BP Admits Budget Pressure a Factor in Alaska Spill
Date: 17-May-07
Country: US
Author: Chris Baltimore and Robert Campbell
"There were extreme budget pressures at Prudhoe Bay," said BP America CEO Bob Malone. "We recognize that those budget pressures put our employees in a very difficult place."
Members of the House Energy Committee investigating the March 2006 leak berated the British oil major for sitting on key documents related to the 200,000 gallon spill and said another hearing may be needed.
BP's image has been shaken by health and safety problems in recent years including a deadly explosion at a Texas oil refinery in March 2005. Critics have blamed a faulty management culture and raised charges of energy market manipulation.
Government investigators looking into the Alaska spill criticized BP for failing to use devices called "pigs" to clean and inspect the inside of its oil transit pipelines at the Prudhoe Bay field in Alaska, allowing corrosive bacteria to eat away at the line.
"People no longer challenge and think," Malone said, Asked if budget pressures could have affected maintenance, Malone said, "Not only could it, we believe it did."
Rep. Bart Stupak, a Michigan Democrat and chairman of the panel, noted that 800 pages of e-mails and other BP documents were only turned over to committee staff Tuesday night.
"I think we are headed for another hearing," Stupak said. "My review of the mountain of circumstantial evidence can only lead me to the conclusion that severe pressure for cost cutting did have an impact on maintenance of pipelines."
Rep. Joe Barton, Texas Republican, said BP was led by "a management culture that just refuses to get it."
Barton also questioned BP's willingness to cooperate, pointing out that the Richard Woollam, manager of the corrosion prevention program at Prudhoe Bay until last September, has refused to talk to committee investigators.
"That doesn't sound like cooperation to me," Barton said.
SHADES OF TEXAS CITY
Committee members sought to portray the cost cutting in Alaska as similar to the management culture at BP's Texas City, Texas refinery, where 15 workers were killed in a 2005 explosion.
Carolyn Merritt, chairman of the US Chemical Safety Board, testified "there are striking similarities" between the two incidents.
"Most if not all of the seven root causes that BP consultants identified for the Prudhoe Bay incidents have strong echos in Texas City," Merritt said in testimony.
Committee members said BP e-mails and documents turned over to staff showed that heavy cost cutting by managers trying to comply with corporate directives to lower spending as output declined at the aging field.
Corrosion-monitoring efforts like smart-pigging were reduced or put on hold even as BP reaped more than US$106 billion in after-tax profits between 1999 and 2006, Stupak said.
In one email from October 2001 cited by Stupak, an unnamed BP employee wrote: "We are under huge budgetary pressure for the last quarter of the year and therefor we have to take some rather disagreeable measures," included shutting down some corrosion-reduction systems until year-end.