Tag Archives: BP

Deepwater Horizon may cost BP $53.8 Billion – 43.1% of it’s current value

Image of the fire from the oil spill

Deepwater Horizon Spill in 2010. Photo: Gerald Herbert, AP.

11 Crew were lost in the explosion and fire on the Deepwater Horizon rig on April 20, 2010. In addition, roughly 5.2 million barrels of oil poured into the Gulf of Mexico during the 87 days between April 20, 2010 when the explosion occurred and July 15, 2010 when the well was capped.

BP, found guilty of “Gross Negligence” and “Willful Misconduct” in the Deepwater Horizon oil spill, (BBC, EcoWatch), has agreed to pay $18.7 Billion over the next 15 years (BP Press Release, Reuters) to settle various claims with the United States, the states of Florida, Alabama, Mississippi, Louisiana and Texas, and others.  This amounts to 14.8% of BP’s current market capitalization.

Pursuant to the agreements, BP will pay $1.1 Billion per year over the next 15 years. While the $18.7 Billion amounts to 14.8% of BP’s current market capitalization of $125.59 Billion, the $1.1 Billion per year is only a loss of 0.88% of BP’s current market capitalization each year.

However,

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Energy Portfolios – Simple Analysis re the Fossil Fuel Portfolio

The Deepwater Horizon Spill

The Deepwater Horizon Spill

“You can’t have oil without oil spills.” – Markwayne Mullin, R, Oklahoma. (Official / GovTrack)

Wind and Sun Won’t Spill

In a period when the Dow Industrials rose 30%, the S&P 500 rose 40%, and the Popular Logistics “Sustainable Energy Portfolio” rose 223%, the “Fossil Fuel Portfolio” rose 21%.

This suggests that a paradigm shift is underway in the energy industry.

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Popular Logistics Energy Portfolios: The Trend Continues.

 

Popular Logistics Energy Portfolios

The trend is clear – if 4 1/2 months is enough to establish a trend – the Sustainable Energy portfolio is up 58.78% from 12/21/12 while the Fossil Fuel portfolio is only up 6.71%. The Dow is up 15.49% and the S&P 500 is up 14.24% in that same period.

Is it because Atmospheric Carbon Dioxide has reached 400 PPM? (NPR / NY Times) Is Wall Street reacting because Goldman Sachs and JP Morgan, and other investment banks and hedge funds are hiring analysts from Greenpeace or people like me with MBAs in Sustainability from Marlboro, the Presidio, and the Bainbridge Institute? Continue reading

Energy Portfolios At 3 Months: Sustainable Energy: Up 22%. Fossil Fuels: Up 3%

PopLog_EPort.130322

As of the close of trading on March 22, 2013, excluding the effects of dividends, the Sustainable Energy reference portfolio I created on 12/21/12 is up 21.67%, from $8.0 Million to $9.73 Million. Excluding the effects of dividends, the Fossil Fuel Reference Virtual Portfolio is up 2.7%, from $8.0 Million to $8.221 Million in the same time frame. The Dow Jones Industrial Average is up 10.85% and the S&P 500 is up 8.88%.  Note that this is a simulation.  Note also that this doesn’t take into account the effects of dividends.

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Reuters: “First spill trial witness: BP put cost cuts over safety”

The oil slick in the gulf

Deepwater Horizon Oil Slick, May 10, 2010.

From Reuters reporting on the BP oil spill trial;  First spill trial witness: BP put cost cuts over safety.

BP Plc fostered a culture that put cost-cutting over safety before the deadly 2010 Gulf of Mexico oil spill, a noted forensic engineer said in the first day of testimony in the federal civil trial centered on the disaster. “There is ample evidence of intense pressure within the system to save time and money,” said Bob Bea, co-founder of the Center for Catastrophic Risk Management at the University of California, Berkeley. “With stress and pressure come sacrifices to safety.” Bea was the first witness for the plaintiffs, the U.S. Justice Department and U.S. Gulf Coast states suing Macondo well owner BP, rig owner Transocean Ltd and well cement provider Halliburton Co. The plaintiffs plan to call Lamar McKay, chairman and president of BP America, to testify as a hostile witness once Bea wraps up. McKay is a member of the London-based oil company’s executive committee, alongside Chief Executive Officer Bob Dudley.

Bear in mind that this was filed after the first day of a long trial. (We think we found access to transcripts at MDL 2179 Trial Docs and Plaintiffs Steering Committee, and provide better daily coverage). It’s likely that things will look worse for BP before they look better.  Of course, there is the possibility that BP, in cross-examining witnesses, and putting on its own case, will be able to demonstrate that that its conduct was entirely proper and honorable.

And also bear in mind that oil gushed into the Gulf of Mexico at the rate of 60,000 barrels per day for 85 days; an approximate total of 5,100,000 barrels of crude oil.

Jonathan Soroko, Esq, is an attorney and an investigative consultant. In addition to writing for Popular Logistics, he writes for Caton Ave and Discovery Strategist blog, where this is posted.

Popular Logistics Series on the Deepwater Horizon / Macondo Spill

  1. Fossil Fuels and a Walk on the Moon, May 3, 2010.
  2. Drill Baby Drill or Drill Baby Oops, May 7, 2010.
  3. The Magnitude of the Spill, May 15, 2010.
  4. One Month After The Spill BP Siphoning 3,000 Barrels Per Day, May 20, 2010.
  5. Deep Water Horizon – The Chernobyl of Deepwater Drilling?, June 2, 2010.
  6. The Deepwater Horizon: 40,000 Barrels Per Day or 70,000, June 13, 2010.
  7. The Deepwater Horizon After the Macondo Well Explosion, June 19, 2010.
  8. Deepwater Horizon – Bombs and Hurricanes, July 1, 2010,
  9. Like a Bad High School Math Problem, July 14, 2010,
  10. Crisis Management and the Gulf Oil Spill, July 16, 2010,
  11. The Deepwater Horizon: The Good, The Bad, and The Ugly, October 7, 2010.

Buggy-Whips, Railroads & Oil: Systems Thinking on Fuel

West Texas PumpjackAt the 6th Annual Babson Energy Conference, “Energy, Environment, & Entrepreneurship: Challenging Assumptions, Changing Perceptions”, here, held March 30, 2012, Cimbria Badenhausen, (LinkedIn), an alum of the Marlboro College MBA in Managing for Sustainability, asked Tahmid Mizan, Senior Planning Advisor of Exxon Mobil, “Are you an ENERGY company or a PETROLEUM company?”

Mr. Mizan, of Exxon, didn’t answer the question.

Henry Ford, when asked why he doesn’t use focus groups, is believed to have said, “If I asked people what they wanted, they’d tell me faster horses.” (HBR) Continue reading

Sustainable Investing

To paraphrase Warren Buffett and Charlie Munger, “Buying a good company at a good price is a good idea. Buying a great company at a bargain price is better.” But to note this in light of L’ Affaire Sokol – Lubrizol, “Buying a great company at a good price when a stick-picker on my staff just bought it for his account is a really stupid idea.  And making excuses is even stupider.” (See this article by Joe Nocera at the NYTimes.)

Buffett claims to practice “Value Investing” as defined by Ben Graham, Phil Fisher, Ken Fisher, Joel Greenblatt, Bruce Greenwald, and others. I see “Sustainable investing” as a subset of “Value Investing.” Value Investing seeks to find companies that are currently undervalued by “Mr. and Ms. Market” but that are really effective at delivering Shareholder value. Sustainable Investing would seek to find companies that are currently undervalued but that are really good at delivering Stakeholder value. Continue reading

The Deepwater Horizon – The Good, The Bad, & The Ugly

Oil Eating Bacteria

Oil Eating Bacteria

The good news is that newly discovered bacteria biodegrade oil in the oceans, and have been chowing down on the oil spilled from the Deepwater Horizon  (Earth and Sky, NPR, PBS, SFGATE) and from oil seeps for millions of years.

While it’s unexpected and wonderful that bacteria are biodegrading the oil, is begs the question:

Do we want to fill the seas with oil and oil-eating bacteria or oceans of clean water, coral, oysters, fish, turtles, and dolphins?

And how quickly can they consume the 5.1 million barrels that gushed into the Gulf at a rate of 60,000 barrels per day for 85 days begining April 20, continuing thru May and June, and ending July 15, 2011?

I suspect it will take more than a few weeks, months, or years.

And do those bacteria break down dispersants?

John Ehrenfeld defines “Sustainability” as “Flourishing.” Because they are small and short-lived, shrimp can handle a higher level of toxics than say dolphins, turtles, etc. We will know the Gulf is clean when there are flourishing populations of dolphins, turtles, and larger and longer-lived fauna, and when they have lower concentrations of heavy metals and petrochemicals in their tissues. Continue reading

Crisis (Mis) Management and the Gulf Oil Spill

 

What BP and the Government Could Have Done and Should Be Doing (updated 10/7/10)

The handling of the Deepwater Horizon catastrophe is a textbook study of how not to manage a crisis. The government and the Obama Administration seems to have understated the problem and ceded responsibility to BP, which seems to have acted to protect the Macondo oil field rather than the Gulf of Mexico and the Gulf Coast.

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It's Like a Bad High School Math Problem

Oil Spill

Oil and Oceans Don't Mix. From Mining News.

“If oil gushes into the Gulf of Mexico at a rate of 60,000 barrels per day, and it takes 84 days to achieve a capability of “process” the spilled oil at a rate of 30,000 barrels per day, how long does it take to “process” the spilled oil?”

It takes two days to process each day’s gushed oil. So the answer is “2N + 188” where “N” equals the number of days oil gushes into the Gulf beyond the 84 days it took to achieve a processing capability of 30,000 barrels a day. If BP or the government stops the spill effective July 15, 2010, then they will process the oil spilled into the Gulf of Mexico by January 20, 2011. If they are able to stop the flow of oil by August 1, 2010, then it will be Feb 19, 2011, before the spilled oil is “processed.” (Source of image)

And what exactly do they mean by “Process the spilled oil?”

People cleaning up the spill

People cleaning up the spilled oil.

Here’s another problem: “What is the toxicity for people cleaning up, or “processing,” the spilled oil? How much exposure can an average person tolerate? Is BP providing adequate safety gear and instructions? If people working to clean up the spill are reporting “light-headedness” and other symptoms, is that an indication that they have sustained a toxic exposure?” For more details, here is Melissa Taylor’s article, “Doctors call for help protecting Gulf oil spill workers.

This Like a Bad High School Math Problem, is ninth in the series on the Deepwater Horizon / Macondo oil well disaster which began after Earth Day. Other posts include:

  1. Fossil Fuels and a Walk on the Moon,
  2. Drill Baby Drill or Drill Baby Oops,
  3. The Magnitude of the Spill,
  4. One Month After,
  5. The Chernobyl of Fossil Fuels?,
  6. Magnitude, Part 2,
  7. After Macondo, and
  8. Deepwater Horizon – Bombs and Hurricanes.

Deepwater Horizon – Bombs and Hurricanes

Satellite Photo of Alex, NOAA

Satellite Photo of Hurricane Alex, courtesy NOAA

Hurricane Alex has temporarily halted cleanup efforts (Reuters).  Yet the oil continues to gush unabated. Using the Government’s “Improved Estimate,” 2.8 to 4.8 million barrels have gushed into the Gulf in the MONTHS since the April 20 explosion which killed 11 workers. The explosion and spill have destroyed fisheries, tourism, and profoundly disrupted the ecology of the Gulf. Given that the spill of 35,000 to 60,000 barrels per day continues unabated the extent of the damage is unclear.

In “Blow Up the Well to Save the Gulf,” in the NY Times, 6/22/10, Christopher Brownfield, a former nuclear submarine officer, wrote, “President Obama needs to create a new command structure that places responsibility for plugging the leak with the Navy, the only organization in the world that can muster the necessary team. Then the Navy needs to demolish the well. … At best, a conventional demolition would seal the leaking well completely and permanently without damaging the oil reservoir. At worst, oil might seep through a tortuous flow-path that would complicate long-term cleanup efforts. But given the size and makeup of the geological structures between the seabed and the reservoir, it’s virtually inconceivable that an explosive could blast a bigger hole than already exists and release even more oil.”

President Obama instituted a 6-month  moritorium on deepwater drilling. Judge Martin L. C. Feldman of United States District Court, appointed by President Reagan in 1983, stopped the moritorium, writing that the Obama administration had failed to justify the need for such “a blanket … moratorium” on deep-water oil and gas drilling. “The blanket moratorium, with no parameters, seems to assume that because one rig failed and although no one yet fully knows why, all companies and rigs drilling new wells over 500 feet also universally present an imminent danger.” NY Times.

With all due respect to Judge Feldman, the editors at Popular Logistics think that oil, coal, natural gas, mining, drilling, and transport, do present an imminent danger

. Look at the evidence in the Gulf of Mexico, Ecuador, Nigeria, Prince Edward Sound, Montcoal, W. V, upriver of Kingston, Tenn, in the coal mines of China, and in the mercury levels in fish, shellfish, dolphins, and whales. The “Precautionary Principle”  dictates that we must stop drilling and figure out to move off fossil fuels.

Notes

  1. The “improved estimate of the Flow Rate Technical group, of 35,000 to 60,000 barrels per day, announced by Energy Secretary Chu, Interior Secretary Salazar, and Director of the U. S. Geological Survey and Chair of the National Incident Command’s Flow Rate Technical Group (FRTG) Dr. Marcia McNutt on June 15, 2010, is consistent with a scientific analysis of the 70,000 barrels per day reported one month earlier by  NPR May 14, 2010  and a “back-of-the-envelope” estimate of 25,000 to 50,000 barrels per day reported in this blog on May 15, 2010.
  2. The “Precautionary Principle” implies a social responsibility to protect the public and the environment from harm.  In general, the burden of proof that an action or policy is not harmful falls on those taking the action. This allows policy makers to take action in the face of limited scientific data.
  3. The series began after Earth Day and includes Fossil Fuels and a Walk on the Moon, Drill Baby Drill or Drill Baby Oops, Magnitude, Part 1, One Month After, The Chernobyl of Fossil Fuel?, Magnitude, Part 2 and The Deepwater Horizon after the Macondo Well Spill. It will continue indefinitely.

The Deepwater Horizon After the Macondo Well Explosion

An Iceberg

First conclusion of a series that began after Earth Day and includes Fossil Fuels and a Walk on the Moon, Drill Baby Drill or Drill Baby Oops, Magnitude, Part 1, One Month After, The Chernobyl of Fossil Fuel?, and Magnitude, Part 2. )

As I wrote on Earth Day, “In 100 years our descendants will not be burning coal, oil, natural gas or using nuclear fission.  They might be using terrestrial nuclear fusion.  They will be using solar, wind, geothermal, marine current hydro, tidal energy systems – clean, renewable, sustainable energy systems. No fuel: No Waste. No mines, mills, wells, spills. No arsenic, lead, mercury, selenium, thorium – no carbon or fly ash to be contained, sequestered, or to leak.

“We have started.  California and New Jersey lead the U. S. Germany and Spain lead Europe. Boeing and Richard Branson’s Virgin Atlantic want to build aircraft that run on biodiesel.  We need to move forward in a big way – to 100% clean energy in 10 years, to retrain coal miners and oil rig operators to build and run solar arrays and wind turbines, and dig deep geothermal systems.”

Otherwise the Deepwater Horizon Explosion at the Macondo oil field, the oil spills in Ecuador and Nigeria, the coal ash floods like the TVA Kingston Steam Plant, coal mine disasters like at Upper Big Branch, spills like the Exxon Valdez, and events like Three Mile Island and Chernobyl will be ‘”Business as Usual.”

A friend of mine who works for BP, and who would like to work for BP Solar, tells me that most BP staff don’t go to work thinking “How can I destroy the earth today. They are, she says “focused on obtaining and selling oil.”  Few consider themselves environmentalists. Many see this as business as usual. “Oil spills happen,” they say. They are “focused on getting petrochemicals to market.”

The Macondo oil field that was tapped by the Deepwater Horizon could have contained 1 Billion Barrels of crude. It could have been one of the largest oil discoveries in the world .” (Click here for CBS and here for Times of London). The well could gush oil for YEARS and could have met US needs in 2007 – 21 Million Barrels per Day – for 47 days (here).

This volume of crude oil – 1 Billion Barrels – could explain the explosion. The equipment was built to operate at 20,000 PSI and withstand 60,000 PSI. It the pressures exceeded the limits, then the equipment could have failed. Simple. And Catastrophic. When you consider the pressures under 5000 feet of ocean, and the pressure of 1 Billion Barrels of oil, when you have engineers scratching their head saying “I don’t know, I never saw anything like this. What do You think we should do?”  One the thing to do is run like hell.

An Orca

An Orca

As was noted earlier in the series, like the iceberg pictured above and the Orca pictured at left, this is a singularity.  But it has precedents.

  • TVA Kingston: 1.2 Billion Gallons of toxic coal ash sludge, upstream of Kingston, Tennessee, 12/22/08.
  • Chevron Texaco: (alleged) 18 Billion Gallons (428.6 million barrels) of Oil Process Waste, Rainforests of Ecuador, 1964 to 1990.
  • Oil Fires of Kuwait: 6 Million Barrels per Day, up to 6 Months, 1991.
  • Exxon Valdez: 250,000 Barrels, Prince William Sound, 1989.
  • The Niger Delta, in Nigeria, 250,000 Barrels per year for the last 50 years (click here), “Big oil spills are no longer news in this vast, tropical land….has endured the equivalent of the Exxon Valdez spill every year for 50 years by some estimates…. Perhaps no place on earth has been as battered by oil, “
Flares in the Jungle

Flares in the Jungle

The TVA coal ash flood (here, here, here), the Upper Big Branch Mine accident (here, here), and the Deepwater Horizon at Macondo may be the “Trifecta” of American Fossil Fuel Disasters.  But, like the problems in Ecuador (here) and Nigeria (here), these are “Systems Problems” – built into the system. The only way to eliminate them is to change the system.

This is what precisely what some people are trying to do. Students and faculty in the Marlboro MBA in Managing for Sustainability at the Marlboro College Graduate Center in Brattleboro, Vermont. They think about “Changing the Climate of Business.” And they may be are on to something, as are like minded people at the Presidio, the Fowler Center for Sustainable Value, at Case Western, and Columbia University’s Earth Institute.

Here’s an idea that will enable BP to make things right, change their image, and even make money. Suppose BP Solar built new factories in Florida and Louisiana, and hire former petrochemical and seafood workers – and churned out 25,000 to 50,000 PhotoVoltaic solar modules and 1,250 to 2,500 inverters per day. This would be 5 to 10 megawatts per day, 160 to 300 mw per month, 600 mw to 1.2 gigawatts per year.

According to my back of the envelope calculations, we need about 50 gw of solar in this country, along with 200 gw of wind, and 50 to 100 gw of other CRS (Clean, Renewable, Sustainable) generating capacity, so this is a drop in the bucket. But this is real change. It’s defining moment, substantive, shake the cobwebs out of the attic, hurricane force, Dorothy we’re not in Kansas anymore, paradigm shifting change.

BP Solar, or Massey Energy, or Akeena, Evergreen, First Solar, Sunpower, could do the same thing in West Virginia – build factories to manufacture PV Solar Modules and Solar Hot Water Panels, and hire local people to work in the factories.

It is change we can wrap our arms around, change we can celebrate. As President Obama might say, “change we can believe in. ”

This was planned as the Final Post in this series on the Deepwater Horizon / Macondo oil well disaster which began after Earth Day. Other posts include:

  1. Fossil Fuels and a Walk on the Moon,
  2. Drill Baby Drill or Drill Baby Oops,
  3. The Magnitude of the Spill,
  4. One Month After,
  5. The Chernobyl of Fossil Fuels?, and
  6. Magnitude, Part 2.

However, I will continue to offer my thoughts and analysis once or twice per month as the oil continues to gush forth into the Gulf of Mexico.

The Magnitude of the Deepwater Horizon Spill

The oil slick in the gulf

The Surface of the Oil Slick

Third in a series (1, 2, 3) that began on “Earth Day” (0).

BP and the government say they can’t measure the spill on the ocean floor. However, 5,000 barrels per day is reaching the surface and most of the oil – 80%  to 90% – is below the surface. So I thnk it’s  is on the order of 25,000 to 50,000 barrels per day.

But that’s my back-of-the-envelope estimate.  NPR, on Friday, May 14, 2010 reported that Steven Wereley, who teaches mechanical engineering at Purdue University, Tim Crone, a research scientist at Lamont-Doherty, and Eugene Chiang, an astrophysicist at UC Berkeley, believe they can make a pretty reasonable estimate of the amount of oil gushing into the Gulf. Wereley based his estimate on particle image velocimetry analysis of the video BP released. He says says 70,000 barrels per day, give or take 14,000 barrels,  is gushing from the Deepwater Horizon spill. Crone agrees with Wereley but said he’d like better video from BP before drawing a firm conclusion. Chiang estimates the flow at 20,000 to 100,000 barrels per day. 880,000 to 2,200,000 gallons of petroleum products into the Gulf of Mexico Each

DAY! That’s 6,160,000 to 15,400,000 gallons per week.

After 20 days that’s 400,000 to 2.0 million barrels. Each barrel could have been refined into 44 gallons of gasoline, jet fuel, and other petrochemicals.  But even at 5,000 barrels per day – 100,000 barrels in the first 20 days – this is a catastrophic event.

President Ronald Reagan

President Reagan

One hundred years from now, when historians, in energy efficient homes and offices powered by wind, solar, and geothermal, write about the end of the era of fossil fuel, they will point to the April 5, 2010 disaster at the Upper Big Branch, W. Virginia coal mine and the April 20, 2010 catastrophe at the Deepwater Horizon oil rig in the middle of the Gulf of Mexico.

Historians may assign responsibility to the energy policies of President George W. Bush and Vice President Cheney. They will note that President Carter put solar water heating system on the roof of the White House (click here for pdf) and President Reagan took them down in 1986. Their assessment of President Obama will be predicated on his next actions. Does he continue to embrace “Drill Baby Oops,” Coal with Carbon Sequestration, and Nuclear Power? Or do a 180 degree turn to sustainability?

President George W. Bush

Pres. George W. Bush

I don’t know what the pressures are at a depth of 5000 feet below the surface of the ocean. But there’s methane ice down there. At atmospheric pressure, Liquid Methane freezes is at -182.5 °C and methane gas liquifies at -181 °C (here)

The most important questions are:

What will be the effect of all that oil on fishing, tourism, the weather and the climate? It could be good for the maple syrup, solar power, and wind power industries, and the locavore food movement.

President Obama

President Obama

Given the severity of the spill, and what it demonstrates about our ability to operate at 5,000 feet below the surface of the ocean, I think we should rethink the Purgen Coal with Carbon Sequestration Plant, which will pump carbon dioxide into a well a mile below the ocean.

In addition, NPR reported on May 12, (here) that a House investigative subcommittee said Wednesday that the blowout preventer, had multiple defects — everything from leaky hydraulics to a dead battery.

How did it happen? BP and Transocean say the rig was built to handle working pressures of 20,000 PSI, but the safety equipment was built for pressures of 60,000 PSI.  Clearly, the upward pressure released by drilling 18,000 feet below the ocean floor, itself at a depth of 5,000 feet below sea level, exceeded the 60,000 PSI – that’s 60,000 pounds per square inch. In terms of reference, atmospheric pressure at sea level is 14 PSI. For more information and an exploration of this,  Click Here to “Moore Think, Less Confusion.

Full text of both articles by NPR are reproduced below the fold Continue reading

Utah Refinery Blast

Utah-Woods-Cross-798169Via TheStandard.Net, By Loretta Park (Standard-Examiner Davis Bureau), (click here for article)

South Davis Metro Fire Agency Deputy Chief Jeff Bassett said the explosion occurred because a pipe carrying hydrogen and diesel overfilled and sent some of the product onto the ground, where it pooled. It found an ignition source, a furnace, which caused the explosion.

This is what economists in the Neoclassical school call an “externality.” The costs of the disaster are borne by the citizens, not the oil company or the refinery. These costs actually add to the GDP. Economists in the Ecological school, at for example the Gund Institute at University of Vermont or the students in the Marlboro College MBA in Managing for Sustainability, argue we should use the Genuine Progress Indicator, GPI, not Gross Domestic Product, GDP (defined here and described here.)

From WikiNews: Burst pipe probed in Utah refinery blast as questions asked over safety

See also Damage To Homes From Refinery Blast Larger Than First Thought viamid-Utah Radio News;

OSHA Levies a Record Fine against Oil Giant BP from OMBWatch.

This in the immediate aftermath of OSHA’s record-setting proposed fine of $86.7 USD against BP for for a 2005 explosion which killed 15 workers and injured 170. See Steven Greenhouse, The New York Times, October 30, 2009, Record OSHA Fine Against BP

Over Texas Refinery Explosion.

The Occupational Safety and Health Administrationannounced the largest fine in its history on Friday, $87 million in penalties against the oil giant BP for failing to correct safety problems identified after a 2005 explosion that killed 15 workers at its Texas City, Tex. refinery.

We take the liberty of reproducing Greenhouse’s excellent piece in full:

Record OSHA Fine Against BP Over Texas Refinery Explosion, by Steven Greenhouse, New York Times, October 30, 2009.

The Occupational Safety and Health Administration announced the largest fine in its history on Friday, $87 million in penalties against the oil giant BP for failing to correct safety problems identified after a 2005 explosion that killed 15 workers at its Texas City, Tex. refinery.

A series of investigations attributed the March 23, 2005, explosion to overzealous cost-cutting on safety, undue production pressures, antiquated equipment and fatigued employees — some who worked 12 hours a day for 29 straight days

The fine is more than four times the size of any previous OSHA sanction.

Federal officials said the penalty was the result of BP’s failure to comply in hundreds of instances with a 2005 agreement to fix safety hazards at the refinery, the nation’s third-largest.

According to documents obtained by The New York Times, OSHA issued 271 notifications to BP for failing to correct hazards at the Texas City refinery over the four-year period since the explosion. As a result, OSHA, which is part of the Labor Department, is issuing fines of $56.7 million. In addition, OSHA also identified 439 “willful and egregious” violations of industry-accepted safety controls at the refinery. Those violations will lead to $30.7 million in additional fines.

Contacted Thursday night after federal officials disclosed the OSHA citations to The New York Times, BP said it was disappointed.

“We continue to believe we are in full compliance with the settlement agreement, and we look forward to demonstrating that before the review commission” which has the power to modify OSHA penalties, BP said in a statement.

BP said the penalties related to a previously announced disagreement with OSHA as to whether BP was complying with the 2005 settlement agreement.

“While we strongly disagree with their conclusions, we will continue to work with the agency to resolve our differences,” the company said, voicing dismay that OSHA was announcing the fines before the review commission had given the matter full consideration.

BP added that it takes its “responsibilities extremely seriously and we believe our efforts to improve process safety performance have been among the most strenuous and comprehensive that the refining industry has ever seen.”

BP says that since the explosion it has spent more than $1 billion to upgrade production and improve safety at the refinery.

A series of investigations attributed the March 23, 2005, explosion to overzealous cost-cutting on safety, undue production pressures, antiquated equipment and fatigued employees — some who worked 12 hours a day for 29 straight days.

The explosion was caused by a broken gauge and flammable hydrocarbons that were overflowing from an octane processing tower, which lacked a flare system to burn off volatile vapors. Those escaping vapors were ignited by the backfire of a nearby truck.

In addition to killing 15 people, the explosion injured 170 workers and obliterated 13 employee trailers and damaged 13 others, some as far as 300 yards away. The Texas City facility is capable of refining 475,000 barrels of crude a day and is located on a 1,200-acre site some 35 miles southeast of Houston.

Labor Secretary Hilda Solis has repeatedly said that “there’s a new sheriff in town,” signaling that she would take a more aggressive approach in enforcing wage and labor laws, after what she said was lax enforcement under President George W. Bush.

But one department official said that the record penalties assessed against BP were not an effort to send a signal to industry, but a straightforward move that punished a company with a long record of moving slowly to address safety problems.

In the 30 years before the 2005 explosion, there were 23 deaths at the Texas City refinery.

One Labor Department official said BP was likely to seek to have the fines reduced by appealing them, first to the Occupational Safety and Health Review Commission and then perhaps in federal court.

Federal officials say they expect BP to dispute that the company was required to do all that OSHA said and that it had failed to meet the deadline to remedy problems.

Six months after the explosion, BP entered into a settlement with OSHA in which it agreed to pay a $21.3 million fine, then the largest in OSHA history.

The previously highest fine was an $11.5 million penalty ordered in 1991 against the Angus Chemical Company and IMC Fertilizer Group, operators of a Louisiana fertilizer plant where an explosion killed eight workers and injured 120.

As part of the settlement, BP also promised to commission an independent audit and to take actions to eliminate potential hazards found in the audit, which was conducted by the AcuTech Consulting Group.

One Labor Department official voiced dismay that BP had four years to correct the problems identified after the settlement, yet OSHA still found hundreds of violations.

BP has already pleaded guilty to federal charges related to the explosion and agreed to pay $50 million, the largest criminal fine ever assessed against a company for Clean Air Act violations. Those violations included failing to maintain the safe startup of processing units and the mechanical integrity of the refinery

Since the explosion, BP has settled more than 4,000 civil claims, paid from a $2.1 billion fund it set aside to resolve claims.