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Hazards 122, April-June 2013
Safe hands? BP old boys linked to disasters find favour with the PM
BP could be benefiting from privileged access to the UK government, despite a record peppered with major disasters, Hazards editor Rory O’Neill has discovered. The London-based oil giant, with two of its most controversial old boys installed in key posts in government and the Health and Safety Executive, could soon be calling in more favours.

BP’s route to the heart of power started with Lord John Browne. The former BP chief executive’s cost-cutting programmes were linked directly to the devastating Texas City oil refinery explosion in 2005 that killed 15 and set the company on a trajectory that invited subsequent catastrophes including the deadly and environmentally devastating 2010 Deepwater Horizon incident in the Gulf of Mexico (Hazards 111).

That same year, three years after his resignation from BP, Lord Browne (right) was appointed a “lead non-executive director” in Whitehall, with a seat on the Cabinet Office board.



CAMERON’S PICK
  New HSE board member John Morgan had the FBI and the Environmental Protection Agency on his case when he was president of BP Alaska, leading to then record criminal and civil penalties. The UK government won’t say if it knew about this worrying record – Hazards provided a briefing -  but David Cameron did give Morgan’s 1 May 2013 appointment to HSE’s board his personal stamp of approval.

Now John Morgan, who headed BP Alaska when it committed a series of environmental and safety crimes that led to a major federal investigation involving the FBI and culminated in 2000 in then record penalties, has been sneaked onto the Health and Safety Executive (HSE) board after getting David Cameron’s personal stamp of approval. According to HSE, at the time of the offences Morgan had a second role, as head of BP’s North Sea operations.

What effect this closeness to power has on the treatment of BP by the UK authorities is not known. But BP appears to be benefiting from an official blind eye.

After the Deepwater Horizon disaster in 2010 in which 11 workers died, HSE admitted to Hazards it did not visit the company’s London HQ to examine potential culpability of the board, responsible for the company’s global safety and business performance.

This contrasts with the action taken by European Commission officials in May this year, when the company’s HQ was raided in an investigation into price fixing. “The commission has concerns that companies may have colluded in reporting distorted prices to a price reporting agency to manipulate the published prices for a number of oil and biofuel products,” an EC spokesperson said.

This was about cost to the consumer. Deepwater Horizon was about the cost in lives.



Morgan and the FBI

BP’s former top man in Alaska and the North Sea, who was until 1997 a 30-year veteran with the company, originally applied to be on the HSE board over a year ago, coming second to Howard Shiplee. When Shiplee resigned, Department of Work and Pensions secretary Iain Duncan Smith and prime minister David Cameron gave first reserve Morgan the nod, without the post being re-advertised – allowable where the incumbent resigns within a year of appointment.  

A DWP spokesperson confirmed the appointment “was endorsed by the DWP Secretary of State and the Prime Minister.” Whether the secretary of state and the prime minister were aware of the less agreeable landmarks on Morgan’s record is uncertain – approached by Hazards, neither HSE nor the government would say.

But the FBI at least did find itself seriously concerned by the company’s behaviour in the Morgan years. During Morgan’s tenure as head of BP Alaska from 1994-1997, the company faced serious criticism for its safety and environmental performance, which led to criminal investigations by agencies including the FBI and the Environmental Protection Agency (EPA).



WHO RULES?  David Cameron’s love affair with industry leaders with suspect safety credentials is not good news for safety. The BP business model the prime minister wants to emulate nationwide has led to worker deaths and devastating environmental catastrophes. BP Alaska attracted the attention of the FBI while Morgan was at the helm.

Over this period a BP contractor injected toxic waste into the wells at its drill site on Endicott Island off Prudhoe Bay. The illegally injected wastes included carcinogenic and highly toxic chemicals including lead, benzene, toluene and methylene chloride. The incident prompted a massive state and federal investigation and a 1999 guilty plea by BP to a felony count.

In 2000, BP paid a $22 million fine, pleaded guilty to a criminal charge and agreed to five years of probation for offences committed on Morgan’s watch. “This case forces a company that should have known better to do better,” said Lois J Schiffer, Assistant Attorney General for Environment and Natural Resources at the US Department of Justice. “Our goal is to deter such violations by all oil companies.”

FBI special agent George Burttram said: “This investigation demonstrates our commitment to dedicating the necessary resources to ensure that corporations and individuals are held accountable for their actions. The FBI will continue to investigate these complex cases in cooperation with other federal law enforcement agencies.”

The application form to be a non-executive director of HSE requires applicants to come clean about any information “relevant to an assessment of your suitability as a public appointee.” Having had the FBI on your tail might be considered to be “relevant.”

The crimes attracting the record criminal and civil penalties occurred at a time BP’s Alaska outfit was following John Browne’s global up production/cut costs lead, with more of the same to come. In December 1996, shortly before leaving Alaska, Morgan said he expected new projects to increase the company's Alaska production from 525,000 barrels a day to 600,000 barrels by 2002. At the same time he said he planned job cuts. It set BP Alaska on a trajectory that led to more serious incidents.

HSE would not comment on whether Morgan has made any declarations or whether the rules had been broken, passing on the enquiry from Hazards to the Department of Work and Pensions (DWP).

DWP also refused to confirm whether Morgan declared the long-duration major incidents during his tenure that led to the record sanctions. An inquiry from Hazards asking “was any information relating to the criminal and other investigations of BP Alaska by the FBI and other federal and state agencies declared in John Morgan’s application?” received this response from a DWP spokesperson: “The department carried out all necessary due diligence in this appointment.”

A separate inquiry asking whether detailed information provided by Hazards on the toxic crimes would lead to Morgan’s appointment being reconsidered or rescinded received an identical reply.



Business as usual

BP does seem to expect and get favours from government to mitigate the consequences of its safety abuses. In May 2013 it asked David Cameron to seek the assistance of the US government over the escalating and it believes unjustified compensation costs arising from the Gulf of Mexico disaster.

US regulators see it differently. In opening statements in a compensation trial in February 2013, BP was accused by Alabama attorney general Luther Strange of being “blinded” by its bottom line with a corporate culture where “money mattered more than the environment”.

In addition to the 11 deaths, the Deepwater Horizon disaster released an estimated four million barrels of oil into the Gulf. The company is contesting the civil action that could cost more than $8bn out of the trust fund set up to pay out damages.
BP is concerned the compensation bill could put dividends to shareholders in jeopardy and could make it a target for a takeover.

Despite a string of record penalties, the company is not in penury yet. BP’s replacement cost profit – its preferred measure because it removes one-off items and the effect of oil prices – was $4.2bn (£2.7bn) for the first quarter of 2013, compared with $4.7bn for the same period last year and $3.9bn for the last quarter of 2012. By the end of April 2013, about $25bn of the $42bn the company set aside to pay for the damage caused by the Deepwater Horizon disaster had been paid out.

The costs of these failures does not appear to have persuaded the company to sort its safety problems, with BP continuing to attract the attention of regulators outside the UK.

On 30 April 2013 – the same day BP released its first quarter results - Norway's Petroleum Safety Authority (PSA) censured the company for the second time in two years, after a September 2012 leak at BP’s Ula oilfield in the North Sea.

“A number of serious regulatory breaches were identified by the PSA investigation,” the Norwegian offshore safety authority said. “The substantial hydrocarbon leak on the Ula P production installation at the southern end of the Norwegian continental shelf (NCS) had the potential to become a major accident, with the risk that a number of lives might have been lost and substantial material damage caused.”

It was business as usual for BP.

 

 

 

 

 

 

 

 

 

 


 

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Safe hands?

BP could be benefiting from privileged access to the UK government, despite a record peppered with major disasters, Hazards editor Rory O’Neill has discovered. The London-based oil giant, with two of its most controversial old boys installed in key posts in government and the Health and Safety Executive, could soon be calling in more favours.

Contents

Introduction
Morgan and the FBI
Business as usual

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