Oil And Water

BP has a history of environmental violations at its refinery on Lake Michigan but wasn't penalized by regulators. A recent oil spill raises new questions about oversight – and drinking water safety.

The BP refinery in Whiting, Ind., is a massive operation covering 1,400 acres and employing 1,850 workers. Environmentalists criticize government oversight of the plant. / WTTW

The Indiana refinery at the center of a March oil spill in Lake Michigan hasn't been fined once in the past 12 years for polluted wastewater discharge violations despite a history of problems that are documented in government inspection reports.

Warnings were issued for breaches such as excessive pollution levels that violated the refinery's permit, but regulators gave the BP Whiting facility a pass after follow-up visits and no fines were assessed for more than a dozen problems cited since 2002, a Better Government Association review found.


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A spokesman for the Indiana Department of Environmental Management, the plant's frontline pollution inspector, said no fines were assessed because violations weren't considered major and problems were fixed in what the agency considered a reasonable time.

The refinery – a hulking complex on the shoreline of Lake Michigan, the source of drinking water for almost seven million Chicago-area residents – likely faces penalties from U.S. officials and possibly from Indiana for the March 2014 spill, which dumped as much as 1,600 gallons of oil into Lake Michigan. The U.S. Coast Guard is expected to assess a fine of no more than $40,000 for the incident.

Environmental groups and Illinois politicians accuse Indiana of being soft on BP, which already is allowed to legally dump millions of pounds of solid pollutants into the lake each year. A major employer in northwest Indiana, the refinery is two miles from the nearest drinking-water intake equipment, and roughly 20 miles from downtown Chicago. Inspection reports reviewed by the BGA show the extreme discretion Indiana officials use to keep a big industrial polluter in check. While U.S. Environmental Protection Agency officials have final say on how air and water pollution laws are enforced, a large part of that oversight is delegated to Indiana officials.

"They treat BP with kid gloves over there," said U.S. Sen. Richard Durbin (D-Ill.), referring to Indiana's regulators. Durbin, like many other U.S. politicians, has taken campaign money from affiliates of BP, one of the heaviest hitters in Washington, D.C.

The wastewater inspection reports reviewed by the BGA are separate from the air-quality issues at the center of a years-long legal battle between the oil company and environmental groups over the levels of mercury that land in the lake as a result of pollution from refinery smokestacks. But the water discharges are central to another long-running controversy, namely pollution dumped directly into Lake Michigan. While Indiana officials last year reduced the levels of mercury BP can dump into the lake, the amount is still much higher than recommended levels under a federal plan to clean up the Great Lakes.

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Section from a BP inspection report (Click to view larger image)

The fight over air quality resulted in fines of more than $8 million and a binding agreement that BP entered into after the U.S. government followed the lead of environmental groups and brought suit against the company for its air pollution violations at the refinery.

As part of a settlement, the company agreed to spend $400 million for new technology that helps BP control air pollution caused by its Indiana plant. The facility is still allowed a certain amount of air and water pollution as permitted by decades-old federal laws. Separately, the company also invested $150 million to reduce levels of ammonia, metals and other pollutants from wastewater, BP spokesman Scott Dean said.

BP's current environmental permits cover the Whiting plant's expansion into processing large amounts of a heavy crude oil from Canada. The company last year completed a more than $4 billion upgrade at the facility that represents a major new initiative. BP is ramping up its output at a plant that already produces around 17 million gallons of gas and other fuels a day – which end up in cars, trucks and planes in Chicago and beyond.

The company revamped the Whiting refinery, enabling it to process greater amounts of heavy tar-sand oil, an alternative to light crude that's extracted through drilling. The Canadian oil is a thick, gooey substance that's scraped from mines. While it's more difficult to process than lighter crude, the heavy tar-sand oil is believed to be more abundant. It produces more air pollution during production because of the energy needed to process the heavier oil, according to environmentalists who are concerned about the impact from processing.

"There isn't enough study of this type of crude," said Ann Alexander, a Chicago-based senior attorney for the environmental group Natural Resources Defense Council.

While U.S. officials cracked down on the plant for air pollution and President Obama has made carbon dioxide emissions a centerpiece of his environmental policy, the oversight for water is critically important, too. The government policing of the refinery is vital for protection of Lake Michigan, according to environmentalists.

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A water intake near Hammond, Ind., providing drinking water to hundreds of thousands of people in south suburban Chicago and northwest Indiana, is just two miles from a BP refinery wastewater outflow.  / TheLighthouseHunters.com
photo by Christine Cardaci

BP, the Coast Guard and U.S. environmental officials touted a quick cleanup after the March accident, but cold temperatures and strong winds blowing toward the shore helped contain the oil from spreading further into the lake.

"We dodged a bullet," said Bill Emerson Jr., who holds the elected position of Lake County, Ind., surveyor.

A water intake near Hammond, Ind., is just two miles from a BP refinery outflow, Emerson said. The intake provides drinking water to hundreds of thousands of south suburban Chicago and northwest Indiana residents. (A Chicago water intake is about seven miles north of the BP facility.)

The exact cause of the March 25 oil spill has not yet been made public. A glitch, or what BP calls a "process upset," caused a backflow of oil into a connection temporarily set up between cooling water and systems that provide water to run the refinery, according to a letter sent to Chicago Mayor Rahm Emanuel. "We have since removed that temporary connection and have no intention of reinstalling it," BP executive John Minge said in the letter. At least two types of crude oil were released into the lake along with cooling water from the refinery, BP said.

While the U.S. EPA oversees permitting, other oversight of the Whiting refinery is left to Indiana. The state agency employs a handful of people who inspect BP's property and other nearby facilities, including U.S. Steel's Gary plant. Otherwise, the refinery's operators self-police and are expected to report problems to Indiana regulators. The Whiting refinery is a sprawling operation covering 1,400 acres and employing about 1,850 workers. It's one of the largest oil refineries in the U.S.

Bruno Pigott, assistant commissioner for the Indiana environmental agency's office of water quality, defends the job his agency does overseeing the refinery. He declined to specifically rate BP's record for adhering to water quality standards. Rather, he said, the reports provide a framework. Only the most serious violations draw fines and usually are accompanied by a so-called agreed order. BP didn't enter into any such orders for wastewater this decade or during the 2000s, state records show. The facility was subject to an agreed order for wastewater discharge in the mid-1990s and received multiple violation letters that decade, according to the Indiana regulator.

The violations identified by Indiana regulators over the past dozen years were mostly related to the discharge of solid pollution that exceeded limits allowed in the refinery's permit. Indiana's environmental agency only routinely inspects every other year but will pay visits as a result of problems detected through BP's self-policing.

Among the violations cited:

  • In 2004, BP reported to state regulators that it violated its permit for the levels of solid pollution dumped into the lake – almost 350 pounds above the legal limit, according to state records obtained by the BGA under Indiana's open records statute. Indiana regulators confirmed the violation in March 2005. In a follow-up inspection in late 2005, the refinery received a clean bill of health. No fine was issued. At the time, BP was allowed to dump almost 5,700 pounds of that kind of waste per day, records show. (BP's current permit allows the same maximum amount of solid pollutants discharged into Lake Michigan, a sum that theoretically can total two million pounds a year.)
  • In late 2006, a state inspector discovered violations for disposal of sludge, a swampy muck created from treatment of industrial wastewater. The refinery's daily records from the year prior indicated another violation of solid pollution dumped into the lake – this time exceeding the limit by about 150 pounds, the inspector's report said. No fines were issued.

In 2007, BP and Indiana's state government took heat for a permit change that allowed the oil company to put a higher level of ammonia and other pollution into Lake Michigan. Within a short period, the outcry from environmental groups and politicians outside Indiana convinced BP to say that it would voluntarily attempt to keep those levels of additional toxins below the limit Indiana set. Following that BP announcement, then-Indiana Gov. Mitch Daniels lashed out at "the hypocrisy of politicians elsewhere whose states dump vastly greater amounts of [waste water] in the Great Lakes," according to a statement issued by his office.

  • In 2010, state inspectors found excessive pH levels, a measure of acidity, in water from a pipe dumping into Lake Michigan. A letter was sent to BP, but no fine was issued.
  • In April 2011, multiple violations were cited as an inspector found nearby "water is turbid and dark due to excessive solids and biomass," according to state records. Discharges from the plant reached more than 3,000 feet into Lake Michigan, according to the report.

BP told the state that a structural failure was hindering its ability to treat wastewater properly. The refinery was sent a letter noting the violation but no fine was assessed.

"Our first priority is to correct the problem," a spokesman for the state agency said. If an issue has been resolved by the time a follow-up inspection takes place, "a fine might not be necessary," he added.

  • In late 2011, records show the plant violated its permit by discharging too much phosphorous into Lake Michigan. The violation, which was reported to the regulators by BP, was cited in an inspection report, though the specific levels weren't quantified. A state inspector confirmed the issue in a letter to the company in July of that year. No fine was issued.

Even when a clear violation is apparent, the bar for proving the transgression is high. "Since an enforcement action is a legal matter, evidence of a violation must be able to be proven in court," according to the Indiana agency spokesman.

The refinery's violations extend beyond a decade.

In a 2002 report, an Indiana state inspector found "a significant deficiency" with an apparatus known as a clarifier, which removes solid waste.

 

The company should be able to abide by permits that aren't particularly strict to begin with, the NRDC's Alexander said.

"The permits are so easy to not violate," said Alexander, a critic of the Indiana agency.

BP says it has been a good environmental citizen. "BP is committed to protecting Lake Michigan and we take last March's incident very seriously," spokesman Dean said. "Being a good environmental steward is one of our top priorities."

The company is a heavy hitter in Washington. BP-affiliated political committees and individuals gave more than a half-million dollars to federal candidates in the 2012 election cycle, including almost $60,000 to Barack Obama, according to the Center for Responsive Politics. The president edged out the Republican Governors Association as the top recipient of BP campaign money.

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Originally owned by John D. Rockefeller's Standard Oil, the BP refinery in Indiana has operated on Lake Michigan since the late 1800s. / WTTW

In the current political election cycle, BP affiliates and employees contributed thousands to Illinois politicians, including U.S. Reps. Peter Roskam, Bobby Rush, John Shimkus, Bill Foster and Danny Davis. Other donations, albeit smaller, were given to U.S. Rep. Robin Kelly and Durbin in the recent campaign fund-raising cycle. Durbin and U.S. Sen. Mark Kirk have been critical of BP. Kirk also took campaign money from the oil giant in recent years.

The company spends far more money lobbying and racked up almost $8.3 million for that last year.

As a big employer in Indiana, BP is revered in the Hoosier state. State and federal politicians from Indiana benefit from thousands of dollars in campaign contributions.

Indiana's Pigott said he doesn't feel political pressure to take it easy on BP.

U.S. EPA regional counsel Robert Kaplan in Chicago also said there's no political pressure to go easy on the company. He points to the air pollution settlement and subsequent fines as evidence. Kaplan also said his agency views the permits as strict. The threat of fines is an effective deterrent for companies such as BP, he said.

"Very few people accuse us of not having high penalties," Kaplan said.

BP has a history of environmental accidents, most notably the 2010 Deepwater Horizon oil spill in the Gulf of Mexico. The company put aside more than $40 billion responding to the disaster, an amount that includes money paid and expected costs for cleanup, fines and legal settlements.

Four years after that catastrophe, BP is viewed by Wall Street analysts as a company on the rise and the Whiting refinery is a big part of the comeback story.

"They treat BP with kid gloves over there," said U.S. Sen. Richard Durbin (D-Ill.), referring to Indiana's regulators.

The U.S. stock price of the London-based company rose steadily over the past year.

The Whiting refinery had its own major disaster decades ago. In 1955, an explosion at the refinery (then owned by Standard Oil) killed a child in a nearby home and created a fire that burned for eight days.

On a company quarterly conference call in late April, BP's CEO Bob Dudley showed little fear over the threat of government actions for the Lake Michigan incident.

Dudley was asked by an industry analyst whether he expects "political or regulatory headwinds following the headlines surrounding the Lake Michigan spill."

Dudley responded: "There haven't been any known impacts to wildlife or human health, and so the exact cause, we're still investigating it, but there were no impacts to the refinery production or supply. So I think that that incident has been put aside."

This story was written and reported by the Better Government Association's Brett Chase, who can be reached at bchase@bettergov.org or (312) 821-9033.

About the Author

Brett Chase

Brett Chase investigates waste, fraud and corruption in a number of areas, including the environment, housing, health care and transportation. A former reporter and editor for Crain's Chicago Business, the Milwaukee Journal Sentinel and Bloomberg News, Chase has covered government and business for more than 20 years.