By DAVID IVANOVICH
But Malone stopped short of conceding that cost cutting was directly to blame for the company's failure to detect the corrosion that caused two pipelines to leak, forcing the company to shut down a portion of the nation's largest oil field and sending crude prices soaring.
Appearing before a House panel Wednesday, Malone said, "We recognize that the budget pressures put our employees in a very difficult place." And over time, the Houston-based oil executive said, that kind of mentality can create a culture where "people no longer challenge and think."
Cutting costs didn't help
Carolyn Merritt, chief executive officer of the U.S. Chemical Safety Board, told lawmakers there were "striking similarities" between the conclusions of a report on Prudhoe Bay prepared for BP by Booz Allen Hamilton and the Chemical Safety Board's conclusions about the March 2005 explosion at BP's Texas City refinery. That blast killed 15 workers and injured scores more.
"Both reports point to the significant role of budget and production pressures in driving BP's decision-making and ultimately harming safety," Merritt said. "Cost cutting became the driving factor in management bonuses and recognition."
At Prudhoe Bay, BP officials failed to conduct the necessary tests to check for corrosion in the pipeline walls.
But Malone told members of the House Energy and Commerce Committee's Oversight and Investigations Subcommittee that the company's corrosion experts "had an unwarranted sense of confidence in their program."
Pointing to the Booz Allen report, Malone argued that "larger corrosion program budgets alone would not have prevented the leaks."
In that report, made public by the committee Wednesday, Booz Allen said BP's Alaska operation "had a deeply ingrained cost management ethic as a result of long periods of low prices, constrained budgets and multiple cost/headcount reduction initiatives.
"However, larger budgets alone would not have prevented these incidents without fundamental changes in corrosion and integrity management," the report said.
The Booz Allen report said BP had failed to run a device known as a "smart pig" through the oil transit lines in both 2004 and 2005 because of "budget pressure." Pipeline operators use smart pigs to analyze the thickness of the internal walls of pipelines to detect signs of corrosion damage.
But BP officials say Booz Allen has since learned that conclusion was incorrect and wanted to delete that reference from the report. A spokeswoman for Booz Allen declined to comment on the report.
Amending report?
"We hope BP is not pressuring Booz Allen to change the report when they get a little critical," Stupak said.
Rep. Gene Green, D-Houston, whose district includes numerous refineries and petrochemical plants along the Houston Ship Channel, said he found it "startling" that "many of the fundamental causes of the Texas City disaster are the exact same causes found in the Prudhoe Bay incident almost one year later. Talk about a lesson lost."
Green said that after the Texas City explosion he had trouble learning about the victims because "BP had not reported the deaths" to the Occupational Safety and Health Administration. "It turns out they didn't have to report them because the workers were contractors," Green said.
Green has introduced legislation to require employers to report contract workers' injuries the same way they report their own employees' injuries.
Rep. Al Green, D-Houston, meanwhile, plans to introduce a bill next week that would make companies criminally liable for willful safety violations that result in the deaths of contractors working at their sites.
Fifth Amendment
"Due to budgetary constraints, the decision has been made to discontinue the inhibitor currently being injected," one e-mail from 1999 read.
Another internal message noted that that chemical had proved to be "very successful at cleaning up the system and arresting corrosion activity.
"We are now at a point where the original monies for this program are used up, so we will be shutting it down until year's end. In the meantime, the system may be subject to increased corrosion activity and fouling. "
Rep. Joe Barton, R-Ennis, the ranking Republican on the full Energy and Commerce Committee, questioned whether BP is really cooperating with congressional investigators, since the BP manager who was responsible for handling corrosion prevention in Alaska in a critical period before the leaks has invoked his Fifth Amendment right against self-incrimination and has refused to talk to investigators.
Malone, who has been on the job only since last summer, struggled to reassure lawmakers that BP is determined to change its ways.
"Please know we get it," Malone said. "We know what's wrong. We have a plan for fixing it. We just need time."
