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LONDON -- One of BP's refineries failed an independent safety review that began a year after an explosion at the company's Texas City, Texas refinery killed 15 people and injured hundreds, a BP executive said in a sworn statement, according to a report by Bloomberg News.
The findings of the review, performed by Alexandria, Va.-based AcuTech Consulting Group, examined records on mechanical integrity, inspections and other federal safety criteria, the report stated. The failing grade will be a setback for BP when more than 300 lawsuits relating to the explosion go to trial, the report stated.
The review came as part of a settlement with federal regulators from the U.S. Occupational Safety & Health Administration (OSHA) over the explosion in March 2005. An outside contractor was hired to audit the plant's operations, which were found to have problems in every unit tested according to Walt Wundrow, the refinery's technical manager.
"There was some gap versus the standards,'' Wundrow testified in the Dec. 15 pre-trial deposition. "They did find deficiencies in those systems on every unit,'' he said. "In most units they found more than one compliance item.'' He continued: "I do not believe they found one unit where they did not have a single [safety violation] finding in their audit process."
While $1.6 billion was set aside for the claims and more than 1,000 lawsuits against the company have been settled to date, the company's admission that there were safety problems at the plant prior to the explosion will be what hurts it the most, the report stated.
"That information blows the lid off punitive damages under Texas law,'' Houston attorney David Berg, who isn't involved in the BP suits, told Bloomberg News. "The jury is going to turn into a lynch mob and be outraged at that kind of evidence."
During the audit, reports were reviewed on the mechanical integrity for ten units, although not all safety equipment was being testing at nine of them, Wundrow said in the deposition. He added that some untested systems were allowed to resume operations, the report stated.
"You'd think after killing 15 people they'd say, 'Let's do it right,''' said attorney David Perry, who conducted Wundrow's deposition and provided the transcript. "It boggles the mind.''
However, BP spokesman Neil Chapman told Bloomberg News "a thorough safety review is conducted prior to each unit being re-commissioned.'' Unless deemed safe, the units aren't being restarted, he said.
"To date the company is in compliance with the agreement,'' OSHA told Bloomberg News in an e-mail sent by spokeswoman Sharon Worthy. The final audit report is due Feb. 16, 2008, according to the e-mail.
"More for Less" Culture
The refinery explosion also triggered additional executives to turn against the company. Last week, the vice president of BP's global refinery operations, Mike Hoffman, announced his resignation, without explanation, effective in late April, The Associated Press reported.
Hoffman joined the company in 1980 and was in charge when the explosion at the refinery occurred, the report stated. Hoffman will be replaced by C. J. Warner, a regional vice president for health, safety and the environment, according to BP.
Another executive, Tony Hayward, the head of the company's exploration and production unit, lashed out against the company's strategy of trying to do "more for less," Reuters reported.
In a memo posted on BP's internal Web site, he stated that this culture could lead to problems:
"The mantra of 'more for less' says that we can get 100 percent of the task completed with 90 percent of the resources; which in some cases is okay and might work but it needs to be deployed with great judgment and wisdom," he stated on the Web site. "When it isn't, you run into trouble."
However, BP's chief executive John Browne denied that the explosion at its Texas City, Texas refinery and the corroded pipeline leak in Prudhoe Bay, Alaska, was due to cost-cutting.
Hayward also noted on the Web site that senior management did not listen adequately to people at the bottom of the organization, which echoes Alaska field employees' complaints that warnings generated no action by senior managers, the report stated.
"We have a leadership style that probably is too directive and doesn't listen sufficiently well. The top of the organization doesn't listen hard enough to what the bottom of the organization is saying," Hayward stated on the site.
Hayward is one of a few candidates expected to take the place of chief executive Browne when he retires in 2008.