The Gulf Coast BP Oil Spill - Assignment Example

The striking feature of the incident is the apparent lack of an adequate plan to contain the spreading environmental damage. The two companies involved, BP Exploration and Production, Inc., and Transocean Ltd., are attempting to contain the oil spilling from the well with techniques that have never been used before at these ocean depths." U.S. Rep. Henry Waxman (D-CA), chair of the Energy and Commerce committee In 2009 British Petroleum, a UK Plc energy production corporation announced the discovery of a major oil field in the Gulf of Mexico containing 3 billion barrels of oil. Bp immediately responded with a projection of increased production by 50%, to 600,000 barrels per day. In 2008, BP had already announced a plan to spend up to $2 billion to expand existing pipelines and build new connections to Gulf Coast refiners, with projected delivery up to 250,000 barrels 2012 (Hoovers 2010). The company also gained additional properties in the Gulf of Mexico. On April 20, 2010 a rig working less than 50 miles south of Louisiana exploded on the Deepwater Horizon rig off the Gulf Coast of Mexico. Initial word from the U.S. Coast Guard was that no oil spill had resulted from the combustion. Briefly after the statement, the U.S. government announced 1,000 barrels of thick oil per day were spilling into the ocean. The preliminary estimate was soon changed to 42,000 gallons or 5,000 barrels per day. BP initially rejected those estimates, but was confronted with environmental assessments that revealed a spill potentially worse than the 1989 Exxon Valdez disaster. Events leading up to and subsequent to the spill are outlined in the following timeline (Elliot 2010): April 20: at approximately 10:00 PM (CET) a fire was reported on the Deepwater Horizon rig, owned by Transocean Ltd. which was leased by lessor energy giant BP. On April 21, Transocean, Ltd. stated that there was no mention of the spill, despite eleven workers killed on site. April 22: Coast Guard spokeswoman Katherine McNamara indicates disaster level spill. BPs chief executive, Tony Hayward, tells the public that Bp is responding with "everything in our power to contain this oil spill and resolve the situation as rapidly, safely and effectively as possible." The rig sinks. April 27: After underwater robots fail in an attempt to stop the flow of oil. The U.S. Coast Guard attempts to trap the oil in containment booms, and then set it on fire. BP indicates that it will commence drilling of a new relief well near the spill site, but completion of the process could take months. In a communication from Rep. Henry Waxman (D-CA), chair of the Energy and Commerce committee to the chairman of BP notifies him that there will be investigation into "what the companies knew about the risks of drilling at the site and the adequacy of the companies response plans." Homeland Security Secretary, Janet Napolitano and Interior Secretary, Ken Salazar announce that there will be an investigation of the explosion. April 28: U.S. Coast Guard announces that 5,000 rather than 1,000, barrels of oil are spilling each day, citing a revised National Oceanic Atmospheric Administration (NOAA) estimate. April 29: In a Rose Garden statement, President Obama responded with "every single available resource" to address the spill, including the military. He also indicated that BP will have to absorb the entire cost. Since the April 20 Explosion, approximately $430,000 a day has floated into the surrounding ocean, killing wildlife in the process. Market losses have resulted in a value of at least $25 billion. Comparatively speaking, clean water to half a billion people is a $15 billion expense. At present, environmental disaster experts estimate that $300 million will be required to merely to control the spill prior to cleanup (Visual Economics 2010). The direct human impact of the recent Bp explosion calls forth immediate examination of risk assessment and management on drilling sites, but those risks and their costs are, of course, known by employees, with full liability sustained only by proof of negligence on the part of the company (International Finance Corporation 2000). Human error and the potential for partial liability on behalf of those working on site has been a critical part of like explosion investigations. In 2005, an explosion and fire at BPs Texas City refinery killed 15 workers, injury many more. In 2007, Bp was obligated to pay US authorities $373.5 million in fines relating to the 2005 explosion, as well as the 2006 Alaska oil spill, and a propane price-fixing scandal (Hoovers 2010). Mitigation is an inherent aspect of doing business as an oil conglomerate, however. For instance, the discovery of corrosion in a major oil pipeline in 2006, forced BP to close down part of its Prudhoe Bay oilfield (which represents 8% of daily US crude production) for several weeks. The intrusion of the oil refinement process(s) into waterways, and the coordination or disjuncture between international regulation on such endeavors and U.S. federal laws pertaining to restrictions on oil drilling in response to a history of environmental legislative amendments toward preservation and protection of ocean territories within U.S. sovereign jurisdiction. According to the United Nations IMO International Convention on Oil Pollution Preparedness, Response and Co-operation (OPRC) designed to assist Governments to combat major oil pollution incidents, the earlier 1971 Convention became international law in May 1995. Designed to facilitate international co-operation and mutual assistance on major oil pollution disasters, the Convention was funded toward an adequate capability to deal with oil pollution emergencies. In 2000, amendments to “raise the maximum amount of compensation payable from the IOPC Fund for a single incident, including the limit established under the 2000 CLC amendments, to 203 million SDR (US$260 million), up from 135 million SDR (US$173 million). However, if three States contributing to the Fund receive more than 600 million tonnes of oil per annum, the maximum amount is raised to 300,740,000 SDR (US$386 million), up from 200 million SDR (US$256 million)” were ratified by tacit consent of member states. All members are now subject to the protocol which in almost all cases stipulates strict liability to the carrier (UN IMO 2010). Even with precision in international policy regarding clean up measures since the Exxon Valdez, it is sill unclear what this means for Bp in terms of compensatory damages and responsibility to violations of international law, if any? Signatory to the various conventions is not always complete, as can be seen in the U.S. response to environmental liability since original party to the Basel Convention, whereby U.S. participation did not conclude to signatory to the later amendments directed at compensatory liability in response to the sale of waste (e.g. technological trash). The proximity of the Bp spill in the Gulf of Mexico to the continental U.S. which now supersedes protections by international laws in the face of the pollutant aftermath is currently under international investigation. In the wake of the Bp disaster, public policy commentary has many asking: how does the incident implicate the demand of the U.S. consumer market and attendant federal governmental regulation toward comprehensive mitigation in the oil drilling industry from the perspective of national environmental policy? As with the Clean Air Act, the Clean Water Act set the legislative framework for induction of Environmental Protection Agency (EPA) into federal administration under President Nixon. The Federal Water Pollution Control Amendments (FWPCAA) comprise the range of legislative acts contributory to the current CWA. While precedent to the Water Pollution Act of 1972, comprehensive revision of the Clean Water Act (CWA) in 1987 should be considered the standing document toward more recent revisions. The goal of the CWA is to insure healthy access by humans and wildlife. Regulatory provisions for existing dischargers include Effluent guidelines to the permit system for factories and wastewater plants, National Pollutant Discharge Elimination System (NPDES), 1972. The Oil Pollution Act of 1990 informed CWA amendment to include “Spill Prevention Control and Countermeasure Plans” for oil transport in waterways. Assessment of CWA compliance is conducted by state EPAs or DEMs (Departments of Environmental Management). The 1953 Outer Continental Shelf Lands Act (OCS), amended in 1978, requires the Department of the Interior – Minerals Management Service to develop a five year lease schedule strategic plan for auction of oil and natural gas meant for exploration and production. Since the first wave of privatized land laws pertaining to ‘use’ in the 19th century, extensive policy decision has been dedicated to expansion of federal land use from multiple use resource extraction to preservation. The Obama Administrations position on revision of legislative policies directed at updating environmental rules as they pertain to the oil drilling industry, were recently articulated in the White House’s Outer Continental Shelf (OCS) announcement, where the President reasserted his dedication to the expansion of conventional methods of energy development, emphasizing jobs in his strategy to rebuild the economy on alternative fuels and natural resource management. On behalf of the Executive Office, Secretary of Interior, Ken Salazar maintained that preservation of coastal areas not available for development will also be considered within the strategy. State-to-State revenue sharing between coastal states as already implemented within the Gulf of Mexico was central to Congressional debate pertaining to allocations and fiscal management revenues from offshore drilling and related economic outputs. Lobbying organizations such as the National Oceans Industry Association (NOIA) are seeking furtherance of decision making on environmental analysis of vital information toward scientific predictability of mitigation measures that may be necessary on the projects. While conventional in scope, the forthcoming OCS legislation will mean much in terms of a commitment to utilize existing infrastructure for the expansion of energy resources and related economic opportunities. Policy does not emerge in a vacuum however, and legal preemption in the area of environmental protection is often derived from uncanny legislative acts, such as Clinton’s evocation of the 100-year-old Antiquities Act to hedge against economic focused activity on federal and state lands. Indeed, with increased attention given to environmental protection legislation, confrontation with public lands policy intended to support resource extraction activities has been reconsidered. Rescission of an Executive Order banning leases under President Bush is now reflected in the Obama Administration’s OCS decision, and also in the retention of the former congressional moratorium on lease sales in certain offshore locations. Limitations on sale of sea floor have been historically been met with challenges, and opposition to off-shore drilling by environmentalists has resulted in lawsuits under the Endangered Species Act (1972) for the protection of habitat – legislation which often serves as in opposition and appropriation in controversial tortfeasor actions. In 2006 Bp sold its remaining producing properties on the OCS of the Gulf of Mexico to Apache Corporation for $845 million. The same year BP sold its 28% stake in the Shenzi field in the Gulf of Mexico to Repsol for $2.2 billion (Hoovers 2010). Bp’s agreements teach us that precedent distinctions in international and U.S. federal laws regarding leases and lease sales on the OCS, instantiate the disjuncture between international commercial laws and international legislative policies directed at environmental cleanup. In short, Bp’s retention of a lease agreement with Transocean Ltd. reflects contract agreement between two British corporations, and rests outside of U.S. legislative restrictions, regulatory compliance, licensure or proxy jurisdictional interests prior to the effluent effects of the spill and the pollution of U.S. ocean waters. On May 14, 2010, the CEO of Transocean Ltd., and owner of the Deepwater Horizon rig, held in a closed-door meeting with shareholders in response to appearance in the U.S. Congress toward furtherance of the investigation into Bp’s oil spill in the Gulf of Mexico in April. Reactionary response from the company continued as the Zurich stock market closed with a Transocean stating that it would distribute over $1 billion in dividend to shareholders, at about $3.11 per share. This comes as the company sustained losses in the joint venture (Jordans 2010).  Since the spill about $450 million has been spent on cleanup operations and settlements which totals to approximately $20 million a day. Frustrating the effort was the failure of BP’s robots deployed to the seafloor to close off the well. Also defunct, “a 40-foot steel structure meant to cap the leak was scuttled when the containment box became clogged with an icy slush of seawater and gas” (Paton 2010). The company is still deliberating over how to contain the well. References Bp Plc (2010). Hoovers. Retrieved from: http://www.hoovers.com Elliot, J. (2010). The Gulf Coast BP Oil Spill: A Timeline. TPM, April 30, 2010. Retrieved from: http://tpmmuckraker.talkingpointsmemo.com/2010/04/the_gulf_coast_bp_oil_spill_a_timeline_1.php International Convention on Oil Pollution Preparedness, Response and Co-operation (OPRC). United Nations IMO. Retrieved From: http://www.imo.org/Conventions/mainframe.asp?topic_id=256&doc_id=661 Jordans, F. (2010). Owner of Gulf oil spill rig holds closed-door shareholders meeting in Switzerland. Star Tribune, Associated Press, May 14, 2010. Retrieved from: http://www.startribune.com/templates/fdcp?1273946943187 Oil and Gas Development - Offshore, (2000). International Finance Corporation Environmental Health and Safety guidelines. Retrieved from: http://www.ifc.org/ifcext/enviro.nsf/AttachmentsByTitle/gui_offshoreOG/$FILE/offshoreoil.pdf Paton, J. (2010). BP Spill May Exceed Estimates, U.S. Congressman Says. Bloomberg, May 14, 2010. Retrieved from: http://www.bloomberg.com/apps/news?sid=akMag.Vq0Ii8&pid=20601087 The Costs and Effects of an Oil Spill (2010). Visual Economics. Retrieved from: http://www.visualeconomics.com/cost-effects-of-the-bp-oil-spill_2010-05-05/ Read More