TOPICS > Economy

Cost-cutting led to BP Refinery Fire, Report Concludes

November 1, 2006 at 3:41 PM EST
LISTEN SEE PODCASTS

TRANSCRIPT

GWEN IFILL: It was the worst industrial accident in this country in 15 years. The March 2005 explosion at BP’s Texas City refinery killed 15 workers and injured 180 others. At least three investigations have been launched into the blast, which was triggered by a geyser-like release of flammable vapors onto refinery grounds.

In a report released Monday, the U.S. Chemical Safety Board, or CSB, said that cost-cutting at BP, the world’s third-largest oil company, was a major factor in the deadly blast. “What BP experienced,” Board Chairman Carolyn Merritt concluded, “was a perfect storm, where aging infrastructure, overzealous cost-cutting, inadequate design and risk-blindness, all converged.”

In a written response, BP officials told the NewsHour it accepts responsibility for what the company says was a “preventable tragedy.” BP, however, took issue with some of the board’s conclusions, saying that its own investigation “did not identify previous budget decisions or lack of expenditure as a critical factor or immediate cause of the accident.”

In the statement, BP said it had been trying to fix the problems it discovered “through increased spending on operations, maintenance and plant integrity.”

In addition to its internal investigation, BP, a NewsHour underwriter, said former Secretary of State James Baker will lead a separate probe, as well. The company, which has settled claims with all but one of the families of those killed in the blast, has set aside $1.6 billion to pay for compensation claims.

And joining me now is Carolyn Merritt, the chairman of the U.S. Chemical Safety and Hazard Investigation Board. We also invited representatives from BP and the Oil Industry Association to appear; both declined.

Chairman Merritt, let’s talk first about the question which everybody wants to know, which is: How could this have happened? What were your answers?

Negligence and cutting costs

Carolyn Merritt
U.S. Chemical Safety Board
We feel that some of the maintenance of equipment that wasn't performed caused this accident to happen.

CAROLYN MERRITT, U.S. Chemical Safety and Hazard Investigation Board: Well, as you mentioned in your opening statement, we feel that this was a perfect storm of events that just converged on this day. There was a series of cost-cutting measures that were very drastic.

Twenty-five percent of the fixed costs at BP were implemented over the last number of years. Those resulted in maintenance deterioration and employee reduction, supervision reductions. And on the day that this event happened, we feel that some of the maintenance of equipment that wasn't performed caused this accident to happen.

GWEN IFILL: Now, without going into too much detail, there were these devices, I suppose, these pipes called blow-down stacks, which couldn't vent out sufficiently or correctly the amount of vapors that were going in. Have these 1950s-era, I gather, types of structures now been discontinued at this oil refinery and at others, as well?

CAROLYN MERRITT: No, these are still being used. BP has committed to replace all of this equipment at all of their refineries in the United States. We think that there are 22 of these devices.

This will take a while, though. In the meantime, they're still being used. They also exist in other refineries across the country, but we're not really sure how many exist.

GWEN IFILL: When you say cost-cutting was a primary reason why this maintenance wasn't kept up, what kind of cost-cutting? And how did that directly affect safety?

CAROLYN MERRITT: The replacement of this equipment was costly. It had been proposed on a number of occasions and had been declined in the budgeting process due to cost-cutting measures. But we also feel that reduction in personnel, reduction in training staff, and preventive maintenance were also indicators that cost-cutting set up this accident and allowed it to happen.

Safety at other companies

Carolyn Merritt
U.S. Chemical Safety Board
We are concerned that process safety is deteriorating across the country and that cost-cutting measures very well may have impacted other companies, as well.

GWEN IFILL: While you were conducting your investigation, did you see any evidence that the kinds of conditions that existed in Texas also exist at other refineries and are not necessarily unique to BP?

CAROLYN MERRITT: Well, certainly, in BP's refineries, we were concerned that these same conditions might exist, and the Chemical Safety Board made an urgent recommendation for the establishment of the independent panel, which is led by James Baker. That panel is reviewing the operations in all of BP's operations to determine whether similar conditions exist.

But in my travels around the country, I think I've also been told by other people -- and we are concerned that process safety is deteriorating across the country and that cost-cutting measures very well may have impacted other companies, as well. That's one of the reasons we feel it's important to release this information now so that other companies might be forewarned in the event that they have similar circumstances.

GWEN IFILL: What are the warning signs that other companies should be looking for that their cost-cutting might be cutting too close to the bone?

CAROLYN MERRITT: I think the in-flow of capitol or money into processes for modernization is certainly one of them. But in evaluation of the manpower cuts that have been made over the last number of years, as to whether or not operators and supervision are sufficient to properly operate these very complicated pieces of equipment, especially in very complex times, like in start-ups, it's a very important thing that they be adequately trained and that they have sufficient personnel to make sure that these processes are going smoothly.

BP's defense

Carolyn Merritt
U.S. Chemical Safety Board
The equipment that was there had been there a long time, and it was there when they purchased it. The problem is, is that no money was invested in this facility to change out this equipment.

GWEN IFILL: Now, BP, in its defense, says this was not a matter of cost-cutting and, in fact, that a lot of the problems that had existed before they purchased this oil refinery were problems they were attempting to address. What do you say to that?

CAROLYN MERRITT: Well, certainly, the equipment that was there had been there a long time, and it was there when they purchased it. The problem is, is that no money was invested in this facility to change out this equipment.

In 1992, it had been identified as unsafe, and it had been identified also in several other studies that should have indicated this equipment should have been replaced. BP's own policy was that, if this equipment were to be modified or if the systems were to be rebuilt, that this equipment should be replaced.

And even though there were a number of opportunities, this equipment was not replaced. And our evidence is that it was not replaced for budgetary reasons.

GWEN IFILL: Carolyn Merritt of the U.S. Chemical Safety Board, thank you so much for joining us.

CAROLYN MERRITT: Thank you.