US House cites similar problems with BP pipeline, refinery

Nick Snow
Washington Correspondent

WASHINGTON, DC, May 17 -- Cost-cutting efforts created a culture at BP America Inc. that led to compromises of systems integrity at its Alaska North Slope oil-gathering pipelines and of workplace safety at its Texas City, Tex., refinery, witnesses and federal lawmakers agreed on May 16.

"Virtually all of the seven root causes identified for the Prudhoe Bay incidents have strong echoes in Texas City," said US Chemical Safety Board Chairwoman Carolyn W. Merritt. She had been asked by the House Energy and Commerce Committee's Oversight and Investigations Subcommittee to compare Booz Allen Hamilton's analysis of the oil line leaks for BP with CSB's investigation of the Mar. 23, 2005, explosion and fire at the refinery.

"Both reports point to the significant role of budget and production pressures in driving BP's decision-making—and ultimately harming safety.... Both investigations found deficiencies in how BP managed the safety of process changes.... Other common findings included flawed communication of lessons learned, excessive decentralization of safety functions, and high management turnover," Merritt told the subcommittee during a hearing on causes of the oil leaks.

Rep. Bart Stupak (D-Mich.), the subcommittee's chairman, also found similarities. "One of the primary findings in the CSB report was that 'cost-cutting and budget pressures from BP group executive managers impaired process safety at Texas City'.... Similarly, documents made available to this subcommittee suggest that BP field managers were under extreme pressure to cut costs in Alaska," he said in his opening statement.

Leak causes revisited
Stupak said the hearing originally was intended to update corrective actions that BP, as well as state and federal agencies, were taking at Prudhoe Bay. Documents that BP recently supplied to the full committee made it necessary to revisit the issue of what caused the leaks, he said.

"Some of these documents were actually available to BP officials before the Sept. 6 hearing, yet BP failed to disclose this information. These documents show that cost-cutting pressures on Prudhoe Bay operations were severe enough that some BP field managers were considering reducing or halting a range of actions related to preventing or reducing corrosion," Stupak said.

BP America Chairman Robert A. Malone said cost-cutting pressures helped create problems at Texas City and Prudhoe Bay. But he also suggested that the ANS oil-gathering line leaks may have been caused more by employees placing too much confidence in corrosion inhibitors' effectiveness.

"Booz Allen Hamilton concluded that in the absence of better risk assessment processes, budget increases alone would not have prevented the leaks. Our own work has revealed that the workforce did not have an adequate process to challenge their own assumptions," he said in his written statement.

In questioning Malone, Stupak noted that the BAH report concluded that because BP Alaska's health, safety, and environment program focused exclusively on workplace safety, its major accident risk and hazard assessments did not consider corrosion risk on the oil transit lines (OTL).

"These risk assessment approaches might have identified the changing profile of the OTL created by the changing operating conditions," the report says. Stupak said falling production at Prudhoe Bay reduced pressure and added produced water to what was going through the gathering lines, making corrosion inhibitors much less effective.

Malone said the BAH report concluded that the leak occurred because there was no formal risk-assessment process that considered the oil field's changing operations and conditions. "It suggests that if we had given them more money, they wouldn't necessarily have used it because they were confident the system they were using was working," he told Stupak.

BP's reforms
Since becoming BP America's chairman in July 2006, Malone said he has installed managers in Alaska as part of a series of reforms across all of BP PLC's US division.

Merritt and three other government witnesses—Richard Fairfax, enforcement programs director at the US Occupational Safety and Health Administration; Stacy Gerard, acting assistant administrator and chief safety officer at the US Pipeline Safety and Hazardous Materials Administration (PSHMA); and Jonne Slemons, coordinator of the Petroleum Systems Integrity Systems Office (PSISO) in Alaska's oil and gas division—said BP's new Alaska team has been much more cooperative.

Rep. Joe Barton (R-Tex.), the Energy and Commerce Committee's chief minority member, was more skeptical. "Everything that's in these documents suggests that BP is trying to do the right thing in public while fighting like a tiger in private. These folks who represent state and federal regulatory authorities can do their jobs to the extent of the law, but we're just rearranging deck chairs if BP refuses to change its attitude," he said.

As he examined BP America's operations soon after taking the helm, Malone said, "The most striking thing to me was that we didn't have rigorous process safety management embedded in our culture. It will take years to do this. But as I've traveled to Texas City and Alaska, I've been impressed with the teams' commitments to getting the job done."

Regulators' actions
In response to the 2006 Prudhoe Bay oil-gathering lines' leaks and shutdowns, Alaska established PSISO as the lead state oversight agency for oil and gas facilities and as coordinator with federal entities, said Slemons. PSISO is conducting a regulatory gas analysis to avoid duplication of efforts while trying to close gaps, and is requiring well operators to implement quality assurance programs, she told the subcommittee.

"Alaska is the only state in the country to require industry to allow regulator access to operator facilities in order to ensure compliance with their own maintenance programs. We look forward to breaking this new ground and to cooperative efforts with our federal partners," she said.

Gerard said in response to the federal Pipeline Safety Act reauthorization—passed by the 109th Congress in December—PHMSA is proceeding with rulemakings that include extending full regulatory protection to low-pressure pipelines such as the BP ANS oil-gathering systems. The US Department of Transportation agency also is improving its coordination with Alaska's regulators, she said.

"We also have progress to report concerning our oversight of BP Alaska. Based on our ongoing monitoring of its activities and pipeline inspection results, we have increasing confidence in engineering, operations, and maintenance of the existing transit lines. BP Alaska also has begun to replace the Prudhoe Bay transit lines and is beginning to address management problems that contributed to the failures they experienced last summer," she said.

Of the 16 miles of Prudhoe Bay oil transit lines that BP intends to replace by the end of 2008, Malone said, 8 miles were completed by the end of April after more than 600 workers worked through the winter without a lost-time injury. The new system will use insulated carbon steel with a special epoxy external coating and will have a new above-ground vertical support structure, permanent pigging facilities, and a highly sensitive leak detection system, he said.

Fairfax said OSHA imposed a $21 million penalty, the largest in its history, against BP Products following the Texas City explosion and fire. It also issued an enhanced enforcement alert to its regional offices and state partners, began inspections of the company's four other US refineries, and fined BP Products another $2.4 million based on 32 violations, he said.

OSHA program launched
"As a result of the Texas City accident, OSHA began evaluating its data on facilities and catastrophes and determined that refineries experienced more of these problems than the next three industry sectors combined. Accordingly, OSHA is preparing to launch a National Emphasis Program (NEP) for petroleum refineries focusing on the Process Safety Management standard," he said.

The federal workplace safety agency plans to conduct enforcement inspections at all 81 refineries under its jurisdiction by the end of 2008 and to encourage its state partners to implement its NEP or create their own emphasis programs, Fairfax said.

Subcommittee member Gene Green (D-Tex.) suggested that federal safety requirements need to be extended to contractors and their employees. Earlier this year he introduced HR 141, which would require companies to report contractor employees' injuries and deaths to OSHA in the same way they report injuries and deaths of their own employees.

Green said when he was visiting another company's refinery following the Texas City blast and fire, he noticed several contractors' temporary structures still were close to process units (a situation that contributed to the deaths and injuries at the BP Products refinery). When Green asked officials of the other company why, he said, they responded, "We haven't got around to moving them yet."

Green said, "Unfortunately, I do not believe all the lessons learned either from the leaks on the North Slope or the accident at Texas City have been applied yet. Incidents such as the ones we're discussing today breed more public mistrust of the industry and suggest a disregard by some companies for the safety of their workers."

Stupak told reporters following the hearing that he thought Malone was as forthright as he could be, considering he's running a multibillion dollar operation. But he also suggested that a cost-cutting culture still pervades BP America.

"You don't change that quickly. There are several layers between workers in the field and [Malone], and I'm certain it will take time for them to grow confident that they can bring safety matters which could cost money to the company's attention," the subcommittee chairman said.

Stupak also said he believes the subcommittee will need to hold another hearing on BP's ANS oil-gathering lines within the next 6 months.

Contact Nick Snow at nsnow@cox.net.

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