Deepwater Horizon & Corporate Environmental Ethics

Written by | Ramon Ahumada

WRTG 3040 | Spring 2016

British Petroleum, or BP, is one of the world's leading integrated oil and gas companies. According to

the “About BP” page on their website (2015), BP operates in more than 70 countries around the world with

nearly 80,000 employees. Last year alone, they generated a boasting $227.9 billion dollars in revenue while

producing an astonishing 3.3 million barrels of oil per day. Their values are kept simple—safety, respect,

excellence, and courage; for, they guide BP’s everyday-business and the decisions they make.

Today, society relies heavily on the energy extracted from fossil fuels on our planet. In 2012, the United

States was responsible for producing 18% of the world’s total primary energy consumption (U.S. Energy

Information Administration, 2012). U.S.’s per capita energy consumption is also higher than most countries

around the world (refer to figure 1). The oil and gas industry itself is extremely controversial because of the

different processes used to extract the limited amount of fossil fuels available to our species. According to a

lecture by Rick Reed (Personal Communication), a Corporate Social Responsibility professor at The University

of Colorado, until society converts to 100%

renewable energy, we essentially need companies

like BP to live the lives we do. As a result, a lot

of economical power is granted to the industry

and because there is a limited amount of

companies supplying oil, BP is considered an

oligopoly.

Oligopolies or monopolies are market

failures in a free-market economy that occur when a few companies control the majority or all of the market

(personal communication). Companies in this domain create limitations for civil regulators or interest groups

(stakeholders who want to change the behavior of a business) by minimizing their voice and opinions. For

example, the production of a good by a company in an oligopoly (e.g. gasoline) cannot be halted by a boycott

unless there is an alternative for that usage and until an alternative is created, companies like BP will continue

to dominate the market and dictate decisions that could impact society in a negative way. In an industry with

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Figure 1: Per capita energy – U.S. comparison.

high entry barriers and limited competition, BP has less incentive to make rational business decisions and fulfill

interest group demands unless shareholders lose money on their investments, an unlikely outcome in an

oligopoly.

Explosions, Spillage, and the Deepwater Horizon

BP’s series of unfortunate events began with an explosion at a Texas refinery, the third largest in the

U.S., in March of 2005 (Schorn, 2006). The explosion, which occurred after a distillation tower flooded with

hydrocarbons and was over-pressurized,

resulted in the death of 15 workers and injury to

180 others around the facility (U.S. Chemical

Safety Board, 2007.) So what’s the big deal?

An explosion in a highly combustible working

environment makes sense. But according to

Margaret Heffernan (2010), BP had warnings

that its Texas City refinery was dangerous.

There was evidence of reports from consultants

that revealed BP’s safety procedures were not taken seriously. Investigators later found a failure by BP to

protect the health and safety of its own workers (Heffernan, 2010).

A year later, BP was in more trouble as several thousand barrels of crude oil spilled from a ruptured

pipeline in Northern Alaska. According to Felicity Barringer (2006), the leak occurred in a section of pipe built

in the late 1970's resulting in the spillage of 267,000 gallons of crude oil. The spill went undetected for five

days before resulting in the largest oil spill to occur

on Alaska’s Northern Slope. BP claimed it

was an accident and that no crime was committed.

However, a government witness claims that

“BP ignored alarms that warned of the pipe’s 3

Figure 2: The explosion of BP’s Texas City refinery.

eventual rupture and leak” (Fisk & Coyne, 2011, para. 11). The accumulation of spillage didn’t stop there; in

September of the same year, BP says they leaked 1,000 barrels of a refined petroleum product into the port of

Long Beach, California (“The Wall Street Journal,” 2007). Mistakes kept accumulating for BP executives and

in April of 2010, they would be held liable for one of the biggest environmental disasters in history.

The Deepwater Horizon was a rig on the Gulf of Mexico leased by BP. Transocean, an offshore-drilling

company, was responsible for operating the rig while another company was contracted to build a concrete core

needed to seal the well for later use (Pallardy, 2015). With so many different contracted companies working on

the same job, communication and a flow of information is crucial in order to avoid costly mistakes.

Unfortunately, BP lacked this rationalization and on April 20th, 2010, gas blasted through the core of the well

because it was too weak to withstand the pressure

of the rig. This caused gas to rise to the platform of the rig where it ignited and killed 11 workers (Pallardy,

2015). Oil proceeded to escape out of the damaged well at uncontrollable levels. The spill lasted for 87 straight

days with an accumulation of an estimated 4.2 million barrels of oil, although BP argued for 3.1 million barrels

in court (Griffin, Black, & Devine, 2015). The economical and environmental damages caused by the explosion

affected anyone near the coast including the beaches of Mississippi, Alabama, and Florida. In a company with a

history of safety failures and unethical business behavior, a disaster this impactful was only a matter of time and

sadly, little could have be done by anyone, including interest groups, because the only people that could have

prevented these accidents were the people making internal decisions within the company.

Utilitarianism and Sustainability

Utilitarianism is defined as a consequentialist theory that demands the greatest good for the greatest

amount of people (personal communication). The focus here is on the situation and its consequences, which

ultimately determines the ethical state of the decisions taken place. If the decisions made by BP throughout the

years were evaluated through a utilitarian lens, one could argue that their business actions were unethical. Take,

for example, the lack of maintenance on their platforms. Cutting costs on projects and not focusing on safety

improvements may have saved executives money in the short-run, but the consequence of that decision placed 4

Figure 3: An aerial view of the oil on the sea surface off the Gulf of Mexico.

stakeholders in a dangerous position. If BP did not fail to notice alarms going off that were connected to

sensors, or spent a little more on refinery improvements, perhaps the Texas refinery explosion and the Alaskan

could have been prevented. One would expect a company that is drilling miles into the ocean to prioritize safety

over profits. Instead, thousands of people were harmed or affected by the unethical decisions made by BP.

Sustainability is a stakeholder model that involves the three pillars of sustainability: economical

(profits), ecological (planet), and social (people) (personal communication). I am aware every company needs

profits to prosper and maintain their market share. However, profit fixation evidently plagues a company’s

decision making because they tunnel vision their options and don’t see all of the consequences their decisions

could provoke. BP needs to incorporate the other two pillars of sustainability into their company model in order

to prevent future accidents from occurring. After all, they’re

a billion-dollar company with an enormous amount of

resources. Their carbon footprint grows exponentially for

every barrel of oil that they produce due to the polluting

processes used to extract fossil fuels. Utilitarianism and

sustainability go hand-in-hand—the bigger a company is the

more responsibility it should have towards their ability to

help social and environment objectives.

Moving Forward

In the case of the Deepwater Horizon, BP should have followed their values and made safety their

overall priority. It’s common sense to make sure everyone working on a project is on the same page. Instead,

they lacked rationalization and caused irreversible damage to our environment and economy: a spike in U.S. gas

prices, a brutal toll to coastal fishing and tourism, health hazards for cleaning crews and residents, billions of

dollars in sunk costs, and the death of thousands of organisms inhabiting the sea (Pallardy, 2015). But again,

what price does BP have to pay besides the governmental fines? At the end of the day, their irrationality is not

punished because of the industry they’re operating in. It’s hard to incentivize companies with a lot of 5

Figure 4: The three pillars of sustainability.

economical power. To address this issue, BP needs to change their corporate culture from revolving around

profit and cost cutting to revolve around safety and sustainability.

Conclusion

Market failures in a free market economy are unavoidable. There will always be a company who holds

more power than their opposing competition depending on the product that is being produced. In the case of oil,

BP is the third largest energy company and the fourth largest company in the world (“Crunchbase,” n.d.).

Because they are an oligopoly, the lack of labor unions leaves interest groups with minimal voice and power to

confront business decisions being made by BP. Ideally, interest groups should work collaboratively with a

company in order to push for more transparency and enforce policies. But the truth is, companies with resources

that have the potential to affect our entire population are just too powerful to incentivize (personal

communication). The role of the

government needs to change. They need to

create and enforce higher minimal standards

for these oil companies in order to address a

market-wide problem. They need to

increase the training and funding toward

regulators, as many were untrained and

unprepared in the past (Elkind, Whitford, & Burke, 2011). Higher standards should be put in place in order to

increase both the safety and sustainability of BP and companies alike. Not only does government intervention

need to change, but BP also needs to do a better job adhering to their values of safety. They need to change their

business model to reflect a more sustainable approach in order to include the environment and society into their

decision making. Self-regulation is key—government regulations can only go so far.

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Figure 5: BP’s Biggest Blunders.

References

About BP. (2015). BP at a glance. Retrieved from http://www.bp.com/en/global/corporate/about-bp/bp-at-a-glance.html

Barringer, F. (2006). Large oil spill in Alaska went undetected for days. The NewYork Times. Retrieved from http://www.nytimes.com/2006/03/15/national/15spill.html?_r=0

Crunchbase (n.d.). Company details. Retrieved from http://https://www.crunchbase.com/organization/british-petroleum#/entity

Elkind, P., Whitford, D., & Burke, D. (2011). BP: An accident waiting to happen. Fortune. Retrieved from http://fortune.com/2011/01/24/bp-an-accident-waiting-to-happen/

Fisk, M. C., & Coyne, A. (2011). BP pipeline rupture. Bloomberg. Retrieved fromhttp://www.bloomberg.com/news/articles/2011-11-29/bp-pipeline-rupture-may-force-company-to-pay-more-for-2006-spill

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Griffin, D., Black, N., & Devine, C. (2015). 5 years after the gulf oil spill. CNN. Retrieved fromhttp://www.cnn.com/2015/04/14/us/gulf-oil-spill-unknowns/

Heffernan, M. (2010). BP’s wretched safety record. Retrieved from http://www.cbsnews.com/news/bps-wretched-safety-record-what-will-it-take-to-change/

Pallardy, R. (2015). Deepwater horizon oil spill of 2010. Encyclopedia Britannica. Retrieved from http://www.britannica.com/event/Deepwater-Horizon-oil-spill-of-2010

Schorn, D. (2006). The explosion at Texas City. Retrieved fromhttp://http://www.cbsnews.com/news/the-explosion-at-texas-city/

The Wall Street Journal (2007). Timeline: BP’s woes. Retrieved fromhttp://www.wsj.com/articles/SB117440502039842844

U.S. Chemical Safety Board. (2007). BP America refinery explosion - investigations. Retrieved from http://http://www.csb.gov/bp-america-refinery-explosion/

U.S. Energy Information Administration. (2015). The United States’ share of world energy consumption. Retrieved from https://www.eia.gov/tools/faqs/faq.cfm?id=87&t=1

Image CreditsCover Page: Retrieved from http://www.kjeanrl.com/full-blog/2015/7/13/riverablog

Figure 1: Per capita energy consumption – U.S. comparison. Retrieved fromhttps://ourfiniteworld.com/2012/03/12/world-energy-consumption-since-1820-in-charts/

Figure 2: The explosion of BP’s Texas City refinery. Retrieved from http://www.popularmechanics.com/technology/gadgets/a295/1758242/

Figure 3: An aerial view of the oil on the sea surface off the Gulf of Mexico. Retrieved fromhttp://www.greenpeace.org/international/en/multimedia/photos/Deepwater-Horizon---Wellhead/

Figure 4: The three pillars of sustainability. Retrieved fromhttp://www.thwink.org/sustain/glossary/EnvironmentalSustainability.htm

Figure 5: BP’s biggest blunders. Retrieved from author

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