For that matter, oil floats on top of water, so how does the lower 99% get contaminated? If somehow a gallon of oil was mixed into water in such a way that every molecule of oil was separate, and each molecule floated 7 inches from any other one, how many gallons would be contaminated by that oil?
All of them. Remember that when the fluid comes out of the well, there is gas, water and oil in one turbulent, bubbly stream. The separation process is relatively simple and doesn't include any filtering really. It's basically a settling process with some baffling to slow the turbulence. The oil and water in the beginning are quite well mixed from turbulence and so on. Lots of stuff that makes oil black can dissolve in water better than it can dissolve in oil, so produced water is really nasty, caustic stuff and varies from clear to black. Depending on the locale it can even eat through stainless steel sometimes. Oil contamination is not the biggest issue, but due to soaps used for lifting the fluid it may have some dispersion, regardless of the other chemicals often pumped down there specifically to separate the oil and water. A typical oil loss to water might be 0.001% if the process is fine tuned and the separation equipment is appropriately sized, or worse if it's not (which it usually isn't in the beginning).
I work on safety systems to prevent these kinds of accidents. By law these tanks have a berm around them to capture the leaked fluid if they are permanently installed, temporary vessels may not, so I'm guessing this was a temporary vessel like a frac tank (looks like a big shipping container). The plug they're referring to is most likely a 1/2" or 1/4" NPT plug where a level gauge or fluid level controller would be installed. They are usually isolated by valves, which may not have been completely closed, and may not have been noticed by the local FNG before the tank was filled and the leak began. No one would usually congregate in this area to notice, so bringing criminal charges is sort of ridiculous. In the end, we wouldn't be talking about jailing an Exxon CEO, more like your childhood buddy who didn't go to college and tries to make a living working wrenches in the oil field. It seems like a costly, but honest, mistake to me. I know from working in the area that there is definitely no top-down directive to violate EPA laws. There are literally daily meetings where human and environmental safety are stressed as the highest priority, especially at a larger company like XTO. They definitely realize that the public wants to castrate them for any reason it possibly can and make the utmost efforts to prevent these kind of environmental (and PR) disasters.