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US: BP Settlements Seen on Safety and Price Cases

by Stephen Labaton and Lowell BergmanNY Times
October 24th, 2007

The British energy company BP, tarnished by a string of costly legal problems, is preparing to settle accusations that it was criminally indifferent to worker safety and that it manipulated energy prices, government officials and lawyers involved in the separate cases said on Tuesday.

The officials said that the Justice Department would announce as early as this week that BP had agreed to a settlement to end criminal investigations stemming from an explosion at a giant BP oil refinery in Texas City, Tex., two years ago.

The accident, at the nation’s third-largest refinery, killed 15 workers and injured 180 others. It was the nation’s deadliest industrial accident since 1990, and one of the worst in modern times.

BP is also preparing to settle accusations that its energy trading unit was involved in manipulating prices in the propane market three years ago.

The expected settlement in the refinery case signals the government’s willingness to take a hard line in forcing companies to redress environmental and worker safety problems. Officials said that the Texas City case would not resolve accusations against BP executives who may have failed to take steps to make the refinery safer and that those investigations would continue.

The paradox for BP, once the oil industry’s highflier, is that it has long promoted itself as an environmentally friendly company that takes its civic responsibilities seriously.

The industrial accidents and trading problems have tarnished that image and led to a management reshuffling and organizational shake-up at the highest levels, including the naming of a chief executive, Tony Hayward, last spring.

Mr. Hayward succeeded John Browne, a media-shrewd executive who resigned after losing a legal battle with a London tabloid. Mr. Browne acknowledged making an untruthful statement in court about the circumstances under which he had met a younger man with whom he had had a relationship.

In recent days, BP announced yet another series of executive appointments as it struggled to turn itself around and as Mr. Hayward sought to address morale problems and make a clean break from the past.

But the difficulties, particularly in the United States, have taken a toll. Despite the sharp spike in crude oil prices in recent months, BP said on Tuesday that its net income for the third quarter declined by 29 percent from the period last year. The company reported quarterly profit of $4.41 billion, or 23 cents a share, on revenue of $72.7 billion.

The results beat analysts’ expectations, which were lowered when Mr. Hayward wrote in a document leaked in September that operational performance in the third quarter was “dreadful.”

BP still faces huge expenses for the accident in Texas City. More than 1,000 civil lawsuits have been filed, and the company has set aside $1.6 billion for compensation claims. It also has committed to spending $1 billion to fix problems at the plant.

BP’s shares closed on Tuesday at $75.44, up $1.56.

The refinery case could be the latest in a string of victories by a small unit of the Justice Department, the environmental crimes and natural resources division.

Last month, a federal appeals court in California ruled in favor of the division when it reinstated criminal charges against W. R. Grace and seven executives over widespread asbestos contamination at a vermiculite ore mine near Libby, Mont. Before that, the division won convictions against executives of companies owned by the McWane Corporation of Birmingham, Ala.

This year, a federal safety panel found that the Texas refinery accident was caused by deficiencies “at all levels” of the company and was a result of aggressive cost-cutting. The panel, the Chemical Safety and Hazard Investigation Board, also concluded that company officials had ignored warning signs of a possible disaster.

At the time of the explosion, the plant in Texas City had a capacity of about 10 million gallons a day, or 2.5 percent of the gasoline sold daily in the nation. It employed 1,800 workers and 800 contractors on a 1,200-acre site about 30 miles southeast of Houston. Since the accident, the refinery has been producing at about half its capacity. That decline has played a role in the erosion in BP’s earnings.

The propane pricing settlement would resolve a complaint filed last year by the Commodity Futures Trading Commission that accused BP of inflating heating and cooking costs in 2004 for millions of Americans by manipulating the price of propane gas.

Spokesmen at BP, the Justice Department and the futures trading commission declined to comment about the planned settlement announcements.

The Wall Street Journal reported on its Web site on Tuesday that the propane pricing settlement would involve a $303 million payment and changes to trading operations. As part of that settlement, and to defer criminal prosecution, BP is expected to put its energy trading operations under the supervision of a government-appointed compliance monitor.





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