The Roots and Backwash of Exxon Valdez Oil Spill - Research Paper Example

Economic Perspectives on Environmental issues Introduction Environmental issues and disasters have always gained much attention from the world in general. At most times, when they occur, they bring about human and financial losses which often devastate the nations affected. In the past decade, environmental issues have been brought to the forefront of politics and economic issues, primarily due to the bigger issue of climate change. With noticeably warmer temperatures and extreme weather conditions affecting most parts of the globe, these environmental issues have demanded more than a token concern for many governments. In the past few weeks, the Gulf Coast oil spill by a British Petroleum tanker has once again brought the focus on the effects of environmental issues. Many countries, including the United States have been attempting to come up with potential solutions to the oil spill and these measures are being implemented to this very moment. But the damage which the oil spill has already brought and will still bring – even if contained or resolved – will still be considered immeasurable. Just by recalling the incidents involving other oil spills in the past will surely set forth the important consideration that these oil spills can bring about dangerous consequences for our economy and environment. This paper shall discuss the Exxon Valdez oil spill. This paper shall first explain how the oil spill came about and the immediate consequences which were seen in the aftermath of the disaster. An analysis of the disaster shall then follow, while considering the different environmental and economic consequences which this oil spill has created, not just for the Exxon Company, but also for those immediately affected by the oil slick. The latter includes the economic costs for the coastal towns and other areas in the vicinity of the oil spill. This analysis shall weigh in on environmental damages which later translate to economic damages and losses as well. Facts: The Exxon Valdez Oil Spill On March 24, 1989, the Exxon Valdez supertanker owned by Exxon Mobil ran aground into Bligh Reef in Alaska’s Prince William Sound (Exxon Mobil, n.d). It was on its way to Long Beach California when the incident happened, which resulted to the supertanker spilling more than 250,000 barrels or 10.8 million gallons of crude oil into the sound (Oceana, 2010). The supertanker was traveling outside normal shipping lanes as it was avoiding ice and after 6 hours of grounding, the ship damaged 8 of its 11 tankers and spilled a portion of its Prudhoe Bay oil cargo (Cutler, 2008). Massive cleanup efforts by Exxon and the US Coast Guard were immediately started. Thousands of Alaskan residents helped in the cleanup efforts and eventually after about three years, the US Coast Guard declared the clean-up complete (Exxon Mobil, n.d). The cleanup started in April 1989 until September of 1989 for the first year and went on in 1990 and 1991 during the summer months and some shoreline monitoring in the winter months (Cutler, 2008). Based on the assessment of the National Transportation Safety Board, there were 5 possible causes of the grounding: 1). The third mate failed to properly maneuver the vessel possibly because of fatigue and excess workload; 2). The master failed to give proper navigation watch probably because of alcohol intoxication; 3). Exxon Shipping Company did not supervise the master and provide rest for their crew; 4). The US Coast Guard did not provide an effective vessel traffic system; and 5). There were no sufficient pilot and escort services (Cutler, 2008). The environmental and economic consequences of the disaster amount to more than just three years of cleanup; they amount to profits lost, damage to coasts, and other sea and bird life. These consequences shall now be discussed in detail. These economic consequences shall cover the ecological cost of the oil spill itself, the economic costs as shouldered by Exxon Company during the cleanup, and the penalties charged against the company for the disaster. Discussion Economic losses from lost income due to fishing and other wildlife About 3700 to 5800 mammals from 9 different species were affected by the oil spill. Three hundred direct mortalities were reported for seals while 2,800 mortalities were reported for otters and these deaths were mostly due to the breathing and ingestion of the toxic oil (Oil Spill Response, n.d). Considerable efforts were also exerted to redirect the path of bears away from the area. Guillemots were heavily harmed by the spill, with about 22,000 of them found dead; and 153 bald eagles also found dead (Oil Spill Response, n.d). Many invertebrates also died as a result of the oil spill with almost all crustaceans disappearing and others becoming rare in the area within 2 weeks after the oil spill. There were about 1630 birds which were sent to rehabilitation centers and only 837 were released after treatment. This rehabilitation process cost Exxon about $25.3 million (Oil Spill Response, n.d). Recreational sport fishing loss was also seen after the oil spill as many fishes were killed by the oil slick. Cutler (2008) discusses that it is important to consider the “impact on the number of anglers, the number of sport fishing trips, the areas fished, the species fished for, and the length of these trips”. In 1989, financial losses in recreational fishing were estimated between $0 and $580 million dollars; and by 1990, the range shot up to between $3.6 million and $50.5 million (Cutler, 2008). In the spring of 1989, Alaska cancelled the opening to the herring fisheries and it also restricted the salmon take (American University, 1999). As a result, fishermen lost $136.5 million in profits in 1989 alone. Apparently, as explained by the fishermen, they lost a total of $580.4 million because the oil slick also ruined the reputation of the Alaskan salmon. Other losses from the oil spill included $154.8 million due to the ecological damage and the depletion of fish stocks brought on by the oil spill to affected parts of Alaska (American University, 1999). The fishermen in the areas affected also lost the value of their fishing permits because of the oil spill. When the fishermen with fishing licenses tried to leave the business and sell their permits, they lost $23.3 million (American University, 1999). In the immediate aftermath of the oil spill, losses also registered for the sale and harvest of shrimps, crabs, and bottom fishing, and although the losses in the pink salmon and herring increased from 1991 till 1992, both species decreased significantly in sales in the summer of 1993 (American University, 1999). When these figures are further assessed and numerically represented, it can be seen that the value of commercial salmon harvest in affected areas in the year before the spill was about $70 million, but in 1993, the harvest was only $24.7 million (American University, 1999). The company Exxon has insisted all along that these changes in profits are actually due to the normal changes in ocean temperatures which in turn affect the food supply of the fishes. However, based on official government studies, the oil spill was still pinpointed as the cause of the decrease in profits because of its toxic effects on the wildlife in the area (American University, 1999). As described by Yale professor Robert Mendelssohn (as cited by American University, 1999), the Exxon Valdez oil spill has caused farmed salmon from Norway and Chile to be the main source of Japanese consumers, costing the Alaskan market valuable loss of profits. Japan is a top consumer of red salmon harvested in Alaska and the farm-raised salmon is the main competitor of Alaska for the Japanese market (American University, 1999). Even years after the oil spill, the American salmon still carried the tainted image caused by the oil spill, hence quantities ordered and prices for these fishes were decreased (American University, 1999). Local fishermen in Prince William Sound describe the Exxon Valdez oil spill as a nightmare that does not seem to have any end (Simon & Martin, 2010). Three years after the oil spill, many of these fishermen remained in the area, fishing for salmon, hoping that things would change for them and the herring would return to their area. But the herring never returned to the Cordova area (Simon & Martin, 2010). Consequently, the income of these fishermen took a nosedive, severely threatening their families, and their emotional health. Some of them had to use their children’s college fund just to support their family (Simon & Martin, 2010). And 21 years after the oil spill, most of the fishermen in the area still claim that they are suffering financially because of the oil spill. The herring loss for the region is pegged to have cost Alaska about $400 million in the past 21 years. “The average fishermen suffered a 30 percent loss in income after the oil spill, but those who specialized in just herring lost everything” (Simon & Martin, 2010). Fishermen emphasize that even if the oil spill on the surface of the waters have indeed been cleared and cleaned, the shores are another matter. Oil residues still remain in many of the areas around Prince William Sound and compensation from Exxon has not eliminated the farmer’s problems (Simon & Martin, 2010). Exxon has spent about $2.5 billion for the cleanup of the oil spill; it also paid $300 million immediately after the incident to about 11,000 fishermen, fish processors, and other individuals affected by the oil spill; $5 billion in punitive damages (reduced on appeal to $507.5 million); and $470 million interest on punitive damages (Simon & Martin, 2010). For most of the fishermen who received compensation from Exxon, they used most of the money to clear liens on their fishing permits and boats. But the compensation has stopped there, and in the meantime, the fishermen and the other individuals who rely in the sea for their living are continuing to suffer the effects of the Exxon Valdez oil spill. It is also important to note the replacement cost of birds and mammals in the aftermath of the Exxon Valdez oil spill. The costs for replacement also include the relocation and rehabilitation of shorebirds, marine and terrestrial mammals which have suffered injuries or were destroyed by the oil spill (Simon & Martin, 2010). Values range from about $20,000 to 300,000 per marine mammal which include the otters, whales, sea lions, and seals; $125 to $500 per terrestrial animal which include the bears, river otters, mink, and deer; and $170 to 6,000 dollars for seabirds and eagles (Simon & Martin, 2010). This is not to mention the cost estimated in the deaths of these wildlife creatures in the immediate aftermath of (and years after) the Exxon Valdez oil spill. There were “as many as 2800 sea otters, 300 harbor seals, 900 bald eagles and 250,000 seabirds [that] died in the days following the disaster” (Oceana, n.d). There were also 1,000 harlequin ducks that were killed by the oil spill and many of them were chronically injured as a result of the oil spill. Manpower involved in the cleanup numbered up to 10,000 workers with about 1000 boats, 100 airplanes, and helicopters deployed to assist in the cleaning (Oceana, n.d). Among these crews, four deaths were reported as a direct result of the cleanup efforts. In general, economic losses caused by the spill were registered at 300 million dollars to 32 thousand individuals who were dependent on the fishing industry (Oceana, n.d). More specifically, the losses in fishing were due to the harm to the health of these fishes as brought about by the oil spill. Some of these fishes registered with high rates of viral diseases; pink salmon embryos were harmed or killed by the oil which was lodged and which settled on stones and gravel stream banks; and consequently, some parts of Prince William Sound lost an estimate of 1.9 million of their potential catch of wild pink salmon (Oceana, n.d). Some of these animals have not fully recovered even after 20 years. “Three species of the cormorant, the common loon, the harbor seal, the harlequin duck, the pacific herring, and pigeon guillemot still have not fully recovered” (Oceana, n.d). All in all, as far as economic losses in fishing were concerned, two years after the oil spill, it registered at about $31 million. Twelve years after the oil spill, oil could still be seen on half of the 91 beaches which were randomly selected. Many experts point out that oil usually penetrates deeply into the beaches and as they penetrate deeply, they also remain fresh even after many years. Consequently, they often resurface and continue to affect animals found in the beaches. Eventually, the fishes are also affected as the tides wash away the oil back into the sea (Cutler, 2008). As a result, even after decades, the Exxon Valdez oil spill still continues to cause damage to animals and wildlife in the area and to cause financial losses to fishermen and other individuals making their living off of the open seas. An analysis by Amadeo (n.d) revealed that the cost of losing 2800 of different wildlife species in the Exxon Valdez oil spill actually amounts to $140 million and the company was ordered to pay about $40,000-$90,000 for their rehabilitation. The loss of harbor seals registers at a cost of $604,000 and the loss of sea birds cost about $75 million (Amadeo, n.d). Eagles cost $22,000 to rehabilitate so about 140 eagles lost are worth $3 million all in all. Based on these totals, the cost for the loss and rehabilitation of these four species, in the first week following the oil spill, amount to $218.6 million (Amadeo, n.d). Tourism losses Losses in the tourism industry in the area were also registered. The areas of Valdez, Homer, Cordova, and Kodiak were especially affected by the decrease in tourism spending (Cutler, 2008). Tourism spending decreased by about eight percent in South Central Alaska; and by 35 percent in Southwest Alaska within the year following the Exxon Valdez oil spill (Oceana, n.d). The net loss in the decrease of visitor spending amounted to about $19 million (Cutler, 2008). Loss of 9,400 visitors and $5.5 million in spending was also seen (Oceana, n.d). There were lesser resident and non-resident tourists in the areas affected by the oil spills, primarily because of the lack of available visitor services like hotel and accommodations, charter boats, and air taxis (Cutler, 2008). Many of those who held these accommodations and services prior to the oil spill have opted to leave the affected areas and settle elsewhere because the sea could no longer support their needs. The businesses mostly affected by the oil spill were the lodges and resorts, the tour companies, guided outdoor activities, charter and sightseeing boats (Cutler, 2008). It was unfortunate that these businesses were not able to benefit from the spending which was allocated for the clean-up operations because most of them were not located near the coasts where most of the cleaning operations were being undertaken (Cutler, 2008). Severe labor shortage in the tourism industry throughout Alaska was also seen in the immediate aftermath of the oil spill (Cutler, 2008). This was because traditional service industry workers sought the high-paying jobs offered for the cleanup of the oil spill (Cutler, 2008). Consequently, higher costs of doing business in the tourism industry were also seen (Cutler, 2008). It was deplorable to note that about 50% of businesses in the affected areas reported cancellations which were related to the spill; and as a result, 16% of business reported was less than that which was expected because of the oil spill (Cutler, 2008). All in all, the pristine quality of Alaska’s environment has forever been destroyed by the Exxon Valdez oil spill. And no amount of cleaning and compensation can ever really repair or rehabilitate the damage done to the environment of the areas affected. About 2000 Alaskan Native Americans and 13,000 subsistence permit holders lost their source of living as a result of the oil spill (Amadeo, n.d). Many of these people, to this very day, do not want to retrieve their fishes from the affected areas because of possible food poisoning. This is one of the reasons why the former customers of these fishermen have chosen other markets and sources of fish instead of the ones takes near the oil spill because of their fears of contamination. It is important to note that the tourism industry lost about 26,000 jobs and more than $24 billion in sales immediately after the oil spill. “Passive use cost the state $2.8 billion, and it too has never fully recovered since vacationers still think of the area as contaminated” (NOAA, as cited by Amadeo, n.d). And 20 years after the oil spill, the shores and beaches are still contaminated with oil and two species which have been seen in the area are no longer seen, ten species have not quite returned, and five more species are unknown (Amadeo, n.d). Most of the tourist attractions still suffer the same difficulties which the fishermen face because the tourism draw of the areas are its wildlife and its pristine nature. But the area of Prince William Sound is no longer as it was before and its depreciated value has turned off tourists from the area. Losses for Exxon Company The cost has also been considerable for the Exxon Shipping Company. Its losses are mostly attributed to the cleanups, the settlements, legal damages, and fees which they were ordered to pay (Cutler, 2008). Also the new cleanup response processes which were established by the Seven Sisters and the need to construct the double hulled ships are likely to add on more expenses to the operating costs of shipping companies (Cutler, 2008). In the aftermath of the oil spill, the stock market did not respond favorably to Exxon’s disaster. Moreover, their legal obligations were adjudged by the courts and “Exxon and Capt. Joseph Hazlewood were found to be reckless in causing the spill…” (Cutler, 2008). Consequently, Exxon’s stock values decreased and it lost 10% of its value. And like any other corporation and business, these losses were later passed on to the customer in the form of raised prices of petroleum. As for its other legal obligations, Exxon was fined 150 million dollars, but the courts reduced the fine to $125 million when it recognized the efforts undertaken by Exxon in the cleanup of its oil spill (Cutler, 2008). About 12 million dollars was ordered to be paid to the North American Wetlands Conservation Fund; and 13 million dollars was ordered to be paid to the national Victims of Crime Fund. As for injuries suffered by the fish, wildlife, and the lands, Exxon was ordered to pay $100 million and such funds were divided between the federal and state government (Cutler, 2008). In the civil suits filed against the company, Exxon agreed to pay $900 million in ten yearly installments; and the final payment was received in September of 2001 (Cutler, 2008). The settlement made provisions for a ‘reopener window’ which basically indicated that from September 2002 to September 2006, the government may make additional claims for another $100 million (Cutler, 2008). These funds are to be used for the restoration of resources which suffered great losses because of the oil spill, and which losses were not known or could not have been anticipated at the time of the initial settlement of the costs (Cutler, 2008). Exxon also immediately and voluntarily gave about $300 million to about 11,000 Alaskans and business establishments which were hurt by the oil spill (Cutler, 2008). Also, $2.2 billion was spent by Exxon for the cleanup of Prince William Sound from 1989 to 1992. The company also paid $1 billion as settlements with the state and federal governments and these funds were used for environmental research and conservation (Cutler, 2008). The Exxon Valdez oil spill is considered to be one of the most expensive oil spill in history. The cleanup alone is said to amount to about $2.5 billion and total costs from fines, penalties, claims, and settlements have been estimated at a total of $7 billion (Lyon & Weiss, 2010). Other reports peg the costs at higher totals with CBS reporting it to be $3.8 billion total cleanup, costs, and fines (Lyon & Weiss, 2010). The oil spill devastated the local fishing industry with estimated cost of about $300 million economic harm on more than 32,000 individuals whose lives were dependent on commercial fishing (Lyon & Weiss, 2010. Furthermore, tourism spending suffered a considerable 8 percent drop in south central Alaska and a drop of 35 percent in southwest Alaska within the year following the oil spill. In two years following the oil spill, significant economic losses to recreational fishing was pegged at $31 million (Lyon & Weiss, 2010). What is probably the most disheartening effect seen from the oil spill was on the loss and devastation on the region’s wildlife. This includes about 250,000 seabirds, 2800 sea otters, 300 harbor seals, 250 bald eagles, up to 22 killer whales, billions of salmon, and herring eggs (Lyon & Weiss, 2010). Conclusion The effects of the Exxon Valdez oil spill are lingering to this very day. The cost as was estimated above run to billions of dollars for the state of Alaska and for the Exxon Company as well. However, as oil still remains one of the most highly profitable business ventures for oil companies, the financial losses the Exxon Company incurred as a result of the oil spill have already been recouped by the company. It is the fishermen who have lost their livelihoods who have suffered and are continuing to suffer because of the oil spill. It is also the wildlife which will never or which will hardly be seen in the area that has suffered the most from the oil spill. And the harsh reality is that, no amount of money spent for cleaning or rehabilitation will ever truly restore the lives lost (both human and non-human) as a result of the oil spill. Works Cited Amadeo, K. (n.d) Effect of Exxon Valdez Oil Spill on the Economy. US Economy. Retrieved 10 May 2010 from http://useconomy.about.com/od/suppl1/p/Exxon_Valdez_Oil_Spill_Economic_Impact.htm American University (1999) Exxon Valdez Disaster. American University. Retrieved 10 May 2010 from http://www1.american.edu/ted/exxon.htm Cutler J. Cleveland (2008) Exxon Valdez oil spill. National Oceanic and Atmospheric Administration In: Encyclopedia of Earth. Eds. Cutler J. Cleveland. Retrieved May 10, 2010 http://www.eoearth.org/article/Exxon_Valdez_oil_spill Exxon Mobil (n.d) The Valdez Oil Spill. Exxon Mobil. Retrieved 10 May 2010 from http://www.exxonmobil.com/corporate/about_issues_valdez.aspx Lyon, S. & Weiss, D. (30 April 2010) Oil Spills by the Numbers: The Devastating Consequences of Exxon Valdez and BP Gulf. American Progress. Retrieved 10 May 2010 from http://www.americanprogress.org/issues/2010/04/oil_numbers.html Oceana (2010) Exxon Valdez Facts. Oceana. Retrieved 10 May 2010 from http://na.oceana.org/en/our-work/stop-ocean-pollution/oil-pollution/learn-act/exxon-valdez-facts Oil Spill Response (n.d) Exxon Valdez: The most expensive oil spill in history. Oil Spill Response. Retrieved 10 May 2010 from http://www.oilspillresponse.com/pdf/Educational/exxon.pdf Simon, D. & Martin, A. (May 7, 2010) Exxon Valdez Oil Spill Still Affecting Alaska Communities. Greenman’s Grove. Retrieved 10 May 2010 from http://greenmansgrove.blogspot.com/2010/05/exxon-valdez-oil-spill-still-affecting.html Read More