Abrahm Lustgarten & Martin Smith
WRITTEN AND PRODUCED BY
Marcela Gaviria & Martin Smith
Editors' Note: Following the broadcast of The Spill, FRONTLINE acknowledged an error of journalistic ethics in the editing of a section of the interview with David J. Hayes, deputy secretary of the Department of the Interior, which appears below in this transcript. This error is addressed here in the PBS Ombudsman column of Nov. 2, 2010. The revised program video and updated program transcript were posted Friday, Nov. 5, 2010, on this website.
TONY HAYWARD, BP CEO: Safety remains our number one priority.
CAROLA HOYOS, Financial Times: BP can talk about safety all they want, but they're not going to become a safer company.
MICHAEL THEURICH, Pipe Inspector: They base everything on a risk. "How many lives can we afford to lose before we need to deal with this?"
911 OPERATOR: 911.
CALLER: Yes, this plant just blew up!
ANNOUNCER: From Texas and Alaska to the Gulf of Mexico—
NEWSCASTER: BP apologized again this morning—
ANNOUNCER: —apology after apology.
ABRAHM LUSTGARTEN, ProPublica: They pledge repeatedly to run a safer operation, yet they continue to cut costs.
KRISTJAN DYE, BP Prudhoe Bay: We have a facility here that could produce a cloud of gas that would make this place look like Hiroshima.
ANNOUNCER: What went wrong at BP?
MARC KOVAC, BP Prudhoe Bay: The culture of BP management has to change. They refuse to change.
ANNOUNCER: Tonight on FRONTLINE, correspondent Martin Smith joins forces with ProPublica to investigate The Spill.
NEWSCASTER: The oil rig Deepwater Horizon exploded.
NEWSCASTER: There was growing desperation along the U.S. Gulf Coast today—
NARRATOR: It's been called the worst environmental disaster in U.S. history.
NEWSCASTER: —42,000 gallons of oil—
NEWSCASTER: —210,000 gallons of oil-
NEWSCASTER: —2.1 million gallons a day—
NARRATOR: A geyser of oil that caught the government off guard—
PROTESTERS: No more oil spills! Arrest BP!
NARRATOR: —and threw a spotlight on a company that Americans knew little about.
BRITISH NEWSCASTER: In Washington today, protesters called for the U.S. government to get hostile with BP.
NARRATOR: When two months after the blowout, BP's CEO, Tony Hayward, came to Capitol Hill.
Rep. BART STUPAK (D-MI), Chair, Energy Scmte.: The testimony you are about to give—
NARRATOR: He was there to explain what happened and why.
Rep. BART STUPAK: Begin your opening statement. And let me again on behalf of—
NARRATOR: From the start, it didn't go well.
TONY HAYWARD: Chairman Waxman, Chairman Stupak—
PROTESTER AT HEARING: Tony Hayward, look at my hands! This is what it looks like for the Plaquemines down there! And I think you need to be charged with a crime! You need to go to jail! As a matter of fact, I've got some chains and I'll- you need to be charged with a crime!
Rep. JOHN DINGELL (D), Michigan: Can you tell us under oath that the decision to use six centralizers instead of—
NARRATOR: Amidst the technical questions, there were deeper concerns—
Rep. MICHAEL BURGESS (R), Texas: You're the CEO of the company!
TONY HAYWARD: With respect, sir, we drill hundreds of wells a year all around the world.
Rep. MICHAEL BURGESS: Yeah, I know. That's what's scaring me right now.
NARRATOR: —about whether this was a company that could be trusted.
Rep. HENRY WAXMAN (D-CA), Chair, Energy and Commerce Cmte.: Mr. Hayward, when you became CEO three years ago, you said that safety was going to be your top priority.
NARRATOR: The interrogation produced few new answers.
TONY HAYWARD: One of the reasons that I am so distraught—
Rep. HENRY WAXMAN: I don't want to know whether you're distraught.
NARRATOR: It was mostly political theater.
Rep. HENRY WAXMAN: They're going to have a hard time reaching conclusions if you stonewall them.
TONY HAYWARD: I'm not stonewalling.
NARRATOR: It was also not the first time the company had been in trouble.
In London, the board has been in crisis mode for much of the last five years. They've encountered disasters on all fronts- at their refineries, in their oil fields. The blowout in the Gulf is just the latest.
DAVID UHLMANN, Department of Justice, 1990-07: This is a company that has brought us the worst environmental disaster in U.S. history. That's not an accident.
NARRATOR: Critics say BP has a very bad record. It's a company that has grown too fast and taken on too many risks. This is a story about ambition and its consequences.
To investigate BP's corporate history, we started here, in Texas City, the site of the company's largest and one of its most troubled refineries.
ABRAHM LUSTGARTEN, ProPublica: [on the phone] Hi, Don. My name is Abrahm Lustgarten and I'm a reporter with ProPublica. I'm calling you because I'm working on an in-depth piece about the history of BP and its management culture.
NARRATOR: BP had an accident here in 2005, where 15 people died in an explosion and fire, 170 more were injured. Afterwards, there were charges that BP's management valued profits more than safety.
We came to the refinery hoping to talk to managers.
MARTIN SMITH, Correspondent: So this is all BP, right?
ABRAHM LUSTGARTEN: Yeah.
NARRATOR: BP declined.
ABRAHM LUSTGARTEN: And the explosion would have happened, then, on the far side of all this big equipment.
MARTIN SMITH: Right.
NARRATOR: The 1,200-acre refinery was acquired by BP in 1999 as part of a $61 billion takeover of the American oil company Amoco. But built in 1934, the refinery was in bad shape. Workers and contractors were wary of the place.
DAVE SENKO, BP Contractor: The refinery was not in prime shape, put it that way- rotted-out columns, things that were rusted, not protected from corrosion, fire hazards everywhere.
MIKE SAWYER, Safety Consultant: It was typical for them to experience a fire every week, on average. A fire every week is a warning sign that something is critically wrong at the facility. It was the worst refinery around this area, for sure.
NARRATOR: When the refinery was under Amoco's management, major upgrades had been postponed. For example, in 1991, Amoco considered replacing its antiquated blowdown drums, used to collect volatile liquids and gases in an emergency, with safer modern flares. They decided against it.
T.J. AULDS, Galveston County Daily News: A flare is more efficient and safer than a blowdown stack. And there were several blowdown stacks within the refinery that were old technology. Long after a lot of other folks said, "We're not using those anymore," BP still was using them.
NARRATOR: It was a question of saving money. These emails from 2002 reveal that BP had also considered updating the blowdown drums. "We need to decide if we want to invest $150,000 now to save more money later on," wrote one employee. A senior manager responded capital expenditure is, "very tight. Bank the $150,000 dollars in savings now."
CAROLA HOYOS, Financial Times: And at that point, BP culture was "Show me the money." And refining was not showing them the money.
RONALD FREEMAN, Banker, Adviser to BP: You can only spend a penny once. "Should we do it fixing up this refinery?" You're choosing among priorities. And they did not give this deferred maintenance priority at Texas City refinery the attention, the priority it should have gotten.
NARRATOR: The pressure to cut costs came from the very top of BP. After the buy-out of Amoco, Tony Hayward's predecessor, Lord John Browne, ordered a 25 percent cost cut across the company. The message was relayed down through the ranks.
NELSON SCHWARTZ, New York Times: I don't know if they realized just how devastating the cost-cutting ethos was when it actually played out in the field. When there's a whisper at the top of the company, it becomes like a shout at the bottom.
T.J. AULDS: You were starting to hear a little bit more about, "Make do with what you've got and try to make it more efficient." So you were taking older equipment and pushed it to the hilt. If something didn't blow up, it was a good day.
NARRATOR: In March 2004, there was a major fire. Fortunately, it was in an unmanned part of the refinery. Nobody was hurt, but problems continued. Don Parus, a safety-conscious engineer, took over the refinery a few months later and was trying to turn things around.
T.J. AULDS: Don was the refinery manager. Or as locals like to say, he was the second mayor of the town. The workforce tended to trust in him because I think for the first time, they were having a refinery manager who was harping a little bit more about safety.
NARRATOR: One of the first things Parus did was commission an employee survey. In it, workers talked about their "exceptional degree of fear." They worried about dying.
[www.pbs.org: Workers' safety concerns]
DON HOLMSTROM, U.S. Chemical Safety Board: There was a fatality once- approximately every 18 months or so. The feeling of the workforce was that there was an eminent catastrophic accident that could happen in the near future.
NARRATOR: Parus alerted his boss in London, John Manzoni, BP's chief of refining, about the severity of safety issues.
ABRAHM LUSTGARTEN, ProPublica: Don Parus had held several meetings with John Manzoni, the head of refining. In each, he expressed grave concerns about the safety of working at the Texas City refinery.
NARRATOR: Parus even went to BP headquarters in London and showed Manzoni a Power Point presentation. In it, a list of dead workers, details on two recent fatal accidents, a tally of more than 20 fatalities in 30 years.
T.J. AULDS: The basic response Don Parus got from that was, "Well, that's your job to make sure this stuff doesn't happen." And he was pleading for, "Well, let me have the materials to do my job that way." London saw it a different way. And that's part of that culture that BP didn't get.
ANNOUNCER: [BP television commercial] We know we have to beat the others to win you over. Can we do it?
MAN: You bet your BP we can!
NARRATOR: Twenty years ago, BP was nothing like the powerful multi-national corporation it is today. The years of the once great Anglo-Persian oil company were long past. A revolution in Iran had crippled the company.
CAROLA HOYOS, Financial Times: Among its peers, it was a company to be pitied rather than emulated. It had had to cut its dividends. Its share price was at a low. BP was in a very dark place in the late '80s, early '90s.
NARRATOR: It was then that a new group of managers came along and attempted to rescue the company from mediocrity.
BP EXECUTIVE: It was a good year for BP in very challenging times—
RONALD FREEMAN, Banker, Adviser to BP: They had not found a way to replace the Iranian reserves. They were not going to do so remaining hierarchical and stuffy. They had to get out there and they had to compete.
NARRATOR: A young engineer, John Browne, was one of the new managers. From early on, he had a reputation as an aggressive cost cutter.
JOHN BROWNE, CEO, BP, 1995-2007: Jobs can be made wider without necessarily moving people.
NARRATOR: He was a math whiz, a numbers man, and the board liked him. In 1995, he was made CEO. But he was a different kind of oilman.
CAROLA HOYOS: In many ways, yes, he wasn't a Texas oilman, but he was also not even a European oilman. He had very refined tastes. He enjoyed, obviously, fine wine and he enjoyed his cigars. He was a very big opera goer and opera buff.
NARRATOR: He never married and lived with his mother, who often accompanied him to BP functions.
NELSON SCHWARTZ, The New York Times: He doesn't have that larger-than-life J R. Ewing kind of thing going on at all. But he was definitely willing to take big risks and make big, big bets.
NARRATOR: Browne surrounded himself with a small group of executives, including Bob Dudley, Tony Hayward and John Manzoni, known inside the company as his "turtles."
ABRAHM LUSTGARTEN: As in Ninja Turtles, rising stars in the BP corporate structure who he thought one day had the ability or the potential to lead the company.
NARRATOR: Until then, Browne set the agenda. It was Browne who took the company on a gigantic buying spree.
RONALD FREEMAN: John wanted to be the biggest. He was competing with Mobil, competing with Exxon, competing with Chevron, and he was bound and determined to use mergers and acquisitions as the lever to propel BP into the big leagues.
JOHN BROWNE: By merging our assets and our prospects with those of Amoco—
NARRATOR: Browne began by purchasing Amoco.
JOHN BROWNE: If you put the two together, you have a world class set of complementary assets.
NARRATOR: Then quickly, Browne would buy six other companies, including Arco with its large Alaskan holdings.
JOHN BROWNE: Putting the two companies together—
NARRATOR: In just five years, he quadrupled the company's value.
JOHN BROWNE: We'll be the largest producer of oil in the non-OPEC world.
ABRAHM LUSTGARTEN: It's a remarkable feat. Almost overnight, BP became a world player.
BP COMMERCIAL: Time to go beyond- beyond- beyond- beyond.
ABRAHM LUSTGARTEN: They went from a struggling also-ran into a company that was fast on the heels of Exxon, the largest company in the world.
BP COMMERCIAL: The people of BP believe it's time to go beyond what the world expects from an energy company.
NARRATOR: But by the end of his buying spree, Browne was under pressure both to cut costs and to reinvent his company.
JOHN BROWNE: One of the problems with building a company up in bits—
NARRATOR: Browne spoke of the challenge at this management retreat in 2003.
JOHN BROWNE: Here's the practical, real danger. A complex organization cannot be specified in rules—
RONALD FREEMAN: Growth creates challenges to management. There's no question about that. I've worked with small companies, I've worked with big companies. Big companies are harder to manage.
JOHN BROWNE: So Enron melted down. Worldcom had an accounting scandal. Adelphia, you know, the CEO's gone to jail, I think.
RONALD FREEMAN: BP in this case just grows beyond its management ability to watch everything they need to watch when they need to watch it.
JOHN BROWNE: Delegation, of course, comes with limits—
JANET GUYON, Fortune 1997-2006: Browne had shown himself as having an ability to get deals done, understanding how to negotiate complex deals.
JOHN BROWNE: It's about integration, too. And I'll come back to that.
JANET GUYON: But while they were successful in expanding commercially, they were less successful in instituting a sense of operational excellence within the organization.
JOHN BROWNE: [2003 interview] You must be very clear, as a leader, who it is you are delegating authority to—
NARRATOR: In an interview that year, Browne acknowledged that the real measure of his new company lay ahead.
JOHN BROWNE: And the real quality of a company is, of course, the test on how well things are going when things go well. But the real test is how do we respond when things go wrong. And that's a test which—
NARRATOR: Things went wrong on March 23rd, 2005, as workers at the Texas City plant were starting up the isomerization unit. The ISOM unit - used to boost the octane level of gasoline - had been down for maintenance, the so-called turn-around.
DAVE SENKO: The most dangerous time of a refinery unit is when it's being started up, and when it's being decommissioned and taking the product out of it and- and turning it- turning it off, so to speak.
NARRATOR: Dave Senko, a supervisor with Jacobs Engineering, a BP contractor, was off-site at the time. But his team, unaware of any danger, had gathered inside a trailer near the adjacent ISOM unit.
DAVE SENKO, BP Contractor: We were not told that that unit was in a turn-around mode. None of my people were aware.
DAVE LEINING, BP Texas City, 1969-06: We were never told. We have a morning meeting before we start the day—
NARRATOR: Dave Leining of BP was meeting with Senko's team. He was also unaware of the start-up.
DAVE LEINING: Nobody said a word to us about the ISOM starting up.
NARRATOR: By midday, workers had unknowingly overfilled the ISOM tower with flammable liquids.
CHEMICAL SAFETY BOARD REPORT: "The tower steadily filled with liquid, more than 15 times the normal level."
NARRATOR: A gauge that was supposed to measure the amount of liquid in the tower failed. Some alarms that should have sounded didn't. Other alarms were simply ignored. In an emergency, excess gas and liquid can be re-routed to the blowdown drum. But there was too much.
CHEMICAL SAFETY BOARD REPORT: "As flammable hydrocarbons overfilled the blowdown drum, operators nearby saw a geyser of liquid and vapor erupt from the top of the stack."
NARRATOR: The antiquated blowdown drum had no flare to handle the emergency.
T.J. AULDS, Galveston County Daily News: The actual flammable liquid is flying out the top of this thing like a- like Old Faithful.
DAVE LEINING: The trailer started shaking real violent. And as I got up and turned sideways, that's when the explosion happened. And then just the force of the blast knocked me down to the ground. And then you could see a big ball of fire just roll over our heads, right over the trailer. It just got real quiet. It got real dark. I figured, you know, that's- that's the end.
911 OPERATOR: 911.
CALLER: A plant just blew up. Oh, my God!
911 OPERATOR: Texas City 911. State your emergency.
CALLER: Yes. This plant just blew up!
CALLER: It's the ISOM! The ISOM!
NARRATOR: It was the biggest industrial accident in decades.
FIRST RESPONDER: Get me at least a half dozen available firemen! We got people trapped in this trailer, trying to get to them.
DON PARUS, Manager, BP Texas City: It's been a sad day for BP Texas City, really sad day for me personally, as well. This time, regretfully and with shock, I have to report to you that there has been some fatalities.
BP SPOKESMAN: Mr. Browne has spent the morning visiting our site. He's now agreed to spend a few minutes with you. This is John Browne, our group chief executive.
JOHN BROWNE: Thank you. Ladies and gentlemen, good morning, and thank you for joining us. Yesterday was a dark day in BP's history. All of us at BP are very deeply saddened by the loss of life and injury suffered by so many people.
NARRATOR: Lawsuits ensued.
JOHN MANZONI: My name's John Manzoni. I live in London, and I'm with BP. And my—
NARRATOR: In a taped deposition, John Manzoni, head of refining, was asked about his visits to Texas City.
TONY BUZBEE, Plaintiffs' Attorney: When was the first time you learned there were serious safety concerns at BP Texas City?
NARRATOR: Manzoni claimed he'd never been made aware of serious safety issues at the plant.
JOHN MANZONI: The 23rd of March, 2005.
TONY BUZBEE: Before that, you had no idea that there was a risk of catastrophic injury?
JOHN MANZONI: No. I think, had I been aware that we could have had a catastrophic failure, we would have taken action earlier.
TONY BUZBEE: When Mr. Manzoni was asked directly, "Were you aware of all of the multiple safety concerns being raised," his response was "No." And I just- I couldn't believe that was true.
NARRATOR: Manzoni also denied knowing about the cost cutting in Texas City.
BRENT COON, Plaintiffs' Attorney: After the merger, there was apparently a decision made to advise the various business unit leaders at the various refineries to cut their fixed operational budgets another 25 percent. Do you know anything about that?
JOHN MANZONI: No, not specifically.
NARRATOR: Eventually, BP paid victims and their families over a billion dollars in exchange for their agreeing never publically to criticize the company. Everyone signed, except for this woman, Eva Rowe, who lost both her mother and father.
EVA ROWE, Plaintiff: BP wanted to meet and talk about a settlement. In my mind, I was thinking, "You people are crazy that I'm just going to sign this and go away, and you guys are going to get away with what you've done?"
MARTIN SMITH, Correspondent: What did you say to them?
EVA ROWE: I specifically told them that that sucks. This was not an accident. This was profits over people. I mean, there were, like, small repairs that would have cost their company, like, $100,000 for, like, a flare system that would have prevented the explosion also, and they didn't do that.
NARRATOR: Rowe says that BP did not get in touch with her until a month after the blast, when they sent her $25,000 dollars and this letter.
EVA ROWE: I got a form letter. "Dear Ms. Rowe, we're sorry for the loss of your father, James Rowe."
NARRATOR: But it was the only letter she received.
EVA ROWE: I never received one that apologized for the loss of my mother, so- it was kind of upsetting.
NARRATOR: A year and a half after the accident, BP finally settled with Rowe for an undisclosed amount of money and $32 million dollars in donations to charities of her choice. She also insisted that BP be forced to release seven million internal documents.
EVA ROWE: That's all I wanted in the first place, was for the world to be able to have the information from BP on what happened there.
NARRATOR: Those documents contributed substantially to government investigations into what happened at Texas City.
Another investigation, commissioned by BP, was led by former secretary of state James Baker.
JAMES BAKER: BP is going to approach process safety—
NARRATOR: The reports concurred.
JAMES BAKER: BP has not adequately established process safety as a core value.
[www.pbs.org: More on the investigations]
NARRATOR: At the end of Baker's press conference, Browne apologized via satellite from London.
JOHN BROWNE, CEO, BP, 1995-2007: BP gets it. And I get it, too. This has happened on my watch, and as chief executive, I have a responsibility to learn from what has occurred.
NARRATOR: Seventy-one million in federal fines were paid, but no BP official was ever charged with a crime.
DAVE SENKO, BP Contractor: What bothers me most is that here we are, five-plus years after that blast, and not a single person has been blamed for the incident or the conditions that caused it.
NARRATOR: Today, the refinery continues to be one of BP's most troubled and dangerous. Four people have died here since the 2005 accident. And in June 2010, T.J. Aulds of The Galveston Daily News reported that BP Texas City released toxic gases over a 40-day period this last spring. It resulted in more than a half a million pounds of pollution. BP reported the release to regulators. The EPA is investigating.
EVA ROWE: You know, it's their history. Bad things have happened everywhere BP operates. Everywhere they operate, something bad happens.
NEWSCASTER: BP is in crisis mode after severe pipeline corrosion forced the company—
NEWSCASTER: The conditions at the spill site nothing less than brutal—
NEWSCASTER: —investigative hearings into why the company had to shut down—
NARRATOR: A year after the explosion in Texas City, there were problems on another front, Alaska.
This is BP's giant Prudhoe Bay oil field on Alaska's North Slope. It represents eight percent of America's domestic oil production. But opened more than 30 years ago, inadequate or deferred maintenance here, too, has workers worried.
MARC KOVAC, BP Prudhoe Bay: The pipelines are rusted where insulation has fallen off.
NARRATOR: Managers won't talk. But workers like Marc Kovac, protected by their union, explained how back in the '60s, everyone thought the field would last 20 years. They were wrong.
MARC KOVAC: All the modules were designed in 1966 and put in place in the '70s. And the expected lifespan of the field and that equipment was designed to last until 1987, and then it was supposed to be pulled out. After they started drilling, they knew that the pay zone was a lot deeper but were still using a lot of the infrastructure that was supposed to be pulled out in '87. They are going to run everything to failure, which means that everything here is going to be worn out completely by the time they decide to leave.
KRISTJAN DYE, BP Prudhoe Bay: There is so much money here and still so much oil to be made that they're kind of in the quandary of having all this aging infrastructure, but they have to stay here to make the big money that they're making off of here.
NARRATOR: As in Texas City, the workers say BP has focused on cost cutting.
NELSON SCHWARTZ, New York Times: When I was doing reporting on Alaska, that's when I really began to hear about this incredible focus on cost cuts and that there was just tremendous pressure. And it was just shocking to me that a company would be flying so close to the edge on something, you know, where the down side is so huge.
NARRATOR: BP employs nearly 300 contractors to inspect the pipes and wells. But it's a huge challenge.
MIKE THEURICH, Pipe Inspector: Our plan would say, "This line, this line, and this line, you're going to do five inspections on it this year." And it might be miles and miles long. It's kind of like a crapshoot, as far as are you going to find some damage or not? We're inspecting as much as we have time to inspect, but BP's- they base everything on a risk. You know, "What's the risk?" "How far can we go with this before we're going to lose a life" or "How many lives can we afford to lose before we need to deal with this?"
NARRATOR: In 2002, oil worker Don Shugak was about to inspect well A-22.
MARC KOVAC: He did not know, and was not told, that that well had a leak and had a problem. The well blew up. He was smashed against his truck. And he had broken bones and was burned.
NARRATOR: Don Shugak lay in a coma for six weeks. These pictures were taken after he awoke. He settled with BP for an undisclosed sum. In exchange, he agreed not to speak to the media.
ABRAHM LUSTGARTEN, ProPublica: It's essentially a gag order. There are many people who would say that BP devotes more effort and attention to making that a priority than they do to keeping their facilities safe in the first place.
NARRATOR: But far from quieting concerns, Shugak's accident spurred workers once again to bring safety problems to the attention of management.
MARC KOVAC: And we would send a letter to London. Normally, we'd get a nice answer back but no action.
SCOTT WEST, Fmr. EPA Criminal Investigator: Information had been brought forward by the corrosion technicians and other employees to management, had been summarily ignored. People had been told to shut up about it. And the potential for a corrosion-related rupture was significant. And lo and behold, in March of '06, it proved to be true.
NARRATOR: In March 2006, 260,000 gallons of oil leaked from a pipeline. It was the worst spill ever on the North Slope.
MARC KOVAC: We told management there was going to be spills and that these lines were going to break. And we had a lake of oil out there that was over three foot deep and rippling in 40-below weather.
SCOTT WEST: Two hundred thousand gallons is nothing to be sneezed at. However, being that it was wintertime, it made the response possible to basically get most, if not all, of the hydrocarbons up out of the environment. Had it been mid-summer and the sheet flow of water across the North Slope and into the Beaufort Sea, 200,000 gallons would have been an environmental, ecological disaster.
NELSON SCHWARTZ: As it turned out, they weren't doing enough of what they call "pigging," which is putting through a metal thing - they call it a pig - that clears the sediment from the pipes. And this was an actual cost cut. They figured they didn't need to do it as often and they'd be just fine.
KRISTJAN DYE: We had not pigged and cleaned the line for a long, long time.
NARRATOR: The pipe had not been pigged for nearly a decade. BP managers had concluded that pigging wasn't necessary.
KRISTJAN DYE: Several years previous to this, they had wanted to do away with the pigging crew entirely in union negotiations. They didn't want them- they wanted to lay them off.
MARTIN SMITH: What, not pig at all?
KRISTJAN DYE: Right. They'd actually made that proposal across the bargaining table. And we said absolutely not.
NARRATOR: Five months after the spill, Lord Browne arrived to personally inspect the pipelines. He was assured by his chief corrosion expert that the leak was an isolated incident.
BILL HEDGES, BP Corrosion Expert: The other lines that we still have in operation today aren't showing this problem at all. So we believe that right now that the problem was located at this specific segment of the line.
JOHN BROWNE: This is the only time that something has happened, but one- one time is too many.
NARRATOR: Two days later, there was another spill.
NEWSCASTER: BP is in crisis mode after severe pipeline corrosion forced the company to shut down its Prudhoe Bay field in Alaska.
NARRATOR: BP was forced to shut down its operations. It caused a major disruption in oil supplies, and in the lower 48, a spike in prices at the pump.
NEWSCASTER: BP apologized again this morning for their failure to keep the crucial commodity flowing.
NARRATOR: In the wake of the shutdown, a senior BP official was reassigned.
NEWSCASTER: Is the pipeline corrosion in Alaska just the latest example of bad luck for the company, or are there serious management issues for BP?
NARRATOR: Meanwhile, the subcontractor responsible for pipe inspections, Acuren, had hired a new supervisor. His name was Martin Anderson.
MARTIN ANDERSON, Acuren Supervisor: [safety video] My name is Marty Anderson. I'm the quality assurance and—
I had received a phone call from North Slope project manager with Acuren at the time, who was responsible for providing nondestructive testing for the corrosion inspection chemicals group for BP. He asked me if I'd be interested in a supervisor's position.
MARTIN SMITH: What do you begin to find? What do you uncover?
MARTIN ANDERSON: As you know, I'm not at liberty to discuss too many details.
MARTIN SMITH: You're saying you can't talk freely because you signed a nondisclosure agreement?
MARTIN ANDERSON: That's correct.
NARRATOR: Anderson can't say anything that criticizes the company.
MARTIN ANDERSON: I'm not at liberty to-
NARRATOR: And has never spoken to the media before. But independently, ProPublica and FRONTLINE have learned that some pipe inspectors were not certified or trained properly.
MARTIN SMITH: I've shown you this letter, this e-mail, previously. And you had a chance to look through that and read it, right?
MARTIN ANDERSON: Yes.
NARRATOR: Anderson's findings are cited in this email sent to BP officials from an attorney who deals with worker complaints. The concerns are described as "serious," revealing a "significant quality control breakdown" with "inspectors in the field performing inspections for which they were not qualified."
[www.pbs.org: Read the e-mail]
MARTIN SMITH: Is there anything in there that is inaccurate?
MARTIN ANDERSON: No, that's a very factual document.
MARTIN SMITH: You found that inspectors were unqualified?
MARTIN ANDERSON: Yes, everything in that letter is factual.
MARTIN SMITH: Have you ever suspected that what you were seeing was actually intentional, and therefore criminal?
MARTIN ANDERSON: I've had concerns, not being an attorney, knowing what is breaking the law, and what is not breaking the law. But I can tell you that I was very uncomfortable with the situation that they had.
NARRATOR: BP has since acknowledged that more than 19 inspectors, responsible for 13,000 inspection points, were unqualified. They say they've corrected the problem and that at least 10,000 inspection points have been re-examined.
By 2006, BP most promising oil fields were here in the Gulf of Mexico. They had bet their future on it.
JANET GUYON, Bloomberg, 2006-10: If you want to continue to grow as an oil company, you have to keep extracting more oil. It's simple. So deepwater was the next frontier.
NARRATOR: The U.S. government, worried about dependence on Middle East oil, encouraged it.
CAROLA HOYOS, Financial Times: They wanted the deep waters of the Gulf of Mexico to be explored. And BP was the kid in the front of the class putting up its hand before it even had an answer, basically. They like to be pushing into ever deeper territory. It's how you get kudos in the industry, and it's hugely impressive, what they were doing.
NELSON SCHWARTZ, New York Times: They were very confident. They actually believed they were going to overtake Exxon in terms of production. They'd found a lot of oil in the gulf, and they were feeling like on top of the world.
NARRATOR: BP is the leading operator here, producing 25 percent of all Gulf oil from some of the deepest waters in the world.
CAROLA HOYOS: In fact, it was BP who had found the deepest ever. So everybody was actually pretty excited about this, and people were just losing sight of the risks.
RONALD FREEMAN, Banker, Adviser to BP: The deep Gulf was regarded as a very difficult place to drill- storms, hurricanes, just putting a deep well down through a lot of water. It's geologically a difficult place in which to operate.
NARRATOR: Thunder Horse, which towers 43 stories above water, was BP's showcase platform, a symbol of the oil giant's ability to innovate, to push technology to the limit. But in July 2005, Hurricane Dennis swirled over the Gulf of Mexico.
The rig's celebrity would be short-lived. Thunder Horse toppled over.
RONALD FREEMAN: This was a state-of-the-art rig which had cost BP billions of dollars to design and build, and it looked like it was going to sink. It was very embarrassing.
NARRATOR: After an investigation, BP discovered that the storm wasn't the problem.
ABRAHM LUSTGARTEN, ProPublica: That in itself shouldn't have been disastrous. It turns out that BP engineers had incorrectly installed a number of valves that are meant to control the flow of water in the supports that keep the rig afloat. And the rig, as a result, took on water instead of shedding it.
NARRATOR: A senior engineer on the Thunder Horse project agrees it was human error.
GORDON AAKER, Mechanical Engineering Consultant: The storm is not really the cause of why that thing almost flipped, it's because the check valve was installed backwards, OK? And all that was probably caused by being in a hurry and not dotting their I's and crossing their T's in this case.
NARRATOR: The platform became one more big black eye for BP.
NELSON SCHWARTZ: You had Texas City. You had Alaska. You had the problems at Thunder Horse. I think the first one or two incidents, people were able to say, "Well, you know, everybody's had these accidents." But after a while, so many things mount up that you've got to wonder, is there a deeper systemic problem?
NARRATOR: Back in London, BP's Board had seen enough of Browne.
RONALD FREEMAN: He'd had Texas City. He had the leak at the pipeline. These were a series of closely spaced accidents which caused the board to lose confidence in John, and then the embarrassment of his personal life. Terrible. That was the end.
NEWSCASTER: Lie over gay partner ends BP chief's career—
NEWSCASTER: The surprise resignation of Lord John Browne—
NARRATOR: A newspaper had pursued a story of Browne's private life. While trying to contain the scandal, Browne lied to a judge about how he met his gay partner. Browne's departure was expedited.
The board had already been considering three of his top "turtles" to replace him. Two of them had strikes against them. Bob Dudley, then head of a big BP venture in Russia, was viewed as an outsider.
CAROLA HOYOS: He is the only guy who was actually a possible candidate to succeed John Browne who had run a company. But he came from Amoco. He's an American.
NARRATOR: And then there was John Manzoni, who had been groomed to take over. But he was marked by the accident at Texas City.
That left Tony Hayward, an engineer who had headed oil exploration worldwide. He took over in 2007.
RONALD FREEMAN: Tony Hayward was well regarded - BP guy, engineer, extremely capable, an oilman through and through - and someone to consider a very worthy successor for John.
TONY HAYWARD, CEO, BP, 2007-10: I guess I should start by saying this has been one hell of a year. I mean, it really has. It started with a tsunami. It continued with Texas City—
NARRATOR: When Hayward took over, he spoke candidly about BP's problems.
TONY HAYWARD: We then nearly sunk our flagship project in the deepwater Gulf of Mexico. And I think the only good thing I would say about all of this is, A, it's good to have it all behind you, and B—
CAROLA HOYOS: The message he was sending was not only that things had been bad, but that he was splitting away from John Browne.
TONY HAYWARD: This is about a fundamental lack of leadership and management in the area of safety, period.
ABRAHM LUSTGARTEN: Tony Hayward came into BP's CEO role on a mission to fix the problems that the company had. In his view, he thought that Browne had been too aloof and too focused on growing the company, and had lost sight of what it took to mine those resources.
TONY HAYWARD: We had a major, major oil spill in Alaska—
NARRATOR: Hayward gave this blunt analysis of what had gone wrong at BP to a group of business students at Stanford University.
TONY HAYWARD: We diagnosed the following- a company that was too top-down, too directive, and not good at listening. We had too many people that were working to save the world. We'd sort of lost track of the fact that our primary purpose in life is to create value for our shareholders. And we failed to recognize we were an operating company. We had too many people that did not understand what it took to run operations. We had too many shallow generalists.
NARRATOR: Hayward set out to refocus BP. He allocated $14 billion dollars to upgrade operations and established a new safety group. The changes were well received internally.
CAROLA HOYOS: BP folks had been through the wringer. They had not felt proud of the company they worked for, and I think in general, they sighed a great sigh of relief when a new management came in.
NARRATOR: But London's bankers weren't happy. BP's stock price was slumping. Hayward came under renewed pressure to keep cutting costs.
NEWSCASTER: Now BP has announced a bid to cut costs, boost revenues and improve the oil giant's lagging performance.
ABRAHM LUSTGARTEN: It just doesn't make sense. It's not clear how the company can continue to shave its expenses while supposedly reinvesting in the procedures and the equipment and the operations that have placed it at such great risk over so many years.
TONY HAYWARD: Safety remains our number one priority. And I'm pleased to report we can see clear progress.
NARRATOR: But if Hayward was going to reform BP's safety culture, he would be doing it while taking bigger and bigger risks in deeper and deeper water. By 2010, BP had over a hundred wells in the Gulf under rigs like the Atlantis, Mad Dog, and the Deepwater Horizon.
CAROLA HOYOS: The U.S. government made it very easy and very attractive for them to move quickly.
NARRATOR: And they were encouraged with generous subsidies and limited penalties if something went wrong.
CAROLA HOYOS: For example, their liability cap if there was a spill was $75 million, which is basically 5 cents to you and me. So why would you go drill somewhere else, where politically it's more difficult and perhaps the geology isn't as great and your liability is going to be really high? It made sense for BP to be there.
Pres. BARACK OBAMA: Today we're announcing the expansion of offshore oil and gas exploration—
NARRATOR: As the Deepwater Horizon was drilling the Macondo well, President Obama announced a major expansion of offshore drilling.
Pres. BARACK OBAMA: There will be those who strongly disagree with this decision—
NARRATOR: He delivered his speech at Andrews Air Force Base to underscore that oil was an urgent strategic issue. BP could only be pleased.
ABRAHM LUSTGARTEN: Clearly, the company that will do most of that drilling in the Gulf of Mexico is BP. They own the vast majority of the leases for new and promising areas that would be explored. Yet at exactly the same time, multiple agencies in the Obama administration are actively investigating BP on several fronts.
NARRATOR: At the EPA, lawyers representing several agencies, including the Departments of Interior and Defense, were considering disqualifying BP from getting any more government contracts. At the Department of Labor, attorneys were evaluating a series of ongoing violations at several BP refineries. And at the Chemical Safety Board, investigators were demanding that BP act on promises made in 2005 to address safety issues in Texas City.
But in the White House, Carol Browner, Obama's chief environmental adviser, said that in the policy discussions over drilling, BP's safety record never came up. They relied instead on the industry's overall 30-year offshore drilling record.
CAROL BROWNER, White House Energy and Environmental Adviser: If you have a 30-year record, that speaks volumes. I think most of us, if making decisions in our own lives, had 30 years of information that suggested something was safe, we would pay attention to that.
MARTIN SMITH, Correspondent: But at what point does the safety and environmental record of a company rise to an issue of concern for you in the White House?
CAROL BROWNER: White House is not involved in individual leasing decisions or permitting decisions. Those are handled, you know, outside of the political system, and appropriately so. They're factual decisions made by the Department of Interior. That's their responsibility. It's not part of the broader policy decision, which is, "Should we enhance and increase the amount of domestic oil production?"
NARRATOR: At Interior, Secretary Ken Salazar's Chief Deputy is David Hayes. But here, too, BP's track record failed to alarm anyone.
MARTIN SMITH: Would an application from BP receive any special attention, given BP's troubled track record?
DAVID HAYES, Dpty. Secretary, Dept. of Interior: I don't believe so. The- the track record for BP as a company in terms of deepwater performance- I'm not aware that BP was- was- would be singled out for special attention.
MARTIN SMITH: The Thunder Horse rig- almost completely destroyed. They had the Texas City disaster. They had the problems on the North Slope of Alaska. At what point does the company performance start to raise red flags?
DAVID HAYES: The enforcement philosophy that we have and the permitting philosophy we have is that we expect every applicant to come in and provide the demonstration required to show they can do the activities they are being requested to do. We expect our permit reviewers and our enforcers to be tough on everybody.
NARRATOR: That would mean lawyers at the Department of the Interior, the EPA or the Justice Department. But former chief of the Environmental Crimes Section at Justice David Ulhmann says that the laws have no teeth.
MARTIN SMITH: How do you explain that a company with an egregious record is allowed to participate in the most challenging kind of drilling in a sensitive environment?
DAVID UHLMANN, Department of Justice, 1990-07: That's a great question. And the answer is that our laws don't today create any barriers, any limits on their ability to continue operating. As soon as they've cleaned up whatever mess they've made, they're off the hook.
MARTIN SMITH: And if you're a repeat offender?
DAVID UHLMANN: The law's no different.
MARTIN SMITH: The law's no different? So you can get another contract? You can drill again? You can operate a refinery?
DAVID UHLMANN: That's correct.
MARTIN SMITH: Simple as that?
DAVID UHLMANN: Simple as that.
[www.pbs.org: Exclusive video & photos]
COAST GUARD RADIO TRANSMISSION: Time 21:03:15 Greenwich Mean Time, the Deepwater Horizon, on fire.
NARRATOR: The explosion came just 20 days after Obama's speech at Andrews Air Force Base- 11 workers killed, 17 more injured. Things had gone wrong here from the beginning. A worker had called the project a "nightmare," the "well from hell." Internal documents show that BP engineers were debating how to cut costs on a project that was already way over budget.
GORDON AAKER, Mechanical Engineering Consultant: Every indication was that the well that blew out was already $10 million over. And to get caught doing a remedial cement job, and going back in there and doing all this work, was another $10 million. And that was going to impact them. So they were cutting corners on an operations side, trying to get by with less.
NARRATOR: BP bypassed a key test called a cement bond log. BP saved more than $100,000. BP cut the number of centralizers used to secure and plug the well. This saved over $1 million. BP also chose to remove heavy drilling mud that was helping to keep gas underground, instead replacing it with lighter sea water, saving millions more.
Rep. HENRY WAXMAN, Chair, Energy and Commerce Cmte.: Please rise and raise your right hands—
NARRATOR: And in a Congressional hearing after the spill, executives of four of the world's largest oil companies all testified that in the case of Deepwater, BP did not operate to industry standards.
Rep. HENRY WAXMAN: I sent a letter to Tony Hayward, the CEO of BP, and the letter describes a series of decisions that BP made that seemed to increase the risk of catastrophic blowout. I'd like to ask each of you whether you think mistakes were made by BP.
REX TILLERSON, CEO, Exxon Mobil: Well, in reviewing the letter that you sent, it appears clear to me that a number of design standards were- that I would consider to be the industry norm were not followed.
MARVIN ODUM, President, Shell: It's not a well we would have drilled with that mechanical setup. And there are operational concerns—
JOHN WATSON, CEO, Chevron: Not all standards that we would recommend or that we would employ were in place.
NARRATOR: Two days later, Tony Hayward was summoned.
Rep. HENRY WAXMAN: Mr. Hayward, we had a hearing earlier this week with CEOs from the other oil companies. They were unanimous in their view that you made risky decisions that their companies would not have made. And the conclusion I draw is that BP used a more dangerous well design to save $7 million. Don't you feel any sense of responsibility for these decisions?
TONY HAYWARD, CEO, BP: In the three years that I've been CEO, I've focused on improving dramatically our safety and environmental performance. Prior to this accident, that has indeed been the case. And that is why, amongst all the other reasons, I am so devastated by this accident.
RONALD FREEMAN, Banker, Adviser to BP: His testimony before the Congress on Macondo well was really embarrassing.
TONY HAYWARD: I'm not a cement engineer, I'm afraid.
RONALD FREEMAN: "I didn't know anything about the centering. I'm not a cementing expert." That was really—
MARTIN SMITH: He says he wasn't part of the decision-making process.
RONALD FREEMAN: Outlandish. You're supposed to know.
NARRATOR: In the weeks and months following the spill, BP's board lost faith in Tony Hayward. He was replaced with Bob Dudley. Dudley would be the third CEO in four years.
BP SECURITY: No questions, guys, please. No questions at all, please.
NARRATOR: For months, we asked BP to grant an interview. They declined.
REPORTER: What are the changes going to be?
BOB DUDLEY, CEO, BP: Well, there's no question we're going to learn a lot from this accident on the Gulf Coast—
NARRATOR: They agreed to consider written questions. We sent more than 40. They gave us a three-paragraph response. In it, they pledged to restructure and improve safety in all their operations.
[www.pbs.org: Our questions and BP's response]
ABRAHM LUSTGARTEN, ProPublica: Several oil executives that I spoke with described this process of reforming a company culture as a monumental task.
BOB DUDLEY: Tony and I are going to work through a transition between now and—
ABRAHM LUSTGARTEN: And it's something that will occupy a chief executive's focus and attention every single day, every day of the week, every week of the year in perpetuity.
BP SECURITY: Thanks, guys. Thanks so much. Thank you. Thank you all.
NARRATOR: BP now faces the largest liabilities in corporate history. In July 2010, a bill passed the House of Representatives that would ban BP from drilling new deepwater wells for seven years. It's not likely to pass the Senate.
In Texas City, the Department of Labor just levied $50 million dollars in new fines for BP's failure to address safety issues they had promised to correct after the 2005 explosion.
And in Alaska, maintenance documents from October 2010 show that the pipelines here remain seriously corroded.
WRITTEN AND PRODUCED BY
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BP Video Library
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