Case Study
Deepwater Horizon of Bp (British Petroleum) Environmental disaster in Gulf of Mexico on April 20/ 2010
Introduction
The Gulf of Mexico disaster was yet another low (very much comparable to the 1989 Valdez Oil Spill in Alaska) in environmental management and even though its impacts have yet to unfold fully in the future, it can be said that the magnitude of the same is, effectively, unprecedented (Kristina, 2010). On April 20 2010 there was a huge explosion on the Deepwater Horizon oilrig. Apart from the environmental damage and the resulting social and cultural impacts associated with the deepwater oil spill, there was a loss of eleven lives (ibid). The potential for negative, long term community impacts which arise out of the same in terms of health and safety cannot be overestimated, particularly on the fishing industry and marine life. Furthermore, there is the issue of the impact disasters like these can have on the future quality of potable drinking water (Kristina, 2010b).
Consequences
The legal implications of the same have yet to be seen. Generally, depending on the legal forum involved, there is a likelihood of punitive damages or severe lawsuits, which will follow in the future (Kristina, 2010 c). There has yet to be a full health and safety audit of how the Deepwater Oil Spill has and will continue to affect the lives of individuals and groups, as well as the social capital of the surrounding communities. The psychological reaction coming from the communities is already evident along with the media hype accusing BP misrepresenting the magnitude of risk by stating that the oil was only eleven million gallons, and secondly that oil does not sink and will therefore not dilute with the water to poison marine life (Kristina, 2010 c).
The local community around the spill will suffer badly in terms of social, economic and health effects. The perceived social and health effects can involve:
- Severe ecological disruption in the area and the distortion of the local capital
- Chronic collective stress
- Post-traumatic stress disorder (PTSD)
- Socio-economic disruption due to halt in the trade of natural resources
- Stress, anxiety and feelings of alienation by the local people in the community
The environmental hazards to residents’ health and safety, along with the possible economic losses they are likely to suffer, will certainly increase with the ongoing and increasing scale and potential longevity of the Gulf oil spill catastrophe. The timing of the disaster has also been a cause in accelerating the economic damage as it happened during spring time, which is technically the most biologically productive season of the year, thereby disrupting the local commercial and subsistence life style and routine of the ongoing fishing projects. This is a long-term resource loss whereas the fishing biomass will remain very low for at least another decade. The same is true for the resources of shrimp, salmon, oysters, and the endangered marine species. All these factors are likely to have a progressively negative impact upon the mental health of the Gulf Coast residents (Kristina, 2010, a&b).
The oil spill is likely to cause a major loss of trust and a culture of blame between corporations, individuals and the government (Kritsina, 2010 b). The current state of the regulation as it affects oil spills, with the same magnitude of the Deepwater oil spill, is already being criticized as frustrating due to its lack of a framework sporting accountability, lack of transparency and blame-shifting. Very little has been done by the EPA so far in this regard and it is, fearing a backlash from the rich oil and gas industry owners, taking things slowly with environmental audit procedures after the backlash it suffered from the superfund legislation decades ago. In the end, the loss is of the residents of the area and the marine life, which is something that cannot be exactly enumerated or quantified at all (Kristina, 2010a). BP has been accused of avoiding the blame by denying the source and magnitude of damage and having corporate posturing, which can actually minimize the responsibility for the resulting environmental, social, and economic damages.
Another view of course is that it would not be right to lay the blame entirely on BP (British Petroleum Plc) for lax health and safety practices. The event occurred mainly as an accident and it can be said that it has been unduly politicized to conceal the negligence of the US government itself in terms of maintaining effective health and safety checks on deep sea oil drilling (Mc Coy et al, 2010). The operator of the rig who should have maintained the rig for better safety (Transocean, a US-based Swiss company) and Halliburton, a US company (who constructed the rig) should be brought to justices as well. BP only held the license to the rig, and perhaps was a convenient foreign scapegoat for a president desperate to create an enemy to try and gain votes in elections – a very cynical ploy. The issue is that there is currently no specific legislation aimed at eradicating health and safety risks as they relate to drilling and exploring oil in that area by providing for joint liability of the actors involved. Moreover, there is likely to be more political bitterness in the aftermath of this disaster (Mc Coy et al, 2010). The US delayed paying compensation for almost 20 years to France after the Amoco Cadiz oil spill in the year 1978, and there are many other examples of US companies ruining the environment and never paying compensation or cleaning up (e.g. Bhopal). In the end after much negotiation and legal haggling managed to cut down the claim to 5% of its original magnitude with regards the Amoco Cadiz. Times have changed, however, and due to the massive US media hype created, BP has already paid 20 billion dollars into an escrow fund for the rehabilitation of the affected people and communities in the coast ((Kristina, 2010 c).
This has given rise to another legal complication for the compensation actually being handed out to the affected persons by such a massive breach of safety legislation which represents a strong future likelihood of long-term, high-stakes litigation for Gulf Coast residents which may further strain the administrative and political credibility of the current US regime. The regulatory dimension is of course evident from the accusation of collusion between the BP and MMS (Minerals Management Service) of the US, which has now been named the Bureau of Ocean Energy Management, Regulation, and Enforcement (Kristina, 2010b). Deep sea drilling is always a risk, of course; US hunger to cheap ‘home-grown’ oil is perhaps the real issue here.
Relevant Legislation and Costs
In terms of the future of the health and safety culture in the oil and gas industry, a lot will change and is in fact already ‘changing. It is possible to note that the laws and policies in the US might become more stringent. It is unknown yet which jurisdictions law will apply to the Oil Spill (Kristina, 2010a). Should the USA decide to sue BP in the United Kingdom a lot of other complications may arise as we may see the EU Environmental law, which is extremely detailed, and strict applying the scenario at hand.
There is a lot of speculation about the current future implications for health and safety legal and management regimes after BP’s mammoth oil spill. While it is possible that the BP may argue in the aftermath of the disaster that it is being protected, a 75 million cap on damages (20 million having been paid already into the Escrow fund), based on the provisions of the Oil Pollution Act of 1990, known as OPA which limits a corporations liability to 75 million in monetary damages during an oil spill (Kristina, 2010c). However, under modern case law and precedent under international environmental law, BP will be paying much more for the costs of cleaning up the oil spill as well as to fund the building of barrier Islands close to the state of Louisiana (ibid). Also, if negligence or a breach of safety law is proven against either BP or Transocean or Halliburton, or even Cameron International (all of which are fortune 500 companies) the chances are that the limit will be waived and these companies will be sued as joint tort-feasers which can give rise to punitive or exemplary damages (ibid).
While the current impact of the OPA 1990 is being contested as dissatisfactory in limiting recovering of damages, it can also be seen that the act actually made federal and state claims much stronger and easier to recover by setting a high threshold upon the company accused of breaching federal safety laws in proving that they had not done so. The OPA actually expanded liability of the tort-feasing company making it easier to sue the contracting oil company for vast categories of damages. Furthermore, the situation before the passage of the OPA was that the health and safety culture of the maritime law of that time would not have allowed the Gulf coast business communities for suing or recovering damages for monetary loss due to the loss of business, unless the oil spill had physically damaged their property. Under the operation of the health and safety regime of OPA now it would be possible for Gulf Coast business owners to bringing claims against the company for business loss based in lost revenue without having to prove any negligence on behalf of BP. Under the new law BP can later recover the same damages from any other entity found to have caused such a loss. In addition, Congress had drafted the OPA 1990 very cleverly to include recovering lost tax revenue, which would cover an environmental authority’s increased costs for public services like health, firefighting and policing. Furthermore, the people affected by the Oil Spill can sue for a breach of their health and safety with the US Treasury’s Oil Spill Liability Trust (Kristina, 2010c) Fund, which is funded under the OPA 1990 by petroleum taxes. Therefore the health and safety culture can now easily be said to be taking a more compensatory role by making provision for idled fishing commercial concerns while allowing claimants to file an administrative claim against the trust fund, which is currently estimated to be of 1 billion dollars and is being administered by the US coast guard (ibid). Once payments are made out (and they have already been made out) the law provides that this fund can ask for reimbursements from the companies involved in this incident which can be either BP, Halliburton, Cameron, or even Transocean).
Towards some conclusions on the changing health and safety culture
The health and safety regime in the USA now looks very promising, at least on paper, with regards to compensation, but it should also be noted that not only does it prevent a person from benefitting from the fund if they take prior legal action against the company and it is ongoing at the time of the claim (Baker et al, 2010). The health and safety culture seems to discourage litigation then in a way by asking people to accept whatever damages are given to it by the administration and not resort to judicial measures which may take many years in the face of adversarial tactics of large corporations like the four involved in this case.
In the future, rig-owner liability will have to increase, as it seems that BP has to pay the majority of the claim in form liability crossing 100 million. It is being suggested that it would be unfair if the Swiss company, Transocean, as the rig owner of the project should be able to invoke the 1851 Limitation of Liability Act which would effectively limit its liability to almost 27 million dollars in damages as that ancient provision limits the liability of the owner to the value of the “vessel” and its pending “freight” (Kristina, 2010c). It is unlikely however that the courts will, keeping in mind the radical environmentally concerned culture of modern times, want to construe a “rig” as a “vessel”. Further, doing the same could be one giant step towards promoting public mistrust in the role of the government in ensuring health and safety. This is because 11 workers have been presumed dead and missing including parts of the rig owner’s own employee base (Baker et al, 2010).
Another reason why the 1851 LLA might not apply is its perceived repeal by the OPA 1990, which means it might have to pay damages up to 75 million dollars. However, if BP is made to pay too much in proportion to the other companies there is a chance that there might be uproar from the United Kingdom about unfair treatment in order to modify the operation of the applicable law due to company’s British domicile (Kristina, 2010c). Furthermore, it is likely that in line with the current health, safety and environmental concerns as they surround the BP oil spill there will be a greater likelihood for Transocean to be deemed as complicit in the negligence of the safety conventions as they relate to the spill, if the operational managers of that company can be brought into the net of “blame”. This is precisely where the US environmental regime lacks coherence. After the occurrence of a disaster with the magnitude of the same it is possible to see that it is not only the Oil rig licensee who can be sued but also the owner and constructor of the same.
Alternatively, we might see another change coming in the health and safety regime now more than ever, and this relates to corporate responsibility increasing on behalf of large corporations. BP has, since the incident, endeavoured to produce a list of failures responsible for the leakage and explosion of the oil. This may mean that BP was admitting its own blame in detail. Had this been the situation almost 2 or 3 decades ago we should have seen a large oil corporation like the BP actually avoiding any admittance of the claim at all. Surprisingly enough, the legal culture in court has still not changed. One fears that there might be an outcome here which is very much similar to the Brent Spar oil spill in the UK where Shell’s technical reports which stated a true fact that it was not liable were set aside for the media credibility of the claims of Greenpeace. A similar hype can be expected here. BP has already explained how prudent health and safety measures failed in the face of the complicated nature of the Macondo well (Kristina, 2010a).
Conclusion
In the future, we can expect a culture where there is an emphasis upon devising legislation which gives out more robust and long lasting key processes and technical standards to improve safety and prevent the pollution that may occur in the aftermath of deepwater drilling operations. Furthermore, there is now an audit culture emerging in companies on a more positive note as BP has broken the classic evasion tradition of large corporations by carrying out an internal audit of its health and safety commitments as they relate to escape and evacuation, regulatory regimes, oil spill response and occupational health on oil rigs. It is also being expected that now, more than ever, BP will try to produce an organizational safety culture. Until now the BP has in addition to stating that the nature of the Mocando oil well was extremely complicated, also admitted that its safety barriers, wellbore cement, poor quality of machines and processes relating to pressure integrity testing, well monitoring, well control response, fire prevented and blowout prevention emergency operations effectively failed. The nature of these lacunae in the safety system actually led to the leakage of oil into the well and subsequent ignition, which arguably was all caused by lax regulation by a US government desperate for US-produced oil (i.e. not Arab or Russian oil).
In conclusion, while the US environmental law and the EPA (Environmental Protection Agency) can only help in administrative matters and the recovery of damages, a more solid industrial response is missing here from the other three companies involved in the Gulf Oil Spill who have attempted throughout to blame BP and ‘pass the buck’ in a totally amoral way. Until there is a definite response to the Oil spill by the courts and the government, it is feared that the ongoing culture of blame and secrecy will prevail between all four companies and the US government which now fears a backlash and political notoriety due to the increasingly frustrated and disappointed Gulf communities.
References
The (US) Oil Pollution Act (1990)
The (US) Limitation of Liability Act 1851
Alexander, Kristina. Jun. 28, 2010. The 2010 oil spill: Criminal liability under Wildlife Law. Congressional Research Service. CRS Report for Congress; R41308. Online access: http://www.fas.org/sgp/crs/misc/R41308.pdf
Alexander, Kristina. Jun. 4 2010. The 2010 oil spill: the Minerals Management Service (MMS) and the National Environmental Policy Act (NEPA). Congressional Research Service. CRS Report for Congress; R41265. Online access: http://fpc.state.gov/documents/organization/145106.pdf
Alexander, Kristina. Sept. 8, 2010. The 2010 oil spill: natural resources damage assessment under the Oil Pollution Act. Congressional Research Service. CRS Report for Congress; R41396. Online access: http://www.fas.org/sgp/crs/misc/R41396.pdf
Assessing the effects of the Gulf of Mexico oil spill on human health: a summary of the June 2010 workshop. 2010. McCoy, Margaret A. and Judith A. Salerno, reporters. I Institute of Medicine of the National Academies. Washington, D.C.National Academies Press. Online access: http://books.nap.edu/openbook.php?record_id=12949 (Open Book format)
Baker, McNeill, Jena and Brian W. Walsh. Jun. 22, 2010. Oil spill response sets poor precedent for public-private cooperation. Heritage Foundation. WebMemo; no. 2940. Online access: http://thf_media.s3.amazonaws.com/2010/pdf/wm2940.pdf