Monday, August 21, 2006

Global energy giant BP has been a leader of the so-called “corporate social responsibility” (CSR) movement. That’s the concept pushed by nongovernmental organizations (NGOs) and environmental activists who want corporations to buy into — and pay for — solving every imagined problem on the planet that can claim to be caused by business activity.

In 2000, BP climbed onto the CSR bandwagon as company executives embarked on a public-relations campaign to show how environmentally sensitive they were. In the years since, BP has issued annual reports assessing its contributions to sustainability, diversity, inclusiveness and the like.

Two weeks ago, the campaign broke down. BP shut down its Prudhoe Bay oil field in Alaska’s North Slope after discovering what a company press release called “unexpectedly severe corrosion” in the pipeline. The company says it will replace 73 percent of the Prudhoe Bay pipelines. The shutdown will cost the nation 8 percent of its output — 400,000 barrels of oil a day — at a time when consumer gas prices are hitting record highs and world oil prices are soaring.

Alaska Gov. Frank Murkowski warns that his state, which gets 89 percent of its revenue from oil company payments, is set to lose $6.4 million in taxes and royalties every day.

BP’s rotting pipes problem is not new. In a company survey in February 2004, BP employees and contractors warned the company it was not taking care of its pipelines. Last March, a badly corroded pipe burst, spilling an estimated 270,000 gallons of crude oil into the Arctic Sea. Also last year, 15 BP workers were killed and 170 injured when a company refinery in Texas City, Texas, exploded. Clearly, BP employees and shareholders are right to wonder whether their company can be trusted to maintain adequate oversight to produce and transport oil from Alaska to the Lower 48. Does BP know how to take care of its own business?

In recent years BP has done everything possible to make itself appear to be anything but an oil company. It has come a long way from the days when BP meant British Petroleum. Today BP proclaims its letters stand for “Beyond Petroleum” and it has done a remarkable job of foisting that image on the public’s mind. British ad agency Ogilvy Mather launched a reported $200 million television and print media ad campaign to “rebrand” BP as a company bad-mouthing its own industry.

Over the last month, BP has been placing weekly full-page ads in the Wall Street Journal and other newspapers that say the company is searching for alternatives to using oil. We’ve learned that BP supports a “Solar Decathlon” that sponsors engineering projects using solar energy. It has awarded $4 million in grants to 3,000 California teachers to teach kids about conserving energy. It is recycling steam to generate power and it plans to convert an electricity-producing power station in Scotland to run on hydrogen. BP is working with automakers to test cars that run on hydrogen. You would think the company is doing everything possible to eliminate use of oil and gas.

NGOs like Environmental Defense cheered when BP quit the oil industry’s coalition to study greenhouse gas emissions and instead joined the Pew Center on Global Climate Change, which argues that enough is already known about global warming to require more restrictions on the use of fossil fuels. Pew Center President Eileen Claussen called the company “pretty brave” for supporting Pew’s position.

Today BP proudly asserts it will spend $8 billion over the next 10 years on alternative energy. It boasts of spending $95 million in “contributions to communities” in 2005 — almost $53 million in the U.S., the remainder divided between the European Continent, the United Kingdom and “the rest of the world.” A review of IRS tax reports (1999-2004) shows BP America gave about $800,000 to the Nature Conservancy and a half-million dollars to the World Wildlife Fund.

However, all this obscures the fact that BP’s $285 billion in annual revenue comes overwhelmingly from producing oil and gas, which generated more than $30 billion in net profits during the last 16 months.

By distancing itself from the rest of the oil industry, BP is “triangulating” in a way worthy of Bill Clinton. Indeed, BP Chief Executive John Browne once joined Enron’s Ken Lay at a White House meeting on global warming with Mr. Clinton and Vice President Al Gore. Author Bonner Cohen quotes from an Enron internal memo on the meeting in his Capital Research Center book, “The Green Wave”: “Sir John thinks there will soon be government regulation of greenhouse gases. And companies that have anticipated regulation will not only know how to use it to their advantage; they will also, as Browne puts it, ‘gain a seat at the table, a chance to influence future rules.’ ”

Well, the jig is up. Green groups and Democratic politicians that once sang BP’s praises now scorn it. BP stands for “Bloated Profits” says Rep. Ed Markey of Massachusetts, senior Democrat on the House Energy and Commerce Committee.

Who would have guessed that the world’s second-largest oil company would fail to maintain its own facilities? Unlike the Middle East or the Gulf of Mexico, Alaskan oil production hasn’t been considered risky. There are no wars or hurricanes. But America’s domestic energy supply is in jeopardy now because BP put the rhetoric of corporate social responsibility ahead of minding its own business — literally.

BP should spent some of its advertising budget and corporate philanthropy on fixing its pipeline.

Terrence Scanlon is president of the Capital Research Center.

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