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>> Safety remains our number one priority.
>> BP can talk about safety all
they want, but they're not going to become a safer company.
>> They base everything on risk.
"How many lives can we afford to
lose before we need to deal with this?"
>> 9-1-1.
>> Yes, this plant just blew up!
>> From Texas and Alaska to the
Gulf of Mexico... >> BP apologized again...
>> ... Apology after apology.
>> They pledged repeatedly to
run a safer operation, yet they continued to cut costs.
>> We have a facility here that could produce a cloud of gas
that would make this place look like Hiroshima.
>> What went wrong at BP?
>> The culture of BP management has to change.
They refuse to change.
>> Tonight on Frontline,
correspondent Martin Smith
joins forces with ProPublica to
investigate... "The Spill."
>> The oil rig Deepwater Horizon exploded.
>> There was growing desperation
along the US Gulf Coast today...
>> NARRATOR: It's been called
the worst environmental disaster in US history...
>> 42,000 gallons of oil a day... >> 210,000 gallons are
leaking... >> 2.1 million gallons a day...
>> NARRATOR: ... A geyser of oil that caught the government
off-guard... >> No more oil spills!
Arrest BP!
>> NARRATOR: ...and threw a spotlight on a company that
Americans knew little about.
>> In Washington today, protesters called for the US
government to get hostile with BP.
>> Mr. Hayward!
>> NARRATOR: When two months
after the blowout, BP's CEO Tony
Hayward, came to Capitol Hill...
>> The testimony you are about to give to be the truth, the
whole truth... >> NARRATOR: . ..he was there to
explain what happened and why.
>> Begin your opening statement,
and let me again, on behalf...
>> NARRATOR: From the start, it didn't go well.
>> Chairman Waxman, Chairman... >> Tony Hayward, look at my
hands.
This is what it looks like for
the Plaquemines down there, and
I think you need to be charged with a crime!
You need to go to jail.
As a matter of fact, I've got some chains and I'll...
You need to be charged with a crime!
>> Can you tell us under oath that the decision to use six
centralizers instead of.... >> NARRATOR: Amidst the
technical questions, there were deeper concerns...
>> You're the CEO of the company!
>> With respect, sir, we drill hundreds of wells a year all
around the world.
>> Yeah, I know.
That's what's scaring me right now.
>> NARRATOR: ...about whether
this was a company that could be trusted.
>> Mr. Hayward, when you became
CEO three years ago, you said
that safety was going to be your top priority...
>> NARRATOR: The interrogation produced few new answers.
>> One of the reasons that I am so distraught...
>> I don't want to know whether you're distraught.
>> NARRATOR: It was mostly political theater.
>> We're going to have a hard
time reaching conclusions if you stonewall them.
>> I'm not stonewalling.
>> NARRATOR: It was also not the
first time the company had been in trouble.
In London, the board had been in
crisis mode for much of the last years.
They've encountered disasters on all fronts-- at their
refineries, in their oil fields.
The blowout in the Gulf is just the latest.
>> This is a company that has brought us the worst
environmental disaster in US history.
That's not an accident.
>> NARRATOR: Critics say BP has a very bad record.
It's a company that has grown too fast and taken on too many
risks.
This is a story about ambition and its consequences.
To investigate BP's corporate history, we started here in
Texas City, the site of the company's largest and one of its
most troubled refineries.
>> Hi, Don.
My name is Abrahm Lustgarten.
I'm a reporter with ProPublica.
I'm calling you because I'm working on an in-depth piece
about the history of BP and its management culture.
>> NARRATOR: BP had an accident here in 2005 where 15 people
died in an explosion and fire.
170 more were injured.
Afterwards, there were charges that BP's management valued
profits more than safety.
We came to the refinery hoping to talk to managers.
>> So this is all BP, right?
>> Yeah.
>> NARRATOR: BP declined.
>> And the explosion would have
happened, then, on the far side of all this big equipment.
>> Right.
>> NARRATOR: The 1,200-acre refinery was acquired by BP in
1999 as part of a $61 billion takeover of the American oil
company Amoco.
But built in 1934, the refinery was in bad shape.
Workers and contractors were wary of the place.
>> The refinery was not in prime shape, put it that way.
Rotted-out columns, things that
were rusted, not protected from corrosion, fire hazards
everywhere.
>> It was typical for them to
experience a fire every week, on average.
A fire every week is a warning sign that something is
critically wrong at the facility.
It was the worst refinery around this area, for sure.
>> NARRATOR: When the refinery was under Amoco's management,
major upgrades had been postponed.
For example, in 1991, Amoco considered replacing its
antiquated blowdown drums, used
to collect volatile liquids and gases in an emergency, with
safer modern flares.
They decided against it.
>> A flare is more efficient and
safer than a blowdown stack.
And there were several blowdown stacks within... within the
refinery that were old technology.
Long after a lot of other folks said, "We're not using those
anymore," BP still was using them.
>> NARRATOR: It was a question of saving money.
These emails from 2002 reveal that BP had also considered
updating the blowdown drums.
"We need to decide if we want to
invest $150,000 now to save more money later on," wrote one
employee.
A senior manager responded, capital expenditure is "very
tight.
Bank the $150,000 in savings now."
>> And at that point, BP culture
was "Show me the money," and refining was not showing them
the money.
>> You can only spend a penny once.
"Should we do it fixing up this refinery?"
You're choosing among priorities, and they did not
give this deferred maintenance
priority at Texas City refinery
the attention, the priority, it should have gotten.
>> NARRATOR: The pressure to cut
costs came from the very top of BP.
After the buyout of Amoco, Tony
Hayward's predecessor, Lord John
Browne, ordered a 25% cost cut across the company.
The message was relayed down through the ranks.
>> I don't know if they realized
just how devastating the cost cutting ethos was when it
actually played out in the field.
When there is a whisper at the
top of the company, it becomes like a shout at the bottom.
>> You were starting to hear a
little bit more about, "Make due
with what you got and try to make it more efficient."
So you were taking older equipment and pushed it to a hilt.
If something didn't blow up, it was a good day.
>> NARRATOR: In March 2004, there was a major fire.
Fortunately, it was in an unmanned part of the refinery.
Nobody was hurt, but problems continued.
Don Parus, a safety conscious
engineer, took over the refinery a few months later and was
trying to turn things around.
>> Don was the refinery manager,
or as locals liked to say, he was the second mayor of the
town.
The workforce tended to trust in
him because, I think, for the first time, they were having a
refinery manager who was harping
a little bit more about safety.
>> NARRATOR: One of the first
things Parus did was commission an employee survey.
In it, workers talked about their "exceptional degree of
fear."
They worried about dying.
>> There was a fatality once,
approximately every 18 months or so.
The feeling of the workforce was that there was an imminent
catastrophic accident that could happen in the near future.
>> NARRATOR: Parus alerted his boss in London, John Manzoni,
BP's chief of refining, about the severity of safety issues.
>> Don Parus had held several
meetings with John Manzoni, the head of refining.
In each, he expressed grave concerns about the safety of
working at the Texas City refinery.
>> NARRATOR: Parus even went to
BP headquarters in London and showed Manzoni a PowerPoint
presentation.
In it, a list of dead workers;
details on two recent fatal accidents; a tally of more than
20 fatalities in 30 years.
>> The basic response Don Parus
got was, "Well, that's your job
to make sure this stuff doesn't happen."
And he was pleading for, "Well,
let me have the materials to do my job that way."
London saw it a different way.
And that's part of that culture that BP didn't get.
>> We know we have to beat the others to win you over.
Can we do it?
>> You bet your BP we can!
>> NARRATOR: 20 years ago, BP was nothing like the powerful
multinational corporation it is today.
The years of the once great Anglo-Persian oil company were
long past.
A revolution in Iran had crippled the company.
>> Among its peers, it was a
company to be pitied rather than emulated.
It had had to cut its dividends,
its share price was at a low.
BP was in a very dark place in the late '80s, early '90s.
>> NARRATOR: It was then that a
new group of managers came along and attempted to rescue the
company from mediocrity.
>> It was a good year for BP in very challenging times.
>> They had not found a way to replace the Iranian reserves.
They were not going to do so remaining hierarchical and
stuffy.
They had to get out there and they had to compete.
>> NARRATOR: A young engineer,
John Browne, was one of the new managers.
From early on, he had a reputation as an aggressive cost
cutter.
>> Jobs can be made wider, without necessarily moving
people.
>> NARRATOR: He was a math whiz,
a numbers man, and the board liked him.
In 1995, he was made CEO.
But he was a different kind of oilman.
>> In many ways, yes, he wasn't
a Texas oilman, but he was also not even a European oilman.
He had very refined tastes, he
enjoyed, obviously, fine wine, and he enjoyed his cigars.
He was a very big opera-goer and opera buff.
>> NARRATOR: He never married and lived with his mother, who
often accompanied him to BP functions.
>> He doesn't have that larger than life J.R. Ewing kind of
thing going on at all, but he was definitely willing to take
big risks and make big, big bets.
>> NARRATOR: Browne surrounded himself with a small group of
executives, including Bob Dudley, Tony Hayward, and John
Manzoni, known inside the company as his "turtles."
>> As in Ninja Turtles, rising stars in the BP corporate
structure who he thought, one day, had the ability or the
potential to lead the company.
>> NARRATOR: Until then, Browne set the agenda.
It was Browne who took the company on a gigantic buying
spree.
>> John wanted to be the biggest.
He was competing with Mobil, competing with Exxon, competing
with Chevron.
And he was bound and determined
to use mergers and acquisitions
as the lever to propel BP into the big leagues.
>> By merging our assets and our prospects with those of
Amoco... >> NARRATOR: Browne began by purchasing Amoco.
>> If you put the two together,
you have a world-class set of complementary assets.
>> NARRATOR: Then, quickly, Browne would buy six other
companies, including Arco with its large Alaskan holdings.
>> Putting the two companies together...
>> NARRATOR: In just five years, he quadrupled the company's
value.
>> We'll be the largest producer
of oil in the non-OPEC world.
>> It's a remarkable feat.
Almost overnight, BP became a world player.
>> Time to go beyond.
>> Beyond.
>> They went from a struggling
also-ran into a company that was
fast on the heels of Exxon, the
largest company in the world.
>> The people of BP believe it's
time to go beyond what the world
expects from an energy company.
>> NARRATOR: But by the end of his buying spree, Browne was
under pressure both to cut costs
and to reinvent his company.
>> One of the problems with building a company up in bits...
>> NARRATOR: Browne spoke of the
challenge at this management retreat in 2003.
>> Here's the practical, real
danger-- a complex organization
cannot be specified in rules.
>> Growth creates challenges to management.
There's no question about that.
I've worked with small companies, I've worked with big
companies.
Big companies are harder to manage.
>> So Enron melted down, Worldcom had an accounting
scandal, Adelphia, you know, the
CEO has gone to jail, I think.
>> BP, in this case, just grows
beyond its management ability to
watch everything they need to watch when they need to watch
it.
>> Delegation, of course, comes with limits.
>> Browne has shown himself as
having an ability to get deals done, understanding how to
negotiate complex deals.
>> It's about integration, too, and I'll come back to that.
>> But while they were successful in expanding
commercially, they were less successful in instituting a
sense of operational excellence within the organization.
>> You must be very clear as a leader who it is you are
delegating authority to.
>> NARRATOR: In an interview that year, Browne acknowledged
that the real measure of his new company lay ahead.
>> And the real quality of a company is, of course, the test
on how well things are going when things go well, but the
real test is, how do we respond when things go wrong?
>> NARRATOR: Things went wrong on March 23, 2005, as workers
at the Texas City plant were starting up the isomerization
unit.
The ISOM unit, used to boost the octane level of gasoline,
had been down for maintenance, the so-called turnaround.
>> The most dangerous time of a
refinery unit is when it's being
started up, and when it's being
decommissioned and taking the
product out of it and turning it off, so to speak.
>> NARRATOR: Dave Senko, a supervisor with Jacobs
Engineering, a BP contractor, was off site at the time, but
his team, unaware of any danger,
had gathered inside a trailer near the adjacent ISOM unit.
>> We were not told that that unit was in a turnaround mode.
None of my people were aware.
>> We were never told.
We have a morning meeting before we start the day, to talk
about... >> NARRATOR: Dave Leining of BP
was meeting with Senko's team.
He was also unaware of the startup.
>> Nobody said a word to us about the ISOM starting up.
>> NARRATOR: By midday, workers
had unknowingly overfilled the ISOM tower with flammable
liquids.
>> The tower steadily filling
with liquid, more than 15 times the normal level.
>> NARRATOR: A gauge that was supposed to measure the amount
of liquid in the tower failed.
Some alarms that should have sounded didn't.
Other alarms were simply ignored.
In an emergency, excess gas and
liquid can be rerouted to the
blowdown drum, but there was too much.
>> As flammable hydrocarbons overfilled the blowdown drum,
operators nearby saw a geyser of
liquid and vapor erupt from the top of the stack.
>> NARRATOR: The antiquated blowdown drum had no flare to
handle the emergency.
>> The actual flammable liquid is flying out the top of this
thing like Old Faithful.
>> The trailer started shaking real violent.
And as I got up and turned sideways, that's when the
explosion happened.
And then, just the force of the blast knocked me down to the
ground, and then you could see a
big ball of fire just roll over our heads, right over the
trailer.
It just got real quiet.
It got real dark.
I figured, you know, "That's... that's the end."
>> 9-1-1.
>> A plant just blew up.
Oh, my God.
>> Texas City 9-1-1, state your emergency.
>> Yes.
This plant just blew up.
>> It's the ISOM, the ISOM!
>> NARRATOR: It was the biggest
industrial accident in decades.
>> Get me at least a half dozen available firemen.
We got people trapped in these
trailers, trying to get to them.
>> It's been a sad day for the BP Texas City Titans.
It's a really sad day for me, personally, as well.
At this time, regretfully and
with shock, I have to report to
you that there have been some fatalities.
>> Mr. Browne has spent the morning visiting our site.
He's now agreed to spend a few minutes with you.
This is John Browne, our group chief executive.
>> Thank you.
Ladies and gentlemen, good morning and thank you for
joining us.
Yesterday was a dark day in BP's history.
All of us at BP are very deeply
saddened by the loss of life and
injuries suffered by so many people.
>> NARRATOR: Lawsuits ensued.
>> My name is John Manzoni.
I live in London and I'm with BP and my...
>> NARRATOR: In a taped deposition, John Manzoni, head
of refining, was asked about his visits to Texas City.
>> When was the first time you learned there were serious
safety concerns at BP Texas City?
>> NARRATOR: Manzoni claimed he'd never been made aware of
serious safety issues at the plant.
>> The 23rd of March, 2005.
>> Before that, you had no idea that there was a risk of
catastrophic injury?
>> No.
I think had I been aware that we
could have had a catastrophic failure, we would have taken
action earlier.
>> When Mr. Manzoni was asked
directly, "Were you aware of all
of the multiple safety concerns
being raised?" his response was "No,"
And I just... I couldn't believe that was true.
>> NARRATOR: Manzoni also denied
knowing about the cost-cutting in Texas City.
>> After the merger, there was apparently a decision made to
advise the various business unit leaders at the various
refineries to cut their fixed
operational budgets another 25%.
Do you know anything about that?
>> No, not specifically.
I don't know when that was.
>> NARRATOR: Eventually, BP paid
victims and their families over
a billion dollars in exchange for their agreeing never
publicly to criticize the company.
Everyone signed except for this
woman, Eva Rowe, who lost both her mother and father.
>> BP wanted to meet and talk about a settlement.
In my mind, I was thinking, "You
people are crazy that I'm just
going to sign this and go away,
and you guys are going to get away with what you've done?"
>> What did you say to them?
>> I specifically told them that that sucks.
This was not an accident.
This was profits over people.
I mean, they were, like, small
repairs that would've cost their
company like $100,000 for, like, a flare system.
That would've prevented the explosion also, and they didn't
do that.
>> NARRATOR: Rowe says that BP did not get in touch with her
until a month after the blast,
when they sent her $25,000 and this letter.
>> I got a form letter.
"Dear Ms. Rowe, we're sorry for
the loss of your father, James Rowe."
>> NARRATOR: But it was the only letter she received.
>> I never received one that apologized for the loss of my
mother.
So, it was kind of upsetting.
>> NARRATOR: A year and a half
after the accident, BP finally settled with Rowe for an
undisclosed amount of money and $32 million in donations to
charities of her choice.
She also insisted that BP be forced to release seven million
internal documents.
>> That's all I wanted in the first place, was for the world
to able to have the information
from BP on what happened there.
>> NARRATOR: Those documents contributed substantially to
government investigations into what happened at Texas City.
Another investigation, commissioned by BP, was led by
former Secretary of State James Baker.
>> BP is going to approach process safety....
>> NARRATOR: The reports concurred.
>> BP has not adequately established process safety as a
core value.
>> NARRATOR: At the end of Baker's press conference, Browne
apologized via satellite from London.
>> BP gets it, and I get it, too.
This has happened on my watch,
and as chief executive, I have a
responsibility to learn from what has occurred.
>> NARRATOR: $71 million in federal fines were paid, but no
BP official was ever charged with a crime.
>> What bothers me most is that here we are, five plus years
after that blast, and not a single person has been blamed
for the incident or the conditions that caused it.
>> NARRATOR: Today, the refinery
continues to be one of BP's most troubled and dangerous.
Four people have died here since the 2005 accident.
And in June 2010, T.J. Aulds of the Galveston "Daily News"
reported that BP Texas City released toxic gases over a
40-day period this last spring.
It resulted in more than half a million pounds of pollution.
BP reported the release to regulators.
The EPA is investigating.
>> It's their history.
Bad things have happened everywhere BP operates.
Everywhere they operate, something bad happens.
>> BP is in crisis mode after
severe pipeline corrosion forced the company...
>> The conditions at the spill site: nothing less than
brutal.
>> ...calls now for investigative hearings into why
the company had to shut down...
>> NARRATOR: A year after the explosion in Texas City, there
were problems on another front:
Alaska.
This is BP's giant Prudhoe Bay oil field on Alaska's North
Slope.
It represents 8% of America's domestic oil production.
But opened more than 30 years ago, inadequate or deferred
maintenance here, too, has workers worried.
>> The pipelines are rusted where insulation has fallen
off.
>> NARRATOR: Managers won't talk, but workers like Marc
Kovac, protected by their union,
explained how, back in the '60s,
everyone thought the field would last 20 years.
They were wrong.
>> All of the modules were designed in 1966 and put in
place in the '70s.
And the expected lifespan of the
field and that equipment was designed to last till 1987, and
then it was supposed to be pulled out.
After they started drilling, they knew that the pay zone was
a lot deeper, but we're still using a lot of the
infrastructure that was supposed to be pulled out in '87.
They're going to run everything to failure, which means that
everything here is going to be
worn out completely by the time they decide to leave.
>> There is so much money here
and still so much oil to be made RíRw!
that they're kind of in the quandary of having all this
aging infrastructure, but they have to stay here to make the
big money that they're making off of here.
>> NARRATOR: As in Texas City,
the workers say BP has focused on cost cutting.
>> When I was doing reporting on
Alaska, that's when I really began to hear about this
incredible focus on cost cuts and that there was just
tremendous pressure.
It was just shocking to me that a company would be flying so
close to the edge on something,
you know, where the downside is so huge.
>> NARRATOR: BP employs nearly
300 contractors to inspect the
pipes and wells, but it's a huge challenge.
>> Okay, you are set.
>> Our plan would say, "This line, this line, and this line,
you're going to do five inspections on it this year."
And it might be miles and miles long.
And it's kind of like a crapshoot, as far as, are you
going to find some damage or not?
We're inspecting as much as we have time to inspect, but
BP's... they base everything on the risk.
You know, "What's the risk?
How far can we go with this before we're going to lose a
life?" or, "How many lives can
we afford to lose before we need to deal with this?"
>> Narrator: In 2002, oil worker
Don Shugak was about to inspect well A-22.
>> He did not know and was not
told that that well had a leak and had a problem.
The well blew up.
He was smashed against his truck, and he had broken bones
and was burned.
>> NARRATOR: Don Shugak lay in a coma for six weeks.
These pictures were taken after he awoke.
He settled with BP for an undisclosed sum.
In exchange, he agreed not to speak to the media.
>> It's essentially a gag order.
There are many people who would
say that BP devotes more effort
and attention to making that a
priority than they do to keeping
their facilities safe in the first place.
>> NARRATOR: But far from quieting concerns, Shugak's
accident spurred workers once again to bring safety problems
to the attention of management.
>> And we would send a letter to London.
Normally, we get a nice answer back but no action.
>> Information had been brought forward by the corrosion
technicians and other employees to management, had been
summarily ignored, people had been told to shut up about it,
and the potential for a corrosion-related rupture was
significant.
And, lo and behold, in March of '06, it proved to be true.
>> NARRATOR: In March 2006, 260,000 gallons of oil leaked
from a pipeline.
It was the worst spill ever on the North Slope.
>> We told management there was going to be spills and that
these lines were going to break.
And we had a lake of oil out there that was over three
foot-deep and rippling in 40-below weather.
>> 200,000 gallons is nothing to be sneezed at.
However, being that it was wintertime, it made the response
possible to basically get most,
if not all, of the hydrocarbons up out of the environment.
Had it been mid-summer and the
sheet flow of water across the North Slope and into the
Beaufort Sea, 200,000 gallons would have been an
environmental, ecological disaster.
>> As it turned out, they weren't doing enough of what
they call pigging, which is putting through a metal thing--
they call it a pig-- that clears
the sediment from the pipes.
This was an actual cost cut.
They figured they didn't need to
do it as often and they'd be just fine.
>> We had not pigged and cleaned
the line for a long, long time.
>> NARRATOR: The pipe had not
been pigged for nearly a decade.
BP managers had concluded that pigging wasn't necessary.
>> Several years previous to
this, they had wanted to do away
with the pigging crew entirely in union negotiations.
They didn't want them.
They wanted to lay them off.
>> What, not pig at all?
>> Right.
They actually made that proposal
across the bargaining table.
And we said, "Absolutely not."
>> NARRATOR: Five months after
the spill, Lord Browne arrived to personally inspect the
pipelines.
He was assured by his chief corrosion expert that the leak
was an isolated incident.
>> The other lines that we still
have in operation today aren't
showing this problem at all, so
we believe right now that the problem was located to this
specific segment of the line.
>> This is the only time that something has happened, but
one... one time is too many.
>> NARRATOR: Two days later, there was another spill.
>> BP is in crisis mode after severe pipeline corrosion
forced the company to shut down
its Prudhoe Bay field in Alaska.
>> NARRATOR: BP was forced to shut down its operations.
It caused a major disruption in
oil supplies, and in the lower 48, a spike in prices at the
pump.
>> BP apologized again this morning for their failure to
keep the crucial commodity flowing.
>> NARRATOR: In the wake of the
shutdown, a senior BP official was reassigned.
>> Is the pipeline corrosion in
Alaska just the latest example
of bad luck for the company, or are there serious management
issues for BP?
>> NARRATOR: Meanwhile, the subcontractor responsible for
pipe inspections, Acuren, had hired a new supervisor.
>> Welcome to BP's Prudhoe Bay operations.
>> NARRATOR: His name was Martin Anderson.
>> My name is Marty Anderson.
I am the quality assurance and radiation...
I had received a phone call from North Slope project manager
with Acuren at the time who was responsible for providing
nondestructive testing for the
corrosion inspection chemicals group for BP.
He asked me if I'd be interested in a supervisor's position.
>> What do you begin to find?
What do you uncover?
>> As you know, I'm not at liberty to discuss too many
details.
>> You're saying you can't talk freely because you signed a
nondisclosure agreement?
>> That's correct.
>> NARRATOR: Anderson can't say anything that criticizes the
company... >> I'm not at liberty to...
>> NARRATOR: ...and has never spoken to the media before.
But independently, ProPublica
and Frontline have learned that
some pipe inspectors were not certified or trained properly.
>> I've shown you this letter,
this e-mail, previously, and you
had a chance to look through that and read it, right?
>> Yes.
>> NARRATOR: Anderson's findings
are cited in this email sent to
BP officials from an attorney who deals with worker
complaints.
The concerns are described as "serious," revealing a
"significant quality control breakdown" with "inspectors in
the field performing inspections for which they were not
qualified."
>> Is there anything in there that is inaccurate?
>> No, that's a very factual document.
>> You found that inspectors were unqualified?
>> Yes, everything in that letter is factual.
>> Have you ever suspected that what you were seeing was
actually intentional and therefore criminal?
>> I've had concerns.
Not being an attorney, knowing what is breaking the law and
what is not breaking the law, but I can tell you that I was
very uncomfortable with the situation that they had.
>> NARRATOR: BP has since acknowledged that more than 19
inspectors, responsible for 13,000 inspection points, were
unqualified.
They say they've corrected the
problem and that at least 10,000 inspection points have been
re-examined.
By 2006, BP's most promising oil
fields were here in the Gulf of Mexico.
They had bet their future on it.
>> If you want to continue to
grow as an oil company, you have
to keep extracting more oil.
It's simple.
So, deepwater was the next frontier.
>> NARRATOR: The US government, worried about dependence on
Middle East oil, encouraged it.
>> They wanted the deep waters of the Gulf of Mexico to be
explored, and BP was the kid in
the front of the class putting
up its hand before it even had an answer, basically.
They like to be pushing into ever-deeper territory.
It's how you get kudos in the industry, and it's hugely
impressive, what they were doing.
>> They were very confident.
They actually believed they were
going to overtake Exxon in terms of production.
They'd found a lot of oil in the
Gulf and they were feeling on top of the world.
>> NARRATOR: BP is the leading operator here, producing 25%
of all Gulf oil from some of the
deepest waters in the world.
>> In fact, it was BP who had found the deepest ever, so
everybody was actually pretty excited about this and people
were just losing sight of the risks.
>> The deep Gulf was regarded as
a very difficult place to drill.
Storms, hurricanes, just putting
a deep well down through a lot of water.
It's geologically a difficult place in which to operate.
>> NARRATOR: Thunder Horse, which towers 43 stories above
water, was BP's showcase platform-- a symbol of the oil
giant's ability to innovate, to
push technology to the limit.
But in July 2005, Hurricane Dennis swirled over the Gulf of
Mexico.
The rig's celebrity would be short lived.
Thunder Horse toppled over.
>> This was a state-of-the-art
rig which had cost BP billions
of dollars to design and build,
and it looked like it was going to sink.
It was very embarrassing.
>> NARRATOR: After an investigation, BP discovered
that the storm wasn't the problem.
>> That, in itself, shouldn't have been disastrous.
It turns out that BP engineers had incorrectly installed a
number of valves that are meant
to control the flow of water in
the supports that keep the rig afloat.
And the rig, as a result, took
on water instead of shedding it.
>> NARRATOR: A senior engineer on the Thunder Horse project
agrees it was human error.
>> The storm is not really the
cause of why that thing almost flipped.
It's because the check valve was installed backwards, okay?
And all that was probably caused by being in a hurry and not
dotting their Is and crossing their Ts, in this case.
>> NARRATOR: The platform became
one more big black eye for BP.
>> You had Texas City, you had
Alaska, you had the problems at Thunder Horse.
I think the first one or two incidents, people were able to
say, "Well, you know, everybody's had these accidents."
But after a while, so many things mount up that you've got
to wonder, "Is there a deeper systemic problem?"
>> NARRATOR: Back in London, BP's board had seen enough of
Browne.
>> He had Texas City; he had the leak at the pipeline.
These were a series of closely spaced accidents which caused
the board to lose confidence in John.
And then, the embarrassment of his personal life.
Terrible.
That was the end.
>> "Lie over gay partner ends BP chief's career."
>> The surprise resignation of Lord John Browne.
>> NARRATOR: A newspaper had pursued a story of Browne's
private life.
While trying to contain the scandal, Browne lied to a judge
about how he met his gay partner.
Browne's departure was expedited.
The board had already been considering three of his top
turtles to replace him.
Two of them had strikes against them.
Bob Dudley, then head of a big
BP venture in Russia, was viewed as an outsider.
>> He is the only guy who was
actually a possible candidate to
succeed John Browne who had run a company, but he came from
Amoco.
He's an American.
>> NARRATOR: And then there was John Manzoni, who had been
groomed to take over, but he was
marked by the accident at Texas City.
That left Tony Hayward, an engineer who had headed oil
exploration worldwide.
He took over in 2007.
>> Tony Hayward was well regarded-- BP guy, engineer,
extremely capable, an oilman
through and through, and someone to consider a very worthy
successor for John.
>> I guess I should start by
saying this has been one hell of a year.
I mean, it really has.
It started with a tsunami.
It continued with Texas City.
>> NARRATOR: When Hayward took over, he spoke candidly about
BP's problems.
>> We then nearly sunk our flagship project in the
deepwater Gulf of Mexico.
And I think the only good thing
I would say about all of this
is, A, it's good to have it all behind you.
>> The message he was sending was not only that things had
been bad, but that he was splitting away from John Browne.
>> This is about a fundamental lack of leadership and
management in the area of safety, period.
>> Tony Hayward came into BP's
CEO role on a mission to fix the
problems that the company had.
In his view, he thought that Browne had been too aloof and
too focused on growing the company, and had lost sight of
what it took to mine those resources.
>> We had a major, major oil spill in Alaska.
>> NARRATOR: Hayward gave this
blunt analysis of what had gone wrong at BP to a group of
business students at Stanford University.
>> We diagnosed the following--
a company that was too top down,
too directive, and not good at listening.
We had too many people that were working to save the world.
We'd sort of lost track of the
fact that our primary purpose in
life is to create value for our
shareholders, and we failed to recognize we're an operating
company.
We had too many people that did
not understand what it took to run operations.
We had too many shallow generalists.
>> NARRATOR: Hayward set out to refocus BP.
He allocated $14 billion to upgrade operations, and
established a new safety group.
The changes were well received internally.
>> BP folks had been through the wringer.
They had not felt proud of the
company they worked for, and I
think, in general, they sighed a
great sigh of relief when a new management came in.
>> NARRATOR: But London's bankers weren't happy.
BP's stock price was slumping.
Hayward came under renewed pressure to keep cutting costs.
>> Now, BP has announced a bid
to cut costs, boost revenues and
improve the oil giant's lagging performance.
>> It just doesn't make sense.
It's not clear how the company can continue to shave its
expenses while supposedly reinvesting in the procedures
and the equipment and the operations that have placed it
at such great risk over so many years.
>> Safety remains our number one
priority, and I'm pleased to report we can see clear
progress.
>> NARRATOR: But if Hayward was going to reform BP's safety
culture, he would be doing it while taking bigger and bigger
risks in deeper and deeper water.
By 2010, BP had over 100 wells
in the Gulf under rigs like the Atlantis, Mad Dog, and the
Deepwater Horizon.
>> The US government made it very easy and very attractive
for them to move quickly.
>> NARRATOR: And they were encouraged with generous
subsidies and limited penalties if something went wrong.
>> For example, their liability
cap, if there was a spill, was
$75 million, which is basically five cents to you and me.
So, why would you go drill somewhere else where,
politically, it's more difficult, and perhaps the
geology isn't as great and your
liability is going to be really high?
It made sense for BP to be there.
>> Today, we're announcing the expansion of offshore oil and
gas exploration.
>> NARRATOR: As the Deepwater
Horizon was drilling the Macondo
well, President Obama announced
a major expansion of offshore drilling.
>> There will be those who strongly disagree with this
decision.
>> NARRATOR: He delivered his
speech at Andrews Air Force Base
to underscore that oil was an urgent strategic issue.
BP could only be pleased.
>> Clearly, the company that
will do most of that drilling in the Gulf of Mexico is BP.
They own the vast majority of
the leases for new and promising
areas that would be explored.
Yet, at exactly the same time,
multiple agencies in the Obama administration are actively
investigating BP on several fronts.
>> NARRATOR: At the EPA, lawyers
representing several agencies, including the Departments of
Interior and Defense, were considering disqualifying BP
from getting any more government contracts.
At the Department of Labor, attorneys were evaluating a
series of ongoing violations at
several BP refineries, and at the Chemical Safety Board,
investigators were demanding that BP act on promises made in
2005 to address safety issues in Texas City.
But in the White House, Carol Browner, Obama's chief
environmental advisor, said that, in the policy discussions
over drilling, BP's safety record never came up.
They relied instead on the industry's overall 30-year
offshore drilling record.
>> If you have a 30-year record, that speaks volumes.
I think most of us, if making
decisions in our own lives, had 30 years of information that
suggested something was safe, we
would pay attention to that.
>> But at what point does the
safety and environmental record
of a company rise to an issue of
concern for you in the White House?
>> The White House is not involved in individual leasing
decisions or permitting decisions.
Those are handled, you know,
outside of the political system, and appropriately so.
They're factual decisions made
by the Department of Interior.
That's their responsibility.
It's not part of the broader policy decision, which is,
"Should we enhance and increase the amount of domestic oil
production?"
>> NARRATOR: At Interior, Secretary Ken Salazar's Chief
Deputy is David Hayes.
But here, too, BP's track record failed to alarm anyone.
>> Would an application from BP
receive any special attention, given BP's troubled track
record?
>> I don't believe so.
The track record for BP as a company, in terms of deepwater
performance, I'm not aware that BP would be singled out for
special attention.
>> The Thunder Horse rig-- almost completely destroyed.
They had the Texas City disaster, they had the problems
on the North Slope of Alaska.
At what point does the company
performance start to raise red flags?
>> Well, we are absolutely committed to having safe
offshore drilling, I'll leave it at that.
I mean, if there's an issue with
a company that is systemic and
that is appropriate for special
enforcement, I have to defer to
our enforcement experts on that one.
>> NARRATOR: That would mean
lawyers at either the EPA or the
Justice Department, but former Chief of the Environmental
Crimes section at Justice, David
Ulhmann, says that the laws have no teeth.
>> How do you explain that a
company with an egregious record
is allowed to participate in the most challenging kind of
drilling in a sensitive environment?
>> That's a great question, and the answer is that our laws
don't today create any barriers, any limits on their
ability to continue operating.
As soon as they've cleaned up whatever mess they've made,
they're off the hook.
>> And if you're a repeat offender?
>> The law's no different.
>> The law's no different?
So you can get another contract,
you can drill again, you can operate a refinery?
>> That's correct.
>> Simple as that?
>> Simple as that.
( explosion )
>> ( indistinct voice over radio )
>> Time, 21:03:15 Greenwich Mean Time, the Deepwater Horizon
on fire.
>> NARRATOR: The explosion came just 20 days after Obama's
speech at Andrews Air Force Base.
11 workers killed, 17 more injured.
Things had gone wrong here from the beginning.
A worker had called the project
a "nightmare," the "well from hell."
Internal documents show that BP
engineers were debating how to
cut costs on a project that was already way over budget.
>> Every indication was that the well that blew out, it was
already $10 million over, and to get caught doing a remedial
cement job and going back in there and doing all this work
was another $10 million.
And that was going to impact them, so they were cutting
corners on an operation side trying to get by with less.
>> NARRATOR: BP bypassed a key
test called a cement bond log.
BP saved more than $100,000.
BP cut the number of centralizers used to secure and
plug the well.
This saved over a million.
BP also chose to remove heavy
drilling mud that was helping to
keep gas under ground, instead replacing it with lighter sea
water, saving millions more.
>> Please rise and raise your right hands.
>> NARRATOR: And in a Congressional hearing after the
spill, executives of four of the
world's largest oil companies
all testified that, in the case
of Deepwater, BP did not operate to industry standards.
>> I sent a letter to Tony Hayward, the CEO of BP, and the
letter describes a series of decisions that BP made that
seemed to increase the risk of catastrophic blowout.
I'd like to ask each of you whether you think mistakes were
made by BP.
>> Well, in reviewing the letter
that you sent, it appears clear
to me that a number of design standards were... that I would
consider to be the industry norm were not followed.
>> It's not a well that we would have drilled with that
mechanical setup, and there are operational concerns.
>> Not all standards that we
would recommend or that we would employ were in place.
>> NARRATOR: Two days later, Tony Hayward was summoned.
>> Mr. Hayward, we had a hearing
earlier this week with CEOs from the other oil companies.
They were unanimous in their view that you made risky
decisions that their companies would not have made.
And the conclusion that I draw
is that BP used a more dangerous
well design to save $7 million.
Don't you feel any sense of responsibility for these
decisions?
>> In the three years that I've been CEO, I've focused on
improving dramatically our safety and environmental
performance.
Prior to this accident, that has
indeed been the case, and that
is why, amongst all the otheroBn
reasons, I am so devastated byoF
>> His testimony before the Congress on Macondo well was
really embarrassing.
>> I'm not a cement engineer, I'm afraid.
>> "I didn't know anything about the centering, I'm not a
cementing expert."
That was really... >> He said he wasn't part of the
decision-making process.
>> Outlandish.
You're supposed to know.
>> NARRATOR: In the weeks and
months following the spill, BP's board lost faith in Tony
Hayward.
He was replaced with Bob Dudley.
Dudley would be the third CEO in four years.
>> No questions guys, please.
No questions at all, please.
>> NARRATOR: For months, we asked BP to grant an interview.
They declined.
>> What are the changes going to be?
>> Well, there's no question we're going to learn a lot from
this accident in the Gulf Coast.
>> NARRATOR: They agreed to consider written questions.
We sent more than 40.
They gave us a three-paragraph response.
In it, they pledged to restructure and improve safety
in all their operations.
>> Several oil executives that I spoke with described this
process of reforming a company culture as a monumental task.
>> Tony and I are going to work
through a transition between now and....
>> And it's something that will
occupy a chief executive's focus
and attention every single day, every day of the week, every
week of the year, in perpetuity.
>> Thanks ever so much.
>> Thank you.
>> Thank you, all.
>> NARRATOR: BP now faces the
largest liabilities in corporate history.
In July 2010, a bill passed the
House of Representatives that would ban BP from drilling new
deepwater wells for seven years.
It's not likely to pass the Senate.
In Texas City, the Department of
Labor just levied $50 million in
new fines for BP's failure to address safety issues they had
promised to correct after the 2005 explosion.
And in Alaska, maintenance documents from October 2010 show
that the pipelines here remain seriously corroded.
>> There's much more on Frontline's web site.
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>> Almost overnight, BP became a world player.
>> And the US government made it very easy and very...
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