In the energy biz, social responsibility is hard to come by.
British Petroleum – BP – has spent millions of dollars branding itself as kinder, gentler and more socially conscious than its competitors.
Back in 1997, the Britain-based petroleum giant announced that it would become the world's first “green” energy company, a move that the firm followed up by dutifully changing the color scheme in its signage to a rather attractive shade of green.
Although BP is facing withering criticism along with the genuine probability of criminal charges in connection with what has now become the biggest single environmental disaster in U.S. history, the firm is no stranger to controversy. In fact, the still uncontrolled spill in the Gulf of Mexico is only the latest in a string of corporate transgressions and improprieties that have dogged company.
To resolve federal criminal charges in 1999 relating to illegal dumping of hazardous substances on Alaska’s North Slope, BP Exploration Alaska (BPXA), one of BP’s U.S. subsidiaries, paid $22 million. The firm was charged with illegally discharging waste oil, paint thinner and other toxic and hazardous substances. Additionally, it was alleged that BP failed to report these discharges as required under the Comprehensive Environmental Response, Compensation and Liability Act.
The government’s settlement with BP included the maximum $500,000 criminal fine and $6.5 million in civil penalties. Ironically, the criminal compromise also called for BP’s establishment of a $15 million environmental management system at all of BP facilities in the U.S. and Gulf of Mexico engaged in oil exploration, drilling or production.
The tragic explosion at the Deepwater Horizon platform, which led to the massive oil spill in the Gulf, is also not the first time in recent memory that U.S. oil workers have been killed or seriously injured at a BP facility.
In March 2005, an explosion at one of BP's largest U.S. refineries in Texas City, TX, caused 15 deaths and injured 180 plant employees. Similar to the catastrophe in the Gulf of Mexico, the Texas City explosion came after a series of well-documented accidents and engineering problems at the plant.
Historic Culpability
Findings by the U.S. Chemical Safety and Hazard Investigation Board concluded that the explosion occurred after an uncontrolled hydrocarbon vapor cloud was ignited by an errant spark. Investigators determined that maintenance and safety at the plant had been cut as a cost-saving measure. Responsibility for the injuries and deaths was laid at the feet of company’s London-based executives.
Despite the findings of culpability, safety issues at the Texas City facility continued. Even though not as dramatic, three BP employees were killed in separate incidents between 2006 and 2008.
BP has long been a major presence in Alaska’s North Slope. In August 2006, the company was forced to shut down operations in Prudhoe Bay after one of its pipelines leaked nearly 500,000 gallons of Arctic pack – a substance consisting of crude oil and diesel fuel. Investigators found that the spill was caused by unchecked corrosion in one of BP’s major transport arteries connecting with the Alaska Pipeline.
Documents produced in 2007 by the U.S. (Environmental Protection Agency) revealed that BP was also one of the largest industrial polluters operating on the shores of Lake Michigan. In August of that year, BP obtained an exemption from the EPA that permitted it to nearly double its discharge of ammonia and other toxic sludge from the company’s Whiting, IN, refinery.
Although it’s a foreign corporation, BP is not above using its largess to gain better treatment by U.S. regulators and officials. Disclosures released by the federal government show that BP has consistently been among the 100 largest corporate political donors. Apparently, getting help going green is an expensive undertaking.
On the Way to Being the Greatest
Taken as a whole, BP’s safety and environmental track record is no better or worse than any of its major competitors. By its very nature, oil is a dirty business.
BP’s real problem is that it has held itself out as being a different kind of oil company. By its own design, BP has raised the bar of expectations that not even the best intentioned oil giant can clear.
At this moment, no amount of handwringing or machinations of sincerity by BP’s forlorn CEO Tony Hayward will assuage the public animus being directed at the company. Only a public lynching will do.
In spite of the calls for his head, CEO Hayward likely will not be canned in the near future. With the dozens of lawsuits already filed and the thousands of claims in the litigation pipeline, firing Hayward would be held out as a tacit admission of wrongdoing by the company. Unfortunately for Hayward, unless he tenders his resignation, he will be forced to endure continued public excoriation.
BP’s share prices touched a 13-year low yesterday on the London Stock Exchange. Today, however, on news that the company plans to cut its dividends to shareholders, BP’s stock prices have started to rebound. Last year, BP paid out about $10 billion to its stockholders.
Long after the Gulf spill is abated – still an unknown proposition – and any clean-up – an even greater unknown – BP will remain a public pariah. Just imagine what would have happened if BP wasn’t committed to becoming the greenest company in the oil industry.
John Cohn is a senior partner in the Globe West Financial Group based in West Los Angeles. He may be contacted at www.globewestfinancial.com
