BP
By Philip Mattera
BP (formerly British Petroleum) has become one of the world’s most controversial giant corporations because of its involvement in a series of major environmental and industrial accidents. The company has been the target of intense criticism for its role in the April 2010 explosion at a drilling platform in the Gulf of Mexico that killed 11 workers and caused an underwater leak that spewed millions of gallons of crude oil into the ocean, creating the most serious environmental disaster in U.S. history.The company later pled guilty to manslaughter and other criminal charges and paid billions in fines, penalties and settlements.
This incident in the Gulf occurred while BP was still contending with the legal and public relations fallout from a deadly explosion at a refinery in Texas, oil spills in the Alaskan tundra, and charges of manipulating energy commodities markets. BP has also faced human rights charges in countries such as Indonesia, Turkey, and Colombia.
BP got its start exploring for oil in Persia (now Iran), where, in the 1950s, it enlisted the help of the American CIA to overthrow a populist leader who had nationalized the company’s assets in the country. Over the past quarter-century BP has solidified its position as one of the premier global oil companies with a series of acquisitions in the United States: Standard Oil of Ohio (1987), Amoco (1998) and Atlantic Richfield (2000).
Environment and product safety
Starting about 2000, BP attempted the difficult feat of depicting itself as an environmentally friendly oil company. Some of its initiatives were merely symbolic—adopting a sunburst logo and claiming that its initials now stood for “Beyond Petroleum”—while others were concrete steps, such as (modest) investments in solar power. BP’s campaign was all the more difficult because of its involvement in controversial Alaskan oil and gas production, and because its environmental compliance record was far from unblemished.
For example, in 1990 BP agreed to pay a $2.3 million fine as part of a settlement of an $11 million suit that the U.S. Environmental Protection Agency (EPA) brought against the company in connection with illegal discharges from BP's Marcus Hook refinery into the Delaware River. Several months later the state of California sued the company over a 400,000-gallon spill of crude oil that occurred in February 1990 near Huntington Beach.
In July 1991 BP was one of ten major oil companies the EPA cited for discharging contaminated fluids from service stations into or directly above underground sources of drinking water. BP agreed to pay a fine of $74,000, and to clean up the contaminated water sources by the end of 1993.
In 1992 the EPA charged BP Chemicals with violating hazardous waste laws at its plant in Lima, Ohio, and sought almost $600,000 in penalties.
In 2000 a federal judge imposed a $500,000 criminal fine on BP for failing to report the illegal disposal of hazardous waste on Alaska’s North Slope. The company was also ordered to establish a national environmental management system to prevent future violations. The total cost to the company from this and a related civil matter was said to be more than $20 million.
In 2002 BP was fined £1 million by UK authorities for violating safety regulations in connection with several accidents at a refinery in Grangemouth, Scotland (later sold by BP).
In 2003 California’s South Coast Air Quality Management District filed an omnibus complaint against BP, seeking $319 million in penalties for thousands of air pollution violations over an 8-year period at the company’s refinery in Carson. BP acquired that facility through its purchase of Atlantic Richfield in 2000. The agency later filed another suit against BP for $183 million. In 2005 the parties reached a settlement under which BP agreed to pay $25 million in cash penalties and $6 million in past emissions fees while spending $20 million on environmental improvements at the refinery and $30 million on community programs focused on asthma diagnosis and treatment.
In 2005 BP was accused of trying to cover up deficiencies in the anti-corrosion coating on the 1,000-mile-long Baku-Tbilisi-Ceyhan pipeline that carries oil from Azerbaijan to the Mediterranean. BP is the lead participant in the joint venture that operates the pipeline, the largest shareholder in the consortium that owns it, and the operator of the oil fields that supply it.
In March 2006 more than 250,000 gallons of crude oil spilled at BP’s Prudhoe Bay operations in the Alaskan tundra. Several month later, the company shut down the huge Prudhoe Bay oil field because of additional leakage caused by corrosion in the transit line that carried crude oil to the Trans-Alaska Pipeline. There were press reports that BP had been warned of the problem more than two years earlier. In May 2007 the House Energy Committee released documents suggesting that cost-cutting pressures weakened preventive maintenance and other safety practices in the period leading up to the leaks.
In October 2007 BP agreed to pay a total of $60 million in fines to the EPA. The amount included $50 million for violations of the Clean Air Act in connection with the 2005 explosion at the Texas City, Texas refinery in which 15 workers were killed. The company also pleaded guilty to a felony violation of the act and was to serve three years of probation. Apart from the fine, BP agreed to spend $265 million for a facility-wide study of its safety valves and a renovation of its flare system to prevent excess emissions.
At the same time, BP agreed to pay the EPA a $12 million fine in connection with the March 2006 oil spill in Alaska, pleaded guilty to one misdemeanor violation of the Clean Water Act, and was ordered to serve three years probation on this offense as well. The company was also required to replace 16 miles of pipeline at a cost of $1.56 billion.
Later, in October 2010, BP agreed to pay $15 million in Clean Air Act penalties in connection with violations at the Texas City refinery.
In 2008 BP and several other oil majors agreed to pay $422 million to settle suits that had been brought by public water systems in 20 states and consolidated in federal court relating to the contamination of groundwater supplies by the carcinogenic gasoline additive MTBE.
At its annual meeting in mid-April 2010, BP faced a barrage of criticism over its involvement in controversial tar sands oil production in Canada.
Deepwater Horizon
Only days after that meeting, BP had to contend with a much bigger problem: an explosion at its Deepwater Horizon oil platform in the Gulf of Mexico that killed 11 workers and opened a massive underwater oil leak. While the disaster continued, government investigators were looking into indications that BP pushed for work on the well to move ahead despite evidence of unsafe conditions.
BP also faced criticism over its massive use of chemical dispersants to treat the contaminated waters. Some critics charged that the company was using the product—known as Corexit (produced by Nalco)—to mask the full extent of the damage, while others pointed out that BP rejected the use of less toxic and more effective alternatives. Corexit was prohibited by the United Kingdom for use in oil spills. The last controversy over the use of Corexit had occurred two decades ago, when Exxon made heavy use of it during the cleanup of its tanker spill off the coast of Alaska. The oil involved in that 1989 disaster had passed through a pipeline operated by the Alyeska consortium, controlled by BP.
As oil continued to gush into the Gulf of Mexico, more information surfaced suggesting that negligence on BP’s part contributed to the explosion that trigged the disaster. The New Orleans Times-Picayune reported on May 19 that only hours before the accident BP had told workers from the oil services firm Schlumberger to leave the Deepwater Horizon without performing a crucial test of the strength of the concrete that had been pumped into the well to seal it. On May 25 the House Energy Committee reported that its preliminary review of internal BP documents showed that there were strong warning signs of a serious problem in the final hours before the explosion.
On May 27 the New York Times reported that several days before the explosion BP chose, partly for financial reasons, to use a type of casing for the well that it knew was the riskier of two options. Also on May 27 the U.S. Geological Survey announced new estimates that put the flow rate of the BP spill at 12,000 to 19,000 barrels per day—far higher than the figure of 5,000 that had been used for the previous month.
In the following days more evidence came to light suggesting that BP was aware of safety hazards in the drilling operation well before the explosion. It was also reported that BP got permission from federal regulators to change the design of the well three times in a single day a week before the accident.
On June 1 the Obama Administration announced that it had begun civil and criminal investigations of the situation, with Attorney General Eric Holder vowing to "prosecute to the fullest extent of the law." Soon the administration was also criticizing BP's plan to pay a dividend to shareholders amid the crisis and later stated that the company's obligations should include paying the salaries of workers throughout the oil industry who had been laid off because of the moratorium on deepwater drilling imposed by the federal government. Given the growing liabilities, a movement called Seize BP emerged to demand that the federal government take control of BP assets to be sure those obligations can be met.
These events increased the anxiety of investors, who pushed BP's stock price low enough to generate widespread speculation that the company might be taken over by another oil giant. The New York Times reported that investment bankers were also drawing up scenarios for a bankruptcy filing for BP as a way to limit its liabilities.
Doubts about BP continued to be heightened by investigative reports such as one prepared by ProPublica revealing that senior BP managers apparently disregarded a series of internal reports about safety and environmental hazards in the company's operations produced over the past decade. And on June 10 a federal panel announced new estimates indicating that the flow of oil from the damaged well was much higher than BP had been claiming.
As the pressure mounted, BP gave in to demands from the Obama Administration that it put $20 billion in escrow to guarantee the economic compensation payments the company consented to make to Gulf Coast residents affected by the disaster. It also agreed to put $100 million into a fund to assist oil industry workers laid off as a result of the drilling moratorium imposed by the Obama Administration in the wake of the gulf accident. To help finance these measures, BP agreed to suspend paying dividends to its shareholders.
On June 17 BP CEO Tony Hayward was grilled at a Congressional hearing and was repeatedly criticized for being evasive in his responses. Yet his performance was overshadowed by the remarkable apology to BP (later retracted) by Texas Republican Joe Barton for what he called a "shakedown" by the Obama Administration in pushing the escrow fund.
It took more than 80 days before the flow of oil from the well, known as Macondo, was halted in mid-July. The nearly 5 million barrels released into the gulf made it the world’s largest oil spill into marine waters.
BP then announced that it had set aside $32 billion for clean-up costs and legal liabilities. The company also said that Tony Hayward would be replaced as CEO by Robert Dudley, the BP executive in charge of the Macondo response. BP also traded accusations with Transocean Ltd., the company from which it leased the Deepwater Horizon, about which was more to blame for the accident. In September 2010 BP issued the results of its internal investigation, which laid most of the blame on Transocean and on Halliburton, which was responsible for cement work on the well. The following month, a federal commission appointed by President Obama concluded that both BP and Halliburton had been aware that the cement mixture they planned to use to seal the bottom of the well was unstable but they proceeded with the work nonetheless.
In December 2010 the federal government sued BP and eight other companies in connection with the accident, charging them with violations of the Clean Water Act and the Oil Pollution Act. Criminal charges were later brought against a former BP engineer for destroying evidence by deleting text messages that discussed the amount of oil that was leaking from the damaged well.
A federal report issued in September 2011 concluded that BP’s efforts to reduce costs connected to the Macondo well contributed to the conditions that caused the blowout and the massive spill. In March 2012 BP agreed to pay $7.8 billion to settle a civil lawsuit brought on behalf of thousands of individuals and businesses affected by gulf accident.
In November 2012 BP agreed to plead guilty to felony manslaughter, environmental and obstruction-of-Congress charges for its conduct related to the Macondo disaster. The company also consented to pay a record $4 billion in fines and penalties--the largest criminal restitution in U.S. history. At the same time, BP agreed to pay $525 million to settle Securities and Exchange Commission charges that it made misleading statements to investors about the magnitude of the oil spill. Two BP supervisors working on the Deepwater Horizon were charged individually for manslaughter while a third was charged with obstructing Congress and making false statements to law enforcement officials.
Later in November 2012, the federal government also temporarily barred BP from obtaining new government contracts. In January 2013 Transocean agreed to pay $1.4 billion to settle the federal civil and criminal charges that had been filed against the company. In July 2013 Halliburton pleaded guilty to a charge of destroying crucial evidence and was fined the maximum of $200,000; it also agreed to make a contribution of $55 million to the National Fish and Wildlife Foundation. A year later, Halliburton agreed to pay $1.1 billion to settle lawsuits brought by Gulf Coast residents, local governments and businesses affected by the spill.
In September 2014 a federal judge in New Orleans, characterizing BP's conduct as grossly negligent and reckless, concluded that the company was primarily responsible for the disaster. In 2015 BP settled all remaining federal, state and local civil claims for a total of $20.8 billion. The largest portions of that amount were a $5.5 billion Clean Water Act penalty, $8.1 billion in natural resources damages and $4.9 billion in economic damages to state and local governments.
In July 2016 BP estimated that its costs relating to Deepwater Horizon would ultimately reach $61.6 billion.
Workplace Safety
BP has one of the worst worker safety records among large industrial companies operating in the United States. The biggest blot on its record came in March 2005, when 15 workers were killed and about 180 were injured in a massive explosion at the company’s refinery in Texas City, Texas. The company blamed employees for causing the accident, but both the Occupational Safety and Health Administration (OSHA) and the Chemical Safety and Hazard Investigation Board pointed to deficiencies in company safety policies. In September 2005 OSHA announced a settlement under which BP agreed to pay a record $21.4 million in fines for nearly 300 “egregious” safety violations and many other violations deemed willful and serious.
In its report, the investigation board found that cost-cutting measures implemented by BP management contributed to a deterioration of safety conditions at the refinery. Even a company-sponsored review of the accident led by former U.S. Secretary of State James Baker was critical of management.
In April 2006 OSHA proposed fines of $2.4 million after finding unsafe conditions at BP’s refinery near Toledo, Ohio, that were similar to those that contributed to the Texas City disaster.
In October 2009 OSHA announced that BP was not living up to its obligations under the settlement agreement relating to the Texas City disaster, and proposed an even larger fine –$87.4 million—against the company for allowing unsafe conditions to persist. BP challenged the fine and later agreed to pay $50.6 million.
In December 2009 a federal jury awarded more than $100 million to ten workers who said they were exposed to toxic substances at the Texas City facility in 2007.
In March 2010 OSHA cited BP’s Toledo refinery, now run jointly with Husky Energy, for 42 willful violations and proposed a fine of more than $3 million.
BP’s enormous oil spill in the Gulf of Mexico began with an April 20, 2010 explosion at an offshore drilling rig that killed 11 workers. Following that incident, the Center for Public Integrity analyzed OSHA records and found that two refineries run by BP—the ones in Texas City and Toledo—accounted for 97 percent of all flagrant violations found in the refining industry over the past three years.
In July 2012 BP agreed to pay $13 million to resolve yet more violations in Texas City.
In October 2012 BP announced that it had sold the Texas City refinery to Marathon Petroleum.
Human rights
BP was one of about two dozen large corporations named as defendants in a lawsuit filed in U.S. federal court in 2002 that accused the companies of aiding and abetting crimes against humanity committed by the government of South Africa during the apartheid era. After surviving various challenges that went all the way to the U.S. Supreme Court, the case continued and is pending.
Groups such as the Kurdish Human Rights Project have criticized BP’s Baku-Tbilisi-Ceyhan pipeline not only for environmental reasons but also for human rights abuses reportedly perpetrated on opponents of the pipeline project in Turkey.
In 2004 some 300 non-governmental organizations and individuals sent a protest to the chairman of BP complaining that the company had failed to meet its commitments regarding the protection of human rights in connection with the Tangguh natural gas project in Indonesia. Those deficiencies persisted, prompting advocacy groups to send another letter to top BP management in 2008.
In 2009 a group of Colombian farmers filed suit against BP in British court, alleging that the company’s pipeline in their country caused landslides and damage to soil and groundwater, thus harming their crops, livestock and fish ponds.
Anti-competitive Practices and Consumer Protection
In 2003 BP paid $2.5 million to settle charges brought by the New York Mercantile Exchange alleging that the company had on numerous occasions engaged in prohibited practices in oil trading.
In 2006 the Commodity Futures Trading Commission (CFTC) accused BP of secretly and illegally cornering the U.S. propane market in 2004, driving up heating and cooking costs for millions of Americans, especially in rural areas. In 2007 BP agreed to pay a record $303 million in penalties to the CFTC to resolve the charge. Charges relating to manipulation of the propane market were also brought against several BP traders.
Also in 2006, it was reported that both the CFTC and the Justice Department were investigating BP's possible manipulation of the over-the-counter crude oil market in 2003 and 2004, and the gasoline market in 2002.
Royalty Disputes
In 2000 BP agreed to pay $32 million to resolve U.S. charges that had been brought against it under the False Claims Act alleging that the company had underpaid royalties on oil produced on federal and Indian leases since 1988.
Other Information Sources
Violation Tracker summary page
Watchdog Groups and Campaigns
Friends of the Earth International
International Federation of Chemical, Energy, Mine and General Workers’ Unions (ICEM)
Project On Government Oversight
Key Books and Reports
Adventure in Oil: The Story of British Petroleum by Henry Longhurst (Sidgwick and Jackson, 1959).
Drowning in Oil: BP and the Reckless Pursuit of Profit by Loren C. Steffy (McGraw-Hill, 2011).
The History of the British Petroleum Company: The Developing Years, 1901-1932 by R.W. Ferrier (Cambridge University Press, 1982).
The Seven Sisters: The Great Oil Companies and the World They Made by Anthony Sampson (Viking Press, 1975).
Green Words, Dirty Deeds: A PIRG Expose of BP Amoco's Greenwashing by Athan Manuel of the U.S. Public Interest Research Group Education Fund (October 1999).
Note: This page draws from a corporate profile originally prepared by the author for the Crocodyl website in May 2010.
Last updated August 1, 2016.