October 9, 2007
Rowan enters guilty pleas in pollution case
Rowan Companies, Inc. (NYSE:RDC) today announced that, pursuant to a plea agreement with the United States Department of Justice (DOJ), it entered guilty pleas to three felony counts in the United States District Court for the Eastern District of Texas, in connection with environmental violations related to maintenance and operations of the offshore drilling rig Rowan-Midland during the period from 2002 through 2004. The Rowan-Midland was sold by the company in January 2007.
Specifically, Rowan pleaded guilty to (i) causing the discharge of a pollutant, abrasive sandblast media, into U.S. navigable waters, thereby violating the Clean Water Act, (ii) failing to immediately report the discharge of waste hydraulic oil into U.S. navigable waters, thereby violating the Clean Water Act, and (iii) discharging garbage in violation of the Act to Prevent Pollution from Ships. As previously disclosed, the company also agreed to fines and environmental fund payments totaling $9 million, of which $7 million is a criminal fine and $2 million is a community service payment to environmental funds designated by the DOJ. In anticipation of such payments, those amounts were recognized as a charge to the company's fourth quarter earnings in 2006.
As part of the plea agreement, Rowan will be subject to unsupervised probation for two years, during which time it has agreed that it will commit no further criminal violations of federal, state, or local laws or regulations and continue to implement its comprehensive Environmental Management System (EMS) in a continuing effort to detect and deter future violations.
The plea agreement and guilty pleas are subject to approval by the United States District Court for the Eastern District of Texas.
Additionally, in connection with the plea agreement, the Environmental Protection Agency (EPA) has approved a compliance agreement with the company, which, among other things, contains a certification that the conditions giving rise to the violations have been corrected. The company believes that if it fully complies with the terms of the compliance agreement, it will not be suspended or debarred from entering into or participating in contracts with the U.S. Government or any of its agencies.
"Today's events are in the best interests of Rowan, our stockholders, our employees, and all of our respective constituencies," said Danny McNease, Chairman and CEO of Rowan Companies, Inc. "Rowan is committed to strict environmental compliance and to raising industry standards for environmental policies and procedures. These standards are an integral part of Rowan's daily operations and will continue to be so going forward."
"Training is an essential element of Rowan's EMS, and we are committed to providing all Rowan employees with the necessary tools and knowledge needed to make environmental compliance, along with safety, a fundamental part of our work every day," Mr. McNease added. "We are serious about our commitment to being the best in the business from both an operational and an environmental standpoint."
To this end, the company is working closely with the EPA and the United States Coast Guard on a pilot program to develop and implement best practices for conducting sandblasting and painting activities of its offshore drilling oil rigs. The pilot program has been launched on four Rowan rigs in the Gulf of Mexico and the company hopes to replicate this model throughout its fleet.
"Oil drilling operations must be done in a way that complies with environmental law," said Ronald J. Tenpas, Acting Assistant Attorney General for the Justice Department's Environment and Natural Resources Division. "Along with paying a criminal fine, Rowan Companies, Inc. is implementing a compliance plan and is helping to set industry standards that will serve as a model for other oil drilling companies."
"We will continue to use every available resource to prosecute these crimes which compromise our environment and our safety, including criminal fines and penalties," said U.S. Attorney for the Eastern District of Texas, John Ratcliffe. "I am particularly pleased that part of the fines will go directly to the future protection and preservation of the Gulf of Mexico and the Texas and Louisiana coastline."
The case was investigated by the Environmental Protection Agency's Criminal Investigation Division and the Coast Guard Criminal Investigative Service. It is being prosecuted by the Justice Department's Environmental Crimes Section and the U.S. Attorney's Office for the Eastern Districts of Texas and Louisiana.