by Tom Bower
Having failed to achieve his purpose, Browne’s interest in Baker’s report was cursory, and he never read the CSB report. “I wasn’t aware of that,” he repeated when he was eventually asked by Brent Coon about the maintenance failures. His detachment was reinforced by an explosion at Total’s storage facility at Buncefield in Hertfordshire on December 11, 2005, in which 43 people were injured in Europe’s biggest explosion since the Second World War. Total admitted negligence, but unsuccessfully disputed the £1 billion claim for damages by denying that it could have foreseen the extent of the harm. In contrast, BP paid most claims promptly, contributed $32 million to public institutions in Texas, paid a $50 million fine, and eventually settled with Eva Rowe and other claimants after Coon’s aggressive campaign. Mike Broadribb, BP’s international director of process safety, conceded, “Texas City was a preventable incident, a totally preventable process failure, a management failure and a culture failure… If we learned one thing from this incident it’s the need for humility.” Browne refused to go that far. The evidence of BP placing profits above safety, he knew, had aroused antagonism in America. Internationally, the company was also damaged. Foreign governments would take a jaundiced view of BP when it pitched for licenses. There was, Browne knew, limited time to repair the damage. Peter Sutherland’s skepticism had become undisguised. Concerned about his fate and frantic to restore his reputation, Browne introduced a myriad of processes into BP’s operations to impose safety checks. Called “The Green Book,” his plan reversed a lifetime’s agenda to delegate and to decentralize BP’s management. This somersault, costing about $3 billion according to internal estimates, evoked screams of protest about excessive bureaucratization. Less than a year after the explosion at Texas City, it did not prevent a new calamity.
In the Western Operating Area of Alaska on March 2, 2006, 5,000 barrels or 267,000 gallons of oil seeped out of GC-21, a 34-inch pipeline carrying crude into a gathering center for shipment through the Trans-Alaska Pipeline System (TAPS) to Valdez. The leak was the largest ever on the North Slope. Browne knew that BP was vulnerable. The company had been fined $716,000 in January 2005 for an explosion in a well bore caused by inadequate procedures. The latest incident would be exploited by former oil broker Chuck Hamel, who since his financial ruin at their hands had dedicated his life to scrutinizing the oil corporations’ activities.
Hamel had become the recipient of regular complaints from Alyeska’s employees, especially after a congressional committee heard workers’ complaints about the pipeline’s management during hearings in 1992 and 1993. Later in 2005, Hamel heard about two more blowouts and an oil spillage, and encouraged the Environmental Protection Agency to launch a criminal investigation into BP’s conduct. Alaska, once BP’s Elysian fields, had become a millstone. Gloom permeated its operations there as production fell to just 35 percent of the peak in 1988, and the cost of maintenance increased proportionately. BP was the pipeline’s sole operator, but the anticipated financial benefits of merging BP’s operations with Arco’s had evaporated after the compulsory sale of Arco’s share to Phillips, and Exxon’s refusal to renegotiate the financial contracts.
About 2,000 miles of pipelines crisscrossed the oilfields on the North Slope of Alaska, terminating at Prudhoe Bay, a desolate area with a permanent population, according to the official census, of five people. From there the oil was piped 16 miles to the 800-mile Trans-Alaska Pipeline, which carried it south across the Alaskan tundra to terminals at Valdez. Those pipelines, built on stilts to allow animal movement and to protect the permafrost, had been hailed as a success when oil started to flow in 1977. Construction, however, had been beset with difficulties. To save money, the pipeline was not built from stainless steel, but from cheaper carbon steel, which was more liable to corrosion. Sand and water had accumulated at the bottom of bends in the pipeline, and when this had combined with sludge deposited by the crude oil, the trapped liquid had turned into acid. The normal treatment to prevent the acid corroding the metal was the introduction of a chemical inhibitor into the pipes, but that was partially abandoned once technicians realized that the sludge was preventing the inhibitor from oozing across the metal. The first sign of corrosion was spotted in the early 1990s. The usual solution would have been to introduce a so-called “pig” inside the pipes: a traveling machine that scraped the sludge and the microbial bacteria that caused corrosion off the metal tube. But, conscious of Browne’s edict to cut costs, the engineers abandoned that option, relying instead on exterior checks using ultrasonic equipment. Even that precaution was limited. The contractors were working under the supervision of Richard Woollam, BP’s corrosion manager. Known for refusing to suffer fools gladly, Woollam regularly deferred maintenance in order to reduce costs, and threatened contractors that he would replace them with a cheaper rival unless their prices were reduced.
Browne had understood the pipeline’s politics and finances ever since he had worked as a low-paid field engineer in Alaska during the 1970s. BP’s relationship with Alaska’s politicians had always been fraught, especially because of unpaid royalties and taxes. In 1995 the company paid Alaska $2 billion to settle tax disputes as part of a sweep that earned the state an additional $3.7 billion. Behind the widespread public mistrust of the oil industry was fear. Experts estimated that the North Slope could be exhausted by 2012, and would be shut down by 2018. The state’s only hope of salvation was to open up the Arctic National Wildlife Refuge to oil exploration.
Some oil companies, encouraged by Alaskan politicians, were convinced that 10.3 billion barrels of recoverable oil lay beneath the wilderness of the ANWR. There were also an estimated 35 to 100 trillion cubic feet of natural gas across north Alaska. Recovering both would require huge investment, not least to run a natural gas pipeline 1,800 miles from the Arctic through Canada to the US. The latest estimate of the cost over 10 years was $20 billion, the biggest private venture in oil’s history in America. Browne did not believe in the existence of huge oil reserves, but was required to pose as hopeful that the historic antagonism about developing the ANWR would be reversed after blackouts rippled across California in January 2001. President George W. Bush, entering office against a background of soaring electricity prices and the potential bankruptcies of utility companies, was keen, like any Texan oil operator, to satisfy the industry’s high expectations. His appointment of Vice President Dick Cheney, the former CEO and chairman of Halliburton, to forge a new energy policy encouraged the oil industry’s hopes that the ANWR would finally be opened up, not least to reduce America’s dependence on imports.
Their fears that President Clinton would decree in his final days that Alaska’s coastal plain was a national monument, thus preventing development, had not been realized. Clinton was advised that the decree would be pointless, although the temporary distress caused by discussions on the subject increased the oil industry’s anger toward the Democrats. Permanently antagonistic toward Big Oil, the party was accused of focusing on conservation, renewables and lies about the industry. Bush’s vocal support for opening up the ANWR and his zeal for deregulation aroused hope, and then disappointment. Despite the need for reliable supplies, the majority in Congress appeared to regard oil as a “dirty business.” Bush and Cheney realized that even a Republican Congress would not be able to overcome the support for environmental regulations or counter the argument that opening the ANWR was not a substitute for a proper energy policy. The administration’s energy bill was delayed by opponents of its plan to allow drilling in the ANWR. The only bright spot was BP’s operations at Seal Island, a man-made gravel atoll off the Beaufort Sea. Drilling for the first time through the Arctic ice into water began in December 2000. The crude would flow six miles through the first subsea pipeline in the Arctic to the Trans-Alaska Pipeline. Contrary to expectations, the drilling failed to improve BP’s share price or profile. The next hope was to win approval and a special tax agreement to transport the natural gas to the USA. Without that breakthrough, the continuing
decline of Alaska’s oil production would sap BP’s commitment.
The task of Steve Marshall, BP’s president of exploration in Alaska, was complicated by defeatism. The decaying infrastructure and the 10 percent reduction in maintenance spending was accompanied by a deteriorating relationship with the workforce, especially after Richard Woollam canceled their monthly lobster dinner to save money. Contracting out work, Marshall admitted, had contributed to “poor” relations, deterring the contractors from advocating “pigging” the pipelines. Relying on the assurance that no leaks had been found in the 16 miles of connecting pipes, Marshall was unaware that the steel was gradually being reconverted into iron ore. He did know, however, that as a precaution the pressure in the pipes had been steadily reduced from 800 psi in 1992 to 80 psi in 2006, but he was oblivious to the consequence that as the pressure was reduced, more water entered the system, speeding corrosion. Marshall’s options were limited, but in response to Chuck Hamel’s warnings he did commission Coffman Engineers to investigate the warnings of corrosion.
Like all whistleblowers, Hamel was hated by BP’s executives. In late 2000 he had received calls from trade union officials about the company’s poor safety record. In particular, Robert Brian, employed in Alaska by BP for 10 years, complained about oil spills, suspected corrosion in the pipelines and BP’s “orchestration of inspection procedures” to rectify any faults in advance of official checks, a charge of which BP said there was no evidence. After serving for six years as the union representative on BP’s health, safety and environment committee, Brian claimed that a BP executive was placing him under pressure to remain silent. Several hundred pressure valves, he wrote, had not been checked, some for nearly three years.
Both Woollam and Hamel knew that BP’s attitude toward safety was influenced by the state government’s lethargy. To please the oil companies, Alaska’s enforcement agencies, reflecting the attitude of the local politicians, were ineffective. The Department of Environmental Conservation’s budget had been cut by 55 percent since 1991, and its request for $500,000 to monitor pipeline corrosion had been rejected after the oil companies retorted that they were monitoring it themselves. The state employed just five inspectors to check 3,500 wells across a vast area. Obligingly, these inspectors notified BP about the time of each check, allowing the company to repair any faults before they arrived. By comparison, California, which produced 40 percent as much oil as Alaska, employed 40 safety officers. Despite their meager resources, the Alaskan inspectors did reject 10 percent of the safety shutoff valves during the first quarter of 2001, a considerable increase over previous years.
“Chatter” about Robert Brian’s complaints was heard by Chris Knauer, the chief investigator of Democratic Congressman John Dingell’s House Energy Committee. To BP’s good fortune, the Republican leadership, focusing on Enron’s collapse and the arguments in favor of nuclear energy, was uninterested in a trade unionist’s complaint about a multinational led by Lord Browne, an international hero. A disappointed Hamel was unaware that Richard Woollam had finally received a damning report from Coffman Engineers. The pipes, Coffman’s team discovered, had not been inspected internally for 14 years, and were probably suffering some corrosion that could be removed using smart pigs. The existing anticorrosion program, they wrote, had been inadequate. BP was accused of providing insufficient information and of being unhelpful. Vehemently, Woollam rejected the report. He accused the consultants of being “biased and unduly negative,” and of producing an error-strewn report that ignored BP’s successful record of containing corrosion. “We will never expose our workforce to unnecessary risk,” wrote BP to its consultants, requesting that the final report be rewritten. Steve Marshall, BP’s manager in Alaska, denied in 2006 that he had seen the Coffman report at the time.
BP ignored the advice to deploy “pigs” inside the transit pipelines. The cost was excessive, production would have been interrupted and the part-use of pigs in 1998 had been, BP believed, sufficient. The decision was supported by senior staff. “This place is getting safer and safer,” said George Blankenship, BP’s manager at Prudhoe Bay. The pipeline, agreed George Nelson, Alyeska’s manager, was “an example of industry’s excellence” and a demonstration of “how well the oil industry can co-exist in a fragile environment.” The only visible environmental damage had been caused 20 years earlier by exploration trucks driven across the tundra and by abandoned building sites. After those were removed, said Bob Malone, BP’s former president of the pipeline service, the corporation would be seen as a white knight for cleaning up the wilderness. Marshall did however urge his staff to focus on safety, “as if our lives and our future in Alaska depend on it. Because they do.” His exhortations were not taken seriously. “Window dressing” was the reaction of the new trade union leader, not least because Richard Woollam’s intimidation of the staff had not been curbed.
Steve Marshall’s freedom of action was constrained by John Manzoni. Some blamed Manzoni’s excessive zeal for his niggling demands to reduce costs, which extended even to BP’s refusal to continue paying for films, ice cream and the annual workforce barbecue. Manzoni’s self-conscious certainty might have had its origins in his family’s distinction. Alessandro Manzoni’s 18th-century novel The Betrothed is regarded as the greatest novel ever written in the Italian language, while Verdi dedicated his Requiem to a Manzoni. From that lofty perch, Manzoni imposed the same “fixed-cost reductions” on Alaska as at Texas City. In the squeeze between profits and performance, he was responding to the culture to increase profits.
On August 16, 2002, A-22, a BP oil well on the North Slope, exploded, burning and maiming a worker, Don Shugak. The company denied failing to inspect the well, but nevertheless closed 137 of its other wells for tests, losing 50,000 barrels a day, a significant financial loss to the Alaskan economy. BP announced that a mechanical integrity test had previously been conducted on the damaged well, and that it had shown no cause for concern. Robert Brian accused the company of lying, complained that it was seeking to silence him, and then resigned. “BP,” Chuck Hamel wrote to the company, “appears to be engaged in a cover up of its operations violating regulations… and safe industry standards.” In November 2002, Robert Brian testified to a congressional committee about the pressure to be silent placed upon him before he left BP. “There is no doubt that cost-cutting and profits have taken precedence over safety and the environment,” he said, asking rhetorically whether, rather than “Beyond Petroleum,” BP actually stood for “Beyond the Pale.” A few weeks later, just before Christmas, an explosion in Alaska killed Rodney Rost, a BP employee. BP would be fined $1 million by Alaska’s regulators for failing to prevent these accidents. Steve Marshall had reason for concern. An internal report about the A-22 accident revealed that production at the well had, as Brian alleged, restarted “without taking adequate safeguards,” making BP responsible for the explosion.
Kip Sprague, working in Richard Woollam’s anticorrosion team, blamed a lack of money. Despite the criticism of BP for poor engineering practices, the improvements to methods of inspecting the pipelines for corrosion advised by the Coffman report had barely been implemented. The company still relied on ultrasonic equipment and visual checks, which missed existing corrosion points. On April 10, 2005, three weeks after the Texas City explosion and three years after the first accidents in Alaska, Sprague protested to Marshall about his refusal to approve an enhanced anticorrosion program. “After 20 years of minimalist resources and maintenance,” Sprague e-mailed, delivering an adequate program “overnight” was impossible. “Reliable funding and resources is a yo-yo, accurate scheduling activities is a joke… we are sitting on a huge backlog of over 1,000 locations.” Twenty years of parsimony, both Sprague and Marshall knew, could not be rectified overnight. Expertise and understanding, and not just extra money, were needed.
John Browne was unaware of the safety problems in Alaska. His political priority was seemingly to lobby in Washington for access to the ANWR, alth
ough his support was not genuine. George Bush and the Texan oil lobby, he knew, were eager to exploit any oil reserves that would minimize America’s reliance on Saudi Arabia. Although environmentalists raised the specter of ruining a 19-million-acre wilderness, Browne expected that rising oil prices, and his own star status as North America’s biggest oil and gas producer, would spur the administration to win sufficient support for legislation in Congress. The mood was only soured by the state of Alaska’s decision to launch an antitrust suit against Exxon and BP for conspiring to withhold its natural gas from US markets. Depressed by the state’s declining fortunes and frustrated by the delay in building the $20 billion pipeline, Alaska’s politicians accused the two oil companies of “corporate greed” in their efforts to reinforce their power over North Slope supplies.
Alaska’s legalistic gripes were inconsequential compared to the simmering unease in BP’s headquarters about technical incompetence. Memories of Texas City had not faded, although John Manzoni decided to leave the corporation, when, in July 2005, in the wake of Hurricane Dennis, Thunder Horse, BP’s $1 billion status symbol in the Gulf of Mexico, was discovered to be listing 20 degrees. Production would be delayed for at least a year, and repairs would cost at least £250 million. The alarm within BP after Texas City had been mild; after Thunder Horse the stakes were raised. BP’s technical incompetence, rather than Hurricane Dennis, had caused the listing. Lacking in-house experts to scrutinize the platform’s design and construction, BP had relied on freelance contractors. The internal inquiry revealed the consequences of Browne’s apparent indifference toward maintaining engineering excellence within BP. He had deflected criticism by presenting Peter Sutherland with an expert’s report describing Thunder Horse as the victim of cutting-edge engineering. Sutherland was unaware that Exxon’s, Shell’s and Schlumberger’s specialists ridiculed that conclusion, but the chairman knew that, at the age of 57, Browne could not change course, and he was disturbed by the irritation aroused among the staff by Browne’s introduction of the “Green Book” to improve safety. Then, on March 2, 2006, while in London he heard about the oil leak in Alaska. Across the state there was outrage, not only about the spill but, more important, about the gift to environmentalists opposed to opening up the ANWR.