More than $373 million payout

Posted: Friday, October 26, 2007

HOUSTON - BP PLC is taking a multimillion dollar broom to sweep away a slew of federal charges linked to energy price fixing, a deadly refinery blast and pipeline leaks and focus on its energy business.

Sound off on the important issues at

The more than $373 million in settlements announced Thursday are part of the company's attempt to get rid of the problems left over from the stewardship of former chief executive John Browne and move ahead with the recently announced restructuring of Europe's second-largest oil company.

On top of the fines and restitution, four former BP employees were indicted by a federal grand jury in Chicago on 20 counts of mail and wire fraud connected to a scheme to manipulate energy markets.

The bulk of the fines - $303.5 million - aim to punish BP for conspiring to fix propane prices in 2003 and 2004.

VoxBox

Voice Your Thoughts

Do you think what BP is paying is a fair amount for the deaths of 15 workers, polluting and price fixing?

•••

Post your comments and check out other people's remarks at http://juneaublogger.com/voxbox/.

London-based BP also agreed to pay a $50 million fine and plead guilty to a felony for its role in a 2005 explosion at its Texas City refinery that killed 15 employees and injured more than 170 others.

Additionally, it will pay $20 million in criminal fines and restitution to Alaska and the National Fish and Wildlife Foundation for pipeline leaks and spills at Alaska's Prudhoe Bay, the nation's largest oil field.

The settlements were made public at U.S. Justice Department news conferences in Washington and Houston.

"These agreements are an admission that, in these instances, our operations failed to meet our own standards and the requirements of the law," Bob Malone, president and chairman of Houston-based BP America, said in a statement. "For that, we apologize."

The chairman of the House Energy and Commerce Committee, Rep. John Dingell, criticized the amount BP will pay to settle the Texas City charge.

"I note with curiosity that when an average citizen commits a felony it usually leads to a prison sentence. 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," the Michigan Democrat said.

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

The new legal developments come amid a wide-ranging overhaul at a company that's had more than safety and operational difficulties in recent years.

Earlier this year, Browne, the man who transformed BP into one of the world's top energy companies, resigned in disgrace after 12 years at the helm for admitting he lied to a judge when he tried to block a newspaper from printing allegations of wrongdoing made by a former boyfriend.

Tony Hayward, who succeeded Browne on May 1, acknowledged earlier this month that BP had lagged peers in the past few years, and he launched a comprehensive restructuring that includes reducing the number of business units and simplifying management by stripping out some layers.

Analysts have said the overhaul would have little short-term impact but positive long-term implications. Indeed, earlier this week, BP reported a 29 percent slump in third-quarter profit because of higher maintenance costs and outages at key refineries, but some analysts said the worst of the company's operations woes may be behind it.

Gary Adams, vice chairman of oil and gas for Deloitte & Touche USA LLP, said it makes perfect sense for a global energy company like BP to want to refocus efforts on its core business - finding, producing and refining oil and natural gas.

The global energy business is difficult enough these days, Adams said, as access to new reserves becomes increasingly difficult and costs for materials and services continue to rise.

"In order for international oil companies to compete, it makes sense to go through a review of their operations around the world," Adams said. "Some have done it, some are in the process. But you've got to be focused on the business right now."

BP is not out from under the federal microscope yet. The U.S. government's investigation of the company and its executives will continue during a three-year probation period, Acting Attorney General Peter Keisler said Thursday.

"Obviously, the actions we're responding to today reflect that there were some very serious problems within the company," Keisler said.

The charges against BP and its U.S.-based subsidiaries come in at least three separate cases that federal investigators have been pursuing for several years. They include:

-A February 2004 scheme by BP America Inc. to inflate the price of propane by buying massive quantities of the gas, to be delivered over a Texas pipeline, and then withholding supplies. That forced other buyers in the wholesale market to pay an unnaturally high premium, costing consumers an estimated $53 million and driving spot prices as high as 94 cents a gallon in places like New York, Pennsylvania and Illinois. Ironically, BP did not profit because the financial benefits of the scheme were outweighed by the unexpectedly huge costs associated with carrying it out.

-The March 23, 2005, explosion at BP's refinery in Texas City. Granta Nakayama, assistant administrator for the Environmental Protection Agency, said BP failed to install environmental and safety standards as required by the Clean Air Act to prevent chemical vapors from being accidentally released. BP is set to formally enter its guilty plea for the felony violation of the Clean Air Act on Nov. 27.

-BP's March 2006 spill of 201,000 gallons of crude oil at Prudhoe Bay. Nakayama said the spill "should not have happened" because BP ignored what he called many warnings about the risks to the ecosystem.

"BP committed serious environmental crimes in our two largest states," Nakayama said. "Every entity that is subject to environmental laws has an obligation to comply. But global companies like BP, with their experience, technical capabilities and financial resources, have no excuse for committing environmental crimes."

BP's U.S. shares gained 29 cents to $75.86 Thursday.



CONTACT US

  • Switchboard: 907-586-3740
  • Circulation and Delivery: 907-586-3740
  • Newsroom Fax: 907-586-3028
  • Business Fax: 907-586-9097
  • Accounts Receivable: 907-523-2230
  • View the Staff Directory
  • or Send feedback

ADVERTISING

SUBSCRIBER SERVICES

SOCIAL NETWORKING