The Guardian: From ethical champion to rogue interloper – BP’s American nightmare

Accidents and allegations of market fixing destroy environmentalist image

Andrew Clark in New York
Thursday November 16, 2006

BP’s tie-up with its United States rival Amoco was supposed to create an ethical champion at the top of the global oil industry. Negotiated by Lord Browne over a bottle of Puligny-Montrachet in a London restaurant, it was one of the biggest mergers in history. But eight years on, BP’s US arm is becoming America’s most accident-prone business.

Federal regulators have accused BP of price gouging. Its corroded pipelines have been leaking in Alaska. A BP oil spill has polluted the coast of California. Civil rights activists are picketing its petrol stations.

To cap it all, a young woman, Eva Rowe, has forced a humbling apology from the company for shocking safety lapses that caused its Texas City oil refinery to explode last year, killing her parents and 13 other people. BP’s yellow sunburst logo and its eco-friendly “Beyond Petroleum” slogan, which once won cautious admiration even from the green lobby, now leave a sour taste in the mouths of many Americans. BP’s public image is at rock bottom and the company is seen by some as a rogue foreign interloper. “If you drew up a list of companies that Americans are most disappointed in, BP would definitely feature,” said James Hoopes, professor of business ethics at Babson College, Massachusetts.

For a while, he says, BP’s talk of ethics and sustainability overcame a grand old American tradition of hating big oil companies.

“Expectations had been raised so high that people’s feelings have been crushed,” said Prof Hoopes. “The predominant feeling about BP is, ‘Oh no, fooled again.'” Others take a blunter line. Athan Manuel, director of lands protection at the Sierra Club, a North American environmental network, said: “Their reputation is pretty much in the toilet.”

It is difficult to identify the point at which things began to fall apart for BP in the US. But the day when a problem became obvious to the world was March 23 last year, when workers overfilled a 50-year-old blowdown drum with chemicals at the Texas City refinery, causing a huge blast in which flaming liquid showered nearby accommodation trailers.

It was the worst US industrial accident for a decade. Safety officials found that antiquated equipment was on site, that trailers were too close to flammable materials, that eight previous incidents had happened at the blowdown drum and that a cost-cutting culture permitted “catastrophic safety risks”.

BP’s reaction to the disaster drew criticism. Ms Rowe says she got a letter a few days later apologising for the death of her father, James. But it appeared to be a form letter intended for a bereaved wife, rather than for a daughter who had also lost her mother. “It was hurtful,” she said. “Those were my parents – my mum and dad. It wasn’t just anybody.”

Although tragic, a single incident could have been seen as a one-off caused by rogue management at a refinery. But at the other end of America, cracks began to appear in the BP facade. On March 2 this year, a worker driving along a gravel road in Alaska smelt oil. He discovered the largest leak on Alaska’s North Slope, as the equivalent of more than 200,000 barrels of oil gushed into the snow. BP’s automated leak detection system had failed.

Worse was to follow as the company discovered worrying signs of corrosion, forcing it to shut much of its Prudhoe Bay oilfield, which produces 400,000 barrels of oil a day.

A congressional inquiry established that the company had failed to perform routine inspections by sending a maintenance “pig” through the pipe. In a hearing in September, Joe Barton, chairman of the House energy and commerce committee, thundered: “This comes from a company which prides itself in their ads on protecting the environment. Shame! Shame! Shame!”

Washington is taking a sharp interest in BP. Over the summer, the Justice Department said it had begun criminal and civil investigations into whether BP traders manipulated crude oil and unleaded petrol markets. During 2003 and 2004, the company’s staff are alleged to have bought huge quantities of propane to establish a dominant market position.

That scandal has attracted the attention of the civil rights leader Jesse Jackson, whose Rainbow/Push Coalition is targeting BP’s filling stations, accusing the company of ripping off the public and failing to employ any black senior executives.

Butch Wing, director of the coalition, says BP is guilty of price gouging, safety lapses, environmental crimes and racial discrimination. “We want a dialogue with them,” he said. “BP has a major, major problem in the US.”

Other issues have added to the impression of an organisation in crisis. In the Gulf of Mexico, BP’s Thunder Horse platform, damaged during Hurricane Katrina, is proving very difficult to repair. In California, pipeline experts are looking at how BP managed to spill 1,000 barrels of a refined petroleum product in the port of Long Beach.

BP’s official line is that there is nothing to link any of the individual setbacks it has suffered in America. A spokesman, Ronnie Chappell, says: “These are all very different in terms of the nature of the incidents and the circumstances that surround them. While we see no direct connection between them, we can understand why people would connect the dots in the way you have.”

However, questions are being asked about whether BP took a firm enough grip on its US management after mergers with Amoco in 1998 and Arco in 2000.

The Sierra Club’s Athan Manuel says: “It’s hard not to come to the conclusion that it’s systemic. I think the folks at the top are enlightened and understand where the company should be. They want to make it progressive. But from an operations point of view, that hasn’t filtered down to the people on the ground.”

BP has responded with a slew of changes. A veteran BP troubleshooter, Robert Malone, was appointed in June to a new post chairing BP solely in the US. The top executives in Texas City and Alaska have been replaced. The company has asked a retired judge, Stanley Sporkin, to act as an independent ombudsman for any whistleblowers. BP has also called in the former US secretary of state, James Baker, to chair a panel examining its safety culture.

BP’s spokesman says its commitment to renewable energy is unchanged. The company has invested heavily in solar and wind power, while a carbon sequestration project is under way in California to generate electricity from petroleum coke. “You’d have a hard time finding another company making a similar level of commitment,” he said.

However, scepticism about BP runs deep in America and the company may never recapture the optimism inspired by its environmentally aware makeover. Pratap Chatterjee, director of California-based CorpWatch, says: “This is a company that says it cares about the community and society, but it’s not repairing its own pipelines and refineries.”

Yet there is a degree of sympathy, even in unlikely quarters. Lois Epstein, senior engineer at Cook Inletkeeper, an Anchorage organisation monitoring the Alaska oil industry, says: “I give them some credit for apologising and saying they were wrong. It takes some guts, some realisation to do so. It’s unusual to see that in America. Maybe they did it because they’re a British company.”

Expansion in US

· America represents 40% of BP’s overall business. After a series of mergers with Amoco, Arco, Burmah Castrol and Vastar, by 2001 BP had become the largest oil and gas producer in the United States and one of the largest petrol retailers.

· The company has 37,000 employees in the US.

· It sells 15bn gallons of fuel every year to motorists at 14,000 petrol stations.

· BP’s five US refineries produce 1.5m barrels of crude oil per day.

· The company holds a fifth of all proven oil and gas reserves in the country.

http://business.guardian.co.uk/story/0,,1949027,00.html

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