BP: RISK vs. PROFITS

Oil giant’s pattern of violations, failures puts workers,
environment, local economies at risk

WASHINGTON, DC – A senior Member of Congress today questioned whether oil giant British Petroleum (BP) should be allowed to drill for oil in American waters in light of its pattern of safety failures on and off shore affecting workers, the environment, and local economies.

Congressman George Miller (D-CA) said that, “BP has a history of cost cutting. They have a history of workers dying on the job. They have a history of failing to maintain their equipment that has led to environmental disasters. What we’re seeing in the Gulf of Mexico and along the coast today is just the latest example of BP playing Russian roulette with the lives of their workers, our precious environment, and local economies - all in the name of increasing profit at what is already one of the most profitable corporations in the world.

“An important question to answer now is whether BP should ever be allowed to drill a new oil well in U.S. waters again.”

Miller used today’s hearing question whether BP traded off risks vs profits in the Gulf to speed up the completion of the well by using too few centering rigs, a well casing that increased risks of a blowout. Evidence is still surfacing, but it is known that BP was spending $533,000 per day to lease the drilling rig, and had potentially scheduled the rig to be put in a new location to begin a new project.

BP is the fourth largest company in the world (according to Fortune magazine), has quarterly profits exceeding $6 billion, and reported annual revenues of approximately $367 billion dollars in 2009.

BP was found liable for a 2005 explosion at its Texas City refinery that killed 15 workers. The Chemical Safety Board found that cost cutting and budget pressures from BP Group Executive managers impaired process safety at Texas City.

BP also paid fines for the 2006 oil pipeline spill in Alaska. Congressional investigations found that BP cut expenditures on corrosion control to save money, but paid the price with severely corroded pipes that spilled 200,000 gallons of oil on the North Slope of Alaska.

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At a congressional hearing held by the Natural Resources Committee today, a panel that Miller chaired between 1992 and 1995, Miller issued the following statement:

I have to say, as former chairman of this committee, and current chairman of the Committee on Education & Labor, I have seen this all before.
BP’s Deepwater Horizon disaster in the Gulf of Mexico was not some “black swan” or “perfect storm” event.  This was not something that could not have been foreseen.  And this was not something that you can promise will never happen again.

There is a theme that now seems to weave though many of BP’s decisions: trading off risks versus profits, and the costs are being shouldered by the families of the 11 dead workers, and the livelihoods of those who depend on the gulf.

An important question to answer now is whether BP should ever be allowed to drill a new oil well in U.S. waters again.

Just consider the history of BP taking risks to boost profits.

Texas City
•    On March 23, 2005 BP’s Texas City refinery exploded killing 15 and injuring 180 during the restart of gasoline production unit. A tower was allowed to be overfilled and caused a flammable liquid geyser to erupt from a stack. Critical alarms and control instruments failed to alert operators.  BP had no flare to burn off the hydrocarbons despite 8 previous releases from this same stack. BP relied upon low personal injury rates as a safety indicator, while the Chemical Safety Board found that, due to cost cutting, BP allowed its process equipment to “run to failure.” OSHA fined BP $21 million for 300 “egregious willful” violations, and then in 2009, OSHA fined BP another $87.4 million for 700 violations that BP promised to fix after the 2005 explosion.  In March 2010, OSHA issued a $3.0 million fine against BP’s Toledo, Ohio refinery for process safety violations.
•    BP commissioned former Secretary of State James Baker to head a panel which found that BP tolerated “serious deviations from safety operating practices,” and concluded that material deficiencies in process safety “performance exist at BP’s five US refineries.”
North Slope Pipeline

•    In March 2006, BP spilled over 200,000 gallons of crude oil over Alaska’s North Slope.  In August 2006, BP found oil leaking from flow lines which were severely corroded with losses of 70 to 81 percent in the 3/8-inch thick pipe. BP had not done an internal pipeline cleanout and inspection for 14 years, despite warnings that is corrosion prevention program was being hampered by cost cutting.  BP had to replace of 16 miles of pipeline. 
•    In November 2007, BP pled guilty to a single criminal misdemeanor for violations of the Clean Water Act, and paid $20 million in fines and restitution for this spill.  
•    This follows a $22 million fine paid in 2000 to settle criminal and civil violations from illegally discharging hazardous waste at its North Slope operations.

Risk versus profit

BP senior executives have a history of trading of risks vs profits, which has led to worker deaths and severe consequences to the environment and local economies.
Congressional investigations found that BP cut expenditures on corrosion control to save money, but the price was severely corroded pipes which spilled 200,000 gallons of oil on the North Slope of Alaska.

The Chemical Safety Board found that cost cutting and budget pressures from BP Group Executive managers impaired process safety at Texas City, which led to 15 deaths, 180 injuries and over $1.5 billion in property damage. Requests for additional funding to BP in London were shot down.

Now there are questions about whether BP traded off risks vs profits in the Gulf to speed up the completion of the well by using too few centering rigs, a well casing that increased risks of a blowout. Evidence is still surfacing,  but it we know BP was spending $533,000 per day to lease this drilling rig, and there are questions about whether they had scheduled this rig to be put in a new location to begin a new project.

We are still learning what precisely happened in the Deepwater Horizon explosion, but we see from BP’s internal investigation and other accounts that numerous things went wrong.

This all adds up to an ongoing pattern of violations and a pattern of failure:

•    A failure to keep the oil and gas in the pipes.
•    A failure to follow processes put in place to avoid the worst case scenario.
•    And a failure to keep workers safe.
In the Gulf, this failure is having devastating consequences — in terms of loss of life, devastation to the marine environment, and untold billions of dollars in economic damage.

This history tells me that there is something terribly wrong with the culture at BP, and that safety is not the priority that it should be for BP executives.

And while I think it’s a good sign that Transocean paid no executive bonuses last year after a poor safety record, I hope that your legal gymnastics to limit liability and deny responsibility for previous spills are not foreshadowing of the dodging and weaving that we can expect going forward in the case of Deepwater Horizon.

So again, we have this question to answer – does the pattern of safety violations and failure to protect workers and the environment and local economies disqualify BP from ever drilling for oil again in U.S. waters.

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