Safety Costs Big Oil’s Wild Child

September 2010 Vol. 237 No. 9

As Janet and I prepare for our annual vacation to the Poconos in northeastern Pennsylvania, there is one big question that I’m sure our friends will ask: is BP representative of the petroleum industry?

The answer is “no”. To prove that, I need only point to a front-page story on Aug. 12: “BP To Pay Record Fine Of $50 Million For Texas Accident.”

This really says it all about Big Oil’s wild child.

BP has agreed to pay a record $50.6 million fine to the federal government for safety violations found by regulators last year at its Texas City refinery. That was the site of the catastrophic 2005 explosion that killed 15 “contract” workers and injured nearly 200 others.

BP also agreed to take “immediate steps” to protect those now working at the refinery, on which it will spend at least $500 million, according to the Occupational Safety and Health Administration (OSHA).

OSHA proposed last fall to fine BP $87 million after determining the company failed to correct problems at the refinery under a previous settlement. Though BP had disputed most of those 2009 findings, it has now accepted the government’s penalties for failing to fix problems as promised. According to published reports, BP is continuing to contest more than $30 million in proposed penalties for the 439 new safety violations that OSHA inspectors found in 2009.

“This agreement achieves our goal of protecting workers at the refinery and ensuring that critical safety upgrades are made as quickly as possible,” said Secretary of Labor Hilda L. Solis in a statement. “The size of the penalty rightly reflects BP’s disregard for workplace safety and shows that we will enforce the law so workers can return home safe at the end of their day.” BP owned the previous record for an OSHA penalty — the $21 million it paid in connection with the 2005 explosion.

Why are safety issues still an issue at Texas City? Add to this the Deepwater Horizon blowout (note that actual blame for the disaster still has not been determined – in its cleverly worded ads BP notes that it has accepted responsibility for the cleanup) and it is obvious that BP’s safety culture has been a victim of systemic failure. In part, BP grew too fast for its own good, swallowing up Amoco and ARCO in the late 1990s. Oil companies work in typically dangerous environments that have grown even more challenging as they reach out to riskier challenges.

It’s not the first time that merger activity outran company management. In the late 1990s, El Paso Corp. quadrupled its size by adding Tenneco, SONAT and Coastal Corp. in short order, but made no changes in its upper management team, similar to BP. The result was the near destruction of company.

A word to the wise: true safety comes with a steep price tag. But you can’t afford to leave home without it.

The Gulf blowout is the main reason why there was so much coverage of the oil spill in Michigan from Enbridge’s Lakehead Pipeline. This could have even bigger ramifications because it is indicative of an aging infrastructure.

Consider how many pipelines were built in the 1950s and ’60s – many in isolated areas eventually overtaken by urban sprawl. Compared to other forms of transportation, pipelines are still the safest, but how many more accidents are waiting to happen to aging and corroded pipelines?

The pipelines may not have appreciated it at the time and still quibble about some of the requirements, but those federal inspection mandates have been among the best pieces of legislation to come out of Washington – just ask anyone who works for a service company.

The feds could do even more to help the pipeline industry, and ultimately the public, if lawmakers would put away their partisan differences and provide the kind of leadership we expect from them. One suggestion The New York Times mentioned (Aug. 12) is a proposal creating a federally backed agency to help finance the repair and rebuilding of the nation’s infrastructure. In addition to providing badly needed jobs, we could stop America’s slide into third-world status.

To repeat: safety doesn’t come cheap.

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