BP Global Oil Spill in Gulf of Mexico & Its Affect on Local Businesses - Research Paper Example

BP Global Oil Spill in Gulf of Mexico and its Affect on Local Businesses Introduction When the Deepwater Horizon platform exploded on April 20, nobody expected that Gulf of Mexico would turn into an ocean wilderness and a dead zone of the size of New Jersey after the spill still in uncountable millions of gallons of oil. The site of offshore oil and gas production had contributed to a highly lucrative commercial and sport fisheries centre. Apart from becoming an ecological wasteland, Gulf of Mexico lost its valuable marine life including the already endangered bluefin tuna. Gulf of Mexico has been a home for as many as 36 Marine Protected Areas (MPA) accounting for 13 % of total MPAs throughout the nation in addition to the MPAs of the bordering States of Alabama, Florida, Louisiana, Mississippi and Texas waters totaling 75 not included in the national mainstream MPAs. Florida Keys National Marine Sanctuary and Flower Garden Sanctuary have been threatened by the oil spill which could implicate British Petroleum under National Marine Sanctuaries Act. The coral reefs have also been damaged by the oil haze extending for about 22 miles from the Deepwater Horizon site. The Act makes it liable for damaging any living or nonliving resource of national marine sanctuary affecting its conservation, recreational, ecological, historical, educational, cultural, scientific or aesthetic value. The Act provides for imposition of civil penalties as high as $ 100,000 on any person and each day of violation constituting a separate violation. Apart from civil penalties, response costs, damages due to destruction, loss or injury plus interest are leviable under the Act. There are also other Acts such as federal Endangered Species Act, Marine Mammal Protection Act which can make BP liable for deaths of dolphins and sea turtles as a result.1 Background The above said blowout occurred at the BP’s Macondo well in the Gulf of Mexico resulting in the deaths of 11 workers who were on Transocean’s Deepwater Horizon Drilling rig. An estimated 4.9 million barrels of oil were spilled in the process. The wellhead was 1,500 m down below the sea water. The United States declared a moratorium on deepwater drilling until October 12, 2010. It is widely believed that the blowout could have been prevented but for the poor quality of equipment meant to prevent blowout.2 Known as the last-line of defense, the blind shear ram on the blowout preventer fixed on well head on the ocean floor would have crushed the drill pipe thus preventing a blowout. The blind shear ram is believed to have failed for want of checks as simple as verifying whether the batteries had been sufficiently charged. BP’s investigation team is reported to have held that the well had been poorly designed. Offshore Pollution Liability Association (OPOL) where membership is voluntary provides for only a maximum liability of $ 250,000which is insufficient given the magnitude of loss resulting from the Gulf of Mexico incident. Although OPOL membership is a pre-condition for drilling license, there is no rationale for a voluntary membership. This is apt to weaken the legal control of the polluters who would claim that damages to biodiversity and ecosystem are indirect and therefore no compensation is payable.3 Marine oil spills are not unavoidable accidents. Adverse environmental conditions or any catastrophic events cannot be attributed to oil spills.4 The offshore drilling unit at the Deep Water Horizon was worth$365 million capable of operating in deep waters as low as 8000 feet and drill further down up to 30,000 feet. The drilling unit had been engaged in drilling an exploratory well 41 miles off the coast of Louisiana at the time of accident. The well from which oil spill started on April 20, 2010 was finally capped on July 15, 2010. The total damages to the company, environment and the coastal economy have been placed at $ 36.9 billion. Apart from human error and equipment failure, the U.S. Government’s failure to respond with damage control measure, media distortion of the magnitude and location of oil pollution have been responsible for the damage of this magnitude. While the Ten Commandments and Quran have inbuilt provisions for preservation of ecology, it was during the time (1901 to 1909) of President Roosevelt who was himself a famous conservationist, several national parks were set up for ecological preservation. And during the period from 1960 to 1980, several environmental laws were passed in the U.S. The current laws are mentioned in the following section. Current Laws The U.S. National Environmental Policy Act was passed in 1969 and Environmental Protection Agency ( NEPA) was formed in the same year. It was in 1969 that Santa Barbara Oil Spill occurred polluting the beaches of Southern California. The U.S. Clean Air Act was passed in 1970. The U.S. Water Pollution Control Act was passed in 1972. The U.S. Endangered Species Act was passed in 1973. The U.S. Resource Conservation and Recovery Act (RCRA) was passed in 1976. The RCRA contains pollution control provisions. The EPA is authorized by the RCRA to initiate removal actions and actions for recovery of costs of damage public health or welfare and environment. The Comprehensive Environmental Response, Compensation and Liability Act (CERCLA) known as Superfund was passed in December 1980. This enactment provided for levy of tax on chemical and petroleum industries which the Federal authority could use for directly responding to such spills or releases of oil both actual and threatened endangering public health or the environment. In 1989 coast of Alaska was spilled with oil due to wreckage of the oil tanker Exxon Valdez. In 1998, Green Guidelines were issued by the Federal Trade Commission. In 2005, Kyoto Protocol was signed by the participating nations undertaking to reduce emissions of harmful gasses responsible for global warming. The Clean Water Act; This act regulates sources of water pollution, limits the amounts of discharge permitted for a firm. The Toxic Substances Control Act: This act enables passing of federal regulations governing the manufacture, processing, and distribution of chemical substances and mixture that could affect health or the environment. Emergency Planning and Community Right to Know Act (EPCRA). This act requires companies to inform their respective State Emergency Response Commission the amounts of hazardous substances stored above certain levels so that the commission can be in readiness with response in case of emergencies.5 Although the US is not a party to the United Nations Convention on the Law of the Sea (UNCLOS), the country recognizes it as a customary international law. As per the convention, the U.S has rights over 200 miles in water off its shores as an exclusive economic zone. Since the Deepwater Horizon is located within the 200 miles, it comes under the U.S. regulatory authority.6 CERCLA places responsibility for the cleanup on the parties transporting hazardous substances to a site, parties arranging for the disposal of hazardous substances, parties who were owners of the site at the time of disposal and the parties who currently own the property. Liability is rather strict and not necessarily dependent upon negligence or fault. There is no defense of innocent purchaser either. Thus, the liability is joint and several. Thus, Potentially Responsible Parties (PRP) having sufficient funds must pay for the cleanup. Accounting standards require the parties to declare in their balance sheets the probable and estimable amount of possible liability or at least note the contingency as a footnote if not estimable7 The Outer Continental Shelf Lands Act (OCSLA) is the main statute regulating the development of gas resources on the Outer Continental Shelf (OCS). Minerals Management Service (MMS) is the agency in charge of implementing OCSLA. After the blowout, the MMS has been succeeded by Bureau of Ocean Energy Management, Regulation and Enforcement (BOEMRE).8 Hyundai Heavy Industries, South Korea constructed the drilling rig in 1998 and delivered to Gulf of Mexico in 2003. The rig had been in operation for several years at various sites earlier to the latest incident. The methane bubble caused the explosion and the resultant fire continued for two days killing 11 and injuring 17 persons besides sinking the Deepwater Horizon.9 This may help investigate whether supplier also is responsible. The British Petroleum was operating the oil drilling and therefore apparently is liable for the cleanup besides damages to environment and economy caused actually by the BP. The U.S. government is responsible for damages to mitigate BP’s responsibility. At the initial stages of the oil spill, the President did not take prompt action by failing to waive the provisions of Jones Act to enable foreign vessels and crew to enter the U.S. waters for assisting in cleanup operations. Economic damages can be attributed to reduced drilling operations in the Gulf, restricted commercial fishing, and fall in tourism in the Gulf Coastal States. The six month moratorium on deepwater drilling imposed by the Obama administration impacted negatively on the BP and other companies already operating the Gulf of Mexico though it was lifted by a federal judge holding the moratorium as arbitrary and capricious.10 BP’s Liability has been estimated as follows. 1) Actual costs up to September 29, 2010 towards spill containment, capping the original well, constructing a relief well, grants to the Gulf states, payment of claims and federal costs ………………………………………………………………….$ 11.2 billion 2) Pledge to Deepwater Horizon Oil Spill Trust towards payment of damages to businesses and individuals ……………………………………………………………….$ 20.0 billion 3) Costs for BP other than the above …………………………………………...$ 1.0 billion 4) Fines that may have to be paid under the Clean Water Act………………….$ 4.7 billion Total ……………$ 36.9 billion11 The above mentioned trust of $ 20 billion will be more than sufficient to cover claims from commercial fishing industry about $ 4.36 billion, tourism industry $ 3.8 billion, and claims regarding loss of value to coastal real estate $ 4.32 billion.12 The $ 20 billion fund named as BP Recovery Fund will be made up in four years at $5 billion per year. It has been collateralized by the company’s assets located in the United States. The BP’s plan to pay $ 10.5 billion in dividends to its shareholders from out of $17 billion profits it earned in 2009 was resisted and Obama forced BP to create the recovery fund.13 In 1979-80, Ixtop oil spill in the Gulf of Mexico resulted in a spill of 139 million gallons of oil. The current BP oil spill is far beyond the Ixtop spill and the impact will last for a long time. BP has a poor track record in terms of giving importance to safety. Or rather, it can be said to have a record of taking too much risks in the name of earning more profits and showing higher growth. In March 2005, BP’s Texas refinery exploded resulting in deaths of 15 workers and injury to 170 workers. The facility which had been constructed in 1934, was never maintained well. The U.S. Chemical Safety Board found that BP had committed more than 300 safety violations at the Texas refinery and levied a fine of $ 21 million which was so huge in those days. In 2005 Hurricane Denis caused near sinking of the Thunder Horse oil platform in the Gulf of Mexico. This was attributed to the installation of a check valve backwards and poor welding of pipes in total disregard for safety. As the well had not been active, it did not result in an oil spill. Otherwise, it would have been a very disastrous spill. At its Ohio oil refinery, the company was found to have committed 62 safety violations and there was an oil spill of 200,000 gallons in Alaska on May 25, 2010 close on the heels of Gulf of Mexico oil spill. In 2006, 267,000 gallons of oil leaked from the pipelines in Alaska. This was again attributed to the poorly maintained pipelines that were found highly corroded. The company was fined $ 20 million including compensation.14 There is an accusation that Federal regulators did not effectively oversee drilling in the Gulf of Mexico. This was an instance of trusting companies that they would self-regulate without supervision. Further Gulf of Mexico oil spill is making of the Congress which decided in 1995 to encourage more drilling and scale down its own oil and gas drilling.15 While it wanted more drilling, it did not appoint adequate staff for regulating the drilling industry. The Minerals Management Service (MMS) an agency for protection of environment had only 6o inspectors to oversee nearly 4000 offshore facilities. This agency is already involved in corruption, sex and drugs.16 Another scandal that has surfaced recently is that the MMS has permitted oil drillings in the Gulf of Mexico without permits from other agencies such as National Oceanic and Atmospheric Administration (NOAA) specially appointed for assessing environmental impact of drilling. Scientists at the MMS have also informed that they are often forced to change their reports indicating adverse environmental impact.17 In 2001, the National Energy Policy was to eliminate regulations found to be excessive and redundant in spite of the fact deep water drilling had its own risks. Majority opinion is that BP oil spill was mainly due to weak regulatory system. 18, 19. Proposed Laws The Centre for Progressive Reform has proposed the following reforms in the wake of regulatory failure that resulted in BP’s blowout. “Adopt strong mandates for environmental protections and safety and create incentives for continued safety innovation”20 It is explained that BOMERE should be given more explicit direction so as to have a balanced approach towards oil production, safety and environmental protection. The OCSLA should have simultaneous norms for environmental and safety alongside the energy production. It should be mandate, goal and policy. The OCSLA should have a policy statement that oil exploration and development could only permitted without any risk to public health, safety and environment. Meeting of national energy needs should not be at the cost of public health, safety and marine and coastal environments, sea life, property, seabed, subsoil and water. Marine life includes fish, marine mammals, coral, and other species.21 Regulatory failure due to inadequate penalties and assurance bonds. Although OCSLA has clear enforcement authority towards levying of civil, criminal penalties and injunctive relief and also specific liability for corporate officers and agents, the fines and other measures are grossly inadequate undermining the deterrent effect penalties and others. The maximum civil penalty of $ 35,000 per day and criminal penalty of $ 100,000 per day are small compared to huge profit potential in oil and gas development. The industry considers penalties as part of their cost of doing business. The commitment of $ 20 billion to pay claim by BO is inadequate considering the large scale damage. The bonding requirement of $ 200,000 while applying for exploration does not really guarantee anything. As such increased penalties, bonding and debarring the serious violators are necessary.22 More funds should be allocated to BOMERE to carry out its regulatory functions effectively. It is reported that Obama administration has already taken steps to grant additional funds of $ 29 million towards recruitment of additional inspectors, more effective enforcement and review of agency’s policies. However the funding is only a small step in managing more than 8,000 wells.23 The NEPA 1978 regulations require the Federal Agencies to submit a worst-case-analysis (WCA) in their Environmental Impact Statement (EIS). But the WCA was not mandatory for every proposal unless information was lacking regarding potential consequences. Hence WCA should be made for every proposal so that it can contribute towards reducing the risks of economic and environmental disasters which would in turn save human lives and millions worth environmental damage and lost revenues. Despite the importance, the WCA requirement was dropped by CEQ in 1986 and introduced a less effective regulation. The CEQ justified that WCA involved more of conjectures and therefore could not be an effective decision making tool. In fact, in BP’s case, WCA was not done thus failing to foresee devastating consequences of equipment failures.24 BP’s own exploration plan, approved by the MMS in 2009, minimized the danger of a spill: “[I]t is unlikely that an accidental oil spill release would occur from the proposed activities.” Although BP acknowledged that a spill could impact wetlands and beaches, it dismissed the significance by stating that, “due to the distance to shore (48 miles) and the response capabilities that would be implemented, no significant adverse impacts are expected.”25 Therefore, the WCA requirement contained in 1978 regulations should be reintroduced. Even if the WCA had been made in BP’s case, it would not have prevented BP being licensed but it would have alerted public and responsible parties. 26 BP is already facing hundreds of tort cases following the spill.27 Justice Department has also filed a civil suit against BP and eight others for violations of the provisions of Clean Water Act claiming civil penalties, cleanup costs and damages.28 This is not all. BP will also be charged with criminal offences along with Transocean and Halliburton for violations under the Clean Water Act and the Migratory Bird Treaty Act and Seaman’s Manslaughter Statute. In Exxon Valdez case, the criminal provisions of the Clean Water Act and Migratory Bird Act have already been invoked.29 The Seaman’s Manslaughter Act is for causing deaths of workers.30 All that the Government has to prove is negligence in respect of charges under Clean Water Act and Seaman’s Slaughter Statute. In Migratory Bird Treaty Act, it is a strict liability offense deemed to have been committed immediately after the oil spill which coated the migratory birds. Criminal charges are also possible under Marine Mammal Protection Act31, Endangered Species Act 32and the Outer Continental Shelf Lands Act.33 The charges under the last three Acts require proof of the damage on aquatic life, proof of violations of drilling regulations committed by the accused knowingly and willfully. If the corporate officials are found to have lied to the Government regarding the conditions at the well or the quantum of oil spilled, they can be proceeded against for giving false statements and obstructing justice.34 In Exxon Valdez case, the BP paid a criminal penalty of $ 125 million which till date remains the largest ever penalty for environmental violation. In Gulf of Mexico’s case where damages are estimated to be between $ 20 billion to $ 50 billion, it can be charged with a multi-billion criminal fine turning out to be the largest ever fine imposed on a corporate. Transocean and Halliburton could also be handed out with criminal penalties of $ 1 billion or more each.35 Criminal charges are mainly because of Clean Water Act provisions which are rarely invoked. But in the case of BP, they are likely to be invoked as the communities along the shores have been severely affected. The impact on the economy is devastating. About 1,041 square miles of the Gulf Coast had been closed to fishing activities as of November 15, 2010. 3.2 million recreational fishermen had taken almost 24 million fishing trips in 2008. 1.27 billion pounds of finfish and shellfish had been harvested by commercial fishermen in the same year. These fishermen have lost their livelihood in 2010 especially because the spill occurred just at the beginning of the fishing season. In terms of revenue, the commercial fishermen have been reported to have earned in 2008 alone $ 659 million. The impact has been felt even beyond the coastal states and also fishing industry. An Oyster fisherman in Louisiana, Mathew Lepetich reports domino effect of the oil spill all over the country. His oyster beds in the Gulf water have been directly affected. Because his Oysters were not mature and because of the fishing restrictions, he has lost $ 4,500 each day. As he has been the supplier of Oysters to seven states, his customers have to wait for Oysters in vain. In Mississippi, an Oyster house could not offer employment to sixty workers anymore. A sea-food supplier Cliff Hall raised his prices expecting scarcity of consumable sea food. He supplies to hotels, restaurants throughout the country. The prices went up by 10 % immediately after the spill as reported by Chef Sandy Ingber from a New York restaurant. Another case of domino effect has been reported by an oyster house in New Orleans. Several businesses relying of oyster supplies remained affected. Another person in the production chain, a trucker lost transportation opportunities from Gulf states to the rest of the country. Weekly deliveries to Los Angeles have stopped. A Minnesota farmer had to switch over to expensive alternative inputs for his chicken feed when oyster shells stopped coming. Tourism industry has also had its toll. Within a few days after the spill, a hotel in Alabama reported loss of $ 100, 0 00 to $ 200,000. On Memorial Day 2010, hotels in Florida had an occupancy rate ranging from 50 % to 15-19 % from the usual 90 percent or even higher rate. Real estate market in the coastal region felt a slowdown of market as reported by respondents in a survey. 23.8 % of them had a negative impact on real estate market after the oil spill although only 3.2 % of them actually suffered physical damage due to the oil spill 36 The Fact sheet, National Oceanic and Atmospheric Association (NOAA) states that that some 7.3 million active businesses spread out in the states of Alabama, Louisiana, Florida, Mississippi and Texas have suffered resulting in loss of employment to 34.4 million employees and loss of $ 5.2 trillion sales revenues. 37 ,38 .BP has paid just $ 20,000 to the owner of Steve Burlap sacs towards lost business as against his actual loss of $320, 000 besides his sweat equity invested for the business.39 BP argues that the Government have overestimated the oil spill by 20 to 50 % which if proved would save the company some $ 10.5 billion in liabilities maximum and $ 1.1 billion minimum depending on whether the Government’s finding it had acted negligently or not. The company is faced with the prospect of fine up to $1,100 for each barrel of oil spill under the Clean Water Act. If it is found to have acted with negligence or willful misconduct, the fine will go up to $ 4,300 per barrel. And the Government’s estimate is 206 million gallons which the BP is disputing. If the Government sticks to its estimates, civil fines alone would be ranging from $ 5.4 billion to $ 21.4 billion. 40 The National Oil Spill Commission’s report implicates the BP and the laxity of MMS for the oil spill.41 The U.S Government has since removed liability limitations regime so as to cover the liability arising out of BP oil spill and future occurrences. This is likely to push up insurance costs to unsustainable levels for the operators. European Commission has also directed member states to pass legislations to ensure payment of compensation by the operators for all the environmental damages. This means licenses could be issued only those to having sufficient financial means to meet the possible liabilities.42 Ethical Considerations Corporate social responsibility requires that interests of all the stakeholders are equally taken care of. The stakeholders are employees, suppliers, customers, environmentalists, regulatory agencies, financiers, and shareholders.43 Once, it was only the agency problem between the management and shareholders. Later came the stakeholder theory as part of corporate governance. 44 The employees, one of stakeholders have been shown utter disregard for their safety. The company has the adverse track record of safety violations.45 The ethical dilemma may probably refer to a management’s difficulty in according priority to a stakeholders. The management is expected to balance the interests of all the stakeholders from the ethical point of view. Curiously enough, the BP appears to have given priority to none of the stakeholders. They have neither safeguarded the interests of the shareholders nor the employees. They have not done justice to other stakeholders, for example environmental agencies. Their extent of honoring of commitments to financiers and suppliers will be known only after some time. The customers who are also stakeholders may not be satisfied with quality or price. Quality is likely to be compromised to maintain price or price is bound to be higher since the management treats fines as business costs.46 There has been a suggestion that consumers boycott the products of BP. But it is not an easy task.47 Far beyond the environmental damage , loss of lives and the ruined economy, BP has been caught giving false advertising portraying a different picture of the company. Different from its peers. People believed in the company’s claim and purchased their gasoline in preference to others. People bought BP’s stock based on the company’s claims regarding their environmental practices.48 There has been a regulatory failure leading to the oil spill. Regulatory failure is attributable to the governmental agencies. How then, BP alone can be singled out for the disaster raises serious ethical questions apart from the question of indicting the regulators for having been lax on supervision. Further, the press was denied access to information on the extent of leak and damage and was also denied physical access to the site. There was total lack of transparency on the part of the Government in regards to matters pertaining to the B.P. oil spill though it might have been for legitimate reasons. Further, there is also the issue of the wild life and environment. Presidential address in respect of oil spill had no concern for the damage to wild life and environment. There is no idea as to how much of the chemicals got embedded on the sea floor that will be toxic to the gulf creatures like pelicans, sea turtles, fish and dolphins. The microbes in the water can cause oxygen depletion impacting on the presence of oxygen in the gulf region.49 BP is not the only responsible party and the oil spill could have been prevented from reaching the coastal areas. Further, the governmental agencies are collecting samples from the ocean for testing the pollution and giving it to the Lab to be paid by the BP. How unbiased will be the Lab report is debatable and raises serious ethical questions.50 “The truth is, in addition to Transocean and possibly Cameron and Halliburton, the Minerals Management Service (MMS), the National Oceanic and Atmospheric Administration (NOAA), and the U.S. Coast Guard (USCG) are also responsible, although not legally liable, for heavy crude oil entering the Louisiana wetlands and the loop current. “51 The relationship between oil companies and the regulators had been so close that they mutually trusted each other without discussing issues openly. The regulators like MMS were probably misled by the BP’s general reputation and BP in turn must have been on the belief that certain safety arrangements not questioned by the regulators amounted to their approval. However, the MMS chief Elizabeth Birnbaum resigned following Presidential directions on 27th May 2010.52 Attitude of the company CEO is important as otherwise it would send wrong signals to the powers that be and other stakeholders. Andrew Winston says that BP CEO has not learnt from Johnson and Johnson case involving Tylenol that killed many children. The company’s massive response in recalling the lethal medicine set the standards of corporate behavior and the case is a gospel in many business schools. On the other hand what BP said was that oil spill was so tiny compared to the big ocean. He was literally down playing his company’s misdeed. The company has already lost its considerable market value worth about $ 70 billion and once its liabilities are fully known, it may well be taken over.53 Further, the compensations are never paid in time. Claimants of Arnoco Cadiz and Exxon Valdez were paid only after 18 and 21 years respectively and many of them had died by then. Arnoco Cadiz took place in 1978 involving splitting of oil tanker into three off the coast of Brittany spilling out 1.6 million barrels, the highest ever at that point of time. The Exxon Valdez hit a reef off the coast of Alaska in March 1989 spilling out 285,000 barrels of oil. Though comparatively a small quantity, the area was so remote that it became quite difficult to mitigate the impact. In cases such as spilling of 630,000 barrels by the Braer oil tanker in 1993, the compensation had to be paid by the Government resulting all claims over spills being compensated by the tax payer. 54 Author’s reflection The BP is a typical case of regulatory failure. The MMS has remained a ‘lapdog rather than a watchdog’ and the maximum liability of $ 75 million under Oil Pollution Act appears to have prompted BP to engage in a fearless exploration. Although it was started as an exploratory well, seeing the oil potential, the company rushed into making it a regular well and started the hasty project throwing all norms to the winds thanks to MMS.55 Although BP oil spill is touted to be the largest ever, it is a lot lesser than the 521 million gallons of oil spill into the Persian Gulf from Kuwait in 1991.56 In the earlier days, shareholders’ stake was the main concern under the pretext of profit maximization. In the case of BP, it is paradoxical that in its attempt to maximize profit, the management has only created huge liabilities instead. This case study presented unique opportunity to understand what it means to be honest and that lies cannot survive for long. In business, it does not pay to be overconfident and adventurous. Sub-prime crisis and Enron scandals have already proved this. But these issues have not killed people. Hence BP will go down in the corporate history as the worst case of corporate governance. Conclusion The exhaustive coverage of BP’s oil spill scenario points to the undeniable fact that BP acted with negligence or with dangerous optimism Its commercial considerations have obviously outweighed its concern for safety. Its attitude of treating fines being paid on several such incidents as business costs is highly deplorable. All that the BP is disputing is the quantum of oil spill arrived at by the Government. It has been responsible enough to create a fund of $ 20.0 billion towards meeting claims for damages by the third parties directly or indirectly affected. It has been also widely admitted that oil spill cannot be categorized as a natural disaster. There is plethora of legislation to sue BP on one count or other already in place. Yet, the manmade disaster has occurred. One has to admit that oil drilling is accident prone and if the present oil spill had occurred without the BP being negligent and willful, what would have been the stand of the Government. How the damages to the businesses and others would be compensated is a moot point. It is farfetched to implicate the company for loss of business and indirect damages incurred by the oil spill. As part of risk management, it is the duty of every business to insure against such risks. If unfortunately the offending company is bankrupt, how the damages will be compensated is another moot point. The BP’s shareholders should not be made to suffer because of the misdeeds of its management especially when they are not allowed to take part in the internal management. The solution lies in the Government itself undertaking such huge ventures as a matter of public policy. The private actors are bound to be motivated by commercial considerations and constrained by various monetary and technical limitations. Apart from the question who should run these ventures, foolproof methods should be developed to prevent such blowouts since risk is the same whether it is the public sector or private sector. Many countries are drawing lessons from the disaster and reviewing the safety provisions in their existing installations. Since the root cause will be different each time, the research and development activities should be a continuous process in these industries. Besides, it may not be correct to say that oil spill cannot be caused by natural disasters even after the recent experience of Tsunami waves destroying the nuclear installations in Japan. The adverse climate change as a result of the oil spill should be viewed seriously and Kyoto protocol should be implemented even more vigorously. Since oil spills can cause harm even beyond the country’s borders, a worldwide forum of petroleum producers should hold conventions frequently so as to share their experiences with other members and also learn from other members’ experiences. National governments can play catalytic roles by hosting such conventions. The licensing regime needs a thorough overhaul so as to remove the possibilities of companies being licensed without the permission of environmental agencies and others. No old equipments should be permitted whether or not they are fit for purpose. It is a kind strict liability provision. Even if the Government is involved in the production, it should be subjected to licensing and strict supervision by the external independent agencies.. As already mentioned, other countries have already started reviewing the safety provisions in their oil drilling facilities. For example, British government have already brought out report on the implications of BP Oil spill in the U.K. facilities A cursory reading of “Great Britain: Parliament: House of Commons: Energy and Climate Change Committee (2011) UK Deepwater Drilling: implications of the Gulf of Mexico Oil Spill., Second Report of Sessions 2010-11 Volume 1 “ would throw several shortcomings in the systems to light. 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Uhlmann M David (2011) After the Spill is Gone: The Gulf of Mexico, Environmental Crime, and the Criminal Law, Working Paper No 227 January 2011 Public Law and Legal Theory Working Paper Series, Michigan Law, University of Michigan Law School. Winston Andrew (2010) Five Lessons From the BP Oil Spill Harvard Buisness Review Avialble at < http://blogs.hbr.org/winston/2010/06/the-bp-oil-spill-top-5-lessons.html> accessed 17 April 2011 Zabarenko Deborah and Whitco Dan (2010) RPT-BP’s battered brand draws US consumer opposition. Available at < http://blogs.reuters.com/deborah-zabarenko/ > accessed 17 April 2011 Read More