The BP Oil Disaster in the Gulf of Mexico - Essay Example

The BP Oil Disaster in the Gulf of Mexico By Introduction In April the Gulf of Mexico experienced one of the worst oil spills in the history of America. For three months, millions of barrels of oil continuously spilled into the gulf before it was finally capped. This problem was caused by the detonation and sinking of the oil rig (Hunter 2012, p. 217). Apart from killing more than ten people, the oil spill caused a lot of harm to the sea animals, fishing, and tourism industries. Additionally, it was reported that it also caused human health complications which can still presently be felt. For instance, many news agencies reported that the number of dolphins and fish were continuously decreasing. It took several weeks and months for the oil cleanup team to contain the disaster caused on the marine waters. BP accepted the criminal responsibility hence paying 4.5 billion dollar in damages. Today, the oil company faces its biggest court challenges. The American government said that the company was grossly negligence (Freudenburg & Gramling 2011, p. 173). The paper will provide a comprehensive knowledge of the legal issues and how the case would affect future operations of the company. It will also identify some of the Human Resource issues involved. Legal Issue Involved in the Disaster After the Gulf of Mexico oil spill, both the American government and the company started their investigations to establish what exactly led to the disaster. They were also required to provide adequate solutions that could prevent future oils spills. Some of the organizations given the authority by the American government to carry out investigations included National Academy of Engineering, Mineral Management Service, and the National Oil Spill Commission (Slorach, Embley, Goodchild & Shephard, 2013, p. 349). This led to many hearings being carried out by the American House Committee on Energy. Consequently, it was discovered that the machine which was used to prevent the rig from blowing had experienced a hydraulic leak and its battery also stopped working. This machine was constructed by the Cameron International Corporation. A number of investigative reports did not only put the blame on BP Oil Company, but also on Transocean. The supervisors misinterpreted the pressure information and ordered the rig operators to substitute the drilling fluid with seawater. This could not prevent the already leaking gas from moving up the rig leading to a huge explosion. Report released by the Oil Spill Commission indicated that the spillage was caused by poor management decisions. The other possible cause was that the well was hurriedly constructed. There are a number of legal acts associated with the Gulf of Mexico oil spill. Some of them include the Oil Pollution Act, Clean Water Act, and the RESTORE Act. The Oil Pollution Act was implemented in 1990 by George W. Bush to respond to the huge public outcry after the Exxon Valdez occurrence. Through this act, America is able to stop and act in response to oil spills by creating provisions that go beyond the capability of the central government (Jennings, 2012, P. 56). It also provides essential funds in response to oil spills. According to this act, BP Oil Company’s accountability is approximated to be $70 million for the harm caused to the people living along the Gulf and their businesses. However, protects such companies from taking full accountability for the total cost of the damages they cause. RESTORE Act was implemented by President Barrack Obama in 2012 after the occurrence of the disaster. Moreover, it creates a new Trust Fund in the American reserves. This implies that 8% of the money obtained from the civil punishment is taken into the Trust Fund and invested. This will provide enough money for the programs, plan, and actions aimed at bringing back and guarding the surroundings and economy of the Gulf Coast Region (Mceachern, 2012, p. 386). Clean Water Act was passed into law to control the release of pollutants to the American waters. Therefore, BP Oil Company went against this law when their oil polluted the United States waters. Environmental Protection Agency was also found guilty since it deliberately used poisonous dispersant rather than opting for cleaner, non-hazardous methods of removing the oil from the water surface. Transocean Deepwater Inc. was also found guilty and made to pay $1.4 billion as a punishment. BP was reluctant to pay their fines arguing that some people who were not affected could also come up and request for compensation. However, American high court rejected their appeal hence they were forced to compensate the people who were affected by the spill and their businesses (Great Britain, 2011, p. 210). For instance, those individuals who were operating hotels along the Gulf Coast Region were affected by the reduction in the number of seafood hence they had to be paid for the damages. Impact of the Case to the Company’s Future Operations The case is expected to have a negative impact on the company’s future operations in a number of ways. For instance, they are expected to pay huge amounts of money to the damages caused. They will be paid under a number of laws including the Clean Water Act, Oil Pollution Act, and the Endangered Species Act. Considering that the image of the company was also destroyed after the spill, it will take them time and money to bring back their image into the international market. BP will also not be allowed to obtain drilling leases from the American government (Luo, 2011, P. 349). This is after the central government was requested to stop the provision of fresh offshore drilling leases before establishing whether extra safety systems were necessary. This would eventually reduce their production capacity thereby reducing their profit margin. Even though BP still has low market value, the amount of money they are expected to pay as compensation will definitely reduce their present market value hence affecting their profit margin. Since the occurrence of the spill, the company’s share price has reduced by half hence affecting the American economy. Many workers were also laid off after the disaster because the production had also reduced thus they will also be forced to pay the workers. Consequently, this will cause more harm to the company having in mind that they are still expected to pay huge sums of money as compensation. This will eventually affect their daily operations (Subba & Murthy 2005, p. 80). After the oil spill, BP has received continuous condemnation from both the global community and United States. For instance, a number of people had promise themselves not to buy BP products. To be successful in future, BP Company will have to put a lot of focus in advancing other alternative energy business like the production of wind and solar energy. This will make them effectively compete with other companies in the local and international market. The company should also prepare itself for a number of business interferences and emergency occurrences. These include information system interference, epidemic response, and hurricane preparedness. They should also ensure that their workers are protected in case of civil protests. Environmental Impacts of the BP Oil Disaster Depending on the location and timing of oil spill, even minor oil spills cause significant damage to the aquatic lives and organisms. These impacts can either be chronic or acute (short-term). Depending on the concentration and toxicity of the oil spill, aquatic animals and plants are likely to be harmed and killed. This was the case of the BP Oil Spill disaster that killed sea and ocean creatures, thereby, reducing their rate of reproduction, altering their development and growth, and impairing feeding mechanisms for these creatures (Kornfeld, 2011, p.333). The oil spill also weakened these animals and plants to the extents that the survivor became more vulnerable to disease attacks. In particular, the BP Oil disaster killed marine mammals, bird, intertidal species, bottom-dwelling species, and their development life stages. A report by environmentalists warned of the possibility of elimination of the waterfowls population along the Louisiana coastal regions (that account for over 75% of waterfowls in U.S.) (Campagna, et al, 2011, p. 395). Not only waterfowls that are at the risk of extinction, but, hundreds of species along the Gulf of Mexico’s coastline. The disaster led to water pollution, thus making the affected coastal waters health hazardous to both human and animal population (Kornfeld, 2011, p.329). Such polluted waters were rendered unfit even for industrial purposes. A report by the Department of Interior revealed that the BP Oil Disaster posed great danger and risk to four National Wildlife Refuges and eight National Parks within Texas to Florida. This further caused environmental damage to the Wildlife Services (Smith Jr., Smith, & Ashcroft, 2011, p.574). Economic Implications of the BP Disaster Although the exact economic costs and implication of the BP disaster cannot be determine given that oil gets biodegraded very quickly, it is estimated that the U.S government loss revenue amounting to $132 billion over the three months (Smith Jr., Smith, & Ashcroft, 2011, p.572). This was attributed to the fact that the Gulf of Mexico coast waters accounted for 73 percent of the domestic and industrial water supplies. Secondly, following the incident, the number of tourists activities along the Gulf of Mexicos coasts significantly declined, hence loss of tourism income (Kornfeld, 2011, p.338). In addition, the company and the federal government had to incur extra financial and economic burden of cleaning up the affected coastlines (Jernelöv, 2010, p.364). This led to diversion of resources that could have been used for other development projects to create employment opportunities and stabilize the economy. On the other hand, the BP Oil Disaster led to inflation in the economy through the unexpected rise in oil prices (Nash, 2011, p.262). The oil disaster affected the real estate values. Following the disaster, the affected land suffered a significant drop in their economic values, hence real estate losses (Smith Jr., Smith, & Ashcroft, 2011, p.574). This further generated inflationary pressure in the American economy given the contribution of oil and petroleum products in the economic well-being of the U.S. In accordance with the “Clean Water Act”, the BP will bear more financial burden to the Federal government in the form of fines and violations of the Act. It was estimated that a civil fine amounting to $4.7 billion will be settled by the company (Smith Jr., Smith, & Ashcroft, 2011, p.575). These will further burden the company finically and limit its expansion and growth capacity. Identification of the Human Resource Issues Certain issues like incompetency and negligence are to blame for the Gulf of Mexico oil spill. For instance, BP supervisors in charge of the operation are the ones who gave wrong recommendations leading to the failure of the group controlling the rig. The group should have been able to identify problem signals pointing to a possible blast at the time of drilling (Cornelius 2001, p. 313). This clearly implies that there was a management failure at the company. The management had also failed to educate its workers on certain important safety measures hence they were not prepared for the disaster. Arguably, this is why it took more than 90 days to fix the problem. For instance, they were not taught on how to respond to such disasters. The other HR issue in the company is poor management. For instance, the Human Resource’s plan did not match with the demands of the company and this explains why they all fell apart. It could not be understood why a company like BP, with its brilliancy in a number of respects, failed to incorporate all its systems, processes, and structures (Aswathappa 2013, p. 144). Therefore, it was important for BP to consider restructuring its top leadership to avoid such incidences. According to the report provided by the presidential commission investigation, the oil spill was majorly caused by the company’s corporate mismanagement. Conclusion Even though the company is still experiencing a number of challenges since the occurrence of the disaster, it is also important to acknowledge that it has proved its capability of conquering significant obstacles. For instance, the company brought back its image through establishing various sustainability programs and being socially accountable for the damages caused. Presently, the company does not have to reduce their costs by using excellent practices for its production activities as this was one of the major causes of the disaster. Moreover, it has a fresh accountability to try and pay the damages to the affected people. It also has to offer leadership in security and sustainability. List of References Aswathappa, K. (2013). Human resource management: text and cases. New Delhi, McGraw Hill Education. Campagna, C., Short, F. T., Polidoro, B. A., Mcmanus, R., Collette, B. B., Pilcher, N. J., & ... Carpenter, K. E. (2011). Gulf of Mexico Oil Blowout Increases Risks to Globally Threatened Species. Bioscience, 61(5), 393-397. doi:10.1525/bio.2011.61.5.8 Cornelius, N. (2001). Human resource management: a managerial perspective. London [u.a.], Internat. Thomson Business. Foley, V. J. (2011). Post-Deepwater Horizon: The Changing Landscape of Liability for Oil Pollution in the United States. Albany Law Review, 74(1), 515-530. Freudenburg, W. R., & Gramling, R. (2011). Blowout in the Gulf: the BP oil spill disaster and the future of energy in America. Cambridge, Mass, MIT Press. Great Britain. (2011). UK deepwater drilling: Implications of the Gulf of Mexico oil spill. Vol. 1. Vol. 1. London, The Stationery Office. Hunter, N. (2012). Offshore oil drilling. London, Raintree. Jennings, M. (2012). Business: its legal, ethical, and global environment. Mason, OH, South-Western Cengage Learning. Jernelöv, A. (2010). The Threats from Oil Spills: Now, Then, and in the Future. AMBIO - A Journal Of The Human Environment, 39(5/6), 353-366. doi:10.1007/s13280-010-0085-5 Kornfeld, I. E. (2011). Of Dead Pelicans, Turtles, and Marshes: Natural Resources Damages in the Wake of the BP Deepwater Horizon Spill. Boston College Environmental Affairs Law Review, 38(2), 317-342. Luo, Z. (2011). Green finance and sustainability: environmentally-aware business models and technologies. Hershey, PA, Business Science Reference. Mceachern, W. A. (2012). Microeconomics: a contemporary introduction. Mason, OH., South-Western Cengage Learning. Nash, S. (2011). Oil and Water, Economics and Ecology in the Gulf of Mexico. Bioscience, 61(4), 259-263. doi:10.1525/bio.2011.61.4.3 Slorach, J. S., Embley, J., Goodchild, P., & Shephard, C. (2013). Legal systems & skills. Smith Jr., L. C., Smith, L., & Ashcroft, P. A. (2011). Analysis of Environmental and Economic Damages from British Petroleums Deepwater Horizon Oil Spill. Albany Law Review, 74(1), 563-585. Subba Rao, P. S., & Murthy, K. G. K. (2005). Cases in management. New Delhi, Discovery Pub. House. Read More