BP Explosion and Oil Leak

http://online.wsj.com/article_email/SB10001424052748704302304575213791958270682-lMyQjAxMTAwMDIwOTEyNDkyWj.html

http://www.texascityexplosion.com/timeline_update

As it begins to occur to those who are paying close attention to the tragedy that is unfolding in the Gulf of Mexico, two things are clear: it is another BP safety mistake, and the extent of the leak will far surpass the Exxon Valdez disaster. For the Valdez, the potential amount of the spill was limited to the size of the ship. In the BP case, the potential amount of the spill is open ended.

We now know that the oil well spewing crude into the Gulf of Mexico didn't have a remote-control shut-off switch used in two other major oil-producing nations as last resort protection against underwater spills. The lack of the device, called an "acoustic switch," could amplify concerns over the environmental impact of offshore drilling.

The most important thing is that 11 people are missing and presumed dead. A company either has a culture that values safety, or it does not. Reading the BP time line below allows one to gain a perspective on the value that safety has in one business culture. This accident was tragic and preventable. We don't know the details but, when they ultimately come out, a breach in process safety management will have been the cause and that is preventable.

Returning to the "acoustic switch," both Norway and Brazil require one on every offshore well. Norway has required them since 1993. The switch, which costs $500,000, has had a good track record according to Norwegian authorities. The U.S. Interior Department's Minerals Management Service has said the remote device wasn't needed because rigs had other "back-up plans" to cut off a well. For this particular rig, that would refer to the two unmanned submarines that have thus far been useless in stemming the flow of oil from the well.

Wait, there's more: in 2003, a report commissioned by the Minerals Management Service said, "acoustic systems are not recommended because they tend to be very costly." Costly in comparison to what?

On March 11, 2010, BP announced that had bought into a diverse and broad deepwater exploration portfolio that includes assets off the shores of Brazil. The value of the deal was $7 billion. Those Brazilian wells will include acoustic switches. That deal also includes 240 leases in the Gulf of Mexico. We wonder what the Minerals Management Service will have to say about that now.

There has been so much discussion about lax government regulation as it relates to the U.S. banks/financial institutions relative to the Great Recession. We are dealing here with another example of it here in another industry.

For a management culture that doesn't value safety, it is defined by a series of "incidents." Incidents prove the case. We will outline below a partial list of incidents and actions that define such a culture. When safety works well, it links to productivity and profitability because employees feel "SAFE" and are highly motivated to give effort in the workplace (and give improvement suggestions that they know will be listened to). DuPont's safety record is one example: they are, and have always been, the best at keeping their employees safe.

The BP Texas City refinery is the second largest in the state of Texas and the third largest in the U.S. It makes 2.5% of all the gasoline sold in the U.S. As one reviews the events that surround the 2005 BP Texas City tragedy, and more recent BP incidents, there have been several conclusions: the U.S. government, as well as safety experts, concluded that there were numerous failings in equipment, risk management, staff management, working culture at the site, maintenance, and general health and safety ...

Partial Timeline - BP Texas City Refinery/Gulf Oil & Other BP Oil Production Issues

5/25/04: a worker falls to his death inside a tank (Texas City)

9/2/04: two workers are killed, one severely injured during a steam release (Texas City)

11/04: Texas City management is informed that someone has been killed at that plant every 16 mos. for the past 30 years.

3/23/05: an explosion at the Texas City refinery kills 15 workers

5/12/05: a BP interim fatality report blames the explosion on hourly workers

9/22/05: OSHA (Occupational Health and Safety Administration) negotiates a "settlement agreement" - BP pays $21 million in fines

3/23/06: a leaky BP oil pipeline in Alaska shuts down one of America's largest oil fields - BP is fined $20 million in criminal penalties

7/21/06: a worker at Texas City is crushed by a pipe while working on a hydraulic lift

1/16/07: Baker Report (James F. Baker III, former Secretary of State) released - BP was required to do a major study of safety problems at all U.S. refineries. Overall conclusion: BP failed to emphasize Process Safety Management (PSM)

3/22/07: The U.S. Chemical Board releases its final report on the 3/23/05 Texas City explosion finding that "costs" played a major role in the conditions that led up to it

4/17/07: over 100 workers were sent to local hospitals as a result of a chemical release at Texas City

5/1/07: Lord John Brown (BP CEO) resigns

5/3/07: Bonse Report - BP is ordered by the court to release an internal investigation assigning responsibility for the 3/23/05 explosion to several members of management from Texas City to London

5/30/07: John Manzoni (BP Head of Refining and Marketing) announces his resignation

6/5/07: a BP Texas City worker is electrocuted while working on a light circuit in a process area

10/24/07: the U.S. Department of Justice accepts BP's agreement to plead guilty to felony violations of the Clean Air Act and pay a fine of $50 million

1/14/08: a BP Texas City worker dies in a refinery accident - BP is issued four citations related to PSM

10/9/08: a contract employee was fatally injured at BP Texas City after being struck by a front end loader

8/3/09: OSHA sends notice to BP that they are still not in compliance with the 2005 settlement agreement

10/29/09: OSHA issues Notification of Failure to Abate and willful citations with proposed penalties of $87,430,000 for 2005 settlement non-compliance

3/23/10: 5 Year Anniversary of Texas City explosion

3/30/10: The Obama Administration announces a plan to open offshore oil exploration in areas (including the Gulf of Mexico) previously closed

4/20/10: An explosion and fire on a BP drilling rig 50 miles off the Louisiana coast in the Gulf of Mexico kills 11 workers and causes a substantial oil leak

4/30/10: The Obama Administration reverses its position on opening up offshore oil exploration until further notice

4/30/10: Despite the 4/20/10 explosion and fire, BP announces that it remains committed to its
Gulf drilling program which contributes 11% of its worldwide production

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It would appear that there is a continuing pattern of cultural disregard for safety within BP and that lax regulation by the U.S. government has contributed to that. Since Gulf drilling supplies 11% of BP's worldwide production, perhaps a fine that is large enough to amount to a percentage of the dollar value of that production would get their attention. Additionally, we would recommend that their leases for Gulf oil production be re-examined.

We, and others, supported expanded offshore oil production for the U.S. If it is possible for one incident to completely change our position, this one has. When optimizing decision making, we have to account for the worst case scenarios. BP is the worst case scenario. This incident clearly indicates that the worst company is not good enough to have fail safe devises for this type of exploration. The best case scenario has to be that the worst (and least safety committed) company must still have optimal fail safe devices. Clearly, that is not currently so.

Memo to the "regulators": you have to do better.