BP blast investigator calls for industry safety review

Cost-cutting was a key factor behind the fatal 2005 explosion at BP’s Texas City refinery, the final report of the US Chemical Safety Board has concluded.1 The CSB has called for a wholesale review of safety by the chemical industry. The Health and Safety Executive and UK investors are already seeking changes.

The CSB says its report, published in March, should "be useful throughout the chemical industry as a lesson on what happens when a corporation’s safety culture fails."

Explosions and fires at BP’s Texas City plant killed 15 people and injured 180, costing BP more than US$1.5 billion to date.

The report is similar to a preliminary version issued last autumn and BP continues to say that it strongly disagrees with some of the report’s contents, "particularly many of the findings and conclusions" (ENDS Report 382, pp 10-11 ).

But earlier this year it accepted the scarcely less damning findings and recommendations of the US Refineries Independent Safety Review Panel - a group commissioned by the company itself following an early recommendation by the Chemical Safety Board. This identified "organisational and safety deficiencies at all levels" (ENDS Report 384, pp 6-7 ).

However, whereas the panel’s mandate specifically steered it away from apportioning blame on specific personnel, the CSB looked into the explosion’s root causes, investigating the role of the BP Group’s London-based management and safety performance at the site. It interviewed 370 witnesses, reviewed more than 30,000 documents and conducted extensive testing.

The CSB concludes that "BP chief executive [Lord Browne] and the BP board of directors did not exercise effective safety oversight" or "safety culture leadership".

They ineffectively assessed the safety implications of major organisational and policy changes such as mergers, reorganisations and staffing and budget cuts, says the board, which "impacted the effectiveness of BP Texas City safety systems."

Had BP reviewed the safety impacts of such changes, the Texas City explosion "would have been less likely to occur".

Structural changes following the merger between Amoco and BP in 1998 led to "a diminished process safety management function".

Senior executives are criticised for inadequately controlling major hazard risks and providing insufficient resources to prevent major accidents.

The board found that "cost-cutting and failure to invest" by Amoco and then BP left "much of the infrastructure in disrepair" and made the third largest oil refinery in the US "vulnerable to catastrophe".

Budget cuts were agreed at "the highest levels" despite a history of accidents and near-misses, warnings of serious safety deficiencies and record profitability at Texas City.

Deficiencies resulted in the ‘run to failure’ of process equipment. Reductions in maintenance and training also contributed to the accident, as did operator fatigue.

The board insists Lord Browne had a duty to consider the long-term shareholder value of the health, safety and environmental impacts of any actions taken. It criticises the fact that although safety performance metrics were built into annual executive bonus decisions, they were absent from employee appraisals which instead emphasised financial performance.

Executive bonuses for 2006 were halved due to operational and safety issues in the US. But many investors see this as a reactive strategy which does not go far enough.

In the wake of the panel and board reports, almost one fifth of BP’s investors used the firm’s AGM in London on 12 April to signal they want more leadership on remuneration issues, with safety-related and other non-financial measures included in the long-term incentive plans of all executive directors, not least Tony Hayward, set to replace Lord Browne.

A significant 17.3% of investors voted against the company’s remuneration report - four times the average level of investor opposition.

The Local Authority Pension Fund Forum recommended that its members, who own about 1.2% of BP, oppose the report. The forum’s chairman, Darrell Pulk, said the board should not underestimate the "clear message that changes need to be made - if safety culture is to be at the heart of the business… it must also be inherent in the board’s remuneration policy".

He said the forum "did not see any linkage between long-term incentives and BP’s stated desire to be a leader in process safety management."

The forum was one of the pension funds advised by Pensions Investment Research Consultants (PIRC). Ebba Schmidt, a PIRC consultancy services executive, said BP’s remuneration report sets "an unwelcome precedent" and goes against the purpose of incentive schemes, which should be to "focus directors on the company’s long-term prosperity rather than the quarterly results treadmill."

BP has pledged to include process safety as a factor to determine future bonuses, but has so far dismissed the idea of including non-financials in incentive plans as "mechanistic", said Ms Schmidt.

However, the forum is aware that this is not solely a BP problem and it "will continue to push for safety performance to be linked more closely with remuneration arrangements at BP, Shell and other companies in the sector," she said.

CSB chairman Carolyn Merritt urged all oil and chemical firms to review their process safety programmes. She raised concerns that standards were deteriorating across the US, where 43 incidents of pipeline leaks, chemical releases, plant upsets and fires were reported in the first seven weeks of this year. She also warned that cost-cutting could be affecting other companies.

Ms Merritt said she hoped the safety panel and board reports would "establish a new standard of care for corporate boards of directors and CEOs throughout the world".

The board has called for new industry safety standards and guidelines to be developed, and for regulators to step up enforcement.

The UK’s Health and Safety Executive says it is monitoring the safety review that BP is undertaking for all of its operations. It is also considering what lessons there are from investigations into the Texas City incident for UK installations.

At a Health and Safety Commission meeting in February, HSE officials drew parallels between the contributing factors to the Texas City blast and those leading to a radioactive leak from the Thorp nuclear fuel reprocessing plant at Sellafield in 2005 (ENDS Report 382, p 57   and 386, p 27 ).

These included the importance of openness and experience, effective change control and recognition that personal safety performance was not a reliable indicator of process safety. They said such factors are being addressed in ongoing HSE work to develop new process safety indicators and to better understand corporate safety culture.