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BP had other problems in years leading to Gulf spill

deepwater_horizon_fire.jpgBy Abrahm Lustgarten, ProPublica

BP, the global oil giant responsible for the fast-spreading spill
soon to make landfall in the Gulf of Mexico, is no stranger to major
accidents.

In fact the company has found itself at the center of several of the
nation’s worst oil and gas-related disasters in the last five years.

In March 2005 a massive explosion ripped through a tower at BP’s
refinery in Texas City, Texas, killing 15 workers and injuring 170
others. Investigators later determined that the company had ignored its
own protocols on operating the tower, which was filled with gasoline,
and that a warning system had been disabled.

The company pleaded guilty to federal felony charges and was fined more
than $50 million by the U.S. Environmental Protection Agency.

Almost a year after the refinery explosion, technicians discovered that
some 4,800 barrels of oil had spread into the Alaskan snow through a
tiny hole in the company’s pipeline in Prudhoe Bay. BP had been
warned
to check the pipeline in
2002, but hadn’t, according to a report in Fortune. When it did inspect
it, four years later, it found that a six-mile length of pipeline was
corroded. The company temporarily shut down its operations in Prudhoe
Bay, causing one of the largest disruptions in U.S. oil supply in recent
history.

BP faced $12 million in fines for a misdemeanor violation of the federal
Water Pollution Control Act. A congressional committee determined BP
had ignored opportunities to prevent the spill and that “draconian”
cost-saving measures had led to shortcuts in its operation.

Other problems followed. There were more spills in Alaska. And BP was
charged with manipulating the market price of propane. In that case, it
settled with the U.S. Department of Justice and agreed to pay more than
$300 million in fines.

At each step along the way, the company’s executives were contrite.

“This was a preventable incident… It should be seen as a process
failure, a cultural failure and a management failure,” John Mogford,
then BP’s senior group vice president for safety and operations, said in
an April 2006 speech about the lessons learned in Texas City. “It’s not
an easy story to tell. BP doesn’t come out of it well.”

In a 2006 interview with this reporter after the Prudhoe Bay spill, published
in Fortune
, BP’s chief executive
of American operations, Robert Malone, said “there is no doubt in my
mind, what happened may not have broken the law, but it broke our
values.”

Malone insisted at the time that there was no pattern of mismanagement
that increased environmental risk.

“I cannot draw a systemic problem in BP America,” he said. “What I’ve
seen is refineries and facilities and plants that are operating to the
highest level of safety and integrity standards.”

Nonetheless Malone, who spent three decades at BP and was promoted to
the CEO of BP America shortly after the Texas refinery blast, promised
to increase scrutiny over BP’s operations and invest in environmental
and safety measures.

He told Congress that it was imperative BP management learn from its
mistakes.

“The public’s faith has been tested recently,” he said. “We have fallen
short of the high standards we hold for ourselves and the expectations
that others have for us.”

Time will tell whether the accident that killed 11 workers and sent the
Transocean Deepwater Horizon drilling rig — a $500 million platform as
wide as a football field — floating to the bottom of the Gulf of Mexico
was simply an accident or something else.

Malone, who retired last year, declined to comment for this article. A
spokesman for BP was not available for comment.

Families of workers who died in the accident have already filed lawsuits
accusing BP of negligence. Congress, as well as the Minerals Management Service, the federal agency that regulates drilling in the
Gulf, were already separately investigating allegations that BP has
failed to keep proper documents about how to perform an emergency
shutdown
of the Atlantis,
another Gulf oil platform and one of the largest in the world.

There are also indications that BP and Transocean, the owner of the
Deepwater Horizon rig that burned and sank, could have used backup
safety gear
— a remote acoustic
switch that would stanch the flow of oil from a leaking well 5,000 feet
underwater — to prevent the massive spill now floating like a
slow-motion train wreck towards the Mississippi and Louisiana coastline.
The switch isn’t required under U.S. law, but is well-known in the
industry and mandated in other parts of the world where BP operates.

In the year before the accident, BP once again aggressively cut costs. A
reorganization stripped 5,000 jobs from its payroll, saving BP more
than $4 billion in operating costs, according to a report sent to
ProPublica by Fadel Gheit, an investment analyst for Oppenheimer.

On April 27, as the U.S. Coast Guard worked with BP engineers to guide
remote control submarines nearly a mile underwater in a futile effort to
close a shut-off valve, BP told investors that its quarterly earnings
were up more than 100 percent over the last year, beating expectations
by a large margin. After underperforming its competition throughout the
last decade, Gheit wrote, BP was the only major oil company to perform
better than the S&P 500 last year.

(Photo of fire on Transocean’s Deepwater Horizon drilling rig from the U.S. Coast Guard.)