25th Oct 2007 18:04
BP PLC25 October 2007 October 25, 2007 THIS PRESS RELEASE WAS ISSUED TODAY IN HOUSTON, TEXAS, BY BP AMERICA INC. BP America announces resolution of Texas City, Alaska, propane trading law enforcement investigations HOUSTON, TX -- BP America today announced two plea agreements and a deferredprosecution agreement with the U.S. Department of Justice and a consent orderwith the Commodity Futures Trading Commission which end governmentalinvestigation of company wrongdoing on matters related to the March 2005explosion and fire at the Texas City refinery, the March and August 2006 oiltransit line spills in Alaska and improper propane trading in April 2003 andFebruary 2004. "These agreements are an admission that, in these instances, our operationsfailed to meet our own standards and the requirements of the law. For that, weapologize," said BP America Chairman and President Bob Malone. "They representan absolute commitment to work with the government as we continue our efforts toprevent another tragedy like Texas City, to make our Prudhoe Bay pipelinecorrosion program more responsive to changing operating conditions and to ensurethat our participation in the nation's energy markets is always appropriate. "In the months and years since these violations occurred, we have made realprogress in the areas of process safety performance and risk management.Oversight of our trading operations has also been greatly enhanced. However,there is more to do and we are committed to doing it," Malone said. Texas City BP Products North America Inc. will plead guilty to a felony for failing to haveadequate written procedures for maintaining the ongoing mechanical integrity ofprocess equipment at the Texas City refinery and for failing to informcontractors of the hazards related to their occupancy of temporary trailers inthe vicinity of the refinery's Isomerization Unit. BP Products has agreed to a $50 million fine and three years probation. Theagreement requires BP Products to continue its cooperation with the government'songoing investigation of the circumstances leading to the March 23, 2005 TexasCity refinery explosion and fire which claimed the lives of 15 workers andinjured hundreds more. The agreement also requires, as a condition of probation,compliance with all terms of the September 2005 Settlement Agreement with theU.S. Occupational Safety and Health Administration (OSHA) and the June 2006Agreed Order issued by the Texas Commission on Environmental Quality. Under the agreement the Justice Department agrees not to bring additionalcriminal charges against BP Products in connection with the March 2005explosion. "If our approach to process safety and risk management had been more disciplinedand comprehensive, this tragedy could have been prevented," Malone said. "We didnot provide our people with systems and processes that would have enabled themto appreciate the risk of a catastrophic release from the F20 blowdown stack andunderstand the danger of placing occupied trailers so close to it. We deeplyregret the loss of life, the injuries and the community disruption caused by theexplosion." BP Product's response to the Texas City explosion and fire has been guided bythe recommendations of its own incident investigation and by the findings andrecommendations of OSHA, the U.S. Chemical Safety and Hazard Investigation Boardand the BP U.S. Refineries Independent Safety Review Panel, led by former U.S.Secretary of State James A. Baker, III. BP America is in the midst of a comprehensive effort to improve its safetyculture and to strengthen and standardize process safety and risk managementprograms at all BP-operated facilities. At the Texas City refinery, BP Products eliminated the use of blow down systemslike the one involved in the March 2005 explosion and removed temporary occupiedstructures (office trailers) from process areas. The refinery is expected toreturn to near full production by the end of 2007 after a 25-month, $1 billionrenewal program that included the inspection and refurbishment of every majorprocess unit in the refinery and extensive re-training of refinery personnel. Alaska BP Exploration Alaska, Inc. (BPXA) will plead guilty to a misdemeanor violationof the U.S. Federal Water Pollution Control Act and admits, in the pleaagreement, that the company's approach to monitoring and managing corrosion inPrudhoe Bay oil transit lines failed to properly consider the risks posed bychanging operating conditions in the field and that, as a result, BPXA failed totake necessary actions to prevent the March 2006 pipeline spill. BPXA has agreed to a $12 million fine and 3 years probation. Under theagreement, BPXA will also pay restitution of $4 million to the State of Alaska,which has agreed not to prosecute the company, and make a $4 million payment tothe National Fish and Wildlife Foundation for Arctic environmental research. The Justice Department and State of Alaska have agreed not to bring furthercriminal charges against BPXA in connection with the March and August 2006spills. The leak and the resulting 4,800 barrel spill impacted 1.9 acres and is thelargest oil spill to ever occur at Prudhoe Bay. The plea agreement acknowledgesthat BPXA promptly and thoroughly cleaned up the discharged oil. No lasting harmto the surrounding environment is expected. "This leak, and the spill that resulted from it, revealed a significant gap inour corrosion management program - a gap that existed because our approach toassessing and managing corrosion risk in these lines was not robust orsystematic enough," Malone said. "We regret that our monitoring of these lines did not meet the expectations ofthe State of Alaska and the U.S. government," Malone said. "Since this incidentwe have worked with state and federal regulators to ensure the safe, reliableoperation of critical Prudhoe Bay pipelines which deliver processed oil to theTrans Alaska Pipeline." Following the March spill, BPXA worked with the U.S. Department ofTransportation to make periodic maintenance and smart pigging part of BPXA's oiltransit line corrosion inspection, monitoring and inhibition program. BPXA will complete replacement of the 16-mile Prudhoe Bay oil transit linesystem in 2008. BPXA began construction of the $250 million project in early2007. April 2003, February 2004 propane trades BP America has entered a deferred prosecution agreement (DPA) with the U.S.Justice Department under which the company admits that it manipulated the priceof February 2004 TET physical propane and attempted to manipulate the price ofTET propane in April 2003. The DPA concludes all criminal investigations of BPAmerica on matters related to propane, gasoline, crude oil and other commoditytrading. BP Products North America Inc. also has entered a companion consent order withthe U.S. Commodity Futures Trading Commission (CFTC) resolving all civilenforcement matters concerning the company's propane and gasoline trading. BP America will pay fines, penalties and restitution totaling just over $303.5million, including $53.5 million to a victim restitution fund, a criminalpenalty of $100 million, a civil penalty of $125 million and a $25 millionpayment to the U.S. Postal Inspection Service Consumer Fraud Fund. The DPA has a term of three years. Charges will be dismissed at the end of theterm following Justice Department determination that BP America has compliedwith the terms of the DPA. The DPA requires BP America's continued cooperationwith the U.S. government investigation of the trades in question. The DPA will result in the appointment of an independent monitor to make sure BPAmerica has appropriate trading compliance policies and programs in place, thatthe policies and programs are implemented appropriately, and that they are beingenforced. The independent monitor will have authority to investigate and reportalleged violations of the Commodity Exchange Act or CFTC regulations and torecommend corrective action. BP America conducted its own investigation and cooperated with the JusticeDepartment and the CFTC investigations of propane trading in April 2003 andFebruary 2004. The February 2004 TET propane trades resulted in a loss of $10million to the company. "Our view of the legality of these trades changed as our knowledge of the factssurrounding them became more complete," Malone said. "This settlementacknowledges our failure to adequately oversee our trading operation. Theagreement provides compensation for victims and establishes a foundation forworking with the government to ensure our participation in the nation's energymarkets is always appropriate. We are determined to restore the trust ofregulators in our trading operations." After investigating the propane trades, BP America developed an enhancedcompliance program specifically fit for the trading organization; increasedcompliance and legal resources; enhanced training for traders; upgradedtransaction monitoring capability and improved metrics to measure complianceperformance. Notes to Editors Texas City •Early on, BP Products accepted responsibility for the Texas City incident and for the management system failures and employee mistakes which were contributing factors. •BP Products has spent $1.6 billion to compensate victims of the explosion and has resolved more than 1,650 personal injury claims arising from the incident. Settlements have been achieved with the families of the workers who died and with most workers who suffered injuries. •In October 2005, BP Products entered a settlement with the U.S. Occupational Safety and Health Administration resolving more than 300 separate alleged violations of OSHA safety regulations. BP Products paid a fine of $21.4 million and agreed to a number of corrective actions, including the hiring of process safety and organizational experts for the refinery. •In June 2006, BP Products negotiated an "Agreed Order" with the Texas Commission on Environmental Quality which authorized the Texas City refinery to quickly replace blowdown stacks in heavier than air, light hydrocarbon service with flares. BP Products paid a fine of $336,556 and has agreed to bring all of the new flares into compliance with New Source Performance Standards (NSPS) by June 15, 2011 at an estimated cost of $250 million. This condition of probation can be extended if the work required under the Agreed Order is not completed within the initial term of probation. •The BP Texas City incident investigation team published its report in December 2005. The team "found no evidence of anyone consciously or intentionally taking actions or decisions that put others at risk." •The Texas City refinery is owned and operated by BP Products North America Inc. It is BP's largest and most complex refinery with a rated capacity of 470,000 barrels per day and an ability to produce up to 11 million gallons of gasoline per day. Alaska •In August 2006, smart pigging of sections of the Prudhoe Bay oil transit line system revealed unexpected severe corrosion in isolated locations and led to the discovery of a 199 barrel spill. BPXA halted production from the eastern side of the field for 47 days while bypass lines were commissioned and the integrity of the oil transit line system was confirmed. •All BP-operated oil transit lines on the North Slope are now included in the U.S. Department of Transportation's Integrity Management Program. •After the 2006 oil transit line leaks, BP America retained three leading corrosion and infrastructure experts to independently review and make recommendations for improving BPXA's corrosion inspection, monitoring and prevention program. April 2003, February 2004 TET Propane trades •Propane is a natural gas liquid, used by petrochemical industries to produce plastics and for residential/commercial purposes. •Primary means of delivery to the Northeast and Midwest U.S. is the Texas Eastern Products Pipeline Company (TEPPCO) system. Propane in the TEPPCO system is identified as TET propane. •BP America has taken disciplinary action, including dismissal of employees for failure to adhere to BP policies following the company's investigation of the April 2003, February 2004 TET propane trades. For additional information: Ronnie Chappell, +1 281-236-3529 or +1 281-366-5174 This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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