BP fights record $87m fine for safety breaches

The British oil company BP has been fined a record $87.4m (£53m) for failing to resolve safety issues exposed by a fatal explosion at its Texas City oil refinery, where 15 people died and 170 were injured in an explosion in 2005.

The US Occupational Safety and Health Administration (OSHA) cited 270 violations of an agreement to repair hazards at the refinery, following a six-month inspection. The fine is the largest in OSHA's history.

However, BP said it would contest the ruling, claiming that only a handful of the actions required by the OSHA had not been completed. It said it was always understood that these improvements would take slightly longer.

Hilda Solis, the US Secretary of Labour, said yesterday that BP's failure to comply with the OSHA directives "could lead to another catastrophe" at the refnery in Texas City, on the shores of Galveston Bay. There have been three fatalities at the plant since the 2005 incident, the last of which was in 2008 when a metal lid blew off a pressurised water filtration unit.

Ms Solis said: "Instead of living up to [its] commitment, BP has allowed hundreds of potential hazards to continue unabated. Workplace safety is more than a slogan. It's the law. The US Department of Labour will not tolerate the preventable exposure of workers to hazardous conditions."

The fine, more than four times higher than any previously imposed by the safety regulator, followed a six-month inspection to evaluate BP's compliance with a four-year "settlement plan" drawn up after the 2005 explosion, for which the oil group received another $21m fine.

The latest penalty includes 270 "notifications of failure to abate", totalling $56.7m, and 439 "new, wilful violations" totalling $30.7m for, among other things, BP's alleged failure to follow industry-standard controls on pressure relief safety systems.

BP was forceful in its defence yesterday, immediately launching an appeal against the ruling. It pointed out that the disagreement over whether or not it had to complete all remedial actions by last month's deadline was still being reviewed by the independent Occupational Health and Safety Review Commission.

"We are disappointed that the OSHA took this action in advance of the full consideration of the review commission," said Keith Casey, the manager of the Texas City refinery. "We believe our efforts to improve process safety performance have been among the most strenuous and comprehensive the refining industry has ever seen."

The row between BP and the OSHA began late last year. BP says it has spent more than $1bn and taken 550 steps to remedy safety problems at Texas City identified in the settlement plan. But three actions are outstanding, including the installation of pressure relief systems. The oil company says it was recognised by both parties that, for logistical reasons, some safety measures could not be implemented until after the settlement period ended. Only late last year did it become clear that the OSHA understood differently, and by August this year the difference of opinion had become a major problem. When the deadline expired, BP sought an independent review to settle the dispute.

Mr Casey said: "We continue to believe we are in full compliance with the settlement agreement, and we look forward to demonstrating that before the review commission. While we strongly disagree with OSHA's conclusions, we will continue to work with the agency to resolve our differences."

BP paid out $2bn to settle civil lawsuits stemming from the 2005 accident. It pleaded guilty to felony over the deaths and was fined $50m by the Department of Justice in 2007.

Texas City is not the only black spot on BP's record in the US. Two years ago, it admitted manipulating propane gas prices and earlier this year, the US federal government and the state of Alaska filed civil cases against the group over oil spills at Prudhoe Bay.

Tony Hayward, who took over as BP's chief executive in May 2007, immediately launched a "simplification and efficiency strategy" to bring the troubled company back under effective management.

BP's shares closed down 2.4 per cent at 572.3p yesterday.