BP Moves to Get Past Mistakes, Buff Image
By Tom Fowler and Kristen Hays, Houston Chronicle
Oct. 25–BP’s efforts to resolve several lengthy criminal investigations this week, including one focused on the March 2005 explosion at its Texas City refinery, illustrate the company’s desire to move past missteps that sapped its image and competitive edge.
“The cost of settling these things is small compared to the cost of an efficient, well-run, well-directed business,” said Robin West, chairman of oil consulting firm PFC Energy in Washington.
BP chief executive Tony Hayward “is doing the right thing to clear the decks,” West said.
The London-based oil giant has agreed to plead guilty to a felony Clean Air Act violation and pay $50 million to settle allegations related to the explosion, which killed 15 people and injured many more, a person knowledgeable about the deal said Wednesday.
BP also will pay $303 million and agree to a deferred prosecution agreement to settle separate allegations that it manipulated the price of propane three years ago.
In a third case, BP is expected to plead guilty to felony environmental crimes and pay a fine related to 2006 leaks in oil pipelines feeding the Trans Alaskan Pipeline in Prudhoe Bay, the person said. That case stems from two spills from corroded pipelines, including a 267,000-gallon leak that was the largest oil spill ever on Alaska’s North Slope.
Details about the deals were expected to be made public today, barring last minute changes or delays. BP and the U.S. Justice Department declined comment Wednesday.
While the propane fine far exceeds that for the deadly explosion, the Texas City-related deal requires the company to plead guilty to a crime while the other spares BP from criminal charges.
In another case involving Clean Air Act violations, refinery operator Motiva Enterprises, a joint venture of Shell Oil Co. and Saudi Arabia’s state-controlled oil company, pleaded guilty in March 2005 to negligently endangering workers at its former refinery in Delaware City, Del., in relation to a 2001 acid tank explosion.
The company also admitted to negligently releasing sulfuric acid into the air, paid a $10 million fine and agreed to serve probation for three years for the blast that killed one worker and injured eight others.
Last month, a year and a half after reaching that settlement, Motiva announced plans to move ahead with the $7 billion expansion of its Port Arthur refinery, which will make it the largest in the nation.
“If you plead guilty to an environmental crime, it’s serious, but it’s not the sort of thing that’s going to destroy a company,” said Adam Gershowitz, assistant law professor at the South Texas College of Law.
“But of course, no corporation ever wants to plead guilty to a crime, ever,” he said.
Previous complaints The BP settlements come nearly six months into Hayward’s tenure as chief executive officer and coincide with other efforts to clean up problems and restore credibility through improved safety and operations.
West said that Hayward’s predecessor, John Browne, transformed what was once a weak BP into a Big Oil behemoth through acquisitions, most notably of Amoco Corp. in late 1998. Browne also promoted BP’s image through its “Beyond Petroleum” campaign emphasizing environmental responsibility and boosted its footprint in Russia with the 2003 formation of TNK-BP with Russian investors.
But Browne and the company came under fire in the last years of his tenure with the explosion, delays in getting Gulf of Mexico oil platforms operating, the pipeline leak, trading allegations and slips in performance that left BP trailing its peers.
BP also faced hundreds of blast-related lawsuits, has settled many of them, and has set aside $1.6 billion for those payments and resolution of pending cases.
Browne abruptly resigned from BP in May upon acknowledging that during a legal battle with a tabloid, he had lied to a British court about how he met a former companion. Hayward, who ran BP’s exploration and production division under Browne, took the top spot.
Analysts say he appears to be making good on vows to improve. BP is streamlining operations and shedding redundant management to give workers such as engineers and refinery workers more of a voice in what Hayward says had become an overly complex organization.
On Wednesday, the company also announced that up to 350 jobs could be cut in its North Sea operations, where declining production and increased costs of doing business call for shrinking the work force.
In addition, the company aims to restore most refining capacity at its plants in Texas City and Whiting, Ind., by early next year and move ahead on getting Gulf platforms in operation.
“John was more interested in being a statesman than simply operating a business,” West said. “I think what Tony has done is absolutely correct. Clearly, he’s rolled up his sleeves and is directly involved in the day-to-day management of the business, which is critical.”
The March 23, 2005, blast occurred when a tower in a unit that boosts octane in gasoline overfilled with hydrocarbons that flowed to an aging vent stack. The stack spewed flammable liquid, which fell to the ground and formed a vapor cloud that ignited.
The unit has been closed since the explosion during probes by federal regulators and prosecutors. BP has said it does not intend to restart the unit.
tom.fowler@chron.com kristen.hays@chron.com
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