On March 23, 2005, 15 people went to work at BP’s refinery at Texas City. They did not come home. They were killed by a huge explosion, perhaps the worst accident in an American workplace in the past 20 years.
The Baker report will fail to satisfy the families of those victims and the 170 other people that were injured in the disaster. The 374-page report, infuriatingly, offers no meaningful explanation of what actually happened at Texas City.
James Baker, the former Secretary of State, and his panel, set out to judge the safety culture of BP, not to apportion blame. This is partly because others have been tasked with that job and partly, one suspects, because BP is seeking to contain, rather than encourage litigation.
It is also, partly, because there is no single person to blame. The deaths were caused because trailers were placed too close to an isomerisation process unit that handled hazardous materials. The blowdown drum on the unit should have been fitted with a flare, so that highly flammable liquid would burn off rather than leak into the atmosphere. It was not. The drum was built in the 1950s and refitted in 1997 — and for all those years it operated without a flare. Long before BP acquired Texas City, there was an explosion waiting to happen.
Nonetheless, the Baker report administered the equivalent of a public flogging for BP, not just painful but humiliating. What was once Britain’s most respected company has been publicly disgraced. Mr Baker has drily savaged BP’s leaders for being full of empty aphorisms about best practice, while systematically failing to put in place process safety management. BP has claimed to be a corporate paragon; it was portrayed yesterday as a cowboy outfit.
The Baker team concludes: BP’s safety problems are systemic; worker-management relations had broken down; safety resources were insufficient; BP’s focus was “short term”. But watching Lord Browne, the BP chief executive, and John Manzoni, the head of refining, in a live webcast to a press conference in Houston, one line of the Baker report reverberated:
“BP has not demonstrated that it has effectively held executive management and refining line managers and supervisors, both at the corporate level and at the refinery level, accountable for process safety performance at its US refineries.”
This is the lesson that BP seems stubbornly unwilling to learn. At the heart of a safety culture is accountability. Lord Browne clearly seemed to be chastened. He is determined to reform the company. But he claimed yesterday that his decision last week to bring forward his retirement had nothing to do with the Baker report. Likewise, Mr Manzoni insisted that he would not resign.
Their insistence that they should not be scapegoats may be understandable. In a sense, they did nothing wrong: the crime at Texas City was one of omission, not commission. But they are responsible for the absence of a safety culture, for the inadequacies of management.
If BP is serious about establishing a culture of safety, it needs to embrace the principle of accountability from the top.
King cannot relax just yet
If Mervyn King, the Bank of England Governor, really does want to keep surprises to a minimum, he could do more to keep the City informed — without succumbing to the kind of nudge-nudge, wink-wink steering of the market that is done so clumsily by the ECB.
The Bank has always basked in its reputation as the most transparent of central banks, so perhaps it is time to go a step further. On the Fridays before the Monetary Policy Committee meetings, the Bank hosts the “pre-MPC”. It is a briefing for MPC members. The vast bulk of the statistics discussed should be put online, so that economists can look at the same numbers as the people setting interest rates. If Mr King really wanted to reinforce his reputation for transparency — and, dare one say it, tedium — he could make the “pre-MPC” question and answer session available to viewers via a live webcam. Any information that cannot be released to the public could be withheld for an in-camera hour at the end of the session. This would not compromise the privacy of the MPC’s deliberations: its thinking is not being made public, just the information it is basing its thinking upon. This would keep monetary policy watchers informed, while helping to avoid nasty shocks.
The Governor himself was yesterday spared the discomfort of having to write an explanatory letter to the Chancellor after December’s inflation number squeaked in just under the 3.1 per cent rate that would have triggered this. The chances are that, with the hangover from last year’s energy price surge set to fade, inflation will now ease back a bit and Mr King will safely avoid putting pen to paper. Still, it will be touch and go for at least several months, which will concentrate minds at the Bank. Neither is the bigger picture very reassuring.
Even if inflation now falls back a bit, there are unnerving indications that the MPC is embarked on an era when keeping inflation on target may prove trickier than for much of its ten-year existence.
The immediate danger is from an inflationary spring pay round. Beyond this, there are signs that a long period of very low or negative inflation for many goods in the shops is ending. Mr King may be off the hook this week, but he still has plenty to fret over.
Aroma that haunts BAE
BAE Systems may yet stand to lose from the Government’s decision to abandon the Serious Fraud Office investigation into its dealings with Saudi Arabia.
In the short term, of course, BAE’s £10 billion deal with the House of Saud has been salvaged. But by being let off the hook in Riyadh, BAE has been left exposed to suspicions in Washington.
For years, US defence companies have shied away from the idea of buying BAE, concerned that the company’s unproven past means that an acquisition would fall foul of America’s Foreign and Corrupt Practices Act. The termination of the SFO investigation into Saudi Arabia means that even if the company’s actions were legal at the time — and they very well may have been — it has not cleared its name. As BAE now looks to go shopping in the US for businesses which are, by their nature, strategic and sensitive, the fact that there is the aroma of an unfinished fraud investigation will mean that any purchase is likely to run into questions from Congress.
- The initial verdict on John Tiner’s reign at the Financial Services Authority has to be favourable. It has been an era free of financial disasters and one where he has nudged the organisation an inch or two away from its box-ticking past. In reputation and prosperity, the City has drawn further ahead of its rivals. On the debit side, too many rogues have gone unpursued. Was no one at Shell responsible for misleading shareholders year after year? And insider dealing appears worse than ever. But overall, the FSA is in better shape than when he took over three years ago.
E-mail: james.harding@thetimes.co.uk
