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

Question

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.

The Oil Industry Post-Deepwater Horizon The federal government placed a moratorium on all-new offshore drilling following the Deepwater Horizon explosion and spill. However, a federal court issued an injunction against the moratorium taking effect on the grounds that the federal government had acted arbitrarily and capriciously.40 The Secretary of the Interior redrafted the morator- ium, which stayed in effect until the Obama administration lifted it in October 2010. In the initial decision, Federal District Judge Martin Feldman concluded that the failure of one well, even with safety issues, was not grounds for prohibiting all offshore drilling. After reviewing the Secretary’s Report, the Moratorium Memorandum, and the Notice to Lessees, the Court is unable to divine or fathom a relationship between the findings and the immense scope of the moratorium. The Report, invoked by the Secretary, describes the offshore oil industry in the Gulf and offers many compelling recommendations to improve safety. But it offers no timeline for implementation, though many of the proposed changes are represented to be implemented immediately. The Report patently lacks any analysis of the asserted fear of threat of irreparable injury or safety hazards posed by the thirty-three permitted rigs also reached by the moratorium. It is incident-specific and driven: Deepwater Horizon and BP only. None others. While the Report notes the increase in deepwater drilling over the past ten years and the increased safety risk associated with deepwater drilling, the parameters of “deepwater” remain confused. And drilling else- where simply seems driven by political or social agendas on all sides. The Report seems to define “deep- water” as drilling beyond a depth of 1000 feet by referencing the increased difficulty of drilling beyond this depth; similarly, the shallowest depth referenced in the maps and facts included in the Report is “less than 1000 feet.” But while there is no mention of the 500 feet depth anywhere in the Report itself, the Notice to Lessees suddenly defines “deepwater” as more than 500 feet. The Deepwater Horizon oil spill is an unprecedented, sad, ugly and inhuman disaster. What seems clear is that the federal government has been pressed by what happened on the Deepwater Horizon into an other- wise sweeping confirmation that all Gulf deepwater drilling activities put us all in a universal threat of irre- parable harm. While the implementation of regulations and a new culture of safety are supportable by the Report and the documents presented, the blanket moratorium, with no parameters, seems to assume that because one rig failed and although no one yet fully knows why, all companies and rigs drilling new wells over 500 feet also universally present an imminent danger.41 Tony Hayward was replaced as CEO of BP on July 27, 2010. Robert Dudley, a U.S. citizen and native of Mississippi, was chosen to replace Mr. Hayward. Mr. Hayward issued a statement upon his forced retirement: “The Gulf of Mexico explosion was a ter- rible tragedy for which—as the man in charge of BP when it happened—I will always feel a deep responsibility, regardless of where blame is ultimately found to lie.”42 The Deepwater Horizon well was plugged permanently in September 2010. Following BP’s guilty plea on charges related to the explosion at its Deepwater Hori- zon oil rig and payment of a $4.5 billion fine, the EPA announced that BP could not hold any federal contracts (which would include drilling on federal lands) until it was able to demonstrate that its operations meet federal standards. BP has agreed as part of its plea, to have a safety monitor on its deepwater operations and to retain an ethics monitor to ensure that employees do not violate federal laws and standards in BP operations.43 Until the ban is lifted, BP cannot bid on federal oil leases that become available.

Evaluate Mr. Hayward’s parting statement and his views on accountability in a seperate paragraph.

Explanation / Answer

The parting statement of the Hayward was

“The Gulf of Mexico explosion was a terrible tragedy for which—as the man in charge of BP when it happened—I will always feel a deep responsibility, regardless of where blame is ultimately found to lie”

This statements shows that the Hayward accepted the responsibility of the deep water drilling explosion that created a wide criticism for the company on not following the standards and practices drafted by federal government that ultimately led the barring of the BP from all federal contracts.

The statement demonstrates the and the Hay words believe that the accountability and responsibility of the acts of the organizational practices lies on the top management. This view enabled the Hayward to accept the responsibility of the accident.

Related Questions

Navigate

• Browse (All)
• Browse C
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.