The Department of Interior won’t comment as to whether or not Goldman Sachs is being investigated for having prior knowledge of the Deepwater Horizon oil rig’s vulnerability.
Goldman Sachs dumped 4,680,822 shares of BP (44 percent of its stock in the company) in the first quarter of 2010, which ended on March 31, just weeks before the spill. That translates into about $225 million worth of BP shares Goldman Sachs sold right before the biggest environmental disaster in U.S. history.
“We reduced some positions [in BP] and others we held,” said Andrea Raphael, a spokesperson for Goldman Sachs. “We still have a significant position in the company.”
Goldman Sachs wouldn’t, however, comment or give any reason as to why it sold those shares of BP so soon before the spill. Goldman Sachs also wouldn’t comment on whether it knew any information about the Deepwater Horizon rig’s questionable safety record before the April 20 explosion.
Eric Smith of the Tulane Energy Institute said that while he doubts Goldman made that decision based on insider information, it could be possible. “It could be something as simple as BP had a great first quarter and Goldman sold them [the shares] while they were up,” Smith said.
Robert Bea, an engineering professor at University of California at Berkeley and the engineer called on to conduct the preliminary investigation into the Deepwater Horizon incident, said the disaster was preventable and that there were several signs of negligence on behalf of BP and the Minerals Management Service, which was recently renamed the Bureau of Ocean Energy Management, Regulation and Enforcement.
According to several previously non-public documents, the Obama administration, BP and the MMS knew the Deepwater Horizon rig wasn’t functioning properly as early as February, but didn’t do anything about it.
The documents show that BP took 10 days to plug cracks in one of its wells in February, and that, on March 10, BP warned MMS it was experiencing difficulties controlling surges of natural gas. The surges of natural gas, or kicks, aren’t uncommon on exploratory wells, said Ken Arnold, of K Arnold Consulting.
“When they have the kicks, they have to tell MMS,” Arnold said. “They also have to report changes in the well design, which are also common. It just means they’re following the law.”
Smith said ties to industry insiders would be difficult to find, but that the Deepwater Horizon had raised some red flags before.
“There was some unfavorable information about that well [the Deepwater Horizon] in the industry before,” Smith said. “This well has had a checkered history.”
Arnold disagrees saying that the well showed no signs of imminent danger, just small day-to-day, ordinary difficulties.
“It wasn’t like people were walking around saying ‘this is a dangerous rig,’” Arnold said.
He continued by noting that he doubts Goldman Sachs knew of any potential problems on the well before the explosion and that even BP probably didn’t know. Moreover, Arnold said that the majority of the questionable decisions, including the basic structure of the well, the cementing of the well, the decision not to use a cement band log and circulating seawater into the well and taking mud out, were made the day of the explosion or in the few days preceding it.
“There were a number of decisions that were made that were marginally acceptable,” Arnold said. “When you start adding marginally acceptable decisions up, the outcome usually isn’t very good.”
Attorneys general from the five Gulf Coast states—Florida, Alabama, Louisiana Mississippi and Texas—all differ on the level of information they are giving out at this point, though they all can neither confirm nor deny investigations, per standard procedure, into any prior knowledge Goldman Sachs may have had of unsafe conditions on the well.
“We are aware of some recent blogs referring to Goldman Sachs’ sales of the shares,” said Ryan Wiggins, deputy communications director for Florida’s attorney general, Bill McCollum. “If information comes to light that suggests a violation of Florida law, we will certainly pursue whatever options may be at our disposal, including opening any appropriate investigations.”
Alabama’s attorney general’s office wouldn’t comment either way, nor would the attorney general’s office in Texas. Louisiana’s attorney general’s office didn’t return e-mails for comment.
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