BP has a history of safety failures

PROFIT: Corporate culture called putting earnings over maintenance, environment.

May 8, 2010 

Oil giant BP is facing unprecedented scrutiny as a result of the explosion and oil spill in the Gulf of Mexico, but it's hardly the first time the company has found itself in an unwelcome spotlight. Critics, judges and members of Congress have accused it time and again of putting profits ahead of safety in Alaska and Texas.

Over the past two decades, BP subsidiaries have been convicted three times of environmental crimes, including two felonies. It remains on probation in Alaska and Texas.

The causes of the disastrous blowout and gas explosion on BP's leased Deepwater Horizon rig -- and what role the company might have played in creating them -- are a long way from being determined. In a story Friday, The New Orleans Times-Picayune quoted witnesses and a contractor as saying that drilling mud, the first line of defense against a blowout, was removed from the well before a cement seal was put in place, setting the stage for the disaster and violating best drilling practices. It's unclear who ordered the mud pumped out or why.

Eleven workers from the platform are missing and presumed dead, and oil continues to flow unabated from a severed underwater line following the failure of the new well's blowout prevention system.

While BP is accepting responsibility for the spill, it denies it's responsible for a systematic pattern of safety and environmental failures.

"We are a responsible and professional company," said BP Alaska spokesman Steve Rinehart. "We work to high standards. Safety is our highest priority."

Much of BP's recent history in America has been written in Alaska's Prudhoe Bay, the nation's largest oil field. BP runs the field and several smaller ones nearby, and owns the largest share of its production. The company's exploration history in the state goes back two decades before the completion of the trans-Alaska pipeline in 1977, when it was still known as British Petroleum. BP also owns the largest share of the 800-mile pipeline to Valdez, Alaska, and its management consortium, Alyeska Pipeline Service Co.

But BP's worst recent disaster took place in Texas in 2005, when an explosion at its refinery in Texas City near Galveston killed 15 workers, injured 180 people and forced thousands of nearby residents to remain sheltered in their homes. BP, workers and their families and the affected communities are still dealing with fallout from the explosion.

LEAKS, SPIES, RETRIBUTION

In Alaska, BP first brought unwelcome attention on itself 20 years ago in the aftermath of the Exxon Valdez oil spill. Exxon was a partner of BP in the Prudhoe Bay oil field and shared in the ownership of the trans-Alaska pipeline system, which then was headed by a BP official.

After a series of leaked documents to the media and Congress showing how Alyeska failed to live up to its promises to contain spills -- the final straw was a critical documentary that aired on British TV -- Alyeska's president, longtime BP executive James Hermiller, who was on loan to the company, ordered an undercover operation to track down the leaker.

Their chief suspect was Chuck Hamel, a former congressional aide and oil broker in Alexandria, Va., who became a conduit between industry whistleblowers and reporters.

In February 1990, with Hermiller's blessing, Alyeska hired Wackenhut Corp., a security company in South Florida, to concoct a sting to nab Hamel and identify his whistleblowers. Operatives from Wackenhut set up a phony environmental law firm and attempted to get Hamel to use it to pursue public interest lawsuits against Alyeska and Exxon. They stole Hamel's trash, bugged an office he used and hired a beautiful blonde to pretend she was an environmentalist in order to get Hamel to talk.

But the scheme collapsed when one of the Wackenhut operatives came to believe that it was Hamel who was honorable, not Alyeska, and switched sides, bringing several of the Wackenhut spies with him.

Hermiller retired in the wake of subsequent investigations and Congressional hearings and was eventually replaced by a new BP official who vowed to clean up Alyeska's corporate culture. Hamel successfully sued and used some of his damage award to continue his watchdog pursuit of the industry. Hamel, now 79 and retired in Washington state, is still contacted by whistleblowers, mostly on BP matters, he says.

From 1993 through 1995, a BP contractor on the North Slope, Doyon Drilling, saved money by illegally dumping hazardous materials down oil well shafts. The company pleaded guilty in federal court to a felony violation of the Clean Water Act and was fined $3 million. BP's punishment for pleading guilty to failing to report the dumping as soon as it learned about it: a felony conviction in 2000 that brought a $500,000 fine, five years probation and an order to create a nationwide environmental management program that cost the company at least $40 million.

A federal prosecutor, Deborah Smith, said at the time that BP's sentence sent a message to corporations that hire contractors: "You can't contract away your responsibilities."

A BP official told the judge, "We are committed to ensuring this never happens again."

PIPELINE LEAKS

BP was still on probation, and under strict rules to prevent reprisals against employees who raised environmental concerns, when new problems erupted in its North Slope corrosion control program.

Despite warnings from a leak-detection system, a badly corroded 34-inch-diameter pipeline in Prudhoe Bay lost oil for at least five days before a worker driving down a nearby service road on March 2, 2006, smelled oil and spotted the spill, which covered at least two acres of tundra. At 200,000 gallons, it was the largest ever on the North Slope.

Just five months later, on Aug. 6, 2006, a second spill of about 1,000 gallons was discovered on another line. Subsequent investigation found the line was riddled with corrosion, with 176 places where more than half the original diameter had been eaten away.

Congressional hearings held to probe the spills immediately focused on claims that BP actively discouraged workers from reporting safety and environmental problems. The chief of BP's corrosion unit, Richard Woollam, who was reassigned to nonsupervisory duties in 2005, took the Fifth Amendment against self-incrimination during the hearings, which uncovered a 2004 report by the Houston law firm Vinson & Elkins warning BP that employees faced retaliation for reporting problems.

Rep. Joe Barton, R-Texas, suggested BP had decided to "bet the farm" that the pipeline wouldn't fail before Prudhoe Bay would run out of oil, saving it the cost of replacement. He accused the company of fostering a "corporate culture of seeming indifference to safety and environmental issues." In 2007, BP pleaded guilty in federal court in Anchorage to another violation of the Clean Water Act for the 2006 spill. This crime was a misdemeanor, but it still cost BP $20 million in fines and restitution and three more years of probation. Prosecutors said the spill occurred because BP was more interested in cutting costs than in maintaining an aging oil field.

A BP vice president told the judge that the corrosion problems were "out of character" for the company. BP had learned its lesson, he said.

But in November last year, 46,000 gallons of oil and water gushed from an over-pressurized BP pipeline on the North Slope, prompting the EPA and the Alaska Department of Environmental Conservation to open another criminal investigation of BP. An EPA investigator declined to comment last week on the probe's status.

BP is still on probation from its 2007 conviction, but its probation officer, Mary Barnes, said the Gulf oil spill would not result in probation revocation because it involved a different BP subsidiary, BP Exploration (Alaska).

TEST RESULTS MANIPULATED

At the same time that BP was neglecting corrosion, Hamel, the Virginia-based watchdog, brought new complaints that workers on a BP-contracted rig on the North Slope were faking tests of blowout prevention devices. The allegations prompted a 2005 investigation by the Alaska Oil and Gas Conservation Commission, a state agency that regulates drilling.

The agency didn't find the widespread violations Hamel alleged, but substantiated two instances of "chart spinning" by employees of Nabors Alaska Drilling. The agency said Nabors workers cheated on the five-minute test of how well the blowout prevention equipment retains pressure, running it for two minutes or less. But they made it appear like the full five minutes by manually moving the paper chart that records the results.

Nabors was assessed $10,000 but not further penalized because the commission said no environmental harm was caused and the violations were "isolated." A spokeswoman for the agency said earlier this week that BP was not implicated in the investigation of its contractor.

Failure of the blowout protection system is suspected in the Deepwater Horizon disaster.

PROFITS, BUT INVESTERS CAUTIOUS

In its report on the 2005 refinery explosion in Texas, the U.S. Chemical Safety and Hazard Investigation Board criticized "organizational and safety deficiencies at all levels of the BP Corporation," and said management failures could be traced from Texas to London.

The first explosion occurred when a geyser of flammable liquid erupted from a blowdown stack, a kind of chimney. The board described the blowdown stack as antiquated equipment of unsafe design originally installed in the 1950s.

"Warning signs of a possible disaster were present for several years, but company officials did not intervene effectively to prevent it," the board said. Echoing the problems found in Alaska by other agencies and Congress, the board wrote, "Cost-cutting, failure to invest, and production pressures from BP Group executive managers impaired process safety performance at Texas City."

BP pleaded guilty to a felony violation of the Clean Air Act on March 12, 2009, was fined $50 million and sentenced to three years probation. Seven months later, a reinspection by the Occupational Health and Safety Administration found 270 previous violations had not been fixed and 439 new violations. It assessed the largest fine in OSHA history, $87 million. BP is appealing that assessment.

After the 2005 explosion, BP officials said they created a panel to study safety practices at its site, increased staff responsible for safety and environmental issues and spent more than $1 billion on upgrades and repairs.

"They have worked hard to get themselves in a better position in all the refineries," Lynne Baker, a spokeswoman for United Steelworkers Union, has told the media.

A new chief executive, Tony Hayward, came on board in 2007 and made even more changes, hiring a management consulting firm and an analyst, among others, to identify needed changes. The company has spent millions of dollars on TV ads talking about how the company is a pioneer for efforts to move "beyond petroleum."

"BP made improvements, but has also run afoul of (OSHA) repeatedly in the time after the explosion," said Ed Sills, a spokesman for the Austin-based Texas AFL-CIO.

In Alaska, Kevin Banks, the head of state's oil and gas division, said BP is also making improvements on the North Slope as a result of more intense government regulation but still has to prove the fixes aren't temporary.

"It gives us reasons to say that BP has improved to a certain extent in the last three years, and it has some ways to go yet," he said.

Brent Coon, a Beaumont, Tex., attorney who represented workers and residents in the 2005 refinery explosion and is already getting clients over the Gulf spill, said BP's profit-driven culture will make it difficult to change.

Last month, BP reported its first quarter profits had more than doubled from the same period in 2009, to $5.6 billion, mainly on higher oil prices. But investors were cautious because of the uncertainties of the financial effects of the spill and efforts in Congress to raise BP's liability.

Coon, who amassed millions of documents and hundreds of depositions in the earlier litigation and plans to make many of them public, said the company hated to spent money on aging facilities.

"They push all their people to maximize the profitability of their sector," Coon said in an interview Thursday. "By all evidence I've seen, every operation they've ever engaged in, they take capital out of infrastructural repairs to put it into profits and into expansion."


Anna M. Tinsley of the Fort Worth Star-Telegram contributed to this story.

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