BP Fined, Investigated for Environment, Safety Violations

Published November 1, 2006

The reputation of BP, the world’s third largest oil company, has been sullied by a series of developments casting doubt on the energy giant’s ability to carry out routine maintenance, provide for worker safety, and engage in ethical pricing practices for crude oil and natural gas.

As a result of these incidents, Congress has been investigating the firm and intensely questioned BP representatives in early September.

Regulators Impose Fines

For BP, the bad news began in 2005 with an explosion in its Texas City, Texas plant that killed 15 workers and injured 170.

The incident earned BP a $21.3 million fine from federal workplace safety regulators, who then sent the case to the U.S. Justice Department for possible criminal investigation. Current and former company employees accused BP of skimping on maintenance and ignoring repeated warnings about trouble at the facility.

In April 2006, BP was fined $2.4 million by the Occupational Safety and Health Administration (OSHA) for safety violations at its Oregon, Ohio refinery. OSHA said the violations were similar to those uncovered at the Texas City plant.

Ignoring Pipeline Corrosion

More storm clouds gathered over BP in late 2005 when the U.S. Environmental Protection Agency (EPA) launched a criminal investigation of BP’s management of pipelines in Alaska’s North Slope. EPA later expanded the inquiry to include the March 2006 spill of an estimated 134,000 to 267,000 gallons of crude oil from a BP-operated pipeline in Prudhoe Bay.

According to Alaska state conservation officials, the pipeline ruptured from internal corrosion, causing what is considered the largest spill ever in the energy-rich North Slope.

Such was the extent of the corrosion in the pipeline that BP in August 2006 was forced to curtail production from Prudhoe Bay, the largest oil field in the United States.

Documents released in September 2006 by the U.S. House Energy and Commerce Committee revealed the position of senior corrosion engineer for BP’s Alaska operations had been left vacant for 15 months. The position was vacant in the months leading up to the March spill and remains unfilled at press time six months later.

Feeling the Heat

Top officials of BP’s U.S. operations were subjected to a severe grilling September 7 by an oversight subcommittee of the House Energy and Commerce Committee. Richard Woollam, BP’s chief pipeline inspection expert in the United States, took the Fifth Amendment under oath rather than explain what he knew about corrosion in the company’s oil pipelines in Prudhoe Bay.

“If a company–one of the world’s most successful oil companies–can’t do the basic maintenance needed to keep Prudhoe Bay’s oil field operating safely and without interruption, maybe it shouldn’t be operating the pipeline,” said committee member Rep. Joe Barton (R-TX).

Under relentless attack from members of both parties serving on the House panel, BP America President Robert A. Malone admitted his company had “stumbled.” Malone acknowledged to the committee, “We have fallen short of the high standards we hold for ourselves and the expectations others have for us.”

Playing Green Card

For BP, the adverse publicity generated by its recent missteps, culminating in the public keelhauling of BP officials on Capitol Hill, undid years of work designed to cultivate an image as an environmentally responsible energy company.

BP had sought to assure the world that it no longer stood for “British Petroleum” but for “Beyond Petroleum.” The corporation reportedly paid the PR firm of Ogilvy Mather $200 million for a television and print media ad campaign praising the company’s environmental stewardship and highlighting BP’s commitment to combating global warming.

“It’s time to turn up the heat on global warming,” read the headline on a BP full-page ad in the Wall Street Journal in August 2005. “We were the first major energy company to take steps to reduce greenhouse gas emissions,” proclaimed another full-page ad in the Journal that year.

Exploiting Regulations

In addition to pouring millions into a PR campaign, BP in the late 1990s teamed up with now-defunct Enron in an attempt to derive advantages from the proposed regulation of greenhouse gases.

BP CEO Sir John Browne joined Enron’s Ken Lay at a White House meeting with President Bill Clinton and Vice President Al Gore in December 1997, a few days after the Kyoto climate change meetings took place.

“Sir John,” an internal Enron memo pointed out, “thinks there will soon be government regulation of greenhouse gases. And companies that have anticipated regulation will not only know how to use it to their advantage, they will also, as Browne puts it, ‘gain a seat at the table, a chance to influence future rules.'”

Bonner R. Cohen ([email protected]) is a senior fellow at the National Center for Public Policy Research in Washington, DC.