ConocoPhillips
By Philip Mattera
ConocoPhillips, formed by the 2002 merger of Conoco and Phillips Petroleum, grew into the third largest oil company in the United States. While it has never attained the high profile of its larger rivals Exxon Mobil and Chevron, the Phillips part of the company was long notorious for the abysmal safety record of its operations in Texas, where a series of accidents resulted in more than two dozen worker deaths and scores of injuries.
In 2012 ConocoPhillips distanced itself from its refinery troubles by spinning off those operations into a new company called Phillips 66, its well-known brand name. ConocoPhillips has also tried to evade controversy by pulling out of controversial exploration activities in the Peruvian Amazon, but the company is facing criticism over its plan to drill in environmentally areas of Alaska’s Chukchi Sea.
The Oklahoma Black Gold Rush
ConocoPhillips traces its roots back to 1875, when Continental Oil & Transportation was founded in Utah. After becoming an affiliate of the Standard Oil trust covering the Rocky Mountain states, it changed its name to Continental Oil. When the U.S. Supreme Court ordered the breakup of Standard in 1911, Continental was one of the independent companies that emerged. In 1929 J.P. Morgan & Co. arranged for it to merge with Marland Oil, a company created by wildcatter Ernest Marland after he struck oil on Indian burial grounds near Ponca City, Oklahoma and set off a “black gold” rush in that state.
The combined company, which retained the Continental name, grew rapidly after the Second World War through its involvement in offshore drilling and foreign exploration in countries such as Libya, Guatemala and Venezuela. In 1966 it acquired Consolidation Coal, then the second largest U.S. coal company. Continental changed its name to Conoco Inc. in 1979. Two years later, after an unprecedented takeover battle involving several large companies, Conoco ended up being acquired by chemical giant DuPont for what was then the astounding sum of $7 billion. Conoco remained under DuPont’s control until it was spun off in two stages in 1998 and 1999.
After two years on its own, Conoco agreed to merge with Phillips Petroleum, which had been founded in Oklahoma in 1917 to take advantage of soaring oil prices during the First World War and went on to create a large retail network under the name Phillips 66. During the 1970s Phillips was caught up in a scandal concerning $100,000 in illegal campaign contributions it made to Richard Nixon’s reelection campaign. It subsequently came out that Phillips had made similar illicit contributions in dozens of other races, drawing the money from a slush fund linked to a Swiss bank account. In 1973 the company and its former chairman pleaded guilty on the Nixon campaign charges; in 1977 Phillips pleaded guilty to charges (including tax evasion) relating to the other contributions. A shareholder lawsuit in response to the abuses forced the company to put six outsiders on its board of directors.
Conoco had its own scandal in 1995 when it was criticized in Congress and elsewhere for allowing a Dutch affiliate to develop two oil fields in Iran in what was alleged to be a violation of the Clinton Administration’s economic sanctions against that country. President Clinton signed an executive order to block the plan.
The merger with Conoco followed three previous major deals completed by Phillips: the purchase of the Alaskan assets of Atlantic Richfield for $7 billion, the creation of a worldwide chemicals joint venture with Chevron and the acquisition of independent refiner Tosco Corp. ConocoPhillips grew even larger after the 2005 purchase of Burlington Resources.
Safety Issues
The merger of Conoco and Phillips Petroleum brought together two companies that each had a checkered safety record. The Consolidation Coal business that Conoco purchased in 1966 and brought with it when acquired by DuPont was one of a group of companies that in 1991 were accused by the U.S. Labor Department of tampering with coal dust samples to hide dangerous conditions and that were together fined $5 million; among the firms, Consolidation had the largest number of citations for tampering.
In 1977 a blowout at a Phillips Petroleum offshore rig spilled some 150,000 barrels of crude oil into the North Sea. Three years later, 123 workers were killed when a Phillips-operated rig that was functioning as a housing facility in the North Sea capsized during a storm. The accident was later attributed to a crack in one of the struts.
In 1979 an explosion at the Phillips refinery near Borger, Texas killed two workers and injured more than a dozen others. OSHA fined the company $19,600 for willful and serious violations at the facility. The following January, another explosion at the refinery injured more than 40 people, and in July 1980 yet another explosion injured eight people, two of them critically.
In 1989 a huge explosion at a Phillips petrochemical complex in Pasadena, Texas (outside Houston) killed 23 workers and injured more than 130 others. OSHA later fined the company $5.7 million—the second largest in the agency’s history up to that point—for 575 willful and serious violations. An additional penalty of more than $700,000 was imposed on a contractor performing service work on the site. In announcing the fines, U.S. Labor Secretary Elizabeth Dole said that the accident could have been avoided and that OSHA had uncovered internal company documents that called for correction action “but which were largely ignored.” The company contested the fines and negotiated a reduction down to $4 million. In 1994 Phillips settled nearly 200 related civil suits. The amount was not disclosed but was later reported to be in excess of $400 million.
In 1999 Phillips was fined $204,000 for 13 safety and health violations uncovered during the investigation of an explosion at the Pasadena complex that killed two contract workers. The company negotiated the amount down to $191,000. Yet another explosion at the plant in 2000 killed one worker and injured more than 70 others, including some who were severely burned. The accident prompted one Texas state legislator to call for a criminal investigation of conditions at the facility. In September 2000 OSHA proposed a $2.5 million penalty on Phillips, with the head of agency stating: “We have cited similar violations again and again at this plant, yet tragedies continue to occur.”
With the acquisition of Tosco Corp. in 2001, Phillips took on a company with its own dismal safety record. For example, in 1999 Cal/OSHA fined the company a then-record $810,750 for violations linked to an explosion at a Tosco refinery in Martinez, California in which four workers were killed (an appeals board later reduced the fine by about half). The company also paid more than $1.9 million after pleading no contest to related criminal charges and then paid another $21 million to settle civil wrongful death lawsuits. It subsequently sold the facility.
The deadly problems continued at the Pasadena complex, which came under the control of the Chevron Phillips Chemical joint venture. In 2002 the company agreed to pay more than $2.1 million to settle another round of OSHA fines in connection with an explosion in 2000. It later paid another $1.8 million as a civil penalty for Clean Air Act violations related to the 1999 and 2000 explosions and the chemical releases they caused.
In 2006 the Washington Department of Ecology ordered ConocoPhillips to pay a fine of $540,000 in connection with a 2004 Puget Sound oil spill by a tanker belonging to its Polar Texas subsidiary. The company later agreed to settle related federal and state charges by paying $588,000 for environmental restoration work around Maury Island.
In 2009 OSHA proposed fines of $92,000 against the ConocoPhillips Bayway Refinery in New Jersey for repeat violations that an agency official said left workers “at risk of accidents that could result in injury or possible death.”
In 2012 the Chinese government imposed a total of $350 million in penalties on ConocoPhillips in connection with a 2011 oil spill and resulting environmental damage to Bohai Bay.
Environmental Issues
In 1988 Conoco agreed to pay a $250,000 civil penalty for violating the Clean Air Act at an Oklahoma oil refinery and also agreed to spend more than $1.5 million on pollution controls at the facility.
In 1999 Conoco Pipeline and Yellowstone Pipeline agreed to pay a penalty of $165,000 and to fund a project to save threatened bull trout in Montana under a settlement with the U.S. Justice Department and the Environmental Protection Agency concerning an earlier pipeline rupture on the Flathead Indiana Reservation that spilled several thousand gallons of oil into the Camas Creek.
In 2001 Conoco settled allegations of Clean Air Act violations by agreeing to spend up to $110 million to install new pollution-control technology at all of its facilities. The company also consented to paying a $1.5 million civil penalty and spending $5 million on environmental projects in the communities where its refineries were located.
In 2003 the EPA announced that ConocoPhillips would pay $150,975 to settle alleged violations of community right-to-know regulations at its refinery in Wilmington, California.
In 2004 ConocoPhillips agreed to pay $70 million to settle a class action suit brought on behalf of more than 7,000 property owners in the Florida Panhandle affected by a plume of contaminated underground water emanating from the site of a former fertilizer plant in Pensacola.
Also in 2004, the EPA announced that ConocoPhillips would pay $485,000 for violations of the Clean Water Act at its Tyonek natural gas platform in Alaska.
In 2005 the Department of Justice and the EPA announced that ConocoPhillips would spend more than $525 million on additional pollution-control equipment at its 12 refineries to resolve new Clean Air Act violations. The company also consented to pay a $4.5 million civil penalty and to spend more than $10 million on supplemental environmental projects.
In 2007 Polar Tankers, a ConocoPhillips subsidiary, pleaded guilty to a criminal charge of covering up an oil spill off the coast of Alaska three years earlier. The company was ordered to pay a $500,000 criminal fine and $2 million to the National Fish and Wildlife Foundation.
In 2008 ConocoPhillips had to pay $1.2 million to settle allegations that it violated the Clean Water Act with more than 2,000 effluent discharges from its refinery in Borger, Texas.
Also in 2008, ConocoPhillips was one of a group of large oil companies that together agreed to pay about $423 million to settle a lawsuit in which more than 100 public water systems claimed that their water sources had been contaminated by the gasoline additive MTBE.
In 2009 the San Francisco Bay Regional Water Quality Control Board fined ConocoPhillips $490,000 for dumping toxic chemicals into San Pablo Bay from its Rodeo refinery.
In 2010 the EPA announced that ConocoPhillips would install new pollution-control equipment and pay $175,000 in penalties to settle Clean Air Act violations at two compressor stations in Colorado.
Also in 2010, ConocoPhillips and Sasol North America settled EPA claims by agreeing to pay a total of $14.5 million to help offset clean-up costs for the Calcasieu Estuary in Louisiana.
In 2012 ConocoPhillips signed a consent agreement with the EPA in which it agreed to pay a penalty of $45,000 to resolve charges relating to a 2007 spill at the company’s Kuparuk Unit facility on Alaska’s North Slope. The company has drawn criticism for its plan to proceed with drilling in the environmentally sensitive Chukchi Sea off Alaska. In April 2013 the company suspended those plans through 2014.
In 2013 California Attorney General Kamala Harris sued ConocoPhillips and Phillips 66 for failing to properly inspect and maintain underground tanks used to store gasoline at more than 500 service stations in the state. The case is pending.
Also in 2013 the EPA announced that Phillips 66, the company into which ConocoPhillips spun off its refineries, would pay a $50,000 penalty for hazardous waste violations at the Trainer refinery in Pennsylvania. The violations occurred when the refinery, which was later sold to Delta Airlines, was still owned by ConocoPhillips.
Pricing and Royalty Controversies
In 1978 Conoco pleaded no contest and agreed to pay $1 million in penalties (including $15,000 relating to a felony count) to settle allegations that it violated federal oil pricing regulations (Associated Press, August 11, 1978).
In 1982 Conoco agreed to pay $3 million to the U.S. Energy Department and provide it with $11 million worth of oil to settle allegations that the company violated price regulations in the 1970s.
In 1998 the U.S. Justice Department sued Conoco and three other firms for deliberately undervaluing oil extracted from federal land to reduce their royalty payments to the federal government. Two years, later, Conoco agreed to pay $26 million to resolve its involvement in the case. In 2001 Phillips Petroleum agreed to pay $8 million to settle the same charges.
Human Rights Controversy
In 2009 Amazon Watch and Save America’s Forests issued a report raising serious environmental and human rights concerns in connection with the huge ConocoPhillips exploration and drilling concession in the Peruvian Amazon, which it obtained through the purchase of Burlington Resources. The company sold its interest in one part of the concession in 2011 and two others in 2012.
Other Issues
In 2013 ConocoPhillips agreed to settle a lawsuit brought by the state of Colorado charging that it double-dipped by using state funds to repair some 350 leaking underground gasoline tanks but was then also reimbursed by its insurance companies for the same work. The terms of the settlement were not announced. The company has faced similar charges in several other states.
Other Information Sources
Violation Tracker summary page for ConocoPhillips
Violation Tracker summary page for Phillips 66
Watchdog Groups and Campaigns
Communities for a Better Environment
International Federation of Chemical, Energy, Mine and General Workers’ Unions (ICEM)
Key Books and Reports
Amazon Crude by Judith Kimerling (Natural Resources Defense Council, 1991)
ConocoPhillips in the Peruvian Amazon (Amazon Watch and Save America’s Forests, 2009).
Last updated April 18, 2013