May 8, 2010
BP has a long record of legal, ethical violations
Richard Mauer and Anna M. Tinsley / McClatchy Newspapers
ANCHORAGE The causes of the disastrous blowout and gas explosion on BP’s leased Deepwater Horizon offshore drilling rig in the Gulf of Mexico are a long way from being determined.
Yet already BP’s actions are facing unprecedented scrutiny, thanks to a years-long history of legal and ethical violations that critics, judges and members of Congress say shows that the London-based company has a penchant for putting profits ahead of just about everything else.
Over the past two decades, BP subsidiaries have been convicted three times of environmental crimes in Alaska and Texas, including two felonies. It remains on probation for two of them.
It also has received the biggest ever fine for willful work safety violations in U.S. history and is the subject of a wide range of safety investigations, including one in Washington State that resulted last week in a relatively minor $69,000 fine for 13 “serious” safety violations at its Cherry Point refinery near Ferndale, Wash.
While BP has said it accepts responsibility for the spill, it denies that it’s guilty of 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.”
A review of BP’s history, however, shows a pattern of ethically questionable and illegal behavior that goes back decades.
BP’s best known disaster took place 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.
An investigation of the explosion by the U.S. Chemical Safety and Hazard Investigation Board blamed BP for the explosion and offered a scathing assessment of the company. It found “organizational and safety deficiencies at all levels of the BP Corporation” and said management failures could be traced from Texas to London.
The company eventually pleaded guilty to a felony violation of the Clean Air Act, was fined $50 million and sentenced to three years probation. The Occupational Health and Safety Administration assessed BP the largest fine in OSHA history $87 million after inspectors found 270 safety violations that had been previously cited but not fixed and 439 new violations.
BP is appealing that fine, but BP’s legal and ethical problems go back much further.
In Alaska, BP first brought unwelcome attention to itself more than 20 years ago in the aftermath of the Exxon Valdez oil spill. Exxon was BP’s partner in Alaska’s Prudhoe Bay oilfield, the nation’s largest, and shared in the ownership of the trans-Alaska pipeline system, known as Alyeska and headed then by a BP executive who was on loan to the pipeline company.
After a series of documents were leaked to news reporters and Congress that showed how Alyeska failed to live up to its promises to contain spills, that executive, James Hermiller, in February 1990 ordered an undercover operation to track down the leaker.
Hermiller’s chief suspect was Chuck Hamel, a former congressional aide and oil broker in Alexandria, Va., who became a conduit between industry whistleblowers and reporters. With Hermiller’s blessing, Alyeska hired Wackenhut Corp., a security company in South Florida, to catch Hamel and identify his whistleblowers.
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 seven months later when one of the Wackenhut operatives came to believe that it was Hamel who was honorable, not Alyeska, and switched sides, bringing the Wackenhut spies with him.
Hermiller retired at the age of 57 in 1993 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.
BP ran afoul of federal environmental laws in Alaska after it was discovered that from 1993 to 1995 a BP contractor, Doyon Drilling, had illegally dumped hazardous materials down oil well shafts on the North Slope, the giant Alaska oil production area bordered by the Brooks Range mountains to the south and the Arctic Ocean on the north.
Doyon pleaded guilty in federal court to a felony violation of the Clean Water Act and was fined $3 million. BP was convicted on Feb. 1, 2000, of failing to report the dumping as soon as it learned about it, a felony. BP was fined $500,000, placed on five years probation and ordered to create a nationwide environmental management program that cost the company at least $40 million.
A BP official told the judge, “We are committed to ensuring this never happens again.”
But BP was still on probation when new problems erupted, this time 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 British-born chief of BP’s corrosion unit, Richard Woollam, who’d left the company in 2005, took the 5th 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.
It’s the 2005 Texas City explosion, however, that drew the harshest accusations against BP from the U.S. Chemical Safety and Hazard Investigation Board, which issued a 341-page report in March 2007, two years after the blast, and from a separate commission led by former Secretary of Sates James Baker III.
Both groups faulted BP’s management at all levels for overlooking problems.
“Warning signs of a possible disaster were present for several years, but company officials did not intervene effectively to prevent it,” the Chemical Safety and Hazard probe concluded. “Cost-cutting, failure to invest, and production pressures from BP Group executive managers impaired process safety performance at Texas City.”
As an example the board cited a blowdown stack where the first explosion occurred when a geyser of flammable liquid erupted from it. A kind of chimney, the blowdown stack was described by the board as antiquated equipment of unsafe design originally installed in the 1950s.
The Baker panel also concluded that BP safety efforts were hurt by bad management and cost cutting. The panel said that the company had “a false sense of confidence” about safety and didn’t always make sure that “adequate resources were effectively allocated” to safety issues.
After the 2005 explosion, BP officials said they created a panel to study safety practices at its site, increased the number of people responsible for safety and environmental issues, and spent more than $1 billion on upgrades and repairs.
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.”
The efforts have won some praise. Lynne Baker, a spokeswoman for United Steelworkers Union, which represents many of BP’s refinery workers, has told reporters that BP has ” worked hard to get themselves in a better position in all the refineries” and Kevin Banks, the director of the oil and gas division of Alaska’s Department of Natural Resources, cautiously says BP has made improvements, though “it has some ways to go yet.”
But others say it’s unlikely BP has changed a profit-driven culture that’s so deeply entrenched.
“They push all their people to maximize the profitability of their sector,” said Brent Coon, a Beaumont, Texas, attorney who amassed millions of documents representing workers and residents in lawsuits against BP for the 2005 Texas City explosion.
Coon says he’s already contracted new clients over the gulf spill and expects to take BP to court again.
“By all evidence I’ve seen,” Coon said, “every operation they’ve ever engaged in, they take capital out of infrastructural repairs to put it into profits and into expansion.”
(Mauer, of the Anchorage Daily News, reported from Anchorage, Tinsley, of the Fort Worth Star-Telegram, reported from Fort Worth.)
Drilling frenzy has outpaced oil industry’s safety efforts
Curtis Morgan and Scott Hiaasen / Miami Herald
MIAMI Over the past 15 years, oil companies have drilled deeper and farther into the Gulf of Mexico, taking on new risks in the hunt for new deposits of oil.
Yet industry safeguards to prevent or minimize spills have failed to keep pace with the increased dangers of exploration, despite a series of warnings, malfunctions and near-misses over the years, federal studies and interviews show.
As BP and other oil companies have drilled wells as far as 10,000 feet down in the Gulf, they have continued to use key safety systems that are largely the same as those used in shallower water safety systems that have failed in the past.
And while the consequences of an accident like last month’s Deepwater Horizon explosion and leak have increased with the expansion of deep drilling, the oil industry’s ability to respond to a catastrophic spill has not.
One federal study from 2004 described the industry’s options for stanching a major well leak as “nonexistent.”
Nevertheless, the federal agency that oversees offshore drilling, the Minerals Management Service, continued to encourage deepwater exploration, and unlike in some other countries did not demand an extra backup system to avert disaster.
“It hasn’t been as much a regulator as a partner,” said Marilyn Heiman, a former member of the Exxon Valdez Oil Spill Commission who now is U.S. Arctic program director for the Pew Environment Group.
Environmentalists, who have long warned that the consequences of a rig failure could be catastrophic in the Gulf, see the rig explosion and the ongoing struggles to contain a slick bigger than some states as a nightmare come all too true.
“It’s clear where the R&D dollars of the oil industry haven’t gone,” said Mark Ferrullo, executive director of the advocacy group Environment Florida. “If you look at the solutions they are employing, they’re using fire, one of the oldest technologies on the planet, and dispersants, which are more toxic than the oil, and basically a giant thimble (the 100-ton containment dome lowered Friday onto the leak) they had to build from scratch.”
Industry leaders conceded as much in a paper presented at a conference seven years ago.
“At times, it appears the industry attitude is that we cannot afford R&D in advance of a defined need,” wrote the authors, among them an executive with Transocean, Ltd., the offshore drilling contractor that owned the Deepwater Horizon.
Robert Bea, a professor of civil engineering at the University of California-Berkeley with decades of experience in offshore drilling design and accident investigation, believes the industry at least in the United States has bought too much into its own high-tech hype.
“If you compared us to commercial aviation, to nuclear power, even to chemical refineries, you would find out the likelihood of having these bad things happen is at least a factor of 10, if not 100, higher,” he said.
The April 20 blowout on the Deepwater Horizon, which left 11 people missing and presumed dead, is now believed to have been caused by a methane gas bubble that escaped from the well and shot up the drill column.
One thing has been clear from the start: The blowout preventer, a safety device connecting the pipe from the rig to the well on the Gulf floor, failed to seal off the well after the explosion, as designed.
The massive devices, which can stand 50 feet tall, contain a series of valves designed to close around a drill or, in an emergency, trigger rams that will cut through the well pipe and seal it. The one on the BP well, however, either failed to close or only partially closed; submersible robots have not been able to active the rams, despite repeated efforts by BP.
The blowout preventer also was equipped with a “dead man” switch designed to seal the leak even if the rig’s power systems fail — but that failed as well.
Blowout preventers are hardly foolproof: One 1999 study for the Minerals Management Service — a study the oil industry refused to help fund — cited more than 20 “safety critical failures,” including leaks on pipes that were supposed to be sealed, loss of controls, and a failure to shear a pipe closed.
In another test by federal officials in 2002, half the blowout preventers studied failed in some way, said Bea. “The equipment itself has got a questionable reliability performance record,” he said.
After the explosion and spill, BP sent a letter to Transocean, the world’s largest offshore drilling contractor with 140 rigs around the globe, asking the company to double-check its blowout preventers to ensure their safety.
Florida Sen. Bill Nelson is leading calls for congressional investigations of both the Gulf spill and the conduct of MMS, a branch of the federal Department of the Interior that oversees the drilling industry.
Nelson has also asked Interior’s inspector general to investigate why the MMS in 2003 dropped a proposal to require additional backup systems on Gulf oil rigs to protect against blowouts like the Deepwater Horizon spill, which continues to spew more than 210,000 gallons of oil a day from a well 5,000 feet deep, threatening the coastlines of Louisiana, Mississippi, Alabama and Florida.
MMS officials did not respond to interview requests on Friday.
Yet industry officials have also raised complaints about the blowout preventers. The 2003 report co-authored by Earl Shanks, a Transocean engineer, called blowout preventer failures “common,” and said they cost oil companies millions of dollars in down time and delays.
Allison Nyholm, a spokeswoman for the American Petroleum Institute, an industry trade group, said blowout preventers have seen improvements in recent years. Industry insiders say safety has improved even as they have moved into deeper territory, citing one federal study showing a steady decline in blowouts on offshore rigs from 2000 to 2006.
Other experts caution against pointing a finger at a single component, calling total failures of blowout preventors rare.
“It’s a proven technology. It’s what we have been using for the last 50 years,” said Bill Bryant, a professor of oceanography with expertise in petroleum engineering at Texas A&M University.
Yet Nelson and others have questioned why the MMS does not require deep-drilling rigs to have another failsafe — an acoustic backup system to cut off the gushing well. Acoustic switches, remote controls that use sound pulses to trigger the blowout preventer, are required in Norway, reputed to have the strictest safety standards for offshore drilling, and in Brazil.
As far back as 2000, records show, MMS urged oil companies to add a backup system to its drilling equipment. The agency issued a series of safety notices, most recently in 2009, warning about reliability and other concerns but never wrote regulations demanding backup systems.
In a conference call last week with Wall Street analysts, Transocean’s president, Steven Newman, questioned whether an acoustic switch would have made a difference April 20. Newman said there were already backup systems built into the blowout preventer and the switch would simply add another “redundancy.”
The 1999 study found that in some blowout preventers, the redundant measures all depended on the same hydraulic line — meaning a leak in that line could collapse the whole safety system.
These dangers are made more acute in deepwater drilling, where deep ocean currents combine with frigid temperatures and crushing pressures to make dangerous accidents more likely — and much harder to fix. A 2004 study found the industry had “no guidelines or procedures for blowout containment in ultradeep water.”
Regulators’ concerns about the potential consequences of a deepwater leak increased in May 2003, when a pipe from a rig in 6,000 feet of water broke in two over a well in the Gulf of Mexico owned by BP. Had the blowout preventer been damaged or failed, the leak would have exceeded the scale of the Exxon Valdez disaster in less than a week, a review later found.
The difficulties in fixing a deepwater well leak have been laid bare by the Deepwater Horizon spill. Adm. Thad Allen, the Coast Guard’s highest-ranking officer, who was appointed by the Obama administration to take command of the containment effort, acknowledged from the outset that the options were limited by what he called “the tyranny of depth.”
The MSS has bankrolled volumes of research over the years into improved oil containment and proposed added safety measures to deal with deep water accidents — from backup blowout systems to robotic tractors — but most of the ideas remain on the shelf.
To contain the gushing Gulf spill, BP has built a massive, four-story dome, hoping to encase the leaking oil and pump it up to a ship.
Even if the containment dome succeeds in corralling the Gulf spill, most experts believe the Deepwater Horizon accident will lead to significant new reforms across the industry, much like the Exxon Valdez disaster in Alaska 21 years before.
“You ask, ‘Why in the hell does this happen?’ The answer is, we are pushing too fast, too far,” said Bea. “I think we got too confident.”
special thanks to Richard Charter