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Fri April 20, 2012
A Punishment BP Can’t Pay Off
Two years after a series of gambles and ill-advised decisions on a BP drilling project led to the largest accidental oil spill in United States history and the death of 11 workers on the Deepwater Horizon oil rig, no one has been held accountable.
Sure, there have been about $8 billion in payouts and, in early March, the outlines of a civil agreement that will cost BP, the company ultimately responsible, another $7.8 billion in restitution to businesses and residents along the Gulf of Mexico. It's also true the company has paid at least $14 billion more in cleanup and other costs since the accident began on April 20, 2010, bringing the expense of this fiasco to about $30 billion for BP. These are huge numbers. But this is a huge and profitable corporation.
What is missing is the accountability that comes from real consequences: a criminal prosecution that holds responsible the individuals who gambled with the lives of BP's contractors and the ecosystem of the Gulf of Mexico. Only such an outcome can rebuild trust in an oil industry that asks for the public's faith so that it can drill more along the nation's coastlines. And perhaps only such an outcome can keep BP in line and can keep an accident like the Deepwater Horizon disaster from happening again.
BP has already tested the effectiveness of lesser consequences, and its track record proves that the most severe punishments the courts and the United States government have been willing to mete out amount to a slap on the wrist.
Prior to the gulf blowout, which spilled 200 million gallons of oil, BP was convicted of two felony environmental crimes and a misdemeanor: after it failed to report that its contractors were dumping toxic waste in Alaska in 1995; after its refinery in Texas City, Texas, exploded, killing 15, in 2005; and after it spilled more than 200,000 gallons of crude oil from a corroded pipeline onto the Alaskan tundra in 2006. In all, more than 30 people employed directly or indirectly by BP have died in connection with these and other recent accidents.
In at least two of those cases, the company had been warned of human and environmental dangers, deliberated the consequences and then ignored them, according to my reporting.
None of the upper-tier executives who managed BP — John Browne and Tony Hayward among them — were malicious. Their decisions, however, were driven by money. Neither their own sympathies nor the stark risks in their operations — corroding pipelines, dysfunctional safety valves, disarmed fire alarms and so on — could compete with the financial necessities of profit making.
Before the accident in Texas City, BP had declined to spend $150,000 to fix a part of the system that allowed gasoline to spew into the air and blow up. Documents show that the company had calculated the cost of a human life to be $10 million. Shortly before that disaster, a senior plant manager warned BP's London headquarters that the plant was unsafe and a disaster was imminent. A report from early 2005 predicted that BP's refinery would kill someone "within the next 12 to 18 months" unless it changed its practices.
Such explicit flirtation with deadly risk was undertaken as part of Mr. Browne's effort while chief executive to expand BP as quickly as possible. Mr. Browne relentlessly cut costs, including on maintenance and safety. Then he hastily assembled a series of acquisitions and mergers between 1998 and 2001 that added tens of thousands of employees, blurred chains of command and wrought chaos on his operations. His methods — and the demands of Wall Street — became overly dependent on quantitative measures of success at the expense of environmental and human risk.
After each disaster, Mr. Browne pledged to refresh his focus on safety, investment in maintenance and commitment to the environment. His successor, Mr. Hayward, followed suit, saying that BP's culture had to change. But the Deepwater Horizon tragedy — which bears many of the same traits as the company's past accidents — shows how difficult it has been for the company's leaders to shift BP's corporate values and live up to their promises.
The question becomes: did they try hard enough, and did the mechanisms of oversight, regulation and law enforcement work sufficiently to provide a recidivist organization the deterrent that could guarantee its compliance?
After its previous convictions, BP paid unprecedented fines — more than $70 million — and committed to spend at least another $800 million on maintenance to improve safety. The point was to demonstrate that the cost of doing business wrong far outweighs the cost of doing business right. But without personal accountability, the fines become just another cost of doing business, William Miller, a former investigator for the Environmental Protection Agency who was involved in the Texas City case, told me.
The problem then (and perhaps now) is that it is the slow pileup of factors that cause an industrial disaster. Poor decisions are usually made incrementally by a range of people with differing levels of responsibility, and almost always behind a shield of plausible deniability. It makes it almost impossible to pin one clear-cut bad call on a single manager, which is partly why no BP official has ever been held criminally accountable.
Instead, the corporation is held accountable. It isn't clear that charging the company repeatedly with misdemeanors and felonies has accomplished anything.
At more than $30 billion and climbing, the amount BP has paid out so far for reparations, lawsuits and cleanup dwarfs the roughly $8 billion that Exxon had to pay after its 1989 spill in Prince William Sound in Alaska. And BP will likely still pay billions more before this is finished.
And yet it is not enough. Two years after analysts questioned whether the extraordinary cost and loss of confidence might drive BP out of business, it has come roaring back. It collected more than $375 billion in 2011, pocketing $26 billion in profits.
What the gulf spill has taught us is that no matter how bad the disaster (and the environmental impact), the potential consequences have never been large enough to dissuade BP from placing profits ahead of prudence. That might change if a real person was forced to take responsibility — or if the government brought down one of the biggest hammers in its arsenal and banned the company from future federal oil leases and permits altogether. Fines just don't matter.
This story was published as an op-ed in The New York Times.
BP Oil Spill
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Gulf Oil Spill