Is it time to consider barring BP from federal oil leases?

Reply Sat 26 Jun, 2010 09:19 am
Posted on Friday, June 25, 2010
Is it time to consider barring BP from federal oil leases?
By Lisa Demer | McClatchy Newspapers

ANCHORAGE, Alaska — The federal government should consider barring oil giant BP from drilling on federal land or holding onto its existing leases, says a recently retired federal attorney who spent years dogging BP's operations in Alaska.

"There comes a point in time where we say enough is enough," said Jeanne Pascal, who worked for 18 years as a Seattle-based attorney for the Environmental Protection Agency. "Because BP has definitely turned into a major serial environmental criminal."

Pascal said that BP has been convicted of environmental violations three times since 2000 — twice in Alaska — and that the April 20 Deepwater Horizon blowout in the Gulf of Mexico that sparked what President Barack Obama calls the biggest environmental disaster in the nation's history fits a pattern of behavior. She said BP got off too easy when it was allowed to plead guilty in 2007 to a misdemeanor for a record North Slope spill in 2006. No individual was charged.

Scott West agrees. He was the EPA special agent in charge of the criminal investigation division in Seattle that investigated BP Alaska's operations.

"The people who are making the decisions playing fast and loose on that (Gulf) rig — 'Hurry up, we are over time, we are over budget, let's take the shortcut' — if they'd seen some of their peers go to jail for those kinds of decisions, maybe they would have said, 'You know, my bonus this year just isn't worth it,' " West said, referring to congressional allegations that BP cut corners to save money on the Deepwater Horizon project.

Both West and Pascal have been speaking out publicly since their retirements.

"BP keeps saying that they follow safety protocols and safety is their goal and health is their goal and the environment is their goal," Pascal said. "But look at their record."

That record includes:

•A felony conviction in 2000 for failing to report immediately illegal dumping of hazardous waste by a contractor at its Endicott oil field in Alaska's Beaufort Sea. The punishment: Five years probation, $7 million in fines and civil penalties and another $15 million to create an environmental management system.

•A misdemeanor conviction in 2007 stemming from the biggest oil spill ever on Alaska's North Slope. In March 2006, a BP worker discovered crude leaking from a corroded Prudhoe Bay transit pipeline — 200,000 gallons in all. BP, which admitted that its system for monitoring and preventing corrosion was inadequate, was put on three more years probation and ordered to pay $20 million in fines and penalties.

•A felony conviction last year for a 2005 Texas City, Texas, refinery explosion that killed 15 people, injured another 170 and devastated a community. BP Products North America Inc. was fined $50 million and put on three years' probation.

Pascal said there were other ruptures, explosions and near misses over the years, plus a propane price-fixing case in the Midwest that BP settled with a deferred prosecution.

West said he thinks that BP made a conscious decision not to invest in aging infrastructure for North Slope fields with declining oil production.

"We kept hearing a phrase called 'operate to failure,'" — a reference West said meant that critical systems and equipment were operated until they broke down instead of maintained.

The federal investigators in the Texas City case were "finding the exact same patterns of neglecting worker safety and environmental concerns to save a few dollars," West said. "That, of course, indicated to us that it was corporate-wide. It wasn't just isolated to a particular operating unit."

BP insists that it puts safety first and is following up on what it promised to do after the 2006 Alaska spill.

"As we said at the time, BP holds its environmental responsibility as a core corporate value," BP spokesman Steve Rinehart said in an e-mailed response to questions. "We made, and continue to make, significant improvements in our integrity management programs."

Before she retired in March, Pascal specialized in debarment, a process in which companies are prohibited from federal contracts because of environmental crimes or performance issues. It's time-consuming, complex and even when successful, might not prevent a company from operating, Pascal said.

Under the federal Clean Water Act, BP was debarred in 2008 as a result of the 2007 Alaska conviction, but the action simply meant that it couldn't get any new federal contracts at Prudhoe Bay. It didn't lose its state-issued leases or its ability to operate the field. The only contracts that might be affected relate to its sales of fuel to the military, and a different BP company refines the oil and sells the fuel.

"So it did not have any (significant) impact on its business," Pascal said of the 2008 EPA debarment action.

Because of the Gulf spill, the federal agencies involved with BP — the EPA; the Interior Department, which oversees federal drilling leases; and the Defense Department, which buys the fuel — need to evaluate whether a more sweeping debarment is in order, she said.

Targeting the company's executives is another possible way to make a tougher legal point, Pascal and West argue.

West said the investigation into BP's 2006 spill at Prudhoe was at first aimed at bringing felony charges against corporate executives on the theory that they knew pipes were dangerously corroded and didn't act.

That position seemed to be supported by Assistant U.S. Attorney Andrea Steward in a June 12, 2007, e-mail in which she said that pledges from BP officials that, "They had changed their attitude of aggressive cost cutting in 2005 and that they were changing how they did things" weren't enough to avoid prosecution.

West is still angry that two months later prosecutors decided to allow BP to plead to a misdemeanor.

"Here we had a case where we had the potential to go way high. Even to the London headquarters of BP . . . and we're settling for a corporate misdemeanor?" said West, who said his team had only begun to examine 62 million pages of documents that BP provided.

U.S. Attorney for Alaska Karen Loeffler, who headed the office's criminal division at the time, defended the decision. "We knew everything that we were going to be able to prove," she said. The $20 million fine, she said, "sent a very strong message."

Pascal and West said that for a company the size of BP, whose quarterly profits are measured in the billions of dollars, the fine was miniscule.

"To me the message has been given to BP loud and clear," West said. "You are protected. You are beyond prosecution."

(Demer reports for the Anchorage Daily News.)

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