P = f(x). The probability of a safety conscious decision being made is a direct function of budgets and margins. Put them both together in a meeting and budgets will rule. When all the analyses on BP’s Deepwater Horizon well are done we will find this inherent tension was at the root of the Gulf Coast disaster. Indeed, we already have evidence of BP’s shortcuts in the critical path and decisions that fell well short of industry standards. BP was notorious for coming out on the wrong side of the safety/budget conflict. In Marianne M. Jennings, Case Studies in Business Ethics, 6th Ed. (2007), BP appeared in a case study used to teach students about the risks of failure to manage the  P = f(x) tension.  The case examined BP’s Prudhoe Bay pipeline rupture and the fatal explosion at its Texas City refinery. Some prescient quotes from that case:
- Industry standards require smart pigging every five years. BP had not done smart pigging on the Prudhoe Bay line since 1998. (The pipeline burst in March 2006 resulting in an oil spill of 267,000 gallons)
- BP employees described Lord John Browne, the former head of BP , as the industry’s best cost cutter, who created “a ruthless culture.â€
- The economic life of the pipes was estimated at twenty-five years when the pipes were first installed in 1977. At the time, no one believed that the oil production in the area would last longer than twenty-five years. One expert likened anticorrosion sensing and repairs to maintenance on a car: they have to be done regularly in order to keep the car running.
- In 2004, Walter Massey, the chair of BP’s board’s environmental committee, wrote a memo to fellow board members expressing concerns about the corrosion problems. Mr. Massey’s memo described “[c]ost cutting, causing serious corrosion damage†to the pipes and creating the possibility of a catastrophic event that would put the Prudhoe Bay employees at risk. Internal documents uncovered in the government investigation show that a corrosion consultant who BP hired in 2004 issued a report that described the twenty-two-mile pipeline as experiencing “accelerated corrosion.â€
- Environmental groups called for additional government investigations into BP’s environmental record and oil pipeline, refinery, and drilling activities: “The North Slope corrosion problem is simply the latest example of a pattern of neglect and less-than-adequate maintenance over the years.â€
- In September 2006, the executives of BP were summoned to appear at congressional hearings on oil pipelines. The executives found few friends during their hearings. The chair of the House Energy and Commerce Committee told BP’s CEO, “Years of neglecting to inspect the most vital oil-gathering pipeline in this country is not acceptable.â€
- The committee heard testimony from an employee who raised concerns about Prudhoe Bay corrosion in 2004 and was then transferred from the facility. Richard Woolham, BP’s chief inspector for the Alaska pipelines, was subpoenaed to testify but took the Fifth Amendment. Another BP executive testified that BP had fallen short of the high standards the public had come to expect of it.
 Here’s an eerie question the students were asked at the end of the 2007 case:
- Discuss how BP got into the position in which it finds itself in late 2006 and what might have prevented the spill, the financial fallout, and the loss of reputation. Be sure to factor in the financial implications of any decision made during the period from 2001 to 2006.
 Change the years in this question and the text is updated for the 7th edition, due out in January 2011. If safety does not trump budgets, those high risk events occur and the budget for clean-up staggers the imagination. BP’s stock price reflects what happens when safety takes a back seat to budgets.
 All quotes reprinted with permission of Cengage Learning, Marianne M. Jennings, BUSINESS ETHICS: CASE STUDIES AND READINGS, 6th ed., © 2007.
