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Big Oil Points Finger at BP in Oil Spill

The big oil companies point the finger at BP in Capitol Hill testimony, but take a beating from the House over oil spill response plans that include embarrassing gaffes.

WASHINGTON D.C. (

TheStreet

) -- Big oil companies went to Capitol Hill on Tuesday hoping to spin their testimony on the

BP

(BP) - Get Report

oil spill as a way to limit the damage to their industry from the federal moratorium on offshore drilling. By the end of the testimony, though, it looked like Congress was the only party to get all that it wanted.

During Capitol Hill testimony from the big oil companies on Tuesday, including statements made by chief executives of

Exxon Mobil

(XOM) - Get Report

,

Chevron

(CVX) - Get Report

, and

Conoco Phillips

(COP) - Get Report

, there was general agreement that BP made preventable mistakes that led to the catastrophic failure of its Deepwater Horizon well.

While the big oil executives prefaced pointing their fingers at BP by saying the investigation was not complete and they needed to learn more about why BP made the decisions that led to the oil spill, Exxon Mobil, Chevron, ConocoPhillips and

Royal Dutch Shell

(RDS.A)

told Congress that BP was not operating with what would be considered industry norms in the Deepwater Horizon well.

Rex Tillerson, CEO of Exxon Mobil, said of the BP well management: "A number of design standards I consider to be the industry norm were not followed. We would not have drilled well the way they did."

Marvin Odum, director of the upstream Americas business for Royal Dutch Shell, said along similar lines, "It's not a well we would have drilled."

>>Video: BP Watch -- Day 57

Chevron CEO John Watson said of BP's well management, "the casing design and mechanical barriers in place appear to be different from what we would use.... Not all the standards that we would employ were in place."

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Tillerson, the most vocal and "good ole boy-esque" of the bunch, added, "Clearly, there were lots of indications of things going wrong with the well.... We don't know why they didn't make decisions that almost any of our drilling operations people would have made differently."

BP was far from finding "a little help from its friends" among the big oil companies during Tuesday's Capitol Hill hearings. The smoking gun that brought the concessions from the oil giants that BP had been operating beneath industry norms was a letter released by the House on Monday. The letter sent by the House to BP CEO Tony Hayward listed a number of findings as to practices in use by BP at the failed well that showed risky decisions made for considerations of saving time or money.

While Congress got what it wanted in the oil industry helping to point the finger at BP -- as the federal government itself facing increasing criticism of its BP oil spill response effort -- the "Walrus incident" made it difficult for the oil companies to distance themselves from BP in proving they would better handle an oil spill response.

In a back-and-forth that might seem absurd in any other situation, the big oil executives were grilled over the "carbon copy" nature of their oil-spill response plans for the Gulf of Mexico. For one, the contact information for a deceased professor of Miami University and Florida Atlantic University was included in all of the oil spill response plans. While Exxon Mobil's Tillerson was able to gently deflect this criticism by arguing that the work completed by Professor Peter Lutz is still instrumental to oil spill response efforts and the impact on marine mammals, even six years after his death, the big oil executive were helpless to explain why the phone number of Lutz was still in the response plans.

The most telling weakness in the industry's oil spill response testimony was related, surprisingly, to walruses. Each oil spill response plan not only had the same cover image -- something noted by the House as a committee member held up a photo reproduction of the identical plans -- but also featured discussion of an oil spill's impact on walruses, a mammal that has not existed in the Gulf of Mexico for 3 million years.

The House committee grilled the big oil executives on the cut-and-paste job, and attempts to deflect criticism by invoking the already maligned Minerals Management Service (MS) of the Interior Department quickly fell flat. The oil executives at first responded to questions asking if including walruses in their oil spill response plans was an embarrassment by saying that the oil spill response plans were devised in accordance with MMS regulations. In effect, when it came to the BP well, the big oil executives were willing to point the finger at their humbled British peer, but when it came to their identical spill plans, the oil executives try to point a finger at the government.

Finally, the big oil executives caved, offering concessions along the lines of, "it was unfortunate that walruses were included and it is an embarrassment that they were included."

Representative Ed Markey (D-Mass.) Chairman of the House Energy and the Environment subcommittee summed it all up by saying to the oil executives, "You seem to be relying on Xerox machine for response plans for catastrophe in the gulf."

Yet Markey's Xerox comment wasn't the most damaging catch phrase of the House hearing on Tuesday.

If the aim of the oil companies was to convince Congress that deep-water drilling under their watch could be trusted, the hearing did not end that way.

After getting the big oil companies to agree that BP messed up, Representative Henry Waxman (D. Calif.) thanked them very much for the help, and then slammed the door in the faces of the oil executives. "If I didn't realize that each of the oil spill response plans were identical, I would say you would have done things differently, but the record does not support other companies being more prepared."

Nevertheless, the big oil stocks led by BP were trading up in the early afternoon on Tuesday. Even after suffering a downgrade from Fitch Ratings to junk bond status on Tuesday morning, BP was leading returns among the big oil companies, up by 3% after the testimony ended. BP had been trading in modestly negative territory for much of Tuesday morning, and its bond yields keep increasing as more investors look to sell, rather than buy, BP debt.

Chevron, Exxon, ConocoPhillips and Royal Dutch Shell were all trading up, though by modest amounts early on Tuesday afternoon.

-- Reported by Eric Rosenbaum in New York.

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