing is at a fever pitch. The anger at BP and the anger at our administration is palpable. You just look at the polls. And we members of this committee have an obligation to get to the bottom of this, to address the frustrations of the American people.

The chief executive of ExxonMobil testified just yesterday, at the Energy & Environment Subcommittee of this committee, that quote, we would not have drilled the well they way they did", end of quote. In addition, the president of Shell, John S. Watson, stated, I quote, "It's not a well that we would have drilled in that mechanical set up. And there are operational concerns," end of quote.

Mr. Hayward, my profession before Congress was the practice of medicine, obstetrics and gynecology. If I had delivered a baby that resulted in a bad outcome, a seriously bad outcome, and two of my friendly competitors, well-respected peers said that, Doctor Gingrey, in this instance, practiced below the standard of care. I would be in a serious world of hurt.

Reflecting on the fact that two of your major competitors admitted that BP drilled a Mikado (ph) well, in a nonstandard way, in retrospect, what is your opinion of BP's design plan for the Mikado well?

HAYWARD: As I tried to explain, there are clearly some issues that our investigation has identified. And when the investigation is complete we will draw the right conclusions. If there is any point-

UNIDENTIFIED MALE: Well, with all due respect, you have had 59 days and you are not exactly moving with fever pitch here. Do you believe BP was drilling the well following the best safety practices you were focused on reinvigorating when you were promoted to the position of CEO a couple of years ago?

HAYWARD: I have no reason to conclude that wasn't the case. If I found at any point, that anyone at BP put costs ahead of safety, I will take action.

UNIDENTIFIED MALE: Do you believe that the decisions made regarding Deepwater Horizon on and leading up to April 20, such as a decision to use only six centralizers, instead of 21? The decision to not run a cement bond log? Do you believe those decisions reflect the normal decision- making process at BP, or would you characterize those decisions as an exception to normal operating procedures?

HAYWARD: There is nothing that I have seen in the evidence so far that suggests that anyone put costs ahead of safety. If there are, then we'll take action.

UNIDENTIFIED MALE: Let me put it this way, Mr. Hayward, in the remaining time that I have left. If you had been physically present on that rig, along with the eleven men that were killed, would you have made the same decisions as were made? Would you have approved the decision to use only six centimeters, despite the recommendation to use 21? Would you have made the decision to not run a cement bond log, if you had been standing on that Deepwater Horizon rig?

HAYWARD: I'm not the drilling engineer, so I am not actually qualified to make those judgments. Better people than I were involved in those decisions in terms of the judgments that were taken. And if our investigation determines that at any time people put costs ahead of safety, then we will take action.

UNIDENTIFIED MALE: Well, with all due respect, Mr. Hayward, I think you are coping out. You are the captain of the ship. And it has been said by members on both sides of the aisle of this committee, you know, we had a president once, that said, you know, the buck stops on my desk; a very distinguished president. And I think the buck stops on your desk, and we're just not getting, I don't think, the answers from you that need to be presented to this committee, in a forthright manner. It is a little frustrating for all of us. And it seems like that you testimony has been way too evasive.

Mr. Chairman, I'll yield back at this time.

UNIDENTIFIED MALE: Thank you, Mr. Gingrey.

Mr. Braley for questions, please.

REP. BRUCE BRALEY (D), INDIANA: Thank you.

I want to follow-up on my friend from Oklahoma's questions about the culture of safety at BP, Mr. Hayward. Because you have stated repeatedly that since you took over as CEO of BP, that safe reliable operations are our number one priority, correct?

HAYWARD: That is correct.

BRALEY: And you've been CEO for the president three years, correct?

HAYWARD: Correct.

BRALEY: Then explain to us why, between June of 2007 and February of 2010, the Occupational Health & Safety Administration checked 55 oil refineries operating in the U.S. Two of those 55 are owned by P -- BP. And BP's refineries wracked up 760 citations for egregiously, willful safety violations accounting for 97 percent of the worst and most serious violations that OSHA monitors in the workplace.

That doesn't sound like a culture of safety.

HAYWARD: We acknowledge that we had very serious issues in 2005 and 2006...

BRALEY: Well, I'm not talking about...

HAYWARD: (INAUDIBLE)...

BRALEY: -- 2005 and 2006. I'm citing from an OSHA study between June of 2007, on your watch, and February of 2010, where OSHA said BP has a systemic safety problem. And of those 760 that were classified as egregious and willful, it's important to note that that is the worst violation that OSHA can identify. And their definition is "a violation committed with plain indifference to or intentional disregard for employees' safety and health -- 97 percent of all of those egregious violations at U.S. refineries on your watch were against your company.

That doesn't sound like a company that, to use your words, is committed to safe, reliable operations as your number one priority. There's a complete disconnect between your testimony and the reality of these OSHA findings.

Do you understand that?

HAYWARD: I understand what you're saying.

BRALEY: So we also had Mr. Barton earlier make this comment about what happened at the White House yesterday.

Were you there for that conference with the White House?

HAYWARD: I was.

BRALEY: Do you think that BP was shaken down by the Obama administration to come up with this $20 billion compensation fund?

HAYWARD: We attended the White House at the invita -- the invitation of the government to form a way forward and try and work together to deal with the -- the leak, the response to the leak and to make or return the Gulf Coast to its past. And -- and that's what -- what we're going to do.

BRALEY: And I realize we speak the same language, but it's not always the same language, when we speak English in the United States and English in Great Britain. So I want to make sure I'm clear on this. Here in this country, the word "shaken down" means "somebody in a position of disadvantage is forced to do something against their will."

Is that how you viewed these negotiations at the White House yesterday?

HAYWARD: Well, as I said, we were -- we came together to figure out a way of working together to resolve what is clearly a very, very serious situation.

BRALEY: And the reason you came together, sir, is because it was not only in the best interests of the United States taxpayers and the citizens of this country, it's also in the best interests of BP to try to get this problem solved so that it can move forward, isn't that true?

HAYWARD: It is undoubtedly true that I -- we would like to resolve this issue, as would everyone else.

BRALEY: And what...

HAYWARD: And...

BRALEY: And what...

HAYWARD: And more broadly in this country.

BRALEY: When the ranking member referred to this compensation fund, which I applaud as a positive step forward, as a slush fund, I want you to know that in this country, that implies a very negative connotation as something illegal, below the surface of what's acceptable.

Did you consider this compensation fund for people whose -- who had lost their lives, lost their businesses, lost their environment, lost their ability to earn a -- did you consider that to be a slush fund?

HAYWARD: As we said yesterday, the fund is a signal of our commitment to do right, to ensure that individuals, fishermen, charter boat captains, small hotel owners, everyone who's been -- been impacted by this, is kept whole. That is what I have said from the very beginning of this and that is what we intend to do.

And as I said in my testimony, I hope people will now take -- see that we are good for our word.

BRALEY: And can we take that as a no in response to my question, sir, that you did not consider this to be a slush fund?

HAYWARD: I certainly didn't think it was a slush fund, Congressman.

BRALEY: Thank you.

I'll yield back.

UNIDENTIFIED MALE: Mr. Latta, for questions.

Five minutes.

REP. ROBERT E. LATTA (R), OHIO: Thank you, Mr. Chairman.

Thanks for being with us, Mr. Hayward.

Earlier in the morning, our ranking member, Mr. Burgess, had asked a question and you had responded -- if I wrote it down here correctional, that "everything that we do is subject to regulatory oversight."

And who is that?

When we're talking about regulatory oversight?

HAYWARD: Regulatory oversight is the people at the drilling operations, it's the Minerals and Management Service.

LATTA: OK. But here with -- in the federal government, who would be out on the rig for that oversight?

HAYWARD: It is the inspectors of the Minerals and Management Service, I believe.

LATTA: And when were -- you know, I -- I'm sure that the records are out there, but when was the last time that the MMS would have been on the rig (INAUDIBLE)?

HAYWARD: I'm afraid I'm not aware of that date, but I would imagine it was relatively shortly before the incident.

LATTA: Well, did you know of any citations that were issued during those -- that time that they were out on the rig?

HAYWARD: I'm not aware of any citations, no.

LATTA: Let me ask this question. I know I've talked to very -- quite a few members from the -- the Gulf Coast and also from news reports. And there have been many, many cases out there where they're talking about it takes almost about five days for a turnaround time. And once it starts -- I came from local government. And so, you know, there's a chain of command out the, the local government, the state government and depending on who's -- what the chain is out there. But they're saying over and over and over that it takes about five days -- and a lot of times it says we have to go talk to BP.

And I was just wondering, because knowing that time is of the essence out there because of all these different critical matters that are happening, why is this that they say they have to go after BP and this turnaround time takes so long?

HAYWARD: I'm afraid I can't answer that question. I don't know.

LATTA: Could you get that information for us?

HAYWARD: We can, yes, sir.

LATTA: Well, I guess the next question probably is going to have the same response, but, you know, the question that is, is who set the procedure up this way that we would have a situation where it would take a five day turnaround time?

Do you have any knowledge of that?

HAYWARD: I'm afraid I don't, no.

LATTA: After the -- the disaster occurred, have you had direct contact with the White House and do you have a direct person at the White House that you have been dealing with that when problems arise, that you can get things turned around quickly?

HAYWARD: My primary contact role of this has been with Admiral Thad Allen, who is the national incident commander. And he and I talk on a very regular basis.

LATTA: When you say on a very regular basis, how often would that be?

HAYWARD: Typically once a day, often more than once a day.

LATTA: Well, and, again, you know, as the lady from Tennessee -- and we -- we have a kind of a frustration level on getting some responses, but with that, Mr. Chairman, I'm going to yield back.

UNIDENTIFIED MALE: Thank you, Mr. Latta.

Miss. DeGette, for eight minutes, please.

REP. DIANA DEGETTE (D), COLORADO: Thank you so much, Mr. Chairman.

Mr. Hayward, in your initial testimony, you testified that BP has drilled hundreds of wells around the world.

How many of them are deepwater wells?

HAYWARD: I don't know the precise number, but we drill a lot of deepwater wells in the various parts of the world and...

DEGETTE: OK. You don't know how many.

Do you think that BP's wells, irrespective of where they are drilled, should be drilled at the highest industry standards?

HAYWARD: I believe that's what we try and do.

DEGETTE: So your answer would be yes?

HAYWARD: Um-hmm.

DEGETTE: OK. And as this well was being drilled, were you informed, as CEO of the company, of the progress of the well?

HAYWARD: I was not.

DEGETTE: You were not?

OK. Now, before I continue, I know you've had difficulty answering some of the technical questions members have asked you, so I know you brought a technical expert with you, Mr. Zange (ph).

Would you like us to swear him in so he can help you answer some of my technical questions?

HAYWARD: That would depend on the question.

DEGETTE: All right. Well, let's see how it goes.

Now, Mr. Hayward, you said that you received the -- the Chairman's June 14th letter to you, which talks about five decisions that compromised the safety of this well -- well design, centralizers, cement bond log, mud circulation and lockdown sleeve.

I want to ask you, in my questioning, about one of those issues, and that's the cement bond log.

The first thing I want you to do, if you can take that notebook that's to your left. Open it up. In the front flap, there is a memo which was written from Brian Morel to Richard Miller on Wednesday, April 14th. And that memo says: "This has been a nightmare well which has everyone all over the place."

Did anybody inform you, as CEO of the country and -- company -- in April of this year that this was a nightmare well?

HAYWARD: They did not.

DEGETTE: Did you -- did you subsequently see this memo?

Have you seen this memo?

HAYWARD: I saw this memo when it was raised by your committee.

DEGETTE: And that's the first you ever heard of it?

HAYWARD: That was the first time.

DEGETTE: Is that the first you ever heard of it being a nightmare well?

HAYWARD: When I first saw this...

DEGETTE: As CEO...

HAYWARD: (INAUDIBLE).

DEGETTE: OK. OK. Now -- now, let's talk for a minute about the cementing job. Because all of the testimony that we've had in this committee, through our hearings, also in the Natural Resources Committee, through their hearings, indicates that the -- the choices that BP made in - - and its subcontractors -- in order to save money led to blind faith in a successful cementing job.

Let me just walk through it first so that you can understand.

First of all, BP wrote -- chose a riskier well design and the chairman, Chairman Waxman, talked about this for a moment. The best practice would have been to use a liner and a tieback, which provides four barriers to prevent the flow of dangerous hydrocarbons to the wellhead. Instead, BP, as the chairman said, chose a long string approach, which has only two barriers.

An internal document of the company warned that this approach was not recommended because, quote: "Cementing simulations indicate it's unlikely to be a successful cement job."

And you can look at tab six of the notebook that you have in front of you to see that, Mr. Hayward.

It says: "Cement simulations indicate it is unlikely to be a successful cement job due to formulation breakdown."

This is an internal BP confidential document from mid-April.

Have you seen this document before?

HAYWARD: I saw it as a consequence of the -- the (INAUDIBLE)...

DEGETTE: But you did not see it at the time?

HAYWARD: I did not see it...

DEGETTE: But there were BP folks who saw it, correct?

HAYWARD: (INAUDIBLE)...

DEGETTE: To your knowledge?

HAYWARD: There were certainly BP people who saw this.

DEGETTE: OK. Secondly, so the document says there would be a potential need to verify with the bond log and perform a remedial cement job. But BP chose the riskier approach.

Secondly, BP chose the riskier centralizer option. Experts have told us in testimony to this committee that the prac -- best practice would have been use -- to use 21 centralizers, but BP only used six. If you take a look at tab eight, it says, on page 18, it says you did this even though your cementer, Halliburton, said this would create a, quote, "severe risk that the cement job would fail."

It says: "Based on an" -- it says -- it says that it would be a severe risk. And BP's operations drilling engineer wrote about this decision: "Who cares? It's done. End of story. We'll probably be fine and get a good cement job."

Were you aware of that document at the time, Mr. Hayward?

HAYWARD: I was not aware of any of these documents at the time.

DEGETTE: And when did you learn about that memo?

HAYWARD: That memo was -- was, again, when I was made aware of it by your committee.

DEGETTE: And -- but you wouldn't deny that BP employees and supervisors were aware of that document at the time, correct?

HAYWARD: There were people in BP who were aware of that document, yes.

DEGETTE: Now, would you say that it's the best business practices to say, who cares, it's done, end of story, we'll probably be fine and we'll get a good cement job?

HAYWARD: I think that e-mail is a cause for concern.

DEGETTE: I would think so.

HAYWARD: I'd like to understand the context in which it was sent. And as I've said a number of times, if there is any evidence that people put costs ahead of safety...

DEGETTE: OK.

HAYWARD: -- then I will take action.

DEGETTE: I understand. Let me finish with the cement bond. Now -- now you would -- BP failed to perform the most effective test that -- that was known to determine whether the cement was properly sealed, and that's the cement bond log test. There was a contractor, Schlumberger, on board, hired to perform this test, but they were sent away 11 hours prior to the explosion.

This test was described by Halliburton's chief safety officer, Tim Probert, as, quote: "The only test that can really determine the actual effectiveness of the bond between the cement sheets, the formation and the casing itself."

Now, the committee has -- has consulted an independent expert who said that cement bond log should always be used. Another expert said it is unheard of not to perform this test. He called your decision -- and I'm quoting -- "horribly negligent."

So I want to ask you a question.

Do you think, as CEO of this company, it was a mistake not to conduct the cement bond log test?

HAYWARD: That is what our investigation will determine. As I understand it...

DEGETTE: So your answer would be yes, it was a mistake...

HAYWARD: That...

DEGETTE: -- correct?

HAYWARD: That is -- I'm not -- I'm not able to answer yes or no until the investigation is complete. When the invest -- when (INAUDIBLE)...

DEGETTE: Have your lawyers told you not to or what?

HAYWARD: No, simply because I wasn't involved. I'm sorry.

DEGETTE: OK. But you -- but you just said you -- you think that all the evidence shows that it was a mistake, correct?

HAYWARD: That is not correct.

DEGETTE: OK.

HAYWARD: That's not what I said.

DEGETTE: Do you think it was all right not to conduct...

HAYWARD: I think...

DEGETTE: -- the test?

HAYWARD: I think we need to complete the investigation.

DEGETTE: OK.

HAYWARD: And determine...

DEGETTE: Well...

HAYWARD: -- whether running a cement bond log or not would have created a major difference for what happened here.

DEGETTE: OK.

HAYWARD: There are (INAUDIBLE)...

DEGETTE: Let me ask you this.

Are you aware of the fact that it would have cost about $128,000 and taken nine to 12 hours to complete the cement bond log test.

HAYWARD: I am all right of that fact, yes.

DEGETTE: Yes. OK.

DEGETTE: OK. I yield back.

Thank you, Mr. Chairman.

UNIDENTIFIED MALE: Thank you.

Mr. Doyle for questions, please.

REP. MIKE DOYLE (D), PENNSYLVANIA: Thank you, Mr. Chairman.

Mr. Hayward, in your testimony, You said that some of the best minds and the deepest expertise bring but -- are being brought to bear on the oil spill and that it's difficult to imagine the gathering of a larger, more technically proficient team in one place in peacetime. And I know that's meant to reassure us that everything possible is being done. But it does make me wonder who was making these key decisions before the accident.

Now, one of these key decisions was which type of pipe to insert in the well, a single tube from the top or a two piece liner with a tieback setup. Now, the second design offers more barriers to unintended gas flow. And on Tuesday, the other oil companies that we talked to told us they would have chosen that design.

Looking back, the decision that BP made appears to have had serious consequences.

Mr. Hayward, were you involved in that decision?

HAYWARD: I was not involved in that decision.

DOYLE: Were you aware of that decision?

HAYWARD: I was not involved or aware of any of the decisions around this well as it was being drilled.

DOYLE: We asked your representatives, who are the senior BP executives responsible for the Macondo well. They told us it was Andy Inglis, the chief executive for exploration, and Doug Suttles, the chief operating officer for exploration.

Can you tell me, was Andy Inglis involved in this decision?

HAYWARD: I'm afraid I can't answer that question. I generally don't know. It would be very surprised.

DOYLE: What about Doug Suttles?

Was he involved in the decision?

HAYWARD: I would also be very surprised if Mr. Suttles was involved in the -- in any decision.

DOYLE: So we've reviewed all of their e-mails and communications. We find no record that they knew anything about this decision. In fact, we find no evidence that they ever received briefings on the activities aboard the Deepwater Horizon before the explosion. These decisions all seem to have been delegated to much lower ranking officials.

Well, Mr. Hayward, then who was the one who made the decision to use a single tube of metal from the top of the well to the bottom?

Who did make that decision?

HAYWARD: I'm not sure exactly who made the decision. It would have been a decision taken by the drilling organization in the Gulf of Mexico.

DOYLE: So...

HAYWARD: They are the technical experts and have the technical knowledge and understanding to make decisions of that sort.

DOYLE: But you can't tell this committee who that person was?

HAYWARD: I can't -- I can't sitting here today, I'm afraid.

DOYLE: You can get this information to our committee?

I mean I think it's pretty amazing that this is a decision that had enormous consequences and -- and you can't even tell the committee who made the decision on behalf of your company.

And -- and the reason I'm asking you these questions is because your industry is different than many. You're the CEO -- you're not the CEO of a department store chain, where it's fine to leave decisions to -- about running the store to branch managers. You know, if a department store middle manager makes a mistake, there's no life or death consequences.

What you do is different. You're drilling far below sea level into a region that's more like outer space than anything else. The consequences of that drilling are huge. If a mistake or a misjudgment is made, workers on the rig can get killed and an environmental catastrophe can be unleashed. The best minds in the senior leadership of the country should be paying close attention to those risks, but it didn't happen here. And now we're all paying the consequences because those of you at the top don't seem to have a clue about what was going on on this rig.

I'm sitting here thinking I could be a CEO of an oil company. I hear it pays a lot better than being a member of Congress, because I've watched you, in front of this committee, and you're not able to give us much in -- much information on anything here.

I want to ask you one last question while I have some time. You told us that you're doing everything possible to stop this -- this well from leaking. But it seems to me that -- that what we're left with now is waiting for this relief well to be -- to be drilled. And that's going to happen some time in August.

So, you know, today is June 17th. Now, back in 1979, the IXTOC 1 took over nine months to cap after drilling several relief wells. And that well was only 160 feet down into the ocean, while the Macondo well is over 5,000 feet below the surface of the ocean.

Can you tell us today, you have abandoned any other efforts to kill this well?

Are we at the point now where BP is doing nothing until the relief well gets down there?

Or are you trying some different technology or some other way to kill the well, you know, before you get a relief well down there?

Is there anything else on -- on -- on the horizon?

HAYWARD: I'm afraid there are no other options to kill this well other than from a well at the base of the reservoir. As you are all aware, we tried to kill the well from the top using the "top kill" operation and the pressures in the well are such that it's not possible to do that.

So we have to rely on the relief wells.

DOYLE: So...

HAYWARD: In the interim...

DOYLE: -- so basically...

HAYWARD: -- we are continuing to contain as much of the oil as we can and that operation is currently continuing 20,000 barrels a day. By the end of this month, we'll have the ability to contain between 40,000 and 50,000 barrels a day. And by the middle of July, between 60,000 and 80,000 barrels a day.

DOYLE: I want to ask you the same question I asked other oil executives on Tuesday.

Why won't -- why wouldn't you just drill relief wells when you drill the main well so that if something like this happened, instead of us waiting two or three months and watching millions of barrels of oil come into the ocean, destroying our ecosystem and our way of life on the Gulf Coast, that you could kill that well in a short period of time?

I understand the expert relief well would cost you a little bit more money, but it seems to me, in this case, it would have saved you billions of dollars.

What are your thoughts on -- on drilling relief wells along with main wells?

HAYWARD: I think we would need to look at all of the options available to us going forward with respect to deepwater exploration.

DOYLE: I see my time is up, Mr. Chairman.

Thank you.

UNIDENTIFIED MALE: Miss. Schakowsky for questions. Please.

REP. JAN SCHAKOWSKY (D), ILLINOIS: Thank you, Mr. Chairman.

I wanted to focus on the mindset of BP when it comes to its workers. You said in your opening statement that you were personally devastated. You attended a memorial service for those men: "It was a shattering moment. I want to offer my sincere condolences to their friends and families. I can only imagine their sorrow."

Probably not as devastated as the widows that testified before our -- our committee. And I asked them, what about BP?

What kind of contact have you had with BP since the incident -- letters, phone calls, visits.

And Natalie Roshto said: "Two BP men came -- attended Shane's services and they -- they never extended a hand, a hug, never extended a "we're sorry," their condolences. The only words that came out of their mouth was where they were to be seated and I never saw them after that."

I asked, what about you, Mrs. Kemp?

"Two BP men came to Wyatt's services and one extended his hand. I shook it. He told me he was very sorry for my loss. He asked if he could hug me. He did. The other gentleman extended his hand, told me who he was. And they sent two plants (ph) to the service -- service. And that is the extent of my conversation or any dealings with BP. That's it."

Do you feel that you owe something more to those women and to the -- you know, just in terms of expressing something and some -- and more?

HAYWARD: As I said, I -- I'm devastated by the accident, absolutely devastated. And I -- I feel great sorrow for the people who have been impacted by it.

SCHAKOWSKY: Well, they haven't heard anything.

HAYWARD: They -- the -- the people who were -- who were killed in the accident were not BP employees. They're employees of Transocean and another contractor. And both of them made it very clear that they wanted to deal with the families.

We have provided support to both Transancan -- Transocean and (INAUDIBLE)...

SCHAKOWSKY: I guess I was talking to...

HAYWARD: And we were...

SCHAKOWSKY: (INAUDIBLE) human being.

HAYWARD: And we have made it clear that we will provide all and every need for the families. But...

SCHAKOWSKY: OK. Let -- let me ask another question. There were BP personnel on the -- the rig. And we read that oil workers from the rig were held in seclusion on the open water for up to two days after the April 20 explosion while attorneys attempted to convince them to sign legal documents stating that they were unharmed by the incident. The men claim that they were forbidden from having any contact with concerned loved ones during that time and were told that they would not be able to go home until they signed the documents they were presented with.

After being awake for 50 harrowing hours, Stephen Davis caved in and signed the papers. He said most of the others did, as well.

Do you think this is an appropriate way to treat people that experienced that?

And since your executives -- you had people on the -- on the rig -- what was their feeling about that?

What is your feeling about that?

HAYWARD: Well, I think it's inappropriate and it was nothing to do with BP.

SCHAKOWSKY: I see. And BP had no comment on it and had no opportunity -- I mean what -- did -- did the company know about it?

Was there any...

HAYWARD: We -- I don't believe we were aware it was taking place, but it was certainly nothing to do with BP.

SCHAKOWSKY: OK. Well, I did mention during my opening statement this document that basically says such voluntary effort shall be at my own risk, that people were made to sign. And there were two court appearances that were needed to finally get BP to take responsibility. But what I understand is that BP continued to fail to provide adequate protective gear to the fishermen. And on May 16th, OSHA issued a detailed directive on the training requirement for specific tasks to responders and stated that OSHA had officials monitoring the training and observing the -- the cleanup.

But according to testimony we heard in Louisiana, still, BP failed to provide respirators to the workers exposed to the crude oil and the workers experienced health impact. The workers were afraid to speak up due to the potential to lose their jobs. Those fishermen who attempted to wear respirators while working were threatened to be fired by BP due to the workers using the respirators.

Do you know anything about that?

HAYWARD: I'm not aware of that. What we clearly are endeavoring to do is make sure that anyone involved in the response is appropriately provided with whatever safety equipment is required. And...

SCHAKOWSKY: Endeavoring to provide...

HAYWARD: Well, I -- we...

SCHAKOWSKY: Are the workers currently provided with what they need?

HAYWARD: Absolutely. In every case, we are trying to make certain that people do not put them...

SCHAKOWSKY: Again, you're trying to make certain, but are -- does -- are all -- is all the equipment there and are all these workers protected?

HAYWARD: To my knowledge, yes.

SCHAKOWSKY: Thank you.

I yield back.

UNIDENTIFIED MALE: Thank you.

Next, turn to Mr. Ross for question, please.

REP. MIKE ROSS (D), ARKANSAS: Thank you, Mr. Chairman.

And Mr. Hayward, since my opening statement, up to 416,666 gallons of oil have leaked into the Gulf. That was about four hours ago. In my opening statement four hours ago, I asked you to provide us, to be open with us and honest with us in your responses. And instead, it -- it -- it seems as though we're getting statements memorized that you had provided by your legal counsel.

I don't know if BP quite understands how angry the American people and the world is at them. I can tell you, it's rare that you see Democrats and Republicans on this panel agreeing with one another, and yet it's been pretty consistent today, with a few major exceptions.

The -- the level of discontent and anger...

DEFTERIOS: Tony Hayward getting a sense of political tension and frustration across the spectrum of America. About an hour's worth of questioning here after two breaks, one for lunch and another roll call vote on the floor.

You heard from congresswomen and men from Michigan, Tennessee, Georgia, Massachusetts, Iowa, Ohio, Colorado and Illinois -- all expressing their frustration.

A couple of highlights here. "The rhetoric is there," Mr. Hayward, "but not the actions so far." Another quote from a congressman from the floor: "All due respect, sir, you are copping out. That's frustrating for all of us."

And another: "The consequences of what you do are huge. Those at the top of BP don't have a clue of what's happening on the rig."

This is a day after BP agreed to a $20 billion escrow account to be filled up in four years and suspension of its dividend for the next three years. And there was even questioning about that, about whether BP was being shaken down by the administration to take the political heat off of the White House.

BP's shares down 1.3 percent today, after a rise of 6.7 percent in London. So a very disheartened investment community on the other side of the pond. The stock was down about 50 percent from its peak prior to the accident. There's even discussion now of whether this relief well in August will tackle the problem in the next 30 days.

And that's QUEST MEANS BUSINESS for this evening.

I'm John Defterios in London.

Thank you for watching.

"WORLD ONE" starts right now.

END