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BP to Pay Largest Criminal Fine for Air Violations

Date: Thu, 25 Oct 2007
From: "U.S. EPA"

News Release (HQ): BP to Pay Largest Criminal Fine Ever for Air Violations
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(Washington, D.C.) Today, BP Products North America, Inc. agreed to pay a total criminal fine of more than $60 million for violations of federal environmental regulations in Texas and Alaska. In addition to the penalty, the company will spend approximately $400 million on safety upgrades and improvements to prevent future chemical releases and spills.

"BP committed serious environmental crimes in our two largest states, with terrible consequences for people and the environment," said Granta Nakayama, assistant administrator for EPA's Office of Enforcement and Compliance Assurance. "Today's agreement sends a message that these types of crimes will be prosecuted."

This is the largest criminal fine ever assessed against a corporation for Clean Air Act violations and the first criminal prosecution of the requirement that refineries and chemical plants take steps to prevent accidental releases. The requirement was passed in 1990 as part of the Clean Air Act following the explosion at the Union Carbide chemical plant in Bhopal, India where thousands were killed and injured.

BP will pay $50 million for a catastrophic explosion in 2005 that killed 15 people and injured more than 170 others at its Texas City refinery. BP will also pay a $12 million fine for spilling 200,000 gallons of crude oil onto the Alaskan tundra and onto a frozen lake in March 2006, resulting in the largest spill that ever occurred on the North Slope.

In addition to the $50 million fine, the company pleaded guilty to a felony violation of the Clean Air Act and will serve three years of probation for the Texas City incident. BP is also required to complete a facility-wide study of its safety valves and renovate its flare system to prevent excess emissions at an estimated cost of $265 million.

For the Alaska spill, BP pleaded guilty to one misdemeanor of the Clean Water Act and will serve three years probation, pay $4 million to the National Fish and Wildlife Foundation to support research and activities on the North Slope, and pay $4 million in restitution to the State of Alaska. BP is required to replace 16 miles of pipeline at an estimated cost of $150 million.

On March 23, 2005, an explosion occurred at the Texas City refinery when hydrocarbon vapor and liquid released from a stack and ignited during the process of increasing octane levels in unleaded gasoline. Investigators learned that operators regularly failed to follow written standard operating procedures for ensuring mechanical integrity of safety equipment. The stack where the release occurred had been in poor operating condition since at least April 2003. Alarms failed to function or were ignored.

The Texas City refinery is BP's largest U.S. refinery, which covers more than 1,200 acres and can process as much as 460,000 barrels of crude oil per day. The refinery was previously owned by Amoco, which merged with BP in December 1998.

In March 2006, BP spilled more than 200,000 gallons of crude oil on the North Slope in Alaska. A second spill occurred in August 2006, but was quickly contained after leaking approximately 1,000 gallons of oil. Investigators determined the leak was caused by a build up of sediment in the pipe, and that BP failed to properly inspect or clean the pipeline, which is required by law to prevent pipeline corrosion. The investigation revealed that in 2004, the company became aware of increased corrosion in the pipeline.

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City planning, zoning, building, environment and public safety officials have been reviewing details of the project for months, and last week received information they requested from BP about potential air and water emissions of hazardous substances from the planned facility, including federal and state environmental permits.

"We have a lot to review," Ronald Novak, executive director of the Hammond Department of Environmental Management, said.

Water used at the asphalt facility would be processed at the refinery's wastewater treatment plant and discharged into Lake Michigan, and city regulators are particularly concerned about plans to move one of the refinery's outfalls 3,520 feet closer to Hammond's drinking water intake.

Residents expressed worries about sulfurous odors from the development in a public meeting about the project in September, and questioned the traffic impact of as many as 200 trucks a day on 129th Street during the facility's peak summer production months.

The BZA already has accepted BP's request for a continuance of the permit hearing in August, and a request from the city for a continuance in September.

The Times, which first reported the fines last month, recently obtained state inspection records detailing the safety hazards cited at the Whiting refinery. While significant, state officials say the violations largely pale in comparison to the problems uncovered at BP's Texas City refinery.

The findings

A Times review of the inspection records found that the most critical violations discovered at the Whiting refinery centered on problems with pressure gauges and rupture disks, a type of relief valve that constricts pipeline flow to prevent surges that could result in a fire or explosion. In one area -- an alkylation unit in which gasoline octane is boosted -- inspectors found two malfunctioning gauges and a blown rupture disk that had not been replaced.

State inspectors also cited the Whiting refinery, the nation's fourth largest, for failing to update written maintenance and safety procedures and, in several instances, for being more than a year behind on self-inspection deadlines for various types of equipment. In the worst of those cases, a structural integrity test that was supposed to have been performed seven years earlier remained unfulfilled at the time of the state review, which began in May 2006.

The inspectors, who spent a total of 40 days at the Whiting refinery, also rapped BP for failing to evaluate whether employees working within six feet of hydrogen sulfide relief valves were being exposed to unsafe levels of the rotten-egg-smelling refinery gas, which can irritate eyes and breathing passages. The refinery also was cited for failing to perform annual flow tests on fire hydrants and nozzles.

All told, the violations resulted in 13 fines ranging from $2,125 to $70,000. BP and the state are in settlement negotiations, and the case will move before an administrative hearing panel if the two sides do not reach an agreement by February.

The Whiting refinery has corrected all of the safety hazards cited by IOSHA and is working with the state agency to resolve the fines, BP spokesman Tom Keilman said Friday.

"BP's primary concern continues to be the safety of our employees, our contractors and the communities in which we operate," Keilman said. "The Whiting refinery has had a solid record on safety performance, showing continuous safety improvement over the past several years."

State inspectors classified five of the Whiting violations as knowing, or willful, the most severe category of workplace hazard under federal safety guidelines.

Keeping it in context

Meanwhile, investigators sifting through the wreckage of the March 2005 explosion that killed 15 people and injured more than 170 others at BP's Texas City refinery found 301 willful violations.

"I think it's fair to say that the (Whiting) refinery doesn't have the breadth of problems that Texas City had," said Carter, the deputy Indiana labor commissioner.

In the wake of the Texas City explosion, BP paid a $21 million fine, the largest in the 35-year history of the federal Occupational Safety and Health Administration and more than double the previous record. Last week, the company agreed to plead guilty to a felony and pay an additional $50 million criminal fine stemming from federal Clean Air Act violations tied to the explosion.

"If our approach to process safety and risk management had been more disciplined and comprehensive, this tragedy could have been prevented," BP America President Bob Malone said last week in a written statement. "We deeply regret the loss of life, the injuries and the community disruption caused by the explosion."