BP: An Unethical Oil Giant

Deepwater Horizon Oil Rig

“We care deeply about how we deliver energy to the world. Above everything, that starts with safety and excellence in our operations” (“About BP”).

These are the first two sentences in BP’s policy titled “What we stand for.” Ironically, BP has been criticized widely for their safety standards and business operations.  More specifically, the most well-known and devastating oil spill in US history is largely the fault of this powerful oil corporation.  In response, BP implemented extensive recovery programs, but the damage had already been done.  The environment, wildlife, and local economies of all of the states lining the Gulf of Mexico felt the consequences of millions of barrels of oil being released into the ocean.  As a social science perspective, Donaldson’s ideas regarding corporate duties provide a basic means to assess BP’s ethicalness as a company in their actions leading up to and in response to the accident.  After BP’s oil drilling operations were widely blamed for the devastating 2010 oil spill in the Gulf of Mexico, the company invested large amounts of time and financial resources to maintain a strong public image, but failed to act as an ethically sound corporation.

BP’s history begins in the early 1900s, when British Petroleum and Amoco were formed in Britain and the United States, respectively.  After merging in 1998, the company completed several purchases and sales, ultimately creating the “BP” present today.  Operating in thirty countries, it is the third largest publicly traded oil company in the world and the largest in the United States. BP’s major operations include refining and marketing, exploration and production, gas and power, chemicals, coal mining, and solar power and it currently holds twenty-six subsidiaries worldwide.  Total sales for 2011 were reported as $386,463 million, the majority in refining and marketing.  The current Group Chief Executive and Director, BP’s equivalent of a CEO, is Robert Dudley, who was appointed to this position after gaining authority as President of the company’s Gulf Coast Restoration Organization (Hampton).  BP is well known for multiple reasons, both good and bad.  It was the “first major energy company to recognize the threat of global climate change and the first to voluntarily reduce its carbon emissions”, but is also often criticized for cost-cutting and lax safety standards (Hyman, pg 1). While BP continues to fund research towards sustainability and reducing climate change, it has been blamed for several environmental disasters as well.

Since the issue of global climate change rose to widespread public awareness in the 1980s, BP has supported governance policies to limit negative effects and invested resources in alternative energy sources.  One of their largest initiatives was their internal cap-and-trade system.  While the US government was considering this idea to limit sulfur dioxide emissions as a whole, BP set an example and raised awareness about the method by implementing their own system between in-house business units.  Unlike the US’s cap-and-trade system, BP’s did not involve any monetary exchange.  It rather “allowed business units to trade rights to emit CO2e to help BP realize its company-wide reduction target in a cost-effective manner” (Hyman, pg 6).  This system caused BP to become known for their voluntary cutback in carbon emissions, which was then supplemented by the formation of BP Solarex.  “In addition to producing solar power equipment, BP endeavored to become… ‘one of the largest single users of solar power,’” according to John Browne, the CEO at the time (Hyman, pg 7).  BP continued their investment in low-carbon energy by forming an Alternative Energy business unit – which consisted of solar, wind, hydrogen power, and natural gas sectors – and establishing a biofuels business.

While their consistent focus on the increasingly pressing issue of climate change makes BP seem like an environmental saint, they have also been blamed for several environmental disasters.  More specifically, BP operations caused an explosion in their Texas City Refinery in 2005, which claimed 15 lives, and a devastating oil spill in the Northern Slope of Alaska in 2006, which released 4,800 barrels of crude oil into the environment (Hyman).  Though these were major setbacks for the company, they had yet to see the worst.

Location of the incident

On April 20, 2010, the Deepwater Horizon oil rig connected to a BP-owned well exploded in the Gulf of Mexico, causing the worlds most devastating oil spill. The explosion caused 11 deaths and released about 4.9 million barrels of oil into the Gulf (Hughes).  BP’s website provides a page explaining the accident, which states:

“The accident involved a well integrity failure, followed by a loss of hydrostatic control of the well.  This was followed by a failure to control the flow from the well with the blowout preventer (BOP) equipment, which allowed the release and subsequent ignition of hydrocarbons.  Ultimately, the BOP emergency functions failed to seal the well after the initial explosions” (“Gulf of Mexico”).

After 36 hours of burning, the fire ultimately caused the rig to sink, leaking hydrocarbons into the Gulf before the well could be sealed (“Gulf of Mexico”).

While investigations into the technical causes for the explosion continue, blame has been thrown back and forth between the three major corporations linked to the oil rig.  Unfortunately for BP, their history of cost-cutting makes them an easy target.  A report from the National Academy of Engineering concluded that “many of BP’s choices ‘were likely to result in less cost and less time relative to other options,’’’ and criticized the “lack of processes to ensure that safety didn’t take a back seat to cost” (Casselman & Power). The BP Deepwater Horizon Oil Spill and Offshore Drilling Commission also condemned BP’s cost-cutting strategies when they released a report stating “BP ‘did not have policies and systems in place’ to ‘ensure that decisions made to reduce costs and improve efficiency do not increase risks or diminish safety’” (Hughes).  In BP’s defense, the report later blames management practices of BP, Halliburton Co. and Transocean Ltd, saying that all three companies “’failed to communicate adequately’” and “as a result, individuals made ‘critical decisions without fully appreciating their context or importance’” (Hughes).

Transocean Ltd., the owner of the rig, places blame on BP, citing that “BP made a series of decisions that increased risk,” including choosing “a design for the well that made it more difficult to seal it off from explosive natural gas,” insisting “on a needlessly complex formula for a crucial cement seal,” and confusing “the rig’s crew by repeatedly changing plans for finishing work on the well” (Casselman & Gonzalez).  On the other hand, “BP released a report that largely faulted Transocean and another of BP’s contractors, Halliburton Co.” (Casselman & Gonzalez). In another circumstance they stated, “’it was not appropriate to second-guess Transocean’” and that “’it’s not BP’s role to oversee the safety of the rig’” (Bower).

Public opinion on the matter varies, but most people blame all three corporations for the explosion.  One New York Times reader stated, “instead of spending many years and millions of dollars in legal fees trying to avoid liability, the three partners — BP, Transocean, and Halliburton – ought to jointly accept responsibility and liability” (NYTimes). A collaborative effort is the best way to move forward.  Interestingly, some blame is also placed on the US government.  One reader commented that “instead of hauling the heads of BP, Transocean, and Halliburton in to testify and attempt to place blame, Congress and the president should be exploring in a bipartisan manner how to break the stranglehold of big oil and energy companies” (NYTimes). This goes along with the fact that the authors of the previously mentioned National Academy of Engineering report concluded that “industry-wide training standards…are ‘relatively minimal’ compared to other high-risk industries” (Casselman & Power).  The government should require standards adequate enough to minimize the risk of accidents like this one.

Early restoration projects

Whether or not the blame should be placed on BP, the company has made a huge effort to alleviate the impacts on the surrounding area.  In order to restore the environment, BP has been working with agencies, both state and federal, to understand the impacts of the spill; monitor the wildlife in the area, specifically birds and sea turtles; implement emergency restoration projects to address any irreversible loss of natural resources; initiate early restoration projects to accelerate efforts to restore injured natural resources, particularly in Alabama, Florida, Louisiana, and Mississippi; and execute conservation projects with the National Fish and Wildlife Foundation.  While the environment was greatly impacted, the economy was in need of restoration as well.  BP continues to promote tourism along the Gulf Coast, support the greatly affected seafood industry, and provide support for a variety of community organizations and programs throughout the region.  In order to ease financial burdens on the region, BP has paid out over $9 billion dollars in claims to individuals, businesses, and the government.

Claims payments

When BP returned to drilling in the Gulf, they implemented voluntary standards, enhanced the monitoring of operations, and worked closely with the regulator to ensure compliance. Lastly, BP increased their support of long-term oil spill research when they committed to fund $500 million towards the cause and has, since the beginning of 2011, promoted safer drilling by taking a more centralized and collaborative approach (“Gulf of Mexico”).

Although BP has made an effort to better the devastating situation for which they are at least partly to blame, it is still hard to consider it an “ethical” company.  To act unethically is to disregard duties resulting in a threat to the welfare of those effected.  It is easy to compare BP’s actions to Hartman’s assessment of Donaldson’s theories about rights and corporate obligations.  Donaldson believes that duties can be divided into three categories:

  1. “The duty to avoid depriving people of their rights.
  2. The duty to help protect people from such deprivation.
  3. The duty to aid those who are deprived” (Hartman, 163).

Hartman states that duties one and two apply to corporations.  One of the fundamental human rights is the right to live.  No matter who is technically to blame for the Gulf oil spill, BP’s repeated involvement in environmental disasters basically proves that the corporation had at least some responsibility in the Gulf spill.   BP has threatened the rights of its workers continuously with lax safety standards and an overbearing focus on cost-cutting, as proven by the 26 lives claimed in the two fatal explosions.

The Gulf oil spill greatly affected the economies in the surrounding areas, especially the seafood industry.  The Gulf Coast “accounts for about 18% of the US’s total commercial seafood production” (“Gulf of Mexico”). Even though it is not a fundamental human right, the people in the area have a right to make a living without suffering from BP’s carelessness.  It is true that they paid those who claimed to be affected by the spill, but this does not negate the fact that it could have fairly easily been avoided by a larger investment in safety and more organized management practices.

Regarding their efforts to help those affected by the Gulf spill, BP technically satisfies Donaldson’s third duty, even though it is not obligated to.  Still, since environmental disasters are a common occurrence for BP, their efforts hardly fulfill the second duty, to help protect people from deprivation.  In order to protect people from the deprivation that their actions repeatedly cause, BP needed to solve management and cost-cutting issues right after their first major disaster. Perhaps their newly implemented standards and safety precautions will prevent future spills, but BP definitely acted unethically by Donaldson’s standards prior to the Gulf spill.

Overall, it is the publics’ responsibility to take action on the unethical behavior of BP and similar oil companies.  It is widely suspected that major oil companies act with profits in mind first, which seems to be the case with BP.  The multiple environmental disasters linked to the company prove that BP is not fulfilling its duties as a corporation and therefore should be considered an “unethical” corporation.  Furthermore, are their efforts to alleviate the impact on the area simply a strategy to trick the public into thinking they are an ethical company? From their description of the causes of the explosion on the corporate website, it seems as though this may be the case.  BP provides only one small paragraph to explain what they did wrong using language like “hydrostatic control” and “blowout preventer equipment,” which the average viewer definitely would not being able to understand, but devotes seven extensive pages to explain everything they have done right since.  Any “ethical” company would take responsibility following a devastating disaster like BP’s Deepwater Horizon oil spill.

Works Cited

“About BP”. bp. Retrieved from http://www.bp.com/extendedsectiongenericarticle.do?categoryId=9039352&contentId=7072114

Bower, T. (2010, May 01). Drilling down: A troubled legacy in oil; the spill in the gulf of mexico is the latest disaster for BP, which has been haunted by a history of cost-cutting. Wall Street Journal (Online). Retrieved from http://search.proquest.com/docview/230976019?accountid=9784

Casselman, B., & Gonzalez, A. (2011, Jun 23). Transocean puts blame on BP for gulf oil spill. Wall Street Journal (Online). Retrieved from http://search.proquest.com/docview/873293894?accountid=9784

Casselman, B. & Power, S. Gulf spill linked to BP’s lack of ‘discipline’; engineers’ report blames oil giant for failing to ensure that safety trumped cost; regulators’ technical acumen is panned. (2010, Nov 17). Wall Street Journal (Online). Retrieved from http://search.proquest.com/docview/782067458?accountid=9784

“Gulf of Mexico restoration”. bp. Retreived from http://www.bp.com/sectionbodycopy.do?categoryId=41&contentId=7067505

Hampton, S. BP p.l.c. Retrieved from Hoover’s Database http://subscriber.hoovers.com/H/company360/overview.html?companyId=58872000000000

Hartman, E. Donaldson on Rights and Corporate Obligations. (163-172).

Hughes, S. Management to blame in gulf spill, panel co-chair says. (2010, Dec 02). Wall Street Journal (Online). Retrieved from http://search.proquest.com/docview/815315089?accountid=9784

Hyman, M. & Reinhardt, F.. (2009). Global Climate Change and BP. Harvard Business School.

What did we learn from the spill?. (2010, May 13) The New York Times. Retrieved from http://www.nytimes.com/2010/05/14/opinion/l14oil.html

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s