Sunday, August 13, 2006

BP: Beyond Believable

As we've noted several times before, the giant oil company, BP (formerly British Petroleum and BP Amoco), seems to be having its share of problems lately, killing workers, leaking huge amounts of oil in Alaska, and failing to maintain its pipelines (as well as a little fraud and good old fashioned air pollution thrown in.) This is despite its nine-year old attempt to change its image to becoming a more environmentally conscious BP -- Beyond Petroleum.

New York Times business writer Joe Nocera notes that BP's attempt to promote its green image hasn't exactly fooled most environmentalists:
When you talk to BP officials about that commitment, they trot out a host of examples to prove that it’s not just public relations. BP owns a big solar energy company. It has significantly lowered its greenhouse-gas emissions. It has a thriving biofuels program. And it is investing $8 billion over 10 years in alternative energy, like solar and wind power (though it includes natural gas as an alternative energy, which strikes me as a stretch).

Yet at its core, BP remains an oil company, and no matter how much it says it wants to create more environmentally sensitive sources of energy, its basic task is still to stick holes in the ground in search of hydrocarbons. The company recently spent nearly $4 billion building a huge pipeline stretching from the Caspian Sea to the Mediterranean. But it also asked a leading environmental group, the World Wildlife Federation, to act as an environmental consultant on the project; Mr. Dean, the BP spokesman, told me I should talk to someone at the W.W.F. if I wanted confirmation that BP was one of the environmental good guys.

So I did. But James Leaton, a senior policy adviser at the federation, didn’t exactly sound thrilled about how the collaboration had turned out. “In our view,” he said, “there are some sensitive places where you just shouldn’t go. BP went there anyway. They were open to some small changes, but we were fairly disappointed. Whenever you spoke to them, their view was about deadlines and budgets. Ours was about protecting the environment.” In other words, BP acted like the oil company it is.

Environmental groups, in fact, can be fairly scathing in their appraisal of BP. In 2002, Greenpeace awarded Lord Browne an Earth Day “Oscar” for Best Impression of an Environmentalist. “They are just not clean,” Melanie Duchin of Greenpeace told me. “And no amount of rebranding can make them clean.” She made the obvious point that when you make upwards of $20 billion in profit, as BP did in 2005, an $8 billion alternative fuels program — over 10 years! —isn’t exactly a bet-the-company move.
Nocera concedes that BP managers may sincerely believe in their "green" mission. But "walking the walk" seems a bit harder than "talking the talk"
I found plenty of people, with long experience in the oil patch, who are convinced that BP has long had a culture of corner-cutting that has led to its current problems. “It has to be systemic,” said Matthew R. Simmons, who runs an investment banking and consulting firm specializing in the oil industry. Mr. Simmons pointed out that whistle-blowers had been complaining for years about BP in Alaska.

And, he added, BP’s failure to inspect the pipeline by using a “pig”— a device that crawls through the pipeline taking X-ray-like pictures — was nothing short of negligence. “They found wall thicknesses that were down to four-tenths of an inch,” he said. “That is the thickness of a beer can.”

When I spoke to Mr. Dean of BP, he asserted that the company hadn’t used the pig because it thought that a newer technology, allowing the company to monitor the pipeline externally, was adequate. “We were shocked and dismayed,” he said. “We really felt we had a good inspection and monitoring program. We realize that we need to do better, and we will spare no expense to get it right.”

Mr. Dean, I have to say, came across as genuinely contrite; he must have said “We’re sorry” a half-dozen times in a 45-minute phone call. “This cuts to our core values,” he told me with considerable anguish. I got the strong impression, not just from him but from watching other BP officials on television this week, that the company really is determined to do whatever it can to fix the problems — and prevent them from happening again.

Which is great, so far as it goes. And I give BP credit for acknowledging so forthrightly that it made mistakes. But in the meantime, BP is going to pass through a painful gantlet. It will undoubtedly be raked over the coals by Congress (hearings are set for early September); it will have its worst documents exposed in lawsuits; it will find itself under fierce regulatory scrutiny; and it will be accused, I’m sure, of the worst sort of corporate greed and hypocrisy. It’ll be a long time before anyone believes anything BP has to say about its environmental sensitivity.

I can’t say that my heart bleeds. If BP hadn’t been so holier than thou in its marketing these past years, I doubt that it would be getting hammered right now — at least to this extent. If there is one ironclad rule about marketing, it is that you had better be practicing internally what you are preaching to the world.

Let me put it another way: You can’t just talk the talk, you have to walk the walk.
A diary entry by Jorndorff at Daily Kos isn't quite so confident of BP's good intentions, pointing out that whistleblowers had raised questions about BP's pipeline maintenance two years ago.
BP's decision to shut down Prudhoe Bay is said to have been due to its recent scrutiny of the pipeline. But back on March 15, shortly after the record pipeline leakage, the Department of Transportation's Pipeline and Hazardous Materials Safety Administration mandated a thorough cleaning and "pigging" of its lines "in order to prevent and detect further corrosion."

In short, this discovery came (not through routine internal safety priorities) but only once such action was mandated by the federal government to ensure the integrity of the company's pipelines. The mandated Corrective Action Order gave the company a June 15 deadline to complete the cleaning of its lines. Not a single line was cleaned by the deadline. The delay is squarely the responsibility of BP, which claimed that "factors outside its control" prevented them to be able to clean its lines. Fingers were pointed at Alyeska Pipeline Company, which is partially owned by BP, for its refusal to allow pigging. BP contended that it would abide by the order, but that it would take approximately two years to complete all aspects.
And even worse,
Chuck Hamel, longtime BP employee advocate, recently told NBC that "a dozen past and current BP employees came to him claiming they'd been told to cut back on a chemical put into the system to retard rust and corrosion, and to falsify records. A federal official confirms that many of these workers have also talked to the FBI."

Asked why BP would do such a thing, Hamel responded, "to save money."
Finally, noting Enron's manipulation of California's energy supply resulting in blackouts several years ago, and accusations that BP recently manipulated the propane market to jack up prices, the author wonders whether the current shutdown is purely accidental, given the increased profit BP will be making by the resulting rise in oil prices.


More BP stories here.