New report deals body blow to BP

Oliver Morgan, industrial editor
Sunday January 21, 2007
The Observer

Top US investigator makes direct link between cost-cutting and explosion at Texas City refinery

BP is to receive another hammer blow to its reputation as a new report will for the first time directly link cost-cutting with the fatal Texas City refinery blast.

Carolyn Merritt, chairman of the US Chemical Safety Board, is accusing BP of complacency and disregard for inherent danger, failings that she says went to the very top of the company.

Cuts to maintenance budgets had a 'causal relationship' with the explosion at Texas City in March 2005 that killed 15 people, she said. Merritt told The Observer that the impact of cost-cutting on safety would be central in the CSB's report into the causes of the accident. The report is due on 20 March.

The Baker Report, commissioned by BP on the advice of the CSB, had no remit to affix blame or responsibility, nor to determine the causes of the blast.

While the report noted significant cuts at Texas City by BP and Amoco, which owned the refinery before it was taken over by the UK company in 1998, it did not try to establish whether cost-cutting could have impacted on safety. The CSB's remit is to establish the cause of the accident. Merritt says one of the key causes was budget cuts, adding that whether executives intended to cut safety budgets was not relevant.

Merritt said: 'Budget cuts had an impact on safety and that impact on safety had a causal relationship with what happened on March 23. We have an iron-clad case for the impact of cost cutting on safety. We will be making those conclusions in our report.'

She said that despite a series of previous 'geyser-like releases' of flammable liquid similar to the one that caused the explosion, 'complacency and disregard for the inherent danger of what was being done was at every level of the organisation to the very top'. She added: 'The message that was communicated was that cost-cutting and maximising profits was the most important thing.'

A BP spokesman said: 'We have always said that budget cuts had no impact on safety. The [Baker] panel said it could not find a link.' He added that BP's spending on its five US refineries increased on average by 10 per cent a year from 2000 to 2005.

However, CSB officials point to a history of cost-cutting at Texas City: from 1992 to 1998 maintenance spending fell by 41 per cent. When the figures are extended to the eight years between 1992 and 2000 the fall was 84 per cent. They add that reports commissioned by BP said clearly that funding was inadequate, but attempts to increase spending were not effective.

CSB officials also point to a 'budget challenge' of 25 per cent ($48m) across BP's five US refineries in late 2004. They say the 'challenge' included items such as sustaining capital expenditure on maintaining the safe operation of the plant, and compliance with regulations. BP ultimately increased spending in 2005, in the aftermath of the accident.

BP chief executive Lord Browne is to travel to the US this week to discuss implementation of the Baker report, which the company has accepted. He will be accompanied by his successor, Tony Hayward, and by John Manzoni, head of refining and marketing.