BP TEXAS CITY

When British Petroleum’s (BP) Horizon oil rig exploded in the Gulf of Mexico in 2010, it triggered
tragic reminders for experts in the safety community. In March 2005, an explosion and fire at
BP’s Texas City, Texas, refinery killed 15 people and injured 500 people in the worst U.S. industrial
accident in more than 10 years. That disaster triggered three investigations: one internal
investigation by BP, one by the U.S. Chemical Safety Board, and an independent investigation
chaired by former U.S. Secretary of State James Baker and an 11-member panel that was
organized at BP’s request. To put the results of these three investigations into context, it’s useful
to understand that under its current management, BP had pursued, for the past 10 or so years
before the Texas City explosion, a strategy emphasizing cost-cutting and profitability. The basic
conclusion of the investigations was that cost-cutting helped compromise safety at the Texas City
refinery. It’s useful to consider each investigation’s findings. The Chemical Safety Board’s (CSB)
investigation, according to Carol Merritt, the board’s chair, showed that “BP’s global
management was aware of problems with maintenance, spending, and infrastructure well before
March 2005.” Apparently, faced with numerous earlier accidents, BP did make some safety
improvements. However, it focused primarily on emphasizing personal employee safety
behaviors and procedural compliance, and thereby reducing safety accident rates. The problem
(according to the CSB) was that “catastrophic safety risks remained.” For example, according to
the CSB, “unsafe and antiquated equipment designs were left in place, and unacceptable
deficiencies in preventive maintenance were tolerated.” Basically, the CSB found that BP’s
budget cuts led to a progressive deterioration of safety at the Texas City refinery. Said Merritt,
“In an aging facility like Texas City, it is not responsible to cut budgets related to safety and
maintenance without thoroughly examining the impact on the risk of a catastrophic accident.”
Looking at specifics, the CSB said that a 2004 internal audit of 35 BP business units, including
Texas City (BP’s largest refinery), found significant safety gaps they all had in common, including,
for instance, a lack of leadership competence, and “systemic underlying issues” such as a
widespread tolerance of noncompliance with basic safety rules and poor monitoring of safety
management systems and processes. Ironically, the CSB found that BP’s accident prevention
effort at Texas City had achieved a 70% reduction in worker injuries in the year before the
explosion. Unfortunately, this simply meant that individual employees were having fewer
accidents. The larger, more fundamental problem was that the potentially explosive situation
inherent in the depreciating machinery remained. The CSB found that the Texas City explosion
followed a pattern of years of major accidents at the facility. In fact, there had apparently been
an average of one employee death every 16 months at the plant for the last 30 years. The CSB
found that the equipment directly involved in the most recent explosion was an obsolete design
already phased out in most refineries and chemical plants, and that key pieces of its
instrumentation were not working. There had also been previous instances where flammable
vapors were released from the same unit in the 10 years prior to the explosion. In 2003, an
external audit had referred to the Texas City refinery’s infrastructure and assets as “poor” and
found what it referred to as a “checkbook mentality,” one in which budgets were not sufficient
to manage all the risks. In particular, the CSB found that BP had implemented a 25% cut on fixed
costs between 1998 and 2000 and that this adversely impacted maintenance expenditures and
net expenditures, and refinery infrastructure. Going on, the CSB found that in 2004, there were
three major accidents at the refinery that killed three workers. BP’s own internal report
concluded that the problems at Texas City were not of recent origin, and instead were years in
the making. It said BP was taking steps to address them. Its investigation found “no evidence of
anyone consciously or intentionally taking actions or making decisions that put others at risk.”
Said BP’s report, “The underlying reasons for the behaviors and actions displayed during the
incident are complex, and the team has spent much time trying to understand them—it is evident
that they were many years in the making and will require concerted and committed actions to
address.” BP’s report concluded that there were five underlying causes for the massive explosion:

● A working environment had eroded to one characterized by resistance to change, and a lack of
trust.

● Safety, performance, and risk-reduction priorities had not been set and consistently reinforced
by management.

● Changes in the “complex organization” led to a lack of clear accountabilities and poor
communication.

● A poor level of hazard awareness and understanding of safety resulted in workers accepting
levels of risk that were considerably higher than at comparable installations.

● Adequate early warning systems for problems were lacking, and there were no independent
means of understanding the deteriorating standards at the plant. The report from the BP-
initiated but independent 11-person panel chaired by former U.S. Secretary of State James Baker
contained specific conclusions and recommendations. The Baker panel looked at BP’s corporate
safety oversight, the corporate safety culture, and the process safety management systems at BP
at the Texas City plant as well as at BP’s other refineries. Basically, the Baker panel concluded
that BP had not provided effective safety process leadership and had not established safety as a
core value at the five refineries it looked at (including Texas City). Like the CSB, the Baker panel
found that BP had emphasized personal safety in recent years and had in fact improved personal
safety performance, but had not emphasized the overall safety process, thereby mistakenly
interpreting “improving personal injury rates as an indication of acceptable process safety
performance at its U.S. refineries.” In fact, the Baker panel went on, by focusing on these some
what misleading improving personal injury rates, BP created a false sense of confidence that it
was properly addressing process safety risks. It also found that the safety culture at Texas City
did not have the positive, trusting, open environment that a proper safety culture required. The
Baker panel’s other findings included the following.
● BP did not always ensure that adequate resources were effectively allocated to support or
sustain a high level of process safety performance.
● BP’s refinery personnel are “overloaded” by corporate initiatives.
● Operators and maintenance personnel work high rates of overtime.
● BP tended to have a short-term focus and its decentralized management system and
entrepreneurial culture delegated substantial discretion to refinery plant managers “without
clearly defining process safety expectations, responsibilities, or accountabilities.”
● There was no common, unifying process safety culture among the five refineries.
● The company’s corporate safety management system did not make sure there was timely
compliance with internal process safety standards and programs.
● BP’s executive management either did not receive refinery-specific information that showed
that process safety deficiencies existed at some of the plants, or did not effectively respond to
any information it did receive. The Baker panel made several safety recommendations for BP,
including the following.
1. The company’s corporate management must provide leadership on process safety.
2. The company should establish a process safety management system that identifies, reduces,
and manages the process safety risks of the refineries.
3. The company should make sure its employees have an appropriate level of process safety
knowledge and expertise.
4. The company should involve “relevant stakeholders” in developing a positive, trusting, and
open process safety culture at each refinery.
5. BP should clearly define expectations and strengthen accountability for process safety
performance.
6. BP should better coordinate its process safety support for the refining line organization.
7. BP should develop an integrated set of leading and lagging performance indicators for
effectively monitoring process safety performance.
8. BP should establish and implement an effective system to audit process safety performance.
9. The company’s board should monitor the implementation of the panel’s recommendations
and the ongoing process safety performance of the refineries.
10. BP should transform itself into a recognized industry leader in process safety management.

In making its recommendations, the panel singled out the company’s chief executive at the time,
Lord Browne, by saying, “In hindsight, the panel believes if Browne had demonstrated
comparable leadership on and commitment to process safety [as he did for responding to climate
change] that would have resulted in a higher level of safety at refineries.” Overall, the Baker panel
found that BP’s top management had not provided “effective leadership” on safety. It found that
the failings went to the very top of the organization, to the company’s chief executive, and to
several of his top lieutenants. The Baker panel emphasized the importance of top management
commitment, saying, for instance, that “it is imperative that BP leadership set the process safety
tone at the top of the organization and establish appropriate expectations regarding process
safety performance.” It also said BP “has not provided effective leadership in making certain its
management and U.S. ref ining workforce understand what is expected of them regarding
process safety performance.” Lord Browne, the chief executive, stepped down about a year after
the explosion. About the same time, some BP shareholders were calling for the company’s
executives and board directors to have their bonuses more closely tied to the company’s
safety and environmental performance in the wake of Texas City. In October 2009, OSHA
announced it was filing the largest fine in its history for this accident, for $87 million, against BP.
One year later, BP’s Horizon oil rig in the Gulf of Mexico exploded, taking 11 lives. In September
2014, the U.S. District judge presiding over negligence claims in the ensuing case found BP guilty
of gross negligence, basically reckless and extreme behavior; the company will appeal his ruling.

Questions
1. The text defines ethics as “the principles of conduct governing an individual or a group,” and
specifically as the standards one uses to decide what his or her conduct should be. To what extent
do you believe that what happened at BP is as much a breakdown in the company’s ethical
systems as it is in its safety systems, and how would you defend your conclusion?

2. Are the Occupational Safety and Health Administration’s standards, policies, and rules aimed
at addressing problems like the ones that apparently existed at the Texas City plant? If so, how
would you explain the fact that problems like these could have continued for so many years?

3. Since there were apparently at least three deaths in the year prior to the major explosion, and
an average of about one employee death per 16 months for the previous 10 years, how would
you account for the fact that mandatory OSHA inspections missed these glaring sources of
potential catastrophic events?

4. The text lists numerous suggestions for “how to prevent accidents.” Based on what you know
about the Texas City explosion, what do you say Texas City tells you about the most important
three steps an employer can take to prevent accidents?

5. Based on what you learned in Chapter 16, would you make any additional recommendations
to BP over and above those recommendations made by the Baker panel and the CSB? If so, what
would those recommendations be?

6. Explain specifically how strategic human resource management at BP seems to have supported
the company’s broader strategic aims. What does this say about the advisability of always linking
human resource strategy to a company’s strategic aims?

Source: Notes for BP Texas City: Sheila McNulty, “BP Knew of Safety Problems, Says Report,”
Financial Times,
October 31, 2006, p. 1 “CBS: Documents Show BP Was Aware of Texas City Safety Problems,”
World Refining
& Fuels Today, October 30, 2006; “BP Safety Report Finds Company’s Process Safety Culture
Ineffective,”
Global Refining & Fuels Report, January 17, 2007; “BP Safety Record Under Attack,” Europe
Intelligence Wire,
January 17, 2007; Mark Hofmann, “BP Slammed for Poor Leadership on Safety, Oil Firm Agrees
to Act on Review
Panel’s Recommendations,” Business Intelligence, January 22, 2007, p. 3 “Call for Bonuses to
Include Link with
Safety Performance,” Guardian, January 18, 2007, p. 24
www.bp.com/genericarticle.do?categoryId=9005029&
contentId=7015905, accessed July 12, 2009; Steven Greenhouse, “BP Faces Record Fine for ’05
Blast,”