Texas City Refinery (BP), A Troublemaker?


At the time that I heard the news about Deepwater Horizon explosion, the first thing came into my mind was BP’s Texas City Refinery explosion occurred on Mar. 25th, 2005. I cannot help asking myself what was wrong with BP, and how come BP had such a bad safety record. On Aug. 3rd, 2010, more than 2,000 Texas City residents filed a class-action lawsuit in federal court, seeking over $10 billion in punitive damages from BP Plc for 40 days of excess pollution from the company’s Texas City, Texas, refinery, according to court documents1. The explosion happened to Texas City refinery in 2005 killed 15 workers, and injured more than 170 others2. This refinery has a pattern of poor operation and maintenance practices3. As Attorney General Greg Abbott stated, a ultracracking unit allowed the emission of about 500,000 pounds of air pollutants (including 17,000 pounds of benzene) in violation of Texas environmental laws4,5. The emission occurred from April 6 due to a failure in the refinery’s ultracracker unit, which helps convert petroleum products similar to diesel fuel into high-octane gasoline3. The failure forced the company to flare off gases. BP reported the “emissions event” to the Texas Commission on Environmental Quality (TCEQ) the following day. As it worked to fix the unit till May 22, the plant released 538,000 pounds of pollutants into the atmosphere4. Within this period, obviously Deepwater Horizon explosion and Gulf of Mexico oil spill drew more attention to the public. According to TCEQ’s report, five other problems were reported in the same unit during the past year. The most recent problem was discovered when an operator noticed erratic gas flows in a compressor’s high pressure case. The unit was shut down3.

This third-largest refinery in United States was acquired as part of BP’s merger with Amoco in 19982. Before the 2005 explosion, the CSB report found that BP had failed to heed or implement safety recommendations made2. In the United States Chemical Safety Board’s report, the 2005 explosion was “caused by organizational and safety deficiencies at all levels of BP.” Thus, OSHA ultimately found over 300 safety violations and fined BP $21 million–the largest fine in OSHA history at the time7. BP said it had paid more than US$1.6 billion to compensate victims so far,  while the judge gave no timetable on when she would make a final ruling2. An $87 million fine pending from the federal Occupational Safety and Health Administration (OSHA), which found a litany of problems and hit the company with the unprecedented penalty. In addition, more than 60 other air quality violations are investigated by Attorney Genera lGreg Abbott at the Texas City facility, dating back to March 2005. The company could be fined up to $25,000 per day, per violation3. Could this refinery generate enough profit to justify the persistent litigation costs that BP generates from owning them6? I do not know, while Mr. Loren Steffy has suggested that BP should sell the refinery in his blog. But, who is going to buy this troublemaker? Let’s suppose that if BP lost the $10 billion lawsuit, what is the destiny of the oil giant? Remember there still lots of legal actions are waiting for BP due to the Deepwater Horizon explosion and Gulf of Mexico oil spill. Comparing to the shareholder equity at the end of 2009, BP has shrank $16 billion8. To be honest, I am very negative on BP’s future.

Updated:

BP agreed to pay a record fine of $ 50.6 million for safety violations in Texas City refinery explosion to settle OSHA complaint on Aug. 13th, 2010. Under the agreement, BP will also invest $ 500 million between now and 20156 to upgrade safety conditions for workers at the refinery9,10.

References:

1. Plaintiffs seek $10 billion in BP refinery lawsuit.

2. Texas City Refinery explosion.

3. Texas accuses BP of poorly operating its refinery.

4. BP faces massive lawsuit over Texas City refinery benzene emissions.

5. BP sued by Texas Attorney General for air pollution at Texas City refinery.

6. Should BP sell its Texas City refinery?

7. In BP’s record, a history of boldness and costly blunders.

8. BP Shrinks by $16 Billion.

9. BP agrees to $50.6 million fine for safety violations in Texas City explosion.

10. BP accepts $50.6M fine, but ’05 blast still dogs company.

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