BP demands Anadarko, Mitsui chip in funds

BP Exploration & Production Inc. is demanding that Anadarko Petroleum Corp. and Mitsui Offshore Exploration, its partners in the well fouling the Gulf of Mexico, help pay the costs of response to the oil spill.

The British oil giant has trained its fire particularly on Anadarko, accusing the company of breaching contract, divulging confidential information and failing to act in "good faith."

The accusations, contained in an exchange of "confidential" letters this month between the two companies, show that the legal wrangling among the companies involved in the Deepwater Horizon spill is getting more pointed and bitter.

Adding to the tension, a Senate subcommittee is asking why Anadarko and fellow partner Mitsui Offshore Exploration (MOEX) are not chipping in to the $20 billion escrow fund established to reimburse fishermen and others losing their livelihood to the spill.

"I am very focused on getting to the bottom of who owes who, and what, so that the communities and businesses hurt by this disaster are made whole and that the taxpayers are protected," said Sen. Tom Carper (D-Del.), chairman of the Federal Financial Management Subcommittee of the Homeland Security Committee, which is holding a hearing today to delve into these questions with the CEO of Anadarko and the president of the Mitsui subsidiary.


BP has billed Anadarko, which has a 25 percent interest in the well, for more than $1 billion of the $4 billion it has spent on spill response. But Anadarko has very publicly refused. Company CEO James Hackett announced in a statement in June that their partnership agreement was voided by BP's "gross negligence" and "willful misconduct" (E&ENews PM, July 1).

Still, in a July 7 letter refusing payment, Robert Reeves, Anadarko's senior vice president and general counsel, wrote that the company "remains committed to working with BP in good faith" on resolving the question of spill expenses.

That drew a stinging rebuke two days later from BP's "chief land negotiator" in Houston, O. Kirk Wardlaw.

"Anadarko's actions, including its public statements against the interest of the joint interest, releases of confidential data and failure to reimburse BP for joint interest expenses incurred and paid by BP, constitute willful breaches of the operating agreement and do not exhibit good faith," Wardlaw wrote in the letter, obtained by E&E Daily.

In the letter to Anadarko and a milder letter sent to MOEX, the BP executive warned that if the investors do not pay, they risk an "event of default." The term is not defined in the letter.

"There are no provisions of the Operating Agreement that would allow Anadarko to withhold reimbursement of its share of emergency and environmental response costs," Wardlaw wrote.

BP is also angry that Anadarko released the operating agreement to the public in a filing to the Securities and Exchange Commission.

The letters indicate that Anadarko and BP officials were to meet last week in New York to discuss the payment issue. Attempts to reach company officials to find out the results of those meetings were not successful.

From great promise to great problems

Originally, the investment by Houston-based Anadarko and Japanese conglomerate Mitsui Group, through its U.S. subsidiary MOEX, meant they were to share in the profits of what was expected to be a rich find 4 miles below the surface of the Gulf.

But the investment went horribly wrong on April 20, when the well blew out, causing an explosion on the Deepwater Horizon rig that had been drilling the well, killing 11 crewmembers. When the rig sank two days later, oil billowed from the well causing the worst oil spill in U.S. history.

BP billed Anadarko $919 million for spill response for June and billed MOEX $368 million, according to invoices obtained by E&E Daily. That comes on top of the $272 million it billed Anadarko for in May. Mitsui's bill was $111 million.

MOEX has declined payment more quietly, simply saying it is awaiting the results of the many investigations into the explosion and spill. The Houston-based subsidiary of the Japanese company is being represented by Elizabeth Vella Moeller, a Republican lobbyist and lawyer at Pillsbury Winthrop Shaw Pittman, a New York-based law firm that has a Tokyo office.

"We must undertake a very careful and independent review of your claims for reimbursement," wrote MOEX Offshore 2007 LLC President Naoki Ishii in a July 12 letter to BP.

The letters were given to the Federal Financial Management Subcommittee as part of its ongoing investigation into the effect of the spill on the federal budget. At its hearing today, the panel will hear for the first time from Anadarko's Hackett and MOEX's Ishii, who will testify through a translator.

Carper, the panel's chairman, had criticized their failure to appear at a previous hearing. Panel members have questioned whether their decision not to chip in will affect BP's ability to shoulder all spill response costs. But BP has said in statements and testimony that the actions of its partners will not affect its ability to pay the costs.

In prepared testimony that has been submitted to the committee, both executives stress that they had no way of knowing the details of how BP was operating the well.

"Offshore placed confidence in BP's expertise and experience in drilling deepwater wells in the gulf," Ishii's prepared testimony states. "Offshore was not aware of any reason to doubt the sufficiency or competency of the drilling plan."

Feinberg on the stand

The spill escrow fund's administrator, Ken Feinberg, is also scheduled to testify today as part of a blitz of appearances to explain his role.

Aides say the committee is expected to question him on why the other companies are not contributing to the $20 billion escrow fund.

Under the current structure of the fund, those who get money from the fund sign away their right to sue BP, but not any of the other companies involved in the spill, such as Anadarko and Mitsui, because the other companies have not contributed to the fund.

Feinberg said in appearances earlier this week that he had no opinion on whether other companies should join his settlement process.

"That's a legal issue as well as a political one. It's up to those companies," Feinberg said. "I have enough of a challenge without advising other companies."

Attorney General Eric Holder said last week that the Justice Department could go after other companies beyond BP.

Feinberg could also be pressed on how independent he is. Republicans have accused the Obama administration of "shaking down" BP for the $20 billion account that Feinberg will administer. But Feinberg says he was first approached by BP rather than the White House, and he is currently being paid outside the escrow fund by BP.

Click here to read Anadarko's letter to BP.

Click here to read BP's response to Anadarko.

Click here to read MOEX's letter to BP.

Click here to read BP's response to MOEX.

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