Case 7.5 BP and the Deepwater Horizon Explosion: Safety First? ; and BP and the

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Case 7.5 BP and the Deepwater Horizon Explosion: Safety First? ; and

BP and the Deepwater Horizon Explosion: Safety First? Background and Nature of Market BP PLC is a holding company with three operating segments: Exploration and Production; Refining and Marketing; and Gas, Power, and Renewables. Exploration and Production’s together with pipeline transportation and natural gas processing. Refining and Marketing includes oil supply and trading, as well as refining and petrochemicals manufacturing and marketing, including the marketing and trading of natural gas. BP is also involved in low- carbon power development, including solar and wholesale marketing and trading (BP Alter- native Energy). BP has a presence in 100 countries and employs 96,000 people in these countries. It has nearly 24,000 retail service stations around the world, and its stations sell coffee made from fair-trade beans. It is the second largest oil company in the world and one of the world’s ten largest corporations. Until 2007, BP had been a perennial favorite of nongovernmental organizations (NGOs) and environmental groups. For example, Business Ethics named BP the world’s most admired company and one of its top corporate citizens. Green Investors named BP its top company because of BP’s continuing commitment to investment in alternative energy sources. BP lists its social and community policy as follows: Objectives • • • • To earn and build our reputation as a responsible corporate citizen To promote and help the company achieve its business objectives To encourage and promote employee involvement in community upliftment To contribute to social and economic development BP has been recognized for its work in helping AIDS victims in Africa. BP Alternative Energy was launched in 2005 and anticipates investing some $8 billion in BP Alternative Energy over the next decade, reinforcing its determination to grow its businesses “beyond petroleum.” In July 2006, BP and GE announced their intention to jointly develop and deploy hydrogen power projects that dramatically reduce emissions of the greenhouse gas carbon dioxide from electricity generation. Vivienne Cox, BP’s Chief Executive of Gas, Power, and Renewables, said, on announcing the joint venture, “The combination of our two compa- nies’ skills and resources in this area is formidable, and is the latest example of our intent to make a real difference in the face of the challenge of climate change.”8 There were issues that belied BP’s good-citizen status. In 2001, BP admitted that it had hired private investigators to collect information on Greenpeace and The Body Shop. Also in 2001, its annual meeting created a stir when a shareholder proposal to stop the erection of a pipeline in mainline China was defeated when the board of direc- tors opposed the proposal. BP’s political donations were also a controversial and newsworthy subject until it abandoned the practice with the following statement: In early 2002 the company Chairman, Lord Browne, announced that it will no longer make donations to political parties anywhere in the world. In a speech to the Royal Institute of International Affairs, Browne, [sic] said “we have to remember that however large our turnover might be, we still have no democratic legitimacy anywhere in the world.... We’ve decided, as a global policy, that from now on we will make no political contributions from corporate funds anywhere in the world.” However, BP will continue to parti- cipate in industry lobbying campaigns and the funding of think-tanks. “We will engage in the policy debate, stating our views and encouraging the development of ideas—but we won’t fund any political activity or any political party,” he said. In response to a question, Browne said that over the long term donations to political parties were not effective.

6. Applying the regulatory cycle, what do you see happening with regulation in offshore drilling and the refinery and drilling portions of the oil and gas business?

7. When does OSHA assess criminal penalties? When does the Clean Air Act require criminal penalties? Wouldn’t workers’ comp cover the employees for the deaths and injuries? Why is there civil litigation?

8. The judge’s opinion on the moratorium contained this discussion of the government’s use of a report by experts on offshore drilling: Much to the government’s discomfort and this Court’s uneasiness, the Summary also states that “the recommendations contained in this report have been peer-reviewed by seven experts identi- fied by the National Academy of Engineering.” As the plaintiffs, and the experts themselves, point-experts charge it was a “misrepresentation.” It was factually incorrect. Although the experts agreed with the safety recommendations contained in the body of the main Report, five of the National Acad- emy experts and three of the other experts have pub- licly stated that they “do not agree with the six month blanket moratorium” on floating drilling. They envi- sioned a more limited kind of moratorium, but a blan- ket moratorium was added after their final review, they complain, and was never agreed to by them. A factor that might cause some apprehension about the probity of the process that led to the Report. The draft reviewed by the experts, for example, recommended a six-month moratorium on explora- tory wells deeper than 1000 feet (not 500 feet) to allow for implementation of suggested safety measures. The Report makes no effort to explicitly justify the moratorium: it does not discuss any irreparable harm that would warrant a suspension of opera- tions, it does not explain how long it would take to implement the recommended safety measures. The Report does generalize that “[w]hile technolo- gical progress has enabled the pursuit of deeper oil and gas deposits in deeper water, the risks associated with operating in water depths in excess of 1,000 feet are significantly more com- plex than in shallow water.”46 Evaluate the ethics of the Secretary of Interior regarding the representations of what the experts concluded.

9. Evaluate Mr. Hayward’s parting statement and his views on accountability.

Explanation / Answer

The regulatory cycle will have the following steps-

Decision about oil and drilling process and related policies

Establishment of the policy framework for oil industry

Administration of the policy implementation

Review of the implemented policies, guidelines and framework.

Occupational Safety and Health Administration(OSHA) is an agency belonging to US Department of Labour passed in 1970 to assure safe and healthful working conditions at workplaces.

The criminal procedures are generally weak with OSHA but employer an be prosecuted for Lying to OSHA or fabricating evidence. Fines and/or jail term can be imposed on the guilty.

Clean Air Act is the federal law intended to control air pollution and emissions from both stationary and moving sources. Penalties are imposed when there is a violation of the standards ( like NESHAP), Provisions, furnishing false reports, hiding failures, violation of operating permits or an emergency order. Jail term and/or fines can be imposed pursuant to the laws.

Worker's companies do cover their employees for death or injury at work but it may be inadequate. The laws help the victim a fair justice and commensurate compensation for their loss. The stringent penalties also ensures that the companies take proper measures for their employees safety and health.

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