First BP oil spill arrest: Why put the squeeze on a mid-level engineer?

The arrest of former BP engineer Kurt Mix two years after the Deepwater Horizon rig exploded in the Gulf of Mexico, causing the biggest offshore oil disaster in the US, suggests that the federal government is still looking for answers about what the oil giant knew, and when, as it sought to convince the public, investors, and US officials that it had the situation in hand.

In the first such criminal indictment related to the BP oil spill, Mr. Mix, of Kady, Texas, appeared Tuesday in court in Houston, charged with obstruction for allegedly destroying some 300 e-mails and text messages related to what BP knew about the true flow rate of the Macondo well in the days after the explosion. Eleven rig workers died in the accident, and at least 4 million barrels of oil spewed into the Gulf.

One e-mail the FBI was able to retrieve suggested that BP knew its first attempt to cap the well – the so-called "top kill" – would probably fail, even though the company told the public and the government that it had a 60 to 70 percent chance of success.

Mix told his superviser that the top kill wasn’t working because the flow rate was more than 15,000 barrels per day. BP had suggested publicly at the time that the rate was about 5,000 barrels per day, and had said that a higher volume could doom the top kill maneuver, which involved pumping heavy mud at high velocity into the well in order to beat back the oil and seal the well.

While more criminal arrests are expected, the indictment against Mix – a mid-level engineer who had his pulse on how much oil was blowing out of the compromised well a mile below the Gulf of Mexico – has the earmarks of a common prosecutorial tactic in corporate cases: Single out a weak link in a company’s armor and put pressure on that person to testify on the government’s behalf.

Mix was released on $100,000 bail on Tuesday. He faces up to 20 years in prison if convicted on both counts.

“As a prosecutor, that’s the first thing you look for, a weak link,” says Jane Barrett, an environmental law professor at the University of Maryland. “And somebody obstructing an investigation is pretty easy to prove … and the goal would be to use this as a way to negotiate a cooperator deal, where [Mix] would, in exchange for [a reduced sentence], agree to provide information to the government on other aspects of the case.”

While civil lawsuits are pending concerning who is liable in the accident, the US Justice Department acknowledges that the flow-rate estimates are a key part of its criminal investigation.

“Among the areas under investigation is whether [BP] and/or individuals employed by BP violated any federal criminal laws by intentionally understating the amount of oil that was flowing from the Macondo well following the April 20, 2010, explosions,” writes FBI special agent Barbara O’Donnell in the affidavit against Mix.

One text message the FBI was able to extract from Mix’s cellphone was dated May 21, 2010 – during the top kill maneuver. “Too much flow rate – over 15,000 and too large an orifice,” it read. “Pumped over 12,800 bbl of mud today plus 5 separate bridging pills. Tired. Going home and getting ready for round three tomorrow.”

A week after the Deepwater Horizon explosion, Mix had also estimated the flow rate to be anywhere from 1,000 barrels of oil per day to 146,000 barrels. At the time, the company released estimates that about 5,000 barrels were leaking each day.

A month later, BP moved forward on the top kill, which had never been attempted at the depth of the Macondo well. BP officials, one eye on a major environmental disaster and the other on a wavering stock price, put an optimistic spin on the attempt. Days before the top kill, then-BP chief Tony Hayward said the efforts to stop the leak had been “extraordinarily successful.”

Special agent O’Donnell notes in the affidavit that BP’s stock price sank 15 percent the day after the company announced that the top kill had failed. Two months later, BP finally squeezed off the flow from the Macondo well. The company says about 4 million barrels of oil escaped; the US says it could have been about 5 million barrels.

That difference is crucial because the Clean Water Act allows the federal government to fine a company up to $4,300 per barrel, if the polluter is found to be grossly negligent. That's at least $21.5 billion total, if the higher spill estimate is applied and if gross negligence can be proved.

BP has said it wants to pay less than the low-end estimate for an accidental spill – about $5 billion – because of how hard it worked to stop the gusher and because of its willingness to put aside $20 billion to help those affected by the spill along the Gulf.

“The [Obama] administration would presumably like to get as much cash out of BP as possible,” writes Christopher Helman, an oil industry analyst for Forbes. “Thus we get this first indictment showing evidence of a concerted effort on the part of BP engineers to cover up their best estimates of the oil flow …. If the government can prove that BP was trying to cover up the extent of the flow rates, it will have an easier time convincing a court to settle on a higher number for the volume of oil spilled.”

The accident sparked a six-month moratorium on deep-water drilling in the Gulf and led to an overhaul of federal drilling regulations. Two years after the spill, many environmentalists remain unconvinced that the Gulf has been restored, even as drilling activity, sparked by high oil prices, is rapidly ratcheting up in the deep Gulf.

One big beneficiaries is BP, which turned a $3.3 billion loss in 2010 into earnings of $26 billion in 2011. The company has paid out $22 billion in damages and cleanup costs so far.  A New Orleans judge is expected to rule Wednesday on whether to approve an additional $7.8 billion settlement that would be paid to 100,000 Gulf residents affected by the spill, including fishermen, restaurateurs, and hoteliers.