User:JTSchreiber/Draft of Consequences of the Deepwater Horizon oil spill

The Deepwater Horizon oil spill has ecological, economic, medical, judicial and regulatory consequences.

The judicial consequences include the filing of over 220 lawsuits against BP by June 17, as well as litigation against Transocean, Cameron International Corporation, and Halliburton Energy Services. The regulatory consequences include a six-month deepwater drilling moratorium and proposed permanent changes to regulations in the United States, as well as a statement by the Canadian Minister of the Environment Jim Prentice that the government would not approve a decision to relax safety or environment regulations for large energy projects.

Ecology


The spill threatens environmental disaster due to factors such as petroleum toxicity, oxygen depletion and the use of Corexit dispersant. Eight U.S. national parks are threatened. More than 400 species that live in the Gulf islands and marshlands are at risk, including the endangered Kemp's Ridley turtle, the Green Turtle, the Loggerhead Turtle, the Hawksbill Turtle, and the Leatherback Turtle. In the national refuges most at risk, about 34,000 birds have been counted, including gulls, pelicans, roseate spoonbills, egrets, terns, and blue herons. A comprehensive 2009 inventory of offshore Gulf species counted 15,700. The area of the oil spill includes 8,332 species, including more than 1,200 fish, 200 birds, 1,400 molluscs, 1,500 crustaceans, 4 sea turtles, and 29 marine mammals. As of August 13, 4,678 dead animals had been collected, including 4,080 birds, 525 sea turtles, 72 dolphins and other mammals, and 1 reptile. According to the U.S. Fish and Wildlife Service, cause of death had not been determined as of late June. Also, dolphins have been seen which are lacking food, and "acting drunk" apparently due to the spill. A Mother Jones reporter kayaking in the area of Grand Isle reported seeing about 60 dolphins blowing oil through their blow holes as they swam through oil-slick waters.

Duke University marine biologist Larry Crowder said threatened loggerhead turtles on Carolina beaches could swim out into contaminated waters. Ninety percent of North Carolina's commercially valuable sea life spawn off the coast and could be contaminated if oil reaches the area. Douglas Rader, a scientist for the Environmental Defense Fund, said prey could be negatively affected as well. Steve Ross of UNC-Wilmington said coral reefs could be smothered. In early June Harry Roberts, a professor of Coastal Studies at Louisiana State University, stated that 4 Moilbbl of oil would be enough to "wipe out marine life deep at sea near the leak and elsewhere in the Gulf" as well as "along hundreds of miles of coastline." Mak Saito, an Associate Scientist at Woods Hole Oceanographic Institution in Massachusetts indicated that such an amount of oil "may alter the chemistry of the sea, with unforeseeable results." Samantha Joye of the University of Georgia indicated that the oil could harm fish directly, and microbes used to consume the oil would also reduce oxygen levels in the water. According to Joye, the ecosystem could require years or even decades to recover, as previous spills have done. Oceanographer John Kessler estimates that the crude gushing from the well contains approximately 40% methane, compared to about 5% found in typical oil deposits. Methane could potentially suffocate marine life and create dead zones where oxygen is depleted. Also oceanographer Dr. Ian MacDonald at Florida State University believes that the natural gas dissolving below the surface has the potential to reduce the Gulf oxygen levels and emit benzene and other toxic compounds. In early July, researchers discovered two new previously unidentified species of bottom-dwelling pancake batfish of the Halieutichthys genus, in the area affected by the oil spill. Damage to the ocean floor is as yet unknown.

In late July, Tulane University scientists found signs of an oil-and-dispersant mix under the shells of tiny blue crab larvae in the Gulf, indicating that the use of dispersants has broken up the oil into droplets small enough they can easily enter the food chain. Marine biologists from the University of Southern Mississippi's Gulf Coast Research Laboratory began finding orange blobs under the shells of crab larvae in May, and reportedly continue to find them "in almost all" of the larvae they collect from over 300 mi of coastline stretching from Grand Isle, Louisiana, to Pensacola, Florida.

On September 29 Oregon State University researchers announced the oil spill waters contain carcinogens. The team had found sharply heightened levels of chemicals in the waters off the coast of Louisiana in August, the last sampling date, even after BP successfully capped its well in mid-July. Near Grand Isle, Louisiana, the team discovered that polycyclic aromatic hydrocarbons or PAHs, which are often linked to oil spills and include carcinogens and chemicals that pose various risks to human health, remained at levels 40 times higher than before the oil spill. Researchers said the compounds may enter the food chain through organisms like plankton or fish. The PAH chemicals are most concentrated in the area near the Louisiana Coast, but levels have also jumped 2 to 3 fold in other spill-affected areas off Alabama, Mississippi and Florida. As of August, PAH levels remained near those discovered while the oil spill was still flowing heavily. Kim Anderson, an OSU professor of environmental and molecular toxicology, said that based on the findings of other researchers, she suspects that the abundant use of dispersants by BP increased the bioavailability of the PAHs in this case. "There was a huge increase of PAHs that are bio-available to the organisms -- and that means they can essentially be uptaken by organisms throughout the food chain." Anderson added that exactly how many of these toxic compounds actually ended up in the food chain was beyond her area of research.

Fisheries
In BP's Initial Exploration Plan, dated March 10, 2009, they said that "it is unlikely that an accidental spill would occur" and "no adverse activities are anticipated" to fisheries or fish habitat. On April 29, 2010, Louisiana Governor Bobby Jindal declared a state of emergency in the state after weather forecasts predicted the oil slick would reach the Louisiana coast. An emergency shrimping season was opened on April 29 so that a catch could be brought in before the oil advanced too far. By April 30 the Coast Guard received reports that oil had begun washing up to wildlife refuges and seafood grounds on the Louisiana Gulf Coast. On May 22 The Louisiana Seafood Promotion and Marketing Board stated said 60 to 70% of oyster and blue crab harvesting areas and 70 to 80% of fin-fisheries remained open. The Louisiana Department of Health and Hospitals closed an additional ten oyster beds on May 23, just south of Lafayette, Louisiana, citing confirmed reports of oil along the state's western coast.

On May 2 the National Oceanic and Atmospheric Administration closed commercial and recreational fishing in affected federal waters between the mouth of the Mississippi River and Pensacola Bay. The closure initially incorporated 6814 sqmi. By June 21 National Oceanic and Atmospheric Administration had increased the area under closure over a dozen times, encompassing by that date 86985 sqmi, or approximately 36% of Federal waters in the Gulf of Mexico, and extending along the coast from Atchafalaya Bay, Louisiana to Panama City, Florida. On May 24 the federal government declared a fisheries disaster for the states of Alabama, Mississippi and Louisiana. Initial cost estimates to the fishing industry were $2.5 billion.

On June 23, National Oceanic and Atmospheric Administration ended its fishing ban in 8000 sqmi, leaving 78597 sqmi with no fishing allowed, or about one-third of the Gulf. The continued fishing ban helps assure the safety of seafood, and National Oceanic and Atmospheric Administration inspectors have determined that as of July 9, Kevin Griffis of the Commerce Department said, only one seafood sample out of 400 tested did not pass, though even that one did not include "concerning levels of contaminants". On August 10, Jane Lubchenco of NOAA said no one had seen oil in a 8000 sqmi area east of Pensacola since July 3, so the fishing ban in that area was being lifted.

On August 31, a Boston lab hired by the United Commercial Fishermen's Association to analyze coastal fishing waters said it found dispersant in a seafood sample taken near Biloxi, Miss., almost a month after BP said it had stopped using the chemical.

Tourism
Although many people cancelled their vacations due to the spill, hotels close to the coasts of Louisiana, Mississippi and Alabama reported dramatic increases in business during the first half of May 2010. However, the increase was likely due to the influx of people who had come to work with oil removal efforts. Jim Hutchinson, assistant secretary for the Louisiana Office of Tourism, called the occupancy numbers misleading, but not surprising. "Because of the oil slick, the hotels are completely full of people dealing with that problem," he said. "They're certainly not coming here as tourists. People aren't sport fishing, they aren't buying fuel at the marinas, they aren't staying at the little hotels on the coast and eating at the restaurants." On May 25 BP gave Florida $25 million to promote the beaches where the oil had not reached, and the company planned $15 million each for Alabama, Louisiana and Mississippi. The Bay Area Tourist Development Council bought digital billboards showing recent photos from the gulf coast beaches as far north as Nashville, Tennessee and Atlanta. Along with assurances that the beaches were so far unaffected, hotels cut rates and offered deals such as free golf. Also, cancellation policies were changed, and refunds were promised to those where oil may have arrived. However, revenues remain below 2009 levels.

The U.S. Travel Association estimated that the economic impact of the oil spill on tourism across the Gulf Coast over a three-year period could exceed approximately $23 billion, in a region that supports over 400,000 travel industry jobs generating $34 billion in revenue annually.

Other economic consequences
On July 5 BP reported that its own expenditures on the oil spill had reached $3.12 billion, including the cost of the spill response, containment, relief well drilling, grants to the Gulf states, claims paid, and federal costs. The United States Oil Pollution Act of 1990 limits BP's liability for non-cleanup costs to $75 million unless gross negligence is proven. BP has said it would pay for all cleanup and remediation regardless of the statutory liability cap. Nevertheless, some Democratic lawmakers are seeking to pass legislation that would increase the liability limit to $10 billion. Analysts for Swiss Re have estimated that the total insured losses from the accident could reach $3.5 billion. According to UBS, final losses could be $12 billion. According to Willis Group Holdings, total losses could amount to $30 billion, of which estimated total claims to the market from the disaster, including control of well, re-drilling, third-party liability and seepage and pollution costs, could exceed $1.2 billion.

On June 25 BP's market value reached a 52-week low. The company's total value lost since April 20 was $105 billion. Investors saw their holdings in BP shrink to $27.02, a nearly 54% loss of value in 2010. A month later, the company's loss in market value totalled $60 billion, a 35% decline since the explosion. At that time, BP reported a second-quarter loss of $17 billion, its first loss in 18 years. This includes a one-time $32.2 billion charge, including $20 billion for the fund created for reparations and $2.9 billion in actual costs.

BP announced that it was setting up a new unit to oversee management of the oil spill and its aftermath, to be headed by former TNK-BP chief executive Robert Dudley, who a month later was named CEO of BP.

BP gas stations, the majority of which the company does not own, have reported sales off between 10 and 40% due to backlash against the company. Some BP station owners that lost sales say the name should change back to Amoco, while others say after all the effort that went into promoting BP, such a move would be a gamble, and the company should work to restore its image.

Local officials in Louisiana have expressed concern that the offshore drilling moratorium imposed in response to the spill will further harm the economies of coastal communities. The oil industry employs about 58,000 Louisiana residents and has created another 260,000 oil-related jobs, accounting for about 17% of all Louisiana jobs. BP has agreed to allocate $100 million for payments to offshore oil workers who are unemployed due to the six-month moratorium on drilling in the deep-water Gulf of Mexico.

The real estate prices and a number of transactions in the Gulf of Mexico area have decreased significantly since beginning of the oil spill. As a result, area officials want the state legislature to allow property tax to be paid based on current market value, which according to State Rep. Dave Murzin could mean millions of dollars in losses for each county affected.

The Organization for International Investment, a Washington-based advocate for overseas investment into the U.S., warned in early July that the political rhetoric surrounding the disaster is potentially damaging the reputation of all British companies with operations in the U.S. and sparked a wave of U.S. protectionism that has restricted British firms from winning government contracts, making political donations and lobbying.

Litigation
By May 26 over 130 lawsuits relating to the spill had been filed against one or more of BP, Transocean, Cameron International Corporation, and Halliburton Energy Services, although it is considered likely by observers that these will be combined into one court as a multidistrict litigation. By June 17 over 220 lawsuits were filed against BP alone. Because the spill has been largely lingering offshore, the plaintiffs who can claim damages so far are mostly out-of-work fishermen and tourist resorts that are receiving cancellations. The oil company says 23,000 individual claims have already been filed, of which 9,000 have so far been settled. BP and Transocean want the cases to be heard in Houston, seen as friendly to the oil business. Plaintiffs have variously requested the case be heard in Louisiana, Mississippi or Florida. Five New Orleans judges have recused themselves from hearing oil spill cases because of stock ownership in companies involved or other conflicts of interest. BP has retained law firm Kirkland & Ellis to defend most of the lawsuits arising from the oil spill.

Health consequences
As of May 29, ten oil spill clean-up workers had been admitted to West Jefferson Medical Center in Marrero, Louisiana. All but two had been hospitalized suffering from symptoms emergency room doctors diagnosed as dehydration. At a press briefing about the May 26 medical evacuation of seven crewmembers from Vessels of Opportunity working in the Breton Sound area, Coast Guard Captain Meredith Austin, Unified Command Deputy Incident Commander in Houma, LA, said that air monitoring done in advance of beginning work showed no volatile organic compounds above limits of concern. No respiratory protection was issued, said Austin "because air ratings were taken and there were no values found to be at an unsafe level, prior to us sending them in there."

On June 15, Marylee Orr, Executive Director for Louisiana Environmental Action Network (LEAN), said on MSNBC's Countdown with Keith Olbermann that people along the Gulf Coast were getting very sick, with symptoms of dizziness, vomiting, nausea, headaches, and chest pains, not only from the first responders to the crisis, but residents living along the coast as well. LEAN's director reported that BP had threatened to fire their workers if they used respirators distributed by LEAN, though health and safety officials had not required their use, as they may exacerbate risks of heat exhaustion. By June 21, 143 oil spill exposure-related cases had been reported to the Louisiana Department of Health and Hospitals (DHH) since the crisis began; 108 of those cases involved workers in the oil spill clean-up efforts, while thirty-five were reported by the general public.

The Institute of Medicine of the U. S. National Academies held a workshop to assess known health effects of this and previous oil spills and to coordinate epidemiological monitoring and ongoing medical research. The Louisiana state health officer Jimmy Guidry stated that need as: “This is more than a spill. This is ongoing leakage of a chemical, and adding chemicals to stop the chemicals. We're feeling like we're in a research lab." On the second day of the meeting the suicide of William Allen Kruse, a charter boat captain working as a BP clean-up worker, intensified previous expert commentary on the current and likely long-term mental health effects of the ongoing crisis. David Abramson, director of research for Columbia's National Center for Disaster Preparedness, noted the increased risk of mental disorders and stress-related health problems.  On August 10, the Institute of Medicine released a Workshop Summary: Assessing the Effects of the Gulf of Mexico Oil Spill on Human Health.

U.S. and Canadian offshore drilling policies
After the Deepwater Horizon explosion a six-month offshore drilling (below 500 ft of water) moratorium was enforced by the United States Department of the Interior. Secretary of the Interior Ken Salazar ordered immediate inspections of all deep-water operations in the Gulf of Mexico. An Outer Continental Shelf safety review board within the Department of the Interior is to provide recommendations for conducting drilling activities in the Gulf. The moratorium suspended work on 33 rigs. It was challenged by several drilling and oil services companies. On June 22, a United States federal judge on the United States District Court for the Eastern District of Louisiana Martin Leach-Cross Feldman when ruling in the case Hornbeck Offshore Services LLC v. Salazar, lifted the moratorium finding it too broad, arbitrary and not adequately justified. The Department of Justice appealed to the 5th Circuit Court of Appeals, which granted the request for an expedited hearing. A three judge panel is scheduled to hear oral arguments on July 8.

On June 30, Salazar said that "he is working very hard to finalize a new offshore drilling moratorium". Michael Bromwich, the head of the newly created Bureau of Ocean Energy Management, Regulation and Enforcement, said that a record of "bad performance, deadly performance" by an oil company should be considered "a relevant factor" for the government when it decides if that company should be awarded future drilling leases. Representative George Miller plans to introduce to the energy reform bill under consideration in the United States House of Representatives that a company's safety record should factor into leasing decisions. By this amendment he wants to ban BP from leasing any additional offshore area for seven years because of "extensive record of serious worker safety and environmental violations".

On April 28 the National Energy Board of Canada, which regulates offshore drilling in the Canadian Arctic and along the British Columbia Coast, issued a letter to oil companies asking them to explain their argument against safety rules which require same-season relief wells. Five days later, the Canadian Minister of the Environment Jim Prentice said the government would not approve a decision to relax safety or environment regulations for large energy projects. On May 3 California Governor Arnold Schwarzenegger withdrew his support for a proposed plan to allow expanded offshore drilling projects in California. On July 8 Florida Governor Charlie Crist called for a special session of the state legislature to draft an amendment to the state constitution banning offshore drilling in state waters, which the legislature rejected on July 20.

According to the U.S. Energy Information Administration (EIA), offshore drilling in the Gulf of Mexico accounts for 23.5% of U.S. oil production. The chief argument in the U.S. offshore drilling debate has been to make the United States less dependent on imported oil. American dependence on imports grew from 24% in 1970 to 66% in 2008.

Spill response fund
BP initially promised to compensate all those affected. Tony Hayward, BP CEO, stated, "We are taking full responsibility for the spill and we will clean it up and where people can present legitimate claims for damages we will honour them. We are going to be very, very aggressive in all of that."

On June 16, after meeting with President Obama, BP executives agreed to create a $20 billion spill response fund. BP has said it will pay $3 billion in third quarter of 2010 and $2 billion in fourth quarter into the fund followed by a payment of $1.25 billion per quarter until it reaches $20 billion. In the interim, BP posts its US assets worth $20 billion as bond. The amount of this fund is not a cap on BP's liabilities. For the fund's payments, BP will cut its capital spending budget, sell $10 billion in assets, and drop its dividend. The fund will be administered by Kenneth Feinberg. One aim of the fund will be to minimize lawsuits against the company. According to BP's officials the fund can be used for natural resource damages, state and local response costs and individual compensation but cannot be used for fines or penalties.

After provisions of the Deepwater Horizon Oil Spill Trust were released August 11, it was revealed that the BP Spill Fund may be backed by future drilling revenue, using BP’s production as collateral.

The Gulf Coast Claims Facility began accepting claims on August 23. Kenneth Feinberg, the man in charge of the $20 billion fund, has confirmed that BP is paying his salary, but questioned who else should pay it. Feinberg said almost 19-thousand claims were submitted in the first week. Of those roughly 1,200 were compensated, totaling about six million dollars, the remainder 'lacked proper paperwork'. Feinberg pointed out that those closest to the spill area were the most likely to receive compensation. Under the new claims facility, claimants can receive between one and six months' compensation without waiving their right to sue; only those who file for and receive a lump-sum payment later in the year will waive their right to litigate. BP had already paid out $375 million, but those who had already filed claims would need to submit a new form. Feinberg stated, "If I haven't found you eligible, no court will find you eligible." Florida Attorney General Bill McCollum disputed Feinberg's statement in a letter.

As of September 8, 50,000 claims, 44,000 of those for lost income, had been filed. Over 10,000 claims had been paid, totaling nearly $80 million. By September 17, about 15,000 claims remained unpaid. The claims were from individuals and businesses that had been fully documented and had already received loss payments from BP. The claims czar acknowledged that he had no excuse for the delay.

By late September Floridians and businesses criticized the claims process, claiming it has gotten worse under Feinberg's leadership, some saying the president and BP "should dump Feinberg if he doesn't get his act together soon". The Obama Administration responded to criticism from Florida officials, including Gov. Charlie Crist and CFO Alex Sink, with a stern letter to Feinberg, saying the present pace of claims is "unacceptable" and directing his office to make whatever changes necessary to move things along. "The Deepwater Horizon Oil Spill has disrupted the lives of thousands upon thousands of individuals, often cutting off the income on which they depend. Many of these individuals and businesses simply do not have the resources to get by while they await processing by the GCCF" associate U.S. Attorney General Thomas Perrelli wrote. One family in Louisiana has been waiting for a month on emergency funds from Feinberg's Gulf Coast Claims Fund, and says for them it is a matter of life and death. "Bills aren't paid, they take my car, they take my insurance, they take my house, and then I can't get him back and forth to dialysis," claims the wife of the former owner of "Lafourche Seafood".

On September 25, Feinberg responded to the complaints in a news release. "Over the past few weeks, I have heard from the people of the Gulf, elected officials, and others that payments remain too slow and not generous enough," Feinberg said. "I am implementing new procedures that will make this program more efficient, more accelerated and more generous." In less than five weeks, the dedicated $20 billion fund that BP set up has paid out over $400 million to more than 30,000 claimants. Funds allocated so far equal 2 percent of the total amount that BP agreed to set aside. Feinberg has denied about 2,000 claims, another 20,000 applications were returned for more financial documentation, and about 15,000 more claims await review. Feinberg has said he’s processing claims at a rate of 1,500 a day.