Sandy Says: Where Was BP’s Credit Check?

June 1, 2010
The oil spill in the Gulf of Mexico is another grim reminder that due diligence on the part of government agencies is necessary when lives and the environment are at stake.

“We need to clean up that house,” testified Secretary of the Interior Ken Salazar, referring to the Minerals Management Agency, during one of many hearings planned by the Senate Energy and Natural Resources Committee about the April 20 Deepwater Horizon drilling rig explosion that killed 11 workers and caused an ongoing environmental catastrophe of massive proportions. He admitted that the Minerals Management Agency, which is tasked with both regulating environmental compliance and safety and promoting offshore oil operations, has a “few bad apples” on the payroll.

Bad as in granting hundreds of expedited drilling permits despite a process outlined in the National Environmental Policy Act (NEPA), which was enacted following the 1969 Santa Barbara, Calif., oil spill and mandates that federal agencies like the Minerals Management Agency must complete a thorough environmental assessment before approving major projects like offshore drilling. Bad as in believing BP officials who assured regulators at the Minerals Management Agency that the company should be granted an exemption from the process required by NEPA because the Deepwater Horizon drilling rig was at a low risk for things like explosions and fires and spills.

“We often cite our nation's strict safety and environmental laws for oil and gas development as a means to reassure Americans that we can responsibly develop our resources, but this argument will ring hollow if those stringent laws are not enforced equally stringently and objectively,” said U.S. Sen. Lisa Murkowski, R-Alaska, ranking member of the Energy and Natural Resources Committee. “Many times I have said that there are words and then there are actions — and actions necessarily have consequences. Hopefully, all actions associated with the Deepwater Horizon incident were in good faith and compliant with our laws. If that is not the case, there will be no excuse.”

I couldn't agree more. Here's a quick history lesson:

  • In March 2005, BP was operating a Texas City, Texas, refinery when a cloud of hydrocarbon vapor exploded, killing 15 workers and injuring more than 180 others. BP officials blamed employees and managers for the incident — just as they already have started to blame others for the Deepwater Horizon explosion — but OSHA disagreed and issued a $21 million fine, the largest at that time.

  • In October 2009, BP earned the distinction of breaking its own record when the company again was fined by OSHA — this time for $87.4 million — “for the company's failure to correct potential hazards faced by employees.” According to OSHA, BP Products North America Inc. failed to abate hundreds of hazards found in the investigation following the 2005 explosion.

  • In October 2007, BP agreed to pay a criminal fine totaling more than $60 million for violations of federal environmental regulations in Texas and Alaska. This was 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 company also pleaded guilty to a felony violation of the Clean Air Act and agreed to serve 3 years of probation for the Texas City incident.

I'm not a federal regulator, but I do have a brain, and common sense tells me that probably the last company I'd allow to self-police at this period in time would be BP. Cleanup costs, lawsuits from victims' families and puny federal fines are chump change to this company. In the first quarter of 2010, BP's profits averaged $93 million a day. If they stay on track, they'll earn $34 billion this year. A fine of $1 billion — 10 times what OSHA so far has issued — is less than 3 percent of their annual profits and barely would cause a ripple to BP.

So what can the federal government do to regulate companies like BP? Here's a start: Follow the intent of the law to the letter. No expedited permits, no approvals based on the word of BP or any other company that everything is fine.

If you want a BP credit card, BP runs a credit check to ensure you're a good risk. They don't just take your word that you'll pay your bill. Where was BP's credit check?

Based on past experience, BP is a bad risk, and regulators at the Minerals Management Agency weren't doing their jobs — or even applying common sense — when they exempted BP from the NEPA process.

Send an e-mail with your thoughts to [email protected].

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