The Galveston County Daily News

TEXAS CITY — BP PLC and its subsidiaries have agreed to pay $50 million in criminal fines and plead guilty to a felony violation of the Clean Air Act, concluding part of a federal investigation into the fatal explosions at BP’s Texas City refinery in March 2005.

The Thursday announcement came with other agreements by BP to pay criminal fines and restitution totaling $373 million as the company seeks to salvage its reputation after environmental and safety disasters and charges of corporate fraud.

Charges are still possible against individuals in the company, said Don DeGabrielle, U.S. attorney for the Southern District of Texas.

The criminal fine of $50 million in the Texas City explosions would be the largest ever under the 1990 Clean Air Act, DeGabrielle said. But one congressman said the fine didn’t go far enough.

The plea agreement must be accepted by U.S. District Judge Gray Miller on Nov. 27.

DeGabrielle said the company’s plea acknowledges that for six years, BP had “either defective or completely nonoperable or nonexistent safety processes in place to prevent this very thing.”

The other payments include $12 million in criminal fines, $4 million in payments to the National Fish and Wildlife Foundation and $4 million in criminal restitution to the state of Alaska in a guilty plea to a violation of the Clean Water Act. A BP pipeline spilled 201,000 gallons of crude oil onto the Alaskan tundra at Prudhoe Bay in 2006.

The company has also agreed to a criminal penalty of $100 million, a payment of $25 million to the U.S. Postal Inspection Consumer Fraud Fund and restitution of $53 million, plus a civil penalty of $125 million to the Commodity Futures Trading Commission in connection with federal charges that the company artificially inflated the price of propane.

DeGabrielle said the $50 million fine was limited by mathematical formulas and was the maximum amount prosecutors could prove that BP should pay. It does not take into account fatalities in the same way civil penalties would, he said.

Fine Criticized

BP has settled 1,650 of more than 3,500 lawsuits stemming from the Texas City explosions, including all involving deaths. But hundreds of others involving injuries and damages remain.

“We hope that BP understands that shelling out more money to settle criminal charges will not make the remaining civil cases related to Texas City simply go away,” plaintiffs’ attorney Brent Coon said in a prepared statement.

Coon is awaiting a Texas Supreme Court ruling to decide whether former CEO John Browne will have to testify in civil cases.

The chairman of the House Energy and Commerce Committee, Rep. John Dingell, D-Michigan, criticized the $50 million fine.

“I note with curiosity that when an average citizen commits a felony it usually leads to a prison sentence,” he told The Associated Press. “Yet, apparently, when a big oil company commits a felony that causes 15 deaths, it pays a criminal penalty equal to less than a day’s corporate profits.”

BP reported an adjusted net profit of $22 billion in 2006, or about $60 million per day.

‘We Deeply Regret’

As part of the plea in the Texas City explosions, BP agrees to three years of probation. During that time, the company must continue to cooperate with investigators, providing documents, employee interviews and other evidence, DeGabrielle said.

As a condition of probation, BP must also comply with the terms of settlement agreements with the Occupational Safety and Health Administration and the Texas Commission on Environmental Quality.

Those agreements require various process safety improvements at the plant.

“If our approach to process safety and risk management had been more disciplined and comprehensive, this tragedy could have been prevented,” BP America President Bob Malone said in a prepared statement.

“We did not provide our people with systems and processes that would have enabled them to appreciate the risk of a catastrophic release from the F20 blowdown stack and understand the danger of placing occupied trailers so close to it.

“We deeply regret the loss of life, the injuries and the community disruption caused by the explosion.”

The explosions happened after an octane-boosting unit overfilled with flammable liquid, creating a vapor cloud that investigators suspect was ignited when a nearby vehicle started its engine.

Fifteen contract workers in nearby trailers died and at least 170 people were injured.

BP has eliminated the blowdown systems in Texas City.

“These agreements are an admission that, in these instances, our operations failed to meet our own standards and the requirements of the law,” Malone said. “For that, we apologize.”

Heavy Cost

BP has spent $1 billion repairing and inspecting the Texas City refinery, which has been operating at about half of its 470,000-barrel per day capacity — about 11 million gallons of gasoline. The company expects to approach full production by the end of 2007.

BP has set aside $1.6 billion to compensate victims.

“This is costing them well more than the $50 million,” DeGabrielle said. The plea agreement resulted from an investigation by the U.S. Department of Justice, the Environmental Protection Agency and the FBI.

It is the first time a company will be charged with a felony under the Clean Air Act. Congress passed the law in 1990 after history’s deadliest industrial accident.

A toxic release at a plant in Bhopal, India, killed more than 3,000 residents and injured more than 100,000 in 1984.

Craig Carlton, special agent in charge of the Environmental Protection Agency’s Houston office, said he hopes the criminal charge and plea will serve as “a graphic reminder, if one was ever needed, that the Clean Air Act contains accident prevention provisions for a reason. Those who violate its provisions will be prosecuted.”

Red Flags

Acting U.S. Attorney General Peter Keisler said BP’s guilty plea to a violation of the Clean Water Act in Alaska acknowledges BP Exploration Alaska’s “failure to heed many red flags and warning signs of imminent internal corrosion” in its pipeline. The result was the largest spill ever on Alaska’s oil-rich North Slope.

In Illinois, the U.S. government charged BP America with conspiring to violate the Commodity Exchange Act, mail fraud and wire fraud.

The government agreed not to prosecute BP in the market manipulation case if the company cooperates with further investigations and an independent monitor.

A federal grand jury has indicted four former BP America employees on charges they conspired to manipulate the TET propane market in February 2004. The indictment alleges BP bought large quantities of propane and withheld it, artificially inflating the price of the gas.

New Strategy

Tony Hayward succeeded Browne as BP’s chief executive on May 1. Since then, he has led efforts to simplify the company’s corporate structure.

The strategy might have had little short-term impact — BP announced a 29 percent drop in third-quarter profits because of refinery outages and maintenance costs — but analysts said they expect Hayward’s efforts will help in the long term.

DeGabrielle stopped short of saying Hayward has cooperated with law enforcement better than his predecessor, but he underscored recent efforts by the company to conclude criminal cases that have stained its reputation.

“I will say that, lately, they have shown a strong interest in getting this resolved,” DeGabrielle said.

“I’m sure they have an interest in resolving ... all three episodes of criminal conduct in the United States.”