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BP fined record $87m for safety lapses at Texas refinery

The Times

October 31, 2009

Robin Pagnamenta: Energy Editor

BP was dealt a bitter blow last night when American regulators fined the oil group a record $87 million (£53 million) for more than 700 safety violations at the Texas refinery where an explosion killed 15 people and injured 170 in 2005.

The company, Britain’s largest, with a market capitalisation of nearly £106 billion, vowed to fight the fine levied by the Occupational Safety and Health Administration (OSHA). It said it strongly disagreed with the ruling.

The fine was four times higher than any penalty previously imposed by the administration, which claimed that BP had committed hundreds of violations of a 2005 settlement agreement to remove hazards at the refinery.

Inspectors found 439 new safety violations during a six-month investigation that ended last month. Texas City returned to full service only a year ago after running at reduced rates after the fire and Hurricane Rita. BP has spent $1 billion upgrading production equipment and improving safety at the plant.

The fire at America’s third-largest refinery, 40 miles south of Houston, triggered the resignation of John Manzoni, BP’s refining chief, and contributed to the downfall of Lord Browne of Madingley, the former chief executive.

Mr Manzoni was replaced by Iain Conn, the current head of refining and marketing responsible for Texas City.

Andrew Whittock, oil analyst at Oriel Securities, warned that the ruling exposed BP to further reputational damage in the US, its biggest market.

The fines comprised $56.7 million for 270 violations related to BP’s failure to take corrective action required by terms of a 2005 ruling, plus a further $30.7 million for 439 new safety violations.

The company has already pleaded guilty to breaching the US Clean Air Act and in October 2007 agreed to pay a $50 million fine. It has resolved more than 4,000 personal injury and property claims since the fire. The ruling comes as a huge blow for Tony Hayward, who took over as BP chief executive in May 2007, pledging to improve its poor safety record and operational performance.

Texas City’s return to service was a critical factor in delivering better than expected third-quarter profits of more than £3 billion this week. Hilda Solis, the US Labour Secretary, said that “unfortunately we have found the company still has not addressed many critical issues the company agreed to address” after the 2005 explosion. If not addressed they could lead to another catastrophe. “An $87 million fine won’t restore those lives but we can’t let this happen again. Workplace safety is more than safety, it’s the law.”

Keith Casey, the refinery manager, dismissed claims that the plant remained unsafe. He said: “We believe our efforts at the Texas City refinery to improve process safety performance have been among the most strenuous and comprehensive that the refining industry has ever seen.”

A spokesman for BP in London said: “While we strongly disagree with their conclusions, we will continue to work with the agency to resolve our differences. BP Texas City plays an important role in the lives and livelihoods of thousands of workers in the communities where they live, and we are proud to be one of the largest producers of transportation fuels in the nation.”

BP’s US refining operation processed 1.3 million barrels of crude oil during the three months to September 30 when the inspection was under way. Jordan Barab, acting assistant secretary of labour for OSHA, said the agency had uncovered “serious systemic safety problems within the cor- poration; and at the Texas refinery”.

The 2005 fire was caused when a piece of equipment called a blowout drum overfilled with highly flammable liquid fuel, which ignited. Safety systems and alarms failed to detect the accident in time to protect staff.

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