In the devastating wake of the Oct. 23, 1989, explosion that killed 23 people and destroyed its high density polyethylene plant in Pasadena, Texas, officials at Phillips Petroleum Co. faced a difficult decision.
Should they rebuild the business, which the Bartlesville, Okla.-based company launched after inventing HDPE in 1951? Or should they call it a loss after seeing their 17 percent share of the U.S. HDPE market obliterated?
Even as the wreckage of the plant was being cleared, Phillips officials announced they would rebuild, launching an incredible odyssey that would see the firm successfully regain its place in the HDPE market.
The scope of the accident itself would have put some companies out of business. In addition to the 23 fatalities, 314 others were injured. Damages to the plant, part of Phillips' Houston chemical complex, were estimated at between $750 million and $1 billion.
Federal labor officials claimed the initial explosion had the force of 2.4 tons of TNT and was equivalent to an earthquake with the magnitude of 3.5 on the Richter scale.
The explosion occurred when hydrocarbons used in HDPE production escaped from a reactor settling leg that had been improperly sealed while maintenance work was being done.
A six-month company investigation determined the accident took place because of ``a single isolated departure from a clearly established procedure and not from a failure in safety management at the complex.''
The aftermath of the accident also was difficult for the firm, as it agreed to pay a record $4 million fine from the Occupational Safety and Health Administration and faced more than 1,000 lawsuits from employees and their families. In the largest of those lawsuits, Phillips agreed to pay $40 million to the family of plant superintendent Mary Kay O'Connor, who was killed in the accident.
Prior to the explosion, Phillips held 17.5 percent of U.S. HDPE capacity with 1.5 billion pounds at Pasadena. In 1999, the company will hold 13.1 percent of capacity with 2.1 billion pounds. Anyone on the ground in Pasadena on Oct. 23, 1989, would have had trouble believing Phillips' recovery would have been so swift or complete.
Longtime Phillips employees Bob Benz and Don Brady each distinctly recall the impact the explosion had on the company and the challenges of rebuilding the business. Benz, who retired in 1998 after a 34-year career, and Brady, a 33-year Phillips veteran who currently serves as manager of its polymers and materials division, each knew people who died in the explosion and fire.
Benz had the agonizing experience of seeing the HDPE plant burning from a plane as he left Houston's Pat Hobby Airport. From the plane, Benz, who was managing all of Phillips' plastic resin businesses at the time, called company headquarters in Bartlesville. He believes he may have been the first to inform Bartlesville of the explosion.
``You never forget those things,'' Benz said recently by telephone.
When Benz's plane landed in Dallas, he immediately turned around and headed back to Houston to assist in the recovery.
Brady was at a planning meeting 60 miles outside of Bartlesville when his group learned of the accident.
``It sounded serious so someone turned on a TV,'' Brady said recently. ``As soon as we saw the magnitude, we couldn't believe it.''
Brady visited the site two weeks later when he was assigned to a team to investigate the catastrophe.
``You can't imagine the mass destruction,'' he said. ``Big beams of steel were twisted like you see in a war movie after someplace has been bombed.''
As difficult as it was, Phillips executives had to decide what to do from a business standpoint in the pressure-packed days after the explosion.
``The decision [to rebuild] was heavily debated at senior management levels but was made fairly quickly,'' Benz said. ``A big factor was that we were integrated in ethylene and propylene and it was a profitable business. We had been in the business for a long time and had invested a lot in the product.''
``It was a question of whether that was the best use of our money or if we should invest in oil or other businesses,'' Brady said. ``History was always a factor. We had an important position within the plastics business.''
To understand Phillips' sense of history, you have to go back to the hula hoop.
Phillips scientists accidentally discovered crystalline polypropylene in 1951. The process soon was applied to ethylene to create what eventually would become standard HDPE. But the company had problems creating high-quality material on a large scale. Off-spec material filled warehouses and Phillips was forced to cancel orders.
Then in the late 1950s, the hula-hoop craze hit and American kids couldn't get enough of the plastic playthings, many of which were made with Phillips' Marlex-brand HDPE. By the time the craze died down, Phillips had emptied its warehouses and perfected its production method, allowing the material to take off into dozens of uses ranging from milk bottles to drainage pipe.
This sense of history was not lost on company executives as they weighed their business alternatives. Sixteen days after the disaster, Phillips formally announced it would rebuild and that it expected to be producing HDPE at the site by the end of 1990.
Phillips' competitors quickly moved in to pick up some of the business Phillips could no longer handle. But as they surveyed the bleak situation, Phillips officials realized they had a few things working in their favor:
Although Phillips' only other HDPE plant was a 250 million-pound-per-year facility in Singapore, more than 70 HDPE plants worldwide were producing HDPE using loop-slurry technology that companies had licensed from Phillips. Phillips worked with these licensees to obtain material to partially supply its customers in the year it expected to be out of production.
Industry consultant Bill Kuhlke said Phillips executives worked all night with their licensees to establish resin supplies for critical applications. When this marathon session ended, Phillips had locked up supply for about one-third of its customers, Kuhlke said.
``We met with customers and laid out our intentions of rebuilding — that we planned to stay in business and maintain our business relationships,'' Brady added.
The company already had engineering work and designs in place for a 300 million-pound HDPE expansion in Pasadena. These plans were put into motion quickly.
Brady said the new plant was ``put on the fast track'' as Phillips added additional construction shifts to speed up the project.
HDPE was already in oversupply, putting some slack in the supply chain. This kept HDPE prices relatively stable in the months immediately following the disaster. Prices rose an average of 2-3 cents per pound, whereas in a tight market, the increase probably would have been higher.
Kuhlke commended Phillips' competitors for not cashing in as some might have expected.
``The industry did the right thing and saw to it that the [HDPE] bottle industry didn't get crucified [with higher prices],'' Kuhlke said.
Another aftereffect of the explosion was the boost given to gas-phase HDPE producers, who were working to position their product in the market at the time.
Gas-phase producers like Union Carbide Corp. and Mobil Chemical Co. were able to sell material to desperate processors that had been buying material from Phillips and other loop-slurry HDPE manufacturers. Some processors were concerned that the gas-phase HDPE wouldn't process as well as loop-slurry, but when the crunch was on, many tried the new materials.
``The explosion gave [gas-phase HDPE makers] an opportunity to introduce their materials faster,'' said consultant Don Bari of Tarrytown, N.Y.-based Chem Systems Inc. ``They were already aggressively marketing the materials, but they probably did gain some business.''
However, a Mobil spokesman disputed the benefit his company saw in the post-explosion HDPE market.
``We had already developed and commercialized the [gas-phase HDPE] material before the explosion and the [HDPE] market was sufficiently supplied beforehand,'' he said. ``There was no particular benefit from the explosion because there was plenty of material around.''
Processors were forced to make tough decisions. The situation was especially tight at Boise/Graham Co., a York, Pa.-based blow molder that at the time was a major player in the motor oil industry's conversion to HDPE bottles. Boise/Graham eventually became Graham Packaging Co. LP, which today ranks as one of the 10 largest blow molders in North America.
``We were more sensitized to continuity of supply issues because we were transferring the [motor oil] market,'' said Bob Gibson, Graham Packaging's vice president of global procurement. At the time of the Phillips explosion, Gibson was Boise/Graham's procurement manager.
``There was plenty of [HDPE] resin around, but we had a handshake deal with our major supliers that if one of them ever went down, the others would step in,'' Gibson said.
But Boise/Graham indicated early on they would stay with Phillips through its rebuilding period.
``Before and after the accident, we had a strong relationship with Phillips,'' Gibson said. ``We let them know that when they came back they'd have a place at Graham.''
Not every buyer was so loyal, however. Phillips' Brady estimates the company may have lost as much as 30-40 percent of its customer base by the time it re-established production at Pasadena.
The company opened a 600 million-pound-per-year line in February 1991 — a mere 16 months after the plant was leveled. A similar line would begin production in October 1991 and a third in November 1992, re-establishing all capacity that was existing or planned at the time of the accident.
Phillips also had to face the challenge of dealing with the emotions of the workers returning to the site.
``That situation was probably more traumatic than we thought it would be,'' Brady said. ``Many workers didn't want to go back. There were pockets of resistance and some absenteeism in the first few years.
``It wasn't so much a fear of the accident repeating,'' Brady added. ``There were just some lasting memories that some people couldn't go back to.''
Safety, which was always important at Phillips, was approached with ``a religious fervor'' after the accident, said Jim Gallogly, Phillips' current vice president of olefins and polyolefins.
``Safety is still our top priority,'' Gallogly said. ``If there's a triple layer of protection, we find ways to have more.''
These extra layers can be seen in the way the firm maintains its reactor settling legs. Brady said that job is now a multiperson task to reduce the risk of error.
Phillips today has some of the best safety standards in the chemical industry, according to John Miles, regional administrator for OSHA region 6, which includes all of Texas.
Miles said the Phillips explosion, as well as four other petrochemical explosions or fires that took place between June and October 1989, led to the 1992 passage of increased federal safety standards for chemical makers.
``After those incidents, there was a real push to get process safety standards through,'' Miles said. ``The chemical industry came under pressure from Congress to adopt the standards.''
Although the impact of the 1989 explosion lingers on, it's no longer a daily topic in Pasadena or Bartlesville.
``It's very seldom mentioned,'' Brady said of the explosion. ``There are some young people working here who have only heard about it.''
``But there's a sign at the end of the parking lot [in Pasadena] with all the names of those who died,'' he added. ``I see it every time I leave the parking lot. It really makes you think.''