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Gulf oil spill: BP has a long record of legal, ethical violations

-- NO MAGS, NO SALES --KRT US NEWS STORY SLUGGED: REFINERYBLAST KRT PHOTOGRAPH BY BRAD LOPER/DALLAS MORNING NEWS (March 24) TEXAS CITY -- Julie King consoles her husband, Mark King, outside the Texas City Convention Center in Texas City, Texas, on Thursda

A wife consoled her husband on the day after the Texas City oil refinery exploded after he learned his father was one of the 15 people killed. | Brad Loper / Dallas Morning News / MCT

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Profile of BP and its troubles

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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."

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 moved out of the corrosion unit 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.)

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For full McClatchy oil spill coverage, click here.

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