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Reports at BP over years find history of problems

By Abrahm Lustgarten and Ryan Knutson
Tuesday, June 8, 2010; A01

ProPublica

A series of internal investigations over the past decade warned senior BP managers that the oil company repeatedly disregarded safety and environmental rules and risked a serious accident if it did not change its ways.

The confidential inquiries, which have not previously been made public, focused on a rash of problems at BP's Alaska oil-drilling operations. They described instances in which management flouted safety by neglecting aging equipment, pressured employees not to report problems and cut short or delayed inspections to reduce production costs.

Similar themes about BP operations elsewhere were sounded in interviews with former employees, in lawsuits and little-noticed state inquiries, and in e-mails obtained by ProPublica. Taken together, these documents portray a company that systemically ignored its own safety policies across its North American operations -- from Alaska to the Gulf of Mexico to California and Texas. Executives were not held accountable for the failures, and some were promoted despite them.

Tony Hayward has committed himself to reform since becoming BP's chief executive in 2007. Under him, the company has worked to implement an operating safety system to create "responsible operations at every BP operation," said Toby Odone, a company spokesman. BP has used the system at 80 percent of its operations and expects to bring it to the rest by the end of the year, he said.

Odone said the notion that BP has ongoing problems addressing worker concerns is "essentially groundless."

Because of its string of accidents before the April 20 blowout in the Gulf of Mexico, BP faced a possible ban on its federal contracting and on new U.S. drilling leases, several senior former Environmental Protection Agency department officials told ProPublica. That inquiry has taken on new significance in light of the oil spill in the gulf. One key question the EPA will consider is whether the company's leadership can be trusted and whether BP's culture can change.

The reports detailing the firm's Alaska investigations -- conducted by outside lawyers and an internal BP committee in 2001, 2004 and 2007 -- were provided to ProPublica by a person close to the company who thinks it has not done enough to fix its shortcomings.

A 2001 report noted that BP had neglected key equipment needed for an emergency shutdown, including safety shutoff valves and gas and fire detectors similar to those that could have helped prevent the fire and explosion on the Deepwater Horizon rig in the gulf.

A 2004 inquiry found a pattern of the company intimidating workers who raised safety or environmental concerns. It said managers shaved maintenance costs by using aging equipment for as long as possible. Accidents resulted, including the 200,000-gallon Prudhoe Bay pipeline spill in 2006 -- the largest spill on Alaska's North Slope -- which was blamed on a corroded pipeline.

Similar problems surfaced at BP facilities in California and Texas.

California officials alleged in 2002 that the company had falsified inspections of fuel tanks at a Los Angeles area refinery and that more than 80 percent of the facilities didn't meet requirements to maintain storage tanks without leaks or damage. Inspectors had to get a warrant before BP allowed them to check the tanks. The company eventually settled a lawsuit brought by the South Coast Air Quality Management District for more than $100 million.

Three years later, a Texas City refinery exploded, killing 15 people. An investigation found that a warning system failed, and independent experts found that "significant process safety issues exist at all five U.S. refineries, not just Texas City."

BP spokesman Odone said that after the accident, the company adopted a plan to update its safety systems worldwide. But last year, the Occupational Safety and Health Administration fined the firm $87 million for not improving safety at that same Texas plant.

'Environmental criminal'

BP has had more high-profile accidents than any other company in recent years. And now, with the disaster in the gulf, independent experts say the pervasiveness of the company's problems, in multiple locales and different types of facilities, is striking.

"They are a recurring environmental criminal and they do not follow U.S. health safety and environmental policy," said Jeanne Pascal, a former EPA lawyer who led its BP investigations. Since the late 1960s, the company has pulled oil from under Alaska, usually without problems. But when it pleaded guilty in 1999 to illegal dumping at an offshore drilling field there, it drew fresh scrutiny and set off a cycle of attempted -- and seemingly failed -- reforms that continued over the next decade.

To avoid having its Alaska division debarred -- the official term for a contract cancellation with the federal government -- the firm agreed to a five-year probationary plan with the EPA. BP would reorganize its environmental management, establish protections for employees who speak out about safety issues, and change its approach to risk and regulatory compliance.

Less than a year later, employees complained to an independent arbitrator that the company was letting equipment and critical safety systems languish at its Greater Prudhoe Bay drilling field. BP hired independent experts to investigate.

The panel identified systemic problems in maintenance and inspections -- the operations that keep the drilling in Prudhoe Bay running safely -- and warned BP that it faced a "fundamental culture of mistrust" by its workers.

"There is a disconnect between GPB management's stated commitment to safety and the perception of that commitment," the experts said in their 2001 report.

The report said that "unacceptable" maintenance backlogs ballooned as BP tried to sustain North Slope profits despite declining production. The consultants concluded that the company had neglected to clean and check valves, shutdown mechanisms and detection devices essential to preventing explosions.

In May 2002 -- less than seven months later -- Alaska state regulators warned BP that it had failed to maintain its pipelines. Alaska struggled for two years to make the firm comply with state laws and clear the pipeline of sedimentation that could interfere with leak detection.

Soon after, BP hired another team of outside investigators to look into worker complaints on the North Slope. The resulting 2004 study by the law firm Vinson & Elkins warned that pipeline corrosion endangered operations.

It also offered a harsh assessment of BP's management of employee concerns. According to the report, workers accused the company of allowing "pencil whipping," or falsifying inspection data. The report quoted an employee who said employees felt forced to skip key diagnostics, including pressure testing, pipeline cleaning and corrosion checks.

The report said that Richard Woollam, the manager in charge of corrosion safety in Alaska at the time, had "an aggressive management style" and subverted inspectors' tendency to report problems. "Pressure on contractor management to hit performance metrics (e.g. fewer OSHA recordables) creates an environment where fear of retaliation and intimidation did occur," it said. Woollam was soon transferred.

More accidents

Two years later, in March 2006, disaster struck. More than 200,000 gallons of oil spilled from a corroded hole in the Prudhoe Bay pipeline. Inspectors found that several miles of the steel pipe had corroded to dangerously thin levels.

When Congress held hearings later that year, Woollam pleaded the Fifth Amendment. He now works in BP's Houston headquarters. Reached at his Texas home last week, he referred questions to the BP media office, which declined to comment.

In August 2006, just five months after the Prudhoe Bay spill, a pipeline safety technician for a BP contractor in Alaska discovered a two-inch snaggletoothed crack in the steel skin of an oil transit line. Nearby, contractors ground down metal welds, sending sparks across the work site. Technician Stuart Sneed feared that the sparks could ignite stray gases, or that the work could worsen the crack, so he ordered the contractors to stop working.

"Any inspector knows a crack in a service pipe is to be considered dangerous and treated with serious attention," he told ProPublica.

Sneed said he thought the Prudhoe Bay disaster had made BP management more amenable to listening to worker concerns about safety. The company had replaced its chief executive for North America with Robert Malone, who focused on reforming BP's culture in Alaska.

But instead of receiving compliments for his prudence, Sneed -- who had also complained that week that pipeline inspectors were faking their reports -- was scolded by his supervisor, who hadn't inspected the crack but believed it was superficial, according to a report from BP's internal employer arbitrators.

The next day, the report said, that supervisor criticized Sneed at a staff briefing, then solicited complaints from colleagues that could be used to justify Sneed's firing. Two weeks later, Sneed was gone.

During the investigation, BP inspectors substantiated Sneed's concerns about the cracked pipe. The arbiter also confirmed his account of what happened when he reported the problem. His dispute with the company is unresolved.

The following year saw another BP shakeup. The company had replaced its chief executive of Alaskan operations with Doug Suttles -- who is now in charge of offshore operations and cleanup of the gulf disaster. In May 2007, it also named Hayward its new global chief executive.

But worker harassment claims continued in Alaska and elsewhere, and more problems with the Alaska pipeline systems emerged.

In September 2008, a section of a gas line on the slope blew apart. A 28-foot-long section of steel -- the length of three pickup trucks -- flew nearly 1,000 feet through the air before landing on the Alaskan tundra. Sneed had raised concerns about the integrity of segments of the gas line system.

Three more accidents rocked the same system of pipelines and gas compressor stations in 2009, including a near-catastrophic explosion. According to a letter that members of Congress sent to BP executives, obtained by ProPublica, the near-miss resulted from malfunctioning safety and backup equipment.

Odone said that BP is continuing to roll out a company-wide operating management system to help track and implement maintenance. He said the company reduced corrosion and erosion-related leaks in Alaska by 42 percent between 2006 and 2009.

Noncompliance

As BP battled through the decade to avoid accidents in Alaska, another facility operating under a different business unit, BP West Coast Products, had similar problems.

For years, the subsidiary that refined and stored crude oil was allowed to inspect its own facilities for compliance with emission laws under the South Coast Air Quality Management District, the agency that regulates air quality in Los Angeles.

In 2002, inspectors with the management district thought BP's inspection results looked too good to be true. Between 1999 and 2002, BP's Carson Refinery had nearly perfect compliance, reporting no tank problems and making virtually no repairs. The district suspected that BP was falsifying its inspection reports and fabricating its compliance.

According to Joseph Panasiti, a lawyer for the management district, the agency had to get a search warrant to conduct inspections required by state law. When the regulators finally got in, they found equipment in a disturbing state of disrepair. According to a lawsuit the management district later filed against BP, inspectors discovered that some tanker seals had extensive tears, tank roofs had pervasive leaks and there were enough major defects to lead to thousands of violations.

"They had been sending us reports that showed 99 percent compliance, and we found about 80 percent noncompliance," Panasiti said.

The district sued BP for $319 million. After lengthy litigation, the firm agreed to pay more than $100 million without admitting guilt. Colin Reid, the plant's operations manager, was later promoted to a vice president position in the United Kingdom. He recently left BP and did not respond to requests for comment.

Allegations that BP or its contractors falsified safety and inspection reports are a recurring theme. Similar allegations were attributed to workers in 2001 and 2004 internal reports on Alaska, but the internal auditors did not confirm that fraud had occurred.

Among the safety equipment that BP was criticized for not having in place in its Alaska facilities, according to its own 2001 operational integrity report, were gas and fire detection sensors and emergency shutoff valves.

Now investigators are learning that similar sensors and their shutoff systems were not operating in the engine room of the Deepwater Horizon rig that exploded in the gulf.

In testimony before a Deepwater Horizon joint investigation panel in New Orleans last month, Deepwater mechanic Douglas Brown said that the backstop mechanism that should have prevented the engines from running wild apparently failed -- and so did the air-intake valves that were supposed to close if gas entered the engine room.

He said the engine room wasn't equipped with a gas alarm system that could have shut off the power.

Minutes later, the rig exploded in a ball of fire, killing 11 workers before sinking to the seafloor, where it left a gaping well pipe that continues to gush oil and gas.

ProPublica director of research Lisa Schwartz and researcher Sheelagh McNeill contributed to this report. For additional information and documents, see www.propublica.org/bpdocs.

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