Too Big to Rein in, BP Continues Galloping Along, Unbridled and Unrepentant

In perhaps the most profoundly embarrassing development yet for the U.S. government’s star-crossed efforts to police offshore drilling, the Interior Department’s Bureau of Safety and Environmental Enforcement announced last week that it was asking BP, Transocean, and Halliburton to pay a total of up to $45.7 million in fines for 15 violations arising out of the catastrophic failure of the Deepwater Horizon in the Gulf of Mexico. That’s million, not billion, by the way, and a total for all three companies, not each. The $15 million or so that they might each pay is so small in comparison to their annual profits that they might just go ahead and put the sum on an expense account. Meanwhile, as if their humiliation was not enough, the Department of Justice remains strangely silent on its criminal investigation of BP, more than a year after the companies managed somehow to close the benighted well that had spewed oil into the Gulf of Mexico for two solid months in 2010.

The whole point of fining companies for violations of environmental laws is to deter future violations. Despite pledging to pay $20 billion in Gulf Coast relief, as well as cleanup costs and natural resources damages of an as-yet undetermined several billion more, BP reported second quarter profits of $5.6 billion—that’s billion, not million—this year. The company has already demonstrated itself immune to the publicity surrounding the typical penalties assessed for regulatory violations, amassing such a dreadful track record of environmental and occupational safety violations at its Texas City refinery and land-based drilling sites on Alaska’s North Slope that it should have been notorious long before the Gulf Spill. The company pled guilty to criminal violations and kept right on doing business as usual. 

Only dramatically more damaging punishment will ever succeed in inspiring the creation of the safety culture needed to ensure that BP workers don’t continue to die on the job (11 died in the Gulf and 15 died at Texas City). One solution would be to prosecute individual BP executives criminally, rather than letting the corporate shield protect them from accountability no matter what they do. A second would be to bar BP from lucrative U.S. government contracts and offshore leasing agreements until it corrects its company-wide disdain for safety and routine maintenance. 

To this day, BP remains the Pentagon’s largest supplier of jet and vehicle fuel, with government contracts valued at more than $2.2 billion. Had the good people at the Interior Department not been afraid of embarrassing themselves by picking and losing a bureaucratic battle with the Pentagon, they might have protested the continuation of BP’s contract. After all, no one should have great confidence in the company’s ability to keep the pumps pumping, the drills drilling, and the crude oil refining after the Gulf fiasco, which came on top of a series of other humiliating moments in the spotlight, one of which actually involved the sideways tilt into the sea--at a 45 degree angle no less--of its $5 billion Thunder Horse drilling rig because a valve was installed backwards. Not only do the Interior people decline to do battle with the Pentagon, they won’t even bar BP from bidding on new leases for further development in the Gulf.

BP is not doing all that much better in its original drilling sites in the North Sea.   The British Health and Safety Executive issued the following notice concerning what sound like extraordinarily serious, life-threatening violations in November 2010, and the company is on its second extension of time to come to grips with these violations.   The charge reads, in its charmless bureaucratic prose:

You are not carrying out suitable and sufficient assessments of the risks to the safety of your employees and other persons working on your offshore installations when you consider whether plant or equipment may be operated out with its normal operating parameters … Recent examples of this are:

a) On Schiehallion you were aware of severe wall thinning on the heating medium line from 21 September 2010 but no operational risk assessment was carried out to determine whether this was safe for continued operation or should be shut down. You carried on operation of this line and directed that work be carried out in close proximity to it and the line failed catastrophically on 24 September 2010 discharging approximately 27 tonnes of fluid at 123 degrees centigrade.

b) WCC 00103069 on Clair did not adequately assess the risk to persons associated with a lubricating oil leak within a turbine enclosure and included a requirement for persons to undertake monitoring work that caused them to deactivate fire detection and suppression systems and open the door of the enclosure thus exposing them to risk should a fire have broken out.

c) WCC 00224492 on ETAP considered continued operations with only one of three lifeboats available but did not provide a clear justification for operation with a POB of 76 given there was lifeboat capacity for only 56. Although the WCC included a helicopter based on ETAP it did not identify that there were foreseeable circumstances in which the installation helideck could not be used or state how the platform could be evacuated in these circumstances.

Spurned by potential investment partners in Russia and Africa, BP recently announced it would spend some $4 billion to develop new drilling sites in Scotland’s North Sea. It remains to be seen whether HSE regulators will approve this expansion, but if they go the way of their American counterparts, BP will continue business—and taking unconscionable risks—as usual.