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Cost cutting causes worry about refinery safety

March 24, 2010, 9:49 am

Originally posted by Brett Clanton - Houston Chronicle - March 22, 2010

A deadly explosion at BP's Texas City refinery five years ago today did more than force the British oil giant to upgrade the plant, pay millions to settle lawsuits and shift its thinking about safety.

The tragic event “fundamentally changed BP,” said Keith Casey, BP's Texas City refinery manager.

But there are questions about whether a new wave of cost-cutting by BP and other oil refiners, struggling amid the worst conditions for the business in decades, could push corporate survival to the forefront and relegate safety to a back burner.

“Right now, it's sort of an unknown,” said Joe Howicz, a retired safety trainer with the U.S. Occupational Health and Safety Administration who worked on refinery safety programs at the agency after the BP blast. “How is it going to affect safety if they go through another cycle of closing refineries and reducing capacity and downsizing staff and money for operations?”

Refining profits have plunged amid higher oil prices and as the weak economy stunts demand for transportation fuels, forcing some refiners to cut output, close plants and slash staff.

Chevron Corp. said this month it will cut 2,000 refining and marketing jobs worldwide and plans to sell a British refinery, while Shell said it will cut 2,000 global jobs, mainly in refining, by the end of 2011, and may close or sell European refineries. Independent U.S. refiners Valero Energy and Sunoco also have sold or closed plants recently.

BP has no plans to close refineries, but has cut 4,500 jobs in its refining and marketing division in last two years and reduced cash costs last year by 15 percent. It now aims to get the unit's costs below 2004 levels, or another $1.5 billion, with a focus on its U.S. operations, division CEO Iain Conn said earlier this month in a presentation to investors.

In a 2007 report, the U.S. Chemical Safety and Hazard Investigation Board found BP fostered bad management at the plant and that cost-cutting moves by BP were factors in the Texas City explosion.

The Chemical Safety board pushed OSHA for stricter oversight of refinery safety on several fronts. And it warned that safety regulators should keep tabs on how corporate downsizing could affect safety, said Howicz.

BP officials insist, however, say corporate turnaround efforts launched with the arrival of CEO Tony Hayward in 2007 have not come at the expense of safety.

They say BP has elevated the role of safety in operations while making the company more efficient.

In Texas City, for instance, the recordable injury rate has declined every year since 2005, and the refinery finished 2009 with a safety performance that placed it among industry leaders, the company said.

Lives lost since 2005

Even so, five more lives have been lost at BP refineries since the 2005 disaster, including three at Texas City. By comparison, the nation's other 146 refineries together had nine fatal incidents from 2005 to 2008.

BP says it's taken direct steps in Texas City to address unsafe conditions that contributed to the blast, including the removal of portable buildings from process areas, replacement of outdated blowdown drums with safer flare systems to get rid of excess vapors and refurbishment of major process units.

The changes have been physical, such as spending more than $1 billion to upgrade the Texas City plant, as well as systemic, like addressing the broken culture that contributed to the tragedy.

The aftermath of the BP disaster also helped usher in several important reforms by the broader U.S. refining industry.

“It was obviously a major catastrophe for BP, but it also wakened the industry to what could happen to them. It pushed them in the right direction,” said John Bresland, chairman of the Chemical Safety and Hazard Investigation Board.

Finding by OSHA

The March 23, 2005, explosion at the BP plant occurred after a blowdown drum overfilled with highly flammable liquid hydro-carbons. The excess liquid and vapor hydrocarbons were vented from the drum and ignited at the startup of the isomerization unit — a device that boosts the octane in gasoline. Alarms and gauges that were supposed to warn of the overfilled equipment did not work properly. The resulting explosion killed 15 workers, most of them in a trailer parked close to the unit, and injured scores more.

Despite the ignominy the accident brought to BP, OSHA said in October that BP still hadn't done enough to fix problems in Texas City. Citing “systemic safety problems,” the agency proposed $87 million in fines against the company for failing to make safety upgrades required under a settlement agreement with the agency following the blast, as well as for new safety violations. BP is contesting the decision.

Bottom line?

Brent Coon, the Beaumont lawyer who handled many of the civil cases against BP, said the company has shown before that it is willing to scrimp when it comes to safety, saving its investments for things that improve the bottom line. He says it's a short-sighted approach.

“Refineries are like cars,” he said. “You can run them without changing the oil, but sooner or later it's going to break down on you.”

Business columnist Loren Steffy contributed to this report.

 

 
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