INTRODUCTION
On April 20th, 2010 the lessees of the Deepwater Horizon had recently completed drilling an exploratory well in 5000 feet of water approximately 41 miles off the Louisiana coast and were closing the well in anticipation of later production. BP PLC. (BP) was leasing the mobile offshore drilling unit (MODU) from the owner, Transocean Ltd., for the purpose of drilling in the Mississippi Canyon Block 252 oil field, at a site known as the Macondo Well. Suddenly a bubble of methane traveled up from the well into the MODU, creating an explosion aboard theDeepwater Horizon, which killed 11 of the crew and created a massive fire. The Deepwater Horizon was completely destroyed by the ensuing inferno and sank to the bottom of the ocean on April 22nd, 2010. The sinking of the MODU caused crude oil to begin gushing out of the wellhead riser – a 5000 foot pipe which connects the opening of the well (wellhead) to the drilling platform on the surface. Seven days later, President Barack Obama appeared on television and assured the American public that BP would be held financially responsible for the costs of response and cleanup operations.The estimated oil flow was 62,000 barrels per day.
By the first week in June, the oil had come ashore in Louisiana, Mississippi, Alabama and Florida. The U.S. Fish and Wildlife Service reported that up to 32 National Wildlife Refuges were potentially affected by the spill. Dead dolphins and turtles were washing up on the Gulf beaches. Until the Deepwater Horizon oil spill, the largest maritime oil spill was the 1989 Exxon Valdez spill off the coast of Alaska. When the well was finally capped on July 15th, 2010, the National Oceanic and Atmospheric Administration estimated 4.9 million barrels of oil had been released into the Gulf of Mexico during the previous 86 days. In total, the amount of oil released was 19 times greater than the amount of oil released during the 1989 Exxon Valdez oil spill. See figure 1.
Figure 1: Visual Representation of Oil Landfall
Source:Aigner, Erin. Map and Estimates of the Oil Spill in the Gulf of Mexico
APPLICABLE LAW
National Environmental Policy Act
The enactment of the National Environmental Policy Act (NEPA) followed a blowout at Union Oil Platform A on the Dos Cuadros field, which spilled roughly 100,000 barrels of crude into the Pacific Ocean off the coast of Santa Barbara, California. The purposes of the NEPA were to make a national policy to prevent or eliminate damage to the environment, as well as enrich the understanding of ecological systems and natural resources. To this end, NEPA established the Council on Environmental Quality (CEQ) in the executive office of the president and mandated detailed environmental reviews to be prepared by government agencies for any major actions affecting the environment. If the adverse environmental effects of the proposed action are adequately identified and evaluated, the agency is not constrained by NEPA from deciding that other benefits outweigh the environmental costs and moving forward with the action.In Robertson v. Methow Valley Citizens Council (1989), the Supreme Court held that NEPA simply describes a process for identifying environmental consequences and serves merely to prohibit “uninformed, rather than unwise” agency action.
In the case of Deepwater Horizon, Minerals Management Service (MMS) was the lead agency ensuring compliance with those requirements. At the time of NEPA review for the Deepwater Horizon exploration permit, MMS guidance provided that many exploration plans in the Gulf may be categorically excluded from further NEPA review. According to the MMS operations manual, “the impacts from the common operations are expected to be negligible to non-existent based upon general information gathered during past environmental analyses.” Essentially, MMS found no reason to conduct an environmental analysis because prior analyses had shown minimal environmental impact from deepwater offshore drilling. Thus, a Categorical Exclusion(CE) was issued for the Deepwater Horizon MODU in April 2009.
Clean Water Act of 1972
The Clean Water Act of 1972 (CWA) serves as the principle statute protecting water from pollution. The CWA and its subsequent amendments were enacted with the goals of restoring and maintaining the integrity of the nation’s waters, eliminating the discharge of pollutants into the waters, and promoting the development and implementation of state-of-the-art technology for use in industry and municipal sources of harmful effluents. In the 2006 case of Rapanos v. United States, the Supreme Court held that while the CWA uses the language “navigable waters of the United States,” all waters with “significant nexus” to navigable waters are covered under the CWA. This would include intermittent streams and wetlands connected to the Gulf of Mexico, which have also been infiltrated by the oil. The CWA is the statute that the DOJ is using to pursue civil lawsuit against BP and other responsible parties.
Under section 311(b)(7)(a), the Administrator of the EPA or DHS, at his discretion, may fine the responsible parties $25,000 (adjusted to $37,500) per day of violation or up to $1,100 per day.If it is determined that the discharge ban was violated as a result of gross negligence or willful misconduct, the fine is increased to $140,000 per day or $4,300 per barrel of oil discharged.In addition to the fine for violating the statute, a violator who discharges oil in “harmful qualities” may be assessed a Class I or Class II penalty by the Department of Homeland Security or the EPA. The Class I penalty ranges from $16,000 per violation to $37,500 per violation. The Class II penalty ranges from $16,000 per violation to $177,500. When determining the amount of BP’s fine or whether an administrative penalty is assessed, the seriousness of the violation will be considered, as well as the degree of culpability and past violations.
Oil Pollution Act of 1990
The Oil Pollution Act of 1990 (OPA 90) was passed by Congress following the Exxon Valdez oil spill into Prince William Sound. The OPA 90 amended Section 311 of the Clean Water Act and clarified prevention, response, liability and compensation with regard to oil pollution in United States navigable waters. The OPA 90 serves as the chief statute for oil spill governance. Prior to the OPA 90, the presiding framework for oil spills consisted of a patchwork of overlapping statutes and regulations. Following the Exxon Valdez oil spill in 1989, the federal government charged Exxon with violations of the CWA, Endangered Species Act, the Migratory Bird Treaty Act, the Refuse Act, etc. OPA 90 consolidated the statutes and regulations governing environmental pollution.
By specifically categorizing the violation by source, such as vessels, onshore facilities, offshore facilities, and deepwater ports, OPA 90 was able to set different fines and fees for different sources. The fines and fees were limited, except in the event of gross negligence, willful misconduct, or violation of a federal safety statute. The limits of liability were enacted with the rationale of allowing smaller companies and smaller corporations to participate in the industry without being excluded by the required $75 million Certificate of Financial Responsibility (COFR). For offshore facilities, the upper limit of liability is $75 million plus removal costs. The upper limit is removed in the event of proven gross negligence, willful misconduct or statutory violations. For the Deepwater Horizon spill, BP waived the upper limit of liability, and BP has already paid over $1.5 billion to state and federal trustees for natural resource damages.
The OPA 90 also authorized use of the Oil Spill Liability Trust Fund (OSLTF). OPA 90 consolidated the liability and compensation requirement of certain federal pollution statutes, including the Federal Water Pollution Control Act, the Deepwater Port Act, the Outer Continental Shelf Lands Act, and the Comprehensive Environmental Response Compensation and Liability Act into the OSLTF. The OSLTF is used to pay for immediate costs of responding to an oil spill, which are supposed to be reimbursed by responsible parties. In the event the responsible parties cannot be determined, the OSLTF can pay for response and restoration up to a limit of $1 billion. The primary funding for the OSLTF is a 5¢ tax on each barrel of imported or domestic oil. Any fines paid by responsible parties are to be deposited into the OSLTF. The United States Coast Guard assumed responsibility of the OSLTF by executive order, and the National Pollution Funds Center was established in 1991 to oversee implementation of the OSLTF, insure funding for federal response, and recover costs from liable parties.
Additionally, OPA 90 specifically addressed natural resource damages and provided a 3-phase response for assessing and restoring natural resource damages. The OPA 90 decreed that federal and state trustees would be designated to oversee the natural resource remediation. Under the Act, the Department of the Interior, working through the National Oceanic and Atmospheric Administration, would implement the Natural Resource Damage Assessment (NRDA). The NRDA is divided into three phases: Preassessment Phase; Restoration Planning Phase; and Restoration Implementation Phase.
who determines damages
Federal and State Trustees
The ecosystem of the Gulf Coast region including the land, waters, plants, wildlife, etc. is referred to collectively as natural resources. A great portion of oil cleanup concerns restoration of those natural resources. The OPA 90 entrusted the post-oil spill restoration of natural resources to a group of federal trustees, state trustees, and Indian trustees, known as the Trustee Council. The Trustee Council determines the extent of natural resource damages, the value of the resources, and the methods of restoration. The Trustees are generally chosen by the President and governors of the affected states. The Trustee Council is tasked with investigating and carefully surveying the post-spill natural resources damages and working with the public and designated responsible parties to create a restoration plan under a process known as Natural Resource Damage Assessment (NRDA).
The NRDA is a legal process created by OPA 90 and is designed to avoid a litigation process regarding natural resource damages. The Trustee Council maintains authority over the NRDA but works closely with the office of the Damage Assessment Remediation and Restoration Program (DARRP), a component of the National Oceanic and Atmospheric Administration (NOAA). At the direction of the Trustee Council, the DARRP provides assistance in the form of scientific data and input from leading experts specializing in post-spill natural resource damage restoration. The final restoration plan developed by the Trustee Council will be given to the responsible parties, as will the costs of assessing the natural resources damages.
The United States Coast Guard
The United States Coast Guard (USCG)maintains regulatory authority over any mobile offshore drilling unit (MODU) operating under a MMS lease, including safety equipment, navigation equipment, and the safety of the crew. The USCG ensures through inspection that foreign-flagged vessels, such as the Deepwater Horizon MODU, are up to design, equipment and operating standards of the United States. The USCG takes on additional responsibilities during an oil discharge. On April 29th, 2010, the Secretary of DHS, Janet Napolitano, declared the Deepwater Horizon oil spill a Spill of National Significance (SONS). Pursuant to Title 40 of the CFR, after a discharge is declared a SONS the commandant of the USCG may name a National Incident Commander (NIC) for spills in a coastal zone. The NIC coordinates resources, facilitates collaboration with the involved parties, and ensures adherence to national policies. The NIC may also act as the Federal On-Scene Coordinator (OSC) or may appoint an OSC. The Federal OSC “directs response efforts and coordinates all other efforts at the scene.”
The USCG ordinarily chairs the National Response Team (NRT) for spills in a coastal region and assigns roles to the NRT members, who currently represent 16 federal departments and agencies. However, the Obama Administration announced that the NRT will be led by the Homeland Security Secretary.This is permitted through Homeland Security Presidential Directive 5.39. The NRT oversees the Regional Response Teams (RRT), which are composed of regional representatives, such as members of state and local governments. The NRT is part of the National Response System (NRS) – a multi-tiered and coordinated national response strategy for addressing oil spills established under the National Contingency Plan. See Figure 2.
Figure 2: Tiers of National Response
Source: Jacob Boomsaad
Finally, the USCG, through its National Pollution Funds Center (NPFC), administers funds from the Oil Spill Liability Trust Fund (OSLTF). The OSLTF is used for immediate costs, such as responding to and removing oil spills, payment of costs incurred during assessment of natural resource damages, and other operational costs related to an oil spill. The OSLTF will pay for the costs of natural resource restoration, should the responsible parties choose not to pay. Any amounts reimbursed to the OSLTF by the responsible parties are paid directly into the Fund.
The Environmental Protection Agency
While the EPA is the principal federal response agency for land-based oil spills, the majority of the EPA’s work in the Deepwater Horizon spill has been support-based.EPA is collecting and monitoring samples of air, water and sediment, as well as effects of the dispersants used to dissipate the oil. The EPA is also required to oversee the implementation of Clean Water Act investigations and penalties. Finally, the EPA is further bound by the National Environmental Policy Act (NEPA) to review and comment on any Environmental Impact Statements (EIS) issued by any federal agency. However, the EPA does not have the power of enforcement. Thus, although the EPA would have seen and commented on the Categorical Exclusion issued by the MMS for the Deepwater Horizon, the EPA could not have affected any change.
HOW THE DAMAGE IS CALCULATED
The responsible party must pay for the cost of assessing the damages and all removal costs incurred. The damages are calculated using the sum of the measure of three parts. The first part consists of the cost of restoring, rehabilitating, replacing, or acquiring the equivalent of the damaged natural resources. The second part considers the diminution in value of those natural resources pending restoration. The third part takes into account the cost of assessing those damages. All damages are assessed by the NOAA’s Damage Assessment Remediation and Restoration Program (DAARP) using the Natural Resource Damage Assessment (NRDA) and are ultimately decided on by the appointed federal, state, and Indian trustees, with input from the public. The DAARP consists of a large team of scientists, lawyers and NRDA trustees.
Data Collection
Data collection is coordinated by the DAARP, using technical working groups, composed of scientists, researchers and other experts. These groups carry out field studies to determine base-level conditions as well as post-impact field studies. Shorelines are surveyed using aerial imaging and task force groups. In addition, dead or injured animals are also tabulated and carefully recorded. During the Exxon Valdez oil spill, a large problem in assessing the oil impact was due to the fact that very little baseline data existed for Prince William Sound. OPA 90 mandated that regular scientific studies be carried out by a newly-created Interagency Coordinating Committee on Oil Pollution Research (also known as the Interagency Committee) and the well-being of environmentally-sensitive areas be reported biennially to Congress. Among other advancements, the Interagency Committee, headed by the USCG, identified environmentally sensitive areas and compiled them in a database for reference. See figure 3.
Figure 3: Environmental sensitivity index (ESI) database
Source:Environmental Sensitivity Index (ESI) Maps
A significant project being undertaken involves chemical fingerprinting as the method of identification for petroleum residues. Chemical fingerprinting involves a relatively new branch of chemistry called petroleomics and characterized by petroleum and petroleum product analysis, with the intent of determining the properties and behaviors of those products. The field of petroleomics allows for matching of petroleum product, even after changes to its chemical composition, due to evaporation and dissolution. For the BP spill, the researchers are able to predict how the composition will change due to evaporation, contact with seawater, biodegradation, etc. The chemical fingerprinting will be used in the NRDA and will also be useful to BP when determining limits of liability.