Beaumont (Tex.) Enterprise  [Printer-friendly version]
October 25, 2007


By Kristen Hays and Tom Fowler, Houston Chronicle

BP will plead guilty next month to violating the Clean Air Act and pay
a $50 million fine for lax safety that contributed to the deaths of 15
workers in the March 2005 explosion at its Texas City refinery, U.S.
Attorney Don DeGabrielle said today.

DeGabrielle said in a Houston news conference that the Nov. 27 felony
plea and fine stem from a confluence of events: BP's lack of process
safety systems in place, its knowing placement of flimsy trailers near
an aging vent stack that was a potential ignition source in a unit
that boosted the octane in gasoline; and failure to inform workers
that the company was about to restart the unit, a potentially
dangerous process that requires particular attention to safety.

As DeGabrielle spoke in Houston, acting Attorney General Peter Keisler
opened a news conference in Washington to discuss the Texas City deal
as well as two other agreements to settle separate BP investigations.

Those deals are:

* A guilty plea to an environmental crime and $20 million in payments
related to 2006 leaks in oil pipelines feeding the Trans Alaskan
Pipeline in Prudhoe Bay, Alaska. The case stems from two spills from
corroded pipelines, including a 267,000-gallon leak that was the
largest spill ever on Alaska's North Slope.

* A $303.5 million fine and a non-prosecution agreement to settle
allegations that BP manipulated of the price of propane three years

Although the company avoided criminal prosecution in the propane
trading case, four former BP traders were indicted today in Chicago on
charges relating to the case. Accused of conspiring to manipulate and
corner the propane market in February 2004, they face charges of mail
and wire fraud and violations of the Commodity Exchange Act .

In a statement today, BP American Chairman and President Bob Malone

"These agreements are an admission that, in these instances, our
operations failed to meet our own standards and the requirements of
the law. For that, we apologize. They represent an absolute commitment
to work with the government as we continue our efforts to prevent
another tragedy like Texas City, to make our Prudhoe Bay pipeline
corrosion program more responsive to changing operating conditions and
to ensure that our participation in the nation's energy markets is
always appropriate.

"In the months and years since these violations occurred, we have
made real progress in the areas of process safety performance and risk
management. Oversight of our trading operations has also been greatly
enhanced. However, there is more to do and we are committed to doing

DeGabrielle said that BP Products North America, the London-based oil
giant's U.S. arm, will enter the felony plea related to the Texas City
explosion before U.S. District Judge Gray Miller. In addition to the
plea and fine, BP will serve probation for three years.

DeGabrille characterized the deal as an "agreement in principle,"
since Miller has not yet approved it.

DeGabrielle, U.S. attorney for the Southern District of Texas, also
said the investigation into events leading up to and surrounding the
explosion is continuing. That means that while the corporation is
discharging its criminal liability with the settlement, assuming it
completes its probation, individuals still could face criminal

"Part of the agreement with BP is that they will continue to cooperate
as they have throughout this investigation with us," he said. "This
includes making employees and witnesses available to us, making other
documentary and physical evidence available to us as needed or
requested" by various agencies, including the FBI, Environmental
Protection Agency, U.S. Occupational Safety and Health Administration,
and the Texas Commission on Environmental Quality.

DeGabrielle acknowledged the disparity between the fines for the
explosion, which resulted in multiple deaths and scores of injuries,
and the trading manipulation, which involved no fatalities. He said
the Clean Air Act calculates criminal fines with a mathematical
formula that doesn't account for loss of human life.

The law considers money that a company may have saved by deferring
repairs to equipment and failing to implement process safety measures
and profits made from the unit where the explosion occurred,
DeGabrielle said. That unit wasn't a big profit-maker for BP and at
times lost money, he said.

Under the law, the $50 million fine was the maximum the government
would have been able to prove in court that BP should pay, he said. By
contrast, the trading settlement involves a civil fine and no criminal

The Clean Air Act that allows for criminal prosecution of
environmental laws was enacted in 1990 in response to history's worst
industrial accident -- the 1984 release of poisonous gas from a Union
Carbide pesticide plant in Bhopal, India that killed at least 15,000
people and injured more than 100,000.

In response to the Bhopal disaster, the U.S. chemical industry
implemented new safety rules and Congress created the U.S. Chemical
Safety and Hazard Investigation Board to investigate explosions and
releases of toxic gas.

That board's two-year probe into the Texas City blast was the longest
in its history. Its exhaustive report, issued in March this year a few
days before the two-year anniversary of the explosion, reached many of
the same conclusions as the criminal probe -- BP was lax on process
safety and put portable trailers too close to the blast site.

Process safety involves operations and handling of hazardous materials
as opposed to personal safety, which focuses on prevention of falls
and other individual accidents. The safety board concluded that BP
focused too much on personal safety and failed to make process safety
a priority.

The 15 contractors who died were in a trailer 121 feet from the blast
site, in violation of BP's own policy that called for placing trailers
at least 300 feet away. After the disaster, the company moved all
trailers off the refinery site. The company also is pouring $1 billion
into improvements at the plant.

The American Petroleum Institute, the oil and gas industry's trade
group, in June this year released new standards that suggest companies
conduct detailed blast safety analyses before placing any portable
buildings closer than 1,930 feet to a process unit area in a refinery.
API, which has no enforcement capability, also set distance limits
between buildings and such units depending on the unit's size.

The chemical safety board also concluded that deep budget cuts that
occurred both before and after BP acquired the Texas City plant with
its purchase of Amoco Corp. in 1998 laid the foundation for the
disaster. BP has disputed any link between cost-cutting and the

The March 23, 2005, blast occurred when a tower in a unit that boosts
octane in gasoline overfilled with hydrocarbons that flowed to the old
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.

In the settlement announced today, BP admitted that on the morning of
the blast, several procedures required under the Clean Air Act for
ensuring the mechanical integrity and a safe startup either had not
been established or were ignored.

The company also admitted it had failed to perform a relief valve
study to determine whether the stack had the capacity to safely
release excess hydrocarbons.

BP also admitted that it had become a regular practice at the company
to locate temporary trailers occupied by contract employees near the
stacks even though BP knew there had been previous releases of
hydrocarbons from those structures.

About 4,000 lawsuits were filed against BP after the explosion, most
of which the company has settled, including all involving deaths.
Hundreds that involve injuries or property damage are still pending.
The only case to go to trial so far involved four plaintiffs who said
they suffered from emotional distress and other blast-related
ailments. That one was settled last month on what would have been the
10th day of testimony.

The company has set aside at least $1.6 billion to resolve lawsuits

BP's efforts to resolve the lengthy criminal investigations this week
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 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

West said that Hayward's predecessor, John Browne, transformed what
was once a weak BP into a Big Oil behemoth through acquisitions, most
notably that of Amoco. 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.

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 Hayward 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 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
Texas City and Whiting, Ind., refineries by early next year and move
ahead on getting delayed Gulf of Mexico platforms in operation that
will boost overall production.

"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."

Copyright The Beaumont Enterprise 2007