|RUN TO FAILURE
BP and the Making of the Deepwater Horizon Disaster
New York: W. W. Norton & Company, March 2012
This book is a good complement to Mike Magner's Poisoned Legacy. Both books examine the early history of the company to some degree. Both look at the Texas City and Macondo Well disasters, as they must. But while Magner focuses on BP's actions in the continental U.S. — the "lower 48" — Lustgarten concentrates on its Alaska operations in detail, showing us not only the persistent efforts of BP management to cut costs to the bone there, but also the long (and ultimately unsuccessful) quest of Jeanne Pascal, a Seattle-based EPA attorney, to hold the company accountable for the results of that cost-cutting.
"At the EPA, Pascal's job had been to act as a behind-the-scenes babysitter for companies whose repeated violations or misconduct might disqualify them from billions of dollars in contracts and other benefits from the federal government. When they got in trouble, it was her job to guide them back toward being responsible and compliant companies. Over the years she'd persuaded hundreds of troubled energy, mining, and waste-disposal companies to quickly change their behavior. When she was first assigned to BP, in 1998, she thought that the company would be another routine assignment. But BP, it turned out, was in a league of its own."
– Pages xii-xiii
All big oil companies want to cut overhead. The equipment they need to bring in that "black gold" is hugely expensive. So is the talent that runs it. So they have a strong incentive to scrimp whenever possible. The tricky part is getting (and holding) an accurate view of "possible."
Exxon lost its grasp on "possible" in March 1989. Correction: it lost it before then,1 but the unlucky grounding of the Exxon Valdez on Bligh Reef showed its loss to the world. Quite simply, it was not prepared to handle the spill. BP, as majority operator of the pipeline and tanker terminal, was unprepared as well. In fact it was more unprepared than Exxon, and the latter stepped in to fill BP's gap in response. The difference is that Exxon learned from the spill. It put safety procedures in place throughout the company — real safety procedures, with teeth. Lustgarten reports:
"Going forward, Exxon would learn to manage its risk and safety operations with a militaristic control and total conformity among its 104,000 global employees, setting an international example of good management."
– Page 27
The result is evident. When was the last time you heard of an Exxon tanker going aground, or an Exxon well blowing out?
BP, on the other hand, kept on doing little more than talking safety. This, too, had predictable results. A few are well-known: Texas City, and the Gulf Gusher. There are hundreds of others. Even now, post-Macondo, indications are that BP still has not learned that skimping on safety costs more in the long run.
And the true horror may be that, in today's America with its blame-the-other-guy culture, it doesn't have to.
Lustgarten also probes more deeply into the business decisions of BP's leaders: not only John Browne and Tony Hayward but division heads like Doug Suttles and John Manzoni. He spends considerable effort making plain who reports to whom in the organization — relationships which frequently shift. He gives us Wall Street's perspective as well; the Street's emphasis on share price and short-term profits is essential to understanding the motivations of business leaders like Browne. Determined to boost BP's ranking among oil companies, Browne chose a risky course: he would aggressively pursue leases and deals that gave him access to more oil reserves. These deals included mergers and acquisitions. He tried to merge with Mobil, but the deal fell through. Later he acquired Amoco and then ARCO. Both these companies added valuable assets: refineries (including Texas City's), a chain of gas stations, and more crude oil reserves. But integrating two companies with disparate cultures is a significant challenge, and BP apparently did a mediocre job of it — the more so because he cut the budgets for inspection and maintenance of critical equipment. It does not help morale when workers know they could die from deferred maintenance.
There is a geopolitical angle to the story too.
"The puzzle Browne sought to solve was bigger than BP and tied to the oil crisis of 1973, when Egypt and Syria invaded Israel in the Yom Kippur War, and when the oil-producing nations, in protest, banded together in a cartel and refused to sell oil to the United States. Members of the Organization of Petroleum Exporting Countries (OPEC) launched a political war to wrest back control over the world's oil markets. The Western oil companies were kicked out of the Middle East, and OPEC tied a tourniquet on shipments of crude to U.S. refineries, sending a shockwave through the nation's markets and gasoline prices to record highs, and spurring a recession. One by one, OPEC nations nationalized their oil assets, blocking the world's largest oil companies from producing their oil, and in 1979, the Iranian revolution occurred. BP at the time had oil in Kuwait, Abu Dhabi, and Libya, but its largest fields, by far, were in Iran."
– Page 8
The technical side of the situation in Alaska comes mainly from whistle-blowers like Stuart Sneed and Marc Kovac, and from a few leaders of other oil companies like John Hofmeister, formerly of Shell — always a straight shooter. Finally he gets input from academics like Joseph Pratt, who wrote a history of the Amoco Corporation.
When it comes to Macondo, Lustgarten has the benefit of the testimony of survivors of the disaster from congressional hearings, and the government commission's report,2 which he says is scathing. Scathing it may be, but it says nothing about BP's persistent neglect of safety. Chapter 15 describes the struggle to get the well drilled and prepared for production. Chapter 16, the account of the actual blowout, is harrowing. Here is where the additional information let Lustgarten fill out the story more than Magner could.
The net result of all this official attention to BP is unsurprising: None of its senior executives is held accountable, and oil exploration (albeit with some stiffer regulations on the books) has expanded in U.S. waters. BP, in fact, looks likely to be a major player in going after oil in the Beaufort Sea, newly accessible to drilling.
"Americans relentlessly demand more energy, and we demand that our oil companies go out and get it and supply it as inexpensively as possible, even while demanding that they do it without accident or environmental risk. [...]"
"The contradiction represents a political quagmire for U.S. presidents and also presents a widening chasm of understanding about the risks inherent in powering the American lifestyle. On the one hand, there is BP, which, its record shows, has difficulty acknowledging that catastrophic accidents are possible, or that they will happen to BP in particular [...] On the other hand, there is a citizen population that assumes that their government has in place the regulations to guarantee their safety, protect their fisheries, and keep their air clean, no matter what."
– Page 301
Lustgarten ends his book with these words: "Many things, it seems, haven't changed at all."
The text is supplemented 21 black&white images. A number of the principals from the story are represented: the EPA's Jeanne Pascal and Scott West, whistle-blower Marc Kovac, Transocean's Mike Williams, a Deepwater Horizon survivor, and more. The index is excellent. There are extensive endnotes. This thoroughly researched book gets full marks, and it is definitely a keeper.