BP hit with Texas City fine just as Gulf oil spill comes under control

Author : Paul Gay

13 August 2010

There seems to be no end to the financial liabilities raining down on BP over its US operations. The cost of the Mexican Gulf clean-up operation following a 4.9 million barrel oil spill and the huge compensation claims the company faces amount to billions of dollars. And it would appear it is still paying for its problems when the Texas City Refinery exploded in 2005 with a record fine for safety violations.

Last week, the company agreed to pay a $50.6 million penalty for continued safety violations at its Texas City refinery after an explosion in 2005 killed 15 and injured 170. BP Products North America and the US Occupational Safety and Health Administration (OSHA) reached a settlement to resolve 270 of the 709 citations that OSHA issued to BP at its Texas City Refinery in October 2009. In these citations, OSHA alleges that BP failed to meet obligations set out in a 2005 agreement.

The allegations related to the continuing implementation of abatement activities following the 2005 accident at the Texas City Refinery. BP contested the citations and maintains that the refinery has undertaken extensive actions to enhance worker safety since 2005 in full conformance with the 2005 agreement.

Both parties have agreed to settle these matters and focus on moving forward collaboratively in order to continue to improve plant safety. A new agreement addresses the concerns that OSHA raised in these citations. BP is hopeful that this agreement will provide a platform to resolve the remaining citations.

As part of this agreement, BP will further accelerate its investment program in activities that are designed to implement industry leading process safety practices and address potential hazards which are identified through comprehensive engineering reviews. BP and OSHA have established an aggressive schedule for these activities, which are already underway. BP is obligated to fund the program, currently estimated to cost up to $500 million over the period 2010 to 2016. This amount is in addition to the more than $1 billion that BP spent on safety and infrastructure improvements at the Texas City Refinery during 2005-2009.

Meanwhile, back in the Gulf of Mexico, US federal officials have now agreed that it might not be necessary to finish drilling the relief well touted as the permanent solution to the Gulf of Mexico oil spill. BP has been drilling two relief wells, which were thought to be the only way to seal off the Macondo well completely. The damaged well had been spewing oil into the Gulf for almost three months until it was capped on July 15th.

BP subsequently plugged the well with mud and cement in a static kill operation but Thad Allen, the official in charge of the response to the spill, had repeatedly said it needed to be killed from the bottom as well. Pressure tests has now showed that the static kill might have adequately plugged the well, making relief wells and plugging it from the bottom unnecessary.

BP has also been able to scale down its oil spill clean-up operation in the Gulf of Mexico, saying that it will continue its efforts at the level needed until the environment is made safe. The focus of the clean-up, which now involves about 5,000 active response vessels and fewer than 30,000 people instead of the 6,500 vessels and 46,000 people at its height, has moved from catching oil as it gushed from the seabed to mopping up affected shorelines and restoring habitats such as wetlands.

There are still sceptics, however. Some scientists are casting doubt on the optimistic picture painted last week by the US National Oceanic and Atmospheric Administration, which found that three-quarters of the 4.9 million barrels spilt had been captured, burnt, evaporated or had dispersed naturally. The picture may not be as rosy as it has been painted.