US: BP Knew of Refinery Lapses Before Blast, U.S. Says (Update3)

BP Plc's global management team knew of safety concerns at the company's Texas City, Texas, oil refinery before a deadly explosion last year, U.S. safety investigators said.

Flammable vapors were discharged in eight instances between 1994 and 2004 from the same tank that caused the March 2005 explosion, the Chemical Safety Board said in a report. BP did not follow up on a 1994 internal action item to analyze the equipment, which dated from the 1950s, the regulator said.

``BP's global management was aware of problems with maintenance, spending and infrastructure well before March 2005,'' the board's chairman, Carolyn Merritt, said today in a statement. Before the blast, BP safety efforts were mostly focused on ``improving procedural compliance and reducing occupational injury rates, while catastrophic safety risks remained,'' she said.

The blast was the worst U.S. industrial accident in more than a decade, killing 15 and injuring 180. BP, Europe's second- largest oil company by market capitalization, has set aside $1.6 billion to compensate victims.

The London-based company, led by Chief Executive Officer John Browne, has seen its reputation suffer from accidents, maintenance failures and other missteps in the U.S. in the past year. BP's third-quarter earnings fell 3.6 percent due largely to the shutdown of Alaska's Prudhoe Bay oil field because of pipeline corrosion.

Shares of BP fell 10.5 pence, or 1.7 percent, to 591.5 pence today in London.

BP Reaction

Ronnie Chappell, a BP spokesman, said many of the findings the board published today were included in a company report last December, and that budget cutbacks criticized by the regulator were not responsible for the blast.

``We stand by the findings of our own investigation,'' Chappell said in an interview. ``Our investigation team found no evidence that previous budget decisions were a critical factor in the terrible tragedy.''

BP ``was aware of infrastructure and safety culture problems at Texas City prior to the March explosion and was taking action to address those,'' including through increased spending, Chappell said.

The investigators said maintenance declined throughout the 1990s when Amoco Corp. owned the refinery, and fell further after BP bought Amoco. ``BP implemented a 25 percent cut on fixed costs from 1998 to 2000 that adversely impacted maintenance expenditures and infrastructure,'' Merritt said in the statement.

``At 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,'' Merritt said.

Regulator Findings

The CSB will hold a press conference tomorrow in Houston to present its findings and recommendations. Today's announcement was the ``first significant update'' to the board's investigations since Oct. 27 last year, the regulator said.

BP's inaction caused ``a progressive deterioration of safety at the Texas City refinery,'' the agency said. The board makes recommendations to industry and cannot levy fines. BP agreed in September 2005 to pay a $21.4 million fine to U.S. workplace regulators because of the refinery blast.

Browne was ordered by a Texas judge earlier this month to give testimony in a lawsuit stemming from the Texas City explosion; the company is appealing the order. BP has resolved about 1,000 of roughly 1,300 lawsuits stemming from the incident.

Browne, 58, plans to retire at the end of 2008. In an interview with Bloomberg Television Oct. 24, he said the company shut down the Prudhoe Bay pipeline in Alaska as a precaution and is working to improve worker safety.

Browne and Safety

``We wouldn't knowingly operate things that are subject to a risk,'' Browne said. The company is ``improving our approach to process safety management,'' he said.

The safety board said today that fires occurred in two of the eight previous instances of vapor discharges from the ``blowdown drum'' responsible for the Texas City explosion. The drum, originally built in the 1950s, was designed to hold hydrocarbons from other lines during a unit shutdown.

Chappell said the previous vapor releases were dissimilar to the overflow that caused the deadly March 2005 explosion.

Reviews of previous vapor releases ``did not identify an incident which would have suggested the possibility of what occurred on March 23,'' Chappell said. ``None of the prior incidents involved significant over-filling of the tower or the release of a large volume of liquid to the blowdown drum.''

The BP plant, which has the capacity to process 460,000 barrels of crude a day, is operating at about half of its capacity, according to Chappell.

The CSB, an independent federal agency that probes all chemical plant accidents, said it has spent $2 million investigating the Texas City explosion. The board expects to finish its investigation of the BP blast sometime in or after March 2007.

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