BP’s “Pattern of Neglect and Corner-Cutting”

by Jared Wade on June 8, 2010 · 1 comment

Two major, damning reports have surfaced in the past 24 hours that may make it impossible for BP’s reputation to ever recover. The spill itself was a major hurdle, but now we are seeing documents that “portray a company that systemically ignored its own safety policies” as well as first-hand accounts from Deepwater Horizon explosion survivors that company decision makers on the oil rig may have prioritized revenue over safety.

Here’s the video of Anderson Cooper discussing the rig’s last moments with the survivors in what “paints perhaps the most detailed picture yet of what happened on the deepwater rig — and the possible causes of the April 20 explosion.”

Here’s more from the CNN story on the workers’ comments:

The BP official wanted workers to replace heavy mud, used to keep the well’s pressure down, with lighter seawater to help speed a process that was costing an estimated $750,000 a day and was already running five weeks late, rig survivors told CNN.

BP won the argument, said Doug Brown, the rig’s chief mechanic. “He basically said, ‘Well, this is how it’s gonna be.’ ”

“That’s what the big argument was about,” added Daniel Barron III.

Shortly after the exchange, chief driller Dewey Revette expressed concern and opposition too, the workers said, and on the drilling floor, they chatted among themselves.

“I don’t ever remember doing this,” they said, according to Barron.

“I think that’s why Dewey was so reluctant to try to do it,” Barron said, “because he didn’t feel it was the right way to have things done.”

Revette was among the 11 workers killed when the rig exploded that night.

In the CNN interviews, the workers described a corporate culture of cutting staff and ignoring warning signs ahead of the blast. They said BP routinely cut corners and pushed ahead despite concerns about safety.

The rig survivors also said it was always understood that you could get fired if you raised safety concerns that might delay drilling. Some co-workers had been fired for speaking out, they said.

On top of these first-hand accounts comes a joint report from ProPublica and the Washington Post that shows that these issues were not just occurring on the Deepwater Horizon. Similar safety concerns have existed throughout many BP operations over the past decade.

A series of internal investigations over the past decade warned senior BP managers that the 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 unit that undermined the company’s publicly proclaimed commitment to safe operations. They described instances in which management flouted safety by neglecting aging equipment, pressured or harassed employees not to report problems, and cut short or delayed inspections in order to reduce production costs. Executives were not held accountable for the failures, and some were promoted despite them.

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.

The report gives a year-by-year breakdown of all the transgressions, but even to an untrained-to-the industry eye, the evidence seems overwhelming to suggest that their has been a legacy of ignoring safety — both for workers and the environment.

ProPublica sees it the same way.

It is difficult to compare safety records among companies in industries like oil exploration. Some companies drill in harsher environments. And bad luck can play a role. But independent experts say the pervasiveness of BP’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 debarment attorney who led the investigations into BP. “At what point are we going to say we are not going to do business with you any more, bye? None of the other supermajors have an environmental criminal record like they do.”

Add all this up and the worst-case fears for BP offered this morning by the New York Times don’t seem so preposterous.

It seems unthinkable, even now, that the disastrous oil spill in the Gulf of Mexico could bring down the mighty BP. But investment bankers get paid to think the unthinkable — and that is just what they are doing.
The idea that BP might one day file for bankruptcy, particularly as part of a merger that would enable it to cordon off its liabilities from the spill, is starting to percolate on Wall Street. Bankers and lawyers are already sizing up potential deals (and counting their potential fees).

It seems unthinkable, even now, that the disastrous oil spill in the Gulf of Mexico could bring down the mighty BP. But investment bankers get paid to think the unthinkable — and that is just what they are doing.

The idea that BP might one day file for bankruptcy, particularly as part of a merger that would enable it to cordon off its liabilities from the spill, is starting to percolate on Wall Street. Bankers and lawyers are already sizing up potential deals (and counting their potential fees).

And even if bankruptcy and takeover is overstated the oil conglomerate’s fate, there are certainly those that agree that the company’s reputation will never recover.

There are many people — besides BP — who think even discussing the possibility of a bankruptcy or takeover is silly. But looking out a few years, that may be BP’s best, last hope.

“Even with a prepackaged bankruptcy, BP’s brand is permanently tainted,” said Robert Bryce, a senior fellow at the Manhattan Institute and author of “Power Hungry: The Myths of ‘Green’ Energy and the Real Fuels of the Future.” Yes, BP is financially sound now. It is unlikely to go bust near term, he said.

“Instead, BP will spend the coming decades circling the drain, mired in endless litigation, its reputation irreparably damaged, and its finances weakened,” Mr. Bryce said.

That, if you believe the bankers, is the optimistic outcome.

Yikes.

And, oh yeah, then there’s this latest “smoking gun” report of the company lying to the public. Plus, right, that whole President of the United States launching a quest to find out “whose ass to kick” thing.

Add it all together and, sure, just going bankrupt starts to sound like an even more and more optimistic outcome by the day. For other BP execs who are culpable in what is now likely to be the worst environment disaster in U.S. history, efforts to sidestep reputation damage may eventually pale in comparison to  efforts sidestep jail.

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Jared Wade is a freelance writer and former editor of the Risk Management Monitor and senior editor of Risk Management magazine. You can find more of his writing at JaredWade.com.

{ 1 comment… read it below or add one }

Darren June 17, 2010 at 11:48 am

I’m a Director for one of the major Organisational Resilience companies, we cover everything from Risk Management, BCM, to Incident Management. If this article is correct, and the witness statements turn out to be true then most of the text book responses to managing an incident and to crisis communications go out of the window.

Epiphany developed a model that illustrated the relationship between incident impact and the fault owner. In essence, the more significant the incident and its impact on stakeholders or society at large f caused by the organisation (ie they were directly to blame especially if through negligence) the greater the risk of corporate failure and the more costly it would be to resolve the issue. Based on the above, if true, BP would certainly fall into this category.

Having implemented risk management across organisations, and been involved in the team leading the response to crisis situations, BP may be doing a reasonable job in holding up its hands and accepting responsibility, but this is unlikely to tip the balance in their favour if it turns out the company acted in a directly negiligent manner.

No risk management system can handle an outward appearance of compliance but an inward policy of disregard. What calculations where made to determine the historic safety or uncertainty surrounding the proposed drilling solution? In the absence of strong quantitative data estabilshing a high probability of safety, then disreagarding every precaution is inviting disaster.

I just wonder how far up the chain of command this went, whether there was a disconnect between the boards approach to risk and the reality held by managers on the ground.

Darren
Organisational Resilience
Risk Management Software

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