Our Questions to BP & Their Response

For months FRONTLINE/ProPublica asked BP to grant an interview. They declined. They agreed to consider written questions, which FRONTLINE/ProPublica submitted on Sept. 29, 2010, and to which the company responded on Oct. 5, 2010.


FRONTLINE/ProPublica Questions

A number of BP employees have described BP's maintenance policy in Alaska, Texas City and elsewhere as "run to failure," referring to the established operational term meaning that equipment is used to its maximum capability before it is replaced or maintained. We have been told that "run to failure" was at one time a formal policy of BP and that later the company stopped using the phrase to describe maintenance practices because of its connotations.

  • a. Was "run to failure" ever an articulated BP policy?
  • b. Regardless of its name, does or did BP pursue a policy of maximizing equipment performance and lifespan with minimal investment in maintaining it?
  • c. If not, what are BP employees referring to when they speak of their experience implementing a "run to failure" policy?

3. How would BP describe/name the balance it sought between cost efficiency and maintenance expenditure at its various facilities and operations, including in Alaska and in Texas City over the years?

4. When Tony Hayward became CEO he reflected on the challenges that BP faced and said that in his view the company executives were not listening to employees, had forgotten that BP is an operational company and had become out of touch with safety and performance issues and operational integrity at its facilities. He said he would "focus like a laser on safety". What specifically did Tony Hayward do that improved operational integrity and health safety and environment concerns?

  • a. What specifically did the company change to do a better job of listening to people?
  • b. What specifically was BPXA [BP Exploration (Alaska) Inc.], or refining directed to do at this time to pay more attention to its operations and maintenance?
  • c. How did these initiatives play out -- what programs were instituted, what budget allocations were made for them, how was their success measured and was progress observed?
  • d. If you can provide a very specific example or two -- including the goal, how it was communicated, implemented, its affect, and how much it cost -- it would be helpful.

5. Soon after Tony Hayward became CEO the company's Alaska subsidiary moved a team for Health Safety and Environment oversight into a lower management tier and severed the group's direct report to the president of BP Alaska. How does this decision -- which has been criticized for devaluing the importance of HSE [Britain's Heath and Safety Executive] issues in Alaska -- reflect Tony Hayward's new focus on safety?

6. BP has continued to cut operational budgets right into the 2010 budget, in some cases. Tony Hayward cut more than 4,000 jobs and boasted of billions of dollars in savings. How can the company improve its safety and maintenance record -- "focus like a laser on safety" -- while simultaneously reducing these expenditures?

7. In the United States BP has been in negotiations with the Environmental Protection Agency for a number of years over a compliance settlement that would prevent the U.S. Government from debarring BP, BPXA, or other segments of the business.

  • a. From a corporate perspective, is discretionary debarment of some or all of BP's operations in the United States a serious concern? Is it a realistic threat? Why or why not?
  • b. In the U.S. BP management has repeatedly rebuffed terms of a debarment settlement with the U.S. Environmental Protection Agency, when it would seem that the government is giving BP, with its four criminal convictions here, a second chance. Why has the company resisted the EPA's terms?

8. In a statement shortly after the Gulf spill this spring Tony Hayward said that the U.S. "needed" BP, and that BP needed the U.S. -- how did this statement pertain to the issue of debarment, and how important does BP believe its procurement contracts with the U.S. government are to both the company, and to the government?

9. How does BP respond to the view that given the company's criminal convictions in the U.S. and the number of spills and close calls in recent years the company should be subject to discretionary debarment and limited in the business it is allowed to do with the United States?

10. There have been a number of very close calls in the past two years at several of BP's facilities on Alaska's North Slope. The close calls have alarmed members of the U.S. Congress and led to numerous BP workers expressing fears that their workplace is not as safe as it should be, and that a catastrophic accident in Alaska is inevitable. Many of their concerns echo those raised in Texas City in the years before the explosion there in 2005 -- that workers feared reporting for duty, that not enough is being invested in maintenance of all sorts, that even with expanded maintenance investment in the last few years it has not been enough.

  • a. Are BP facilities on Alaska's North Slope a safe place to work?
  • b. Are these facilities being adequately maintained, and kept as safe as they could be?
  • c. How confident is BPXA management that the next close call will not result in worker deaths?
  • d. According to a 2007 survey the majority of workers feel that BP is not looking out for their safety despite great attention to what they describe as "slips, trips, and falls." Why has this perception persisted and what does it mean to BP?

11. Statistically, in the United States especially, BP has far more spills, larger quantities of oil spilled, and far more worker safety violations than its competitors and peer companies. This is the case in Alaska, in the Continental U.S., and in offshore drilling regions of the U.S., even after adjusting for the relative proportion of the operations in these places. Why is this the case? And what should we understand from these figures?

12. Each time there has been a major accident involving BP company executives have come forward and expressed remorse, contrition, and a seemingly viable plan for addressing what the company itself has described as persistent cultural and communication issues. John Browne expressed these sentiments after Texas City, Bob Malone did in the U.S. after both Texas City and the Prudhoe Bay spill, and Tony Hayward provided a lengthy analysis of what was wrong at the company in the months after he became CEO. Regarding Hayward in particular, how should we square what he said -- that the company was out of touch with its workers and its operations and safety -- with the problems that BP has continued to have, in both Alaska and in the Gulf of Mexico, since?

13. Mr. Hayward had clearly defined an objective to reform BP's corporate culture, like those before him. How would BP characterize his vision for what this would entail? Was it a two-year plan? Was it recognized that this would be a 24-hour-a-day effort, or one that would last 10 years? Did he do enough?

14. What does it take to reform a company's culture?

15. Acknowledging that investigations into the Deepwater Horizon accident have to be completed before we can fully understand the technical details of what went wrong there -- based on what is known now what is different in that incident from pervious accidents in which cultural issues were ultimately blamed? Is the Deepwater Horizon incident part of a broader pattern of haste, cost cutting, and disconnect from operational integrity?

16. What specifically in was done in the Gulf of Mexico to ensure that the cultural and operational problems Hayward had identified previously and in other places had NOT also infected Gulf operations, especially given that the deep drilling in the Gulf was widely known to be risky and among the most technically difficult endeavors in the world?

17. Under the leadership of John Browne the BP corporate structure was flattened. Mr. Browne expressed concern that too many rules and too much hierarchy inhibited managers' freedom to think and problem solve on their own. In our reporting we have heard from former BP management and executives who say that the flat structure led to confusion, unclear accountability, and a dissociation between upper management and operations level management. To what extent does the company today see a flat corporate structure as partly to blame for an apparent breakdown in communications and leadership?

18. Did that structure or something else in the corporate structure inhibit communication about serious operational issues to top management? (After the Gulf spill Mr. Hayward professed he was not informed about major decisions about how to drill the Deepwater Well. After the Prudhoe Bay pipeline spill in 2006 Bob Malone told Congress he was not aware of the cost cutting pressures that had affected the corrosion maintenance program there. After the Texas City refinery blast John Manzoni said in a deposition that he was unaware of the severity of the needs at the refinery.)

19. Exxon officers describe a famously regimented corporate structure in which operational efficiency and stability is gained through an acute focus on safety and operations. They say the company learned and progressed measurably as a result of the mistakes around the Valdez disaster and other problems in that period, and that they have never looked back. How does BP compare to Exxon in this sense? In terms of its approach to operational integrity and its success in implementing cultural reforms?

20. Regarding Texas City; it was well known in the industry that the Texas City refinery had serious problems for many years before BP's acquisition of Amoco. Even under the old owners equipment needed to be replaced desperately, and the risks were widely known. So when BP purchased the facility, did it have a specific plan identified at that time for how it would manage the well-known concerns about Texas City's safety and operations? What was it? If there was not a plan why not?

21. Specifically, why did BP not replace the blowdown drums that are now known to have been outdated and identified for replacement years before the refinery explosion?

22. Did BP management review the Telos report produced by Don Parus regarding safety issues at the Texas City Refinery in 2004 and early 2005, as Mr. Parus has repeatedly said?

23. If not -- does BP dispute Mr. Parus' explanation that he shared the serious concerns in that report with both John Manzoni and Mike Hoffman?

24. If yes, does BP stand by John Manzoni's deposition that he knew nothing of the serious problems with the blowdown drums or any other equipment at the Texas City refinery, as recorded in the Eva Rowe lawsuit?

25. Regarding the Deepwater Horizon incident, and BP's preliminary investigation report: Specifically and technically, how does the company explain the conclusion that the flow came up the center of the well and not through the annulus?

26. Was it standard BP practice to use a single casing string for an exploratory well?

27. Did BP identify the Macondo well as one in which there were unknown risks and unpredictable aspects characteristic of an exploratory well, as opposed to the somewhat known entity of a production well? Why or why not?

28. Other Gulf operators say that while they may use a single string in some cases in production wells in the Gulf, it is not industry best practice, or normal, to employ a single casing string in an exploratory well. Can BP explain and justify its earliest design decisions and strategy regarding the decision to use a single casing string: Why? Did it consider the unknown pressure levels? Was it aware of industry standard practice in the Gulf and the belief that a single casing string was not appropriate?

29. Understanding there are different solutions to the same challenge, can BP specifically articulate the benefits or gains it believed it would get from the use of a single string design as opposed to the standard exploratory well practice in the Gulf?

30. An indemnity clause is a standard component in most industry contractor agreements and partnerships: did BP NOT have an indemnity clause in both its contractor contracts (with Halliburton, Transocean, et al) and its partnership contracts?

BP's Reply

"Bob Dudley, BP's new Group Chief Executive Officer, recently announced significant changes designed to strengthen safety and risk management at BP. These changes include the creation of a new safety division, reporting directly to the CEO, with sweeping powers to oversee and audit the company's operations around the world. The new Safety and Operational Risk function will have the authority to intervene in all aspects of BP's technical activities, will have its own expert staff embedded in BP's operating units, and will be responsible for ensuring that all operations are carried out in accordance with common standards.

The changes announced also include a substantial restructuring of BP's upstream business segment from a single business into three functional divisions - Exploration, Development, and Production - each of which will report directly to the CEO. With this restructuring, Mr. Dudley made significant leadership changes, including appointing new leaders for each of the Upstream divisions. Finally, Mr. Dudley announced that BP will review and reform key aspects of its business operations, including its compensation structure and oversight over third-party contractors, with the aim of encouraging excellence in safety and risk management.

The tragedy of the Deepwater Horizon should not obscure the substantial progress BP has made in recent years to improve safety and operational integrity within the company. At the same time, however, we are not content with this progress. BP and its new leadership are looking carefully at all aspects of BP's business to identify ways to improve further, including through a reorganization that will alter the manner in which rigorous safety standards are applied within the company."


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posted october 26, 2010

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