ADMIRALTY: PROFESSOR HOOKS. What is the Deepwater Horizon and Why is it important? Devastation to the Coasts and the Cost

Transcription

1 ADMIRALTY: PROFESSOR HOOKS What is the Deepwater Horizon and Why is it important? Devastation to the Coasts and the Cost Tyne' Davis November 16, 2012 The Deepwater Horizon (Oil Platform) and its failure have caused immense damage. Due to this damage, British Petroleum (BP) has been required to restore not only the sea, but the individuals who lost family members, wages and businesses as well.

2 Table of Contents A. Introduction 2-3 B. History of the Oil Rig/Platform 3-5 C. The Oil Spill: D. Liability..8-9 E. Importance of the Deepwater Horizon F. The Cost Incurred by British Petroleum (BP) G. Conclusion

3 A. Introduction The Deepwater Horizon oil spill, commonly referred to as the BP oil spill, caused the death of nearly a dozen people, injured over a dozen others, and shut down seafood production along the gulf for months. The aftermath of the oil spill is still being felt two years later. Oil platforms, one of the many dangerous machines to work on, have been known to have a significant amount of injuries to workers and possible pollution to the air and sea because of the highly combustible materials. 1 The process of oil exploration and production is extremely challenging, offering significant rewards that are offset by equally significant risks. 2 Oil platforms are built, leased and ultimately positioned in a great body of water in order to drill for oil and natural gas. 3 This type of exploratory drilling presents a higher risk for longshoreman, as well as, leasees and lessors of the machine. The risk however, was not enough to halt the Deepwater Horizon. The Deepwater Horizon exploded and subsequently released barrels of oil into the Gulf of Mexico. This explosion, 1 Kayla Webley, Just How Dangerous Are Oil Rigs, Anyway?, April Lawrence C. Smith, Jr. & L. Murphy Smith, Analysis of Environmental and Economic Damages from British Petroleum s Deepwater Horizon Oil Spill, 74 Alb. L. Rev. 563, Albany Law Review, P. A. Ashcroft Albany Law School, Russel McLendon: Types of offshore oil rigs, May

4 to date, is known as the worst maritime disaster in the history of the world. As a result, an investigation ensued to determine who would be at fault for the explosion, oil leakage, possible damage to wildlife and businesses, and wrongful death of the longshoremen. The Deepwater Horizon s impact on the Gulf of Mexico and the coast is important because the explosion completely devastated the citizens of the states, bordering the Gulf of Mexico, as well as the remaining states that invested in the Gulf Coast states products and tourism. The explosion further helped contribute to policy change and innovative study to ensure that this type of disaster never happens again. The cost of this great disaster is paramount to any other maritime catastrophe. While the United States continues to suffer as a result of the oil spill of 2010, British Petroleum (BP) has made extreme efforts to restore the communities, by hiring workers to help clean, as well as, allotting a settlement fund to provide relief to those whom were damaged as a result of the explosion. B. History of the Oil Rig/Platform Oil rigs have been known to be the largest movable manmade structures in the world and on average are anchored with durable wire and - 3 -

5 rope. 4 For further clarity, an oil drilling platform is a large structure with facilities to drill wells to extract and process oil and natural gas. 5 It also temporarily stores product until it can be brought to shore for refining and marketing. Deepwater horizon, an offshore oil drilling platform, was a nineyear-old, deep water, dynamically positioned, semisubmersible platform, owned by Transocean LTD. This was a remarkable oil rig, unlike any other, and because of its extensive build and mechanics it could operate in water of 8,000 feet and could drill down to 30,000 feet. 6 The Deepwater Horizon was by far one of the most amazing and accommodating rigs known. To a lay person, you would assume that it is just a big machine and longshoremen are practically working their lives away with no source of entertainment, family or happiness. That is undeniably incorrect with regards to the Deepwater Horizon. It was equipped with a twenty-five story derrick which was flanked by two cranes. 7 In the living quarters, there was room for one hundred and forty-six people. The quarters had a gym, sauna and a movie theater. 8 Each room had its 4 Id. 5 McLendon Supra note, 3. 6 Albany Law Review, Supra note 1. 7 David Barstow, David Rohde and Stephanie Saul: Deepwater Horizon s Final Hours, New York Times, Dec. 25, Id

6 own bathroom and satellite television. This allowed the members of the crew to relax and stay in tune with everyday shows and current events. Each person also had a housekeeper to clean and do laundry. Some said that living on the Horizon was like living on a floating Hilton. 9 The Deepwater Horizon was definitely moving with the times. Before the oil spill, the Deepwater Horizon had drilled the deepest oil well on earth, at 35,055 feet. 10 This depth for the oil rig was risky and a notable achievement, because it kept the oil platform s schedule very busy, but resulted in cost and time effective shortcuts. C. The Oil Spill: 2010 The United States was devastated by the explosion of the Deepwater Horizon that occurred on April 20, The Deepwater Horizon was drilling an exploratory well at approximately 5,000 feet when the explosion occurred. News coverage was at its optimum with regards to the status of the Deepwater Horizon and the damage it caused. The crew was terrified that they would not make it out of the rig alive. They heard explosion after 9 Id 10 Id

7 explosion. In the initial coverage of the explosion, it was stated that eleven longshoremen were killed and seventeen were injured. 11 There were nine critical minutes that the crew and captain had to respond to the eruption of the mud from the well. There were two ways for the Deepwater Horizon to defend against oil and gas surging to the rig. 12 The valve could have been turned and sent the blowout to the sea, or the crew could have tried to gain control of the blowout by funneling it into a device called a mud gas separator. 13 The separator is the most preferred method for handling a blowout because the aftermath is less invasive, with regard to investigation. 14 The crew on the Horizon chose the latter, to no avail. The separator was overwhelmed and at that point, vast amounts of oil began to pour onto the aft of the Horizon. 15 Crew members were injured and some were giving up. There were a few instances when crew members wanted to be left behind because they were physically impaired and felt that they would be a burden. One person in particular could not imagine leaving anyone behind because they considered each other family on and 11 Hope M. Babcock: Articles: A RISKY BUSINESS: GENERATION OF NUCLEAR POWER AND DEEPWATER DRILLING FOR OFFSHORE OIL AND GAS, 37 Colum. J. Envtl. L. 63, Columbia Journal of Environmental Law, Id. 13 Id. 14 Id. 15 Id

8 off the ship, since they spent so much time together. 16 All, but eleven people escaped the torment of the explosion and although injured, they are alive to tell their story. The moments before the explosion were the most crucial. Reports have shown that although the crew was trained to handle blowouts, some members of the crew did not do their part. 17 It was not that they purposely did not react, but rather the fact that they were shocked and underestimated the risk of the chemicals. These chemicals (mud) ultimately caused the rig to continue to break down and explode. This explosion was the most horrific maritime explosion in the world s history. An estimated five million barrels of oil were released into the Gulf of Mexico. The investigation concluded that there was negative pressure in the well and it failed to provide an effective barrier to hydrocarbon flow, which caused the well to combust. 18 The incident had an enormous effect primarily on Louisiana, but also on Florida, Mississippi, and Alabama. Some say that the explosion was foreseeable, maybe not in such depth, but that some serious problems 16 Id. 17 Barstow, Rohde and Saul, supra note National Academy of Engineering and National Research Council of the National Academies, Analysis of causes of Deepwater Horizon Explosion, Fire and Oil Spill to Identify Measures to Prevent Similar Measures in the Future, May

9 would occur due to previous leaks. 19 The crew notified a superior that the test gave rise to some concerns regarding the well. After looking at the report they decided that the well was intact and that they would be able to move on to a new project soon. This was not the case. Long after the explosion, after several attempts, the well was finally capped on July 15, D. Liability The families of the deceased longshoremen sought out answers. It is imperative to know who owns and operates the vessels in order to determine any liability in this type of situation. The drill was owned by the world s largest offshore drilling contractor, Transocean. 21 Transocean is a reputable company that has been in existence for fifty years. This company is known for helping customers find and develop oil and natural gas reserves. 22 Throughout those fifty years, Transocean has never been held liable for damages such as the damage caused by the Deepwater Horizon. 19 Id. 20 Bradley Blackburn & David Muir, Gulf of Mexico Oil Spill: Well Integrity Test Shows Oil Stopped, ABC News (July 15, 2010), abcnews.go.com/wn/gulf-oil-spill-bps-cap-success-oil-stops/story? id= Transocean: 2012, 22 Id

10 Transocean leased their oil platform to British Petroleum (BP). BP s lease term for the oil drilling rig was from March 2008 to September If the investigation would have proven that Transocean knew of any leakage before the explosion, they may have been held liable after the investigation. However, through intense examination it was found that although several reports stated problems with leakage and that measures needed to be taken to repair them, Transocean was unaware of any problems with the oil rig. Ultimately BP was held liable for violating both the Clean Water Act which regulates the discharge of pollutants into the water of the United States and regulates quality standards for surface waters, and the Oil Pollution Act which improved the nation s ability to prevent and respond to oil spills. Macondo co-owner Andarko Petroleum was only held liable for violating the Clean Water Act. 23 BP plans on filing an appeal on the grounds that Transocean should be held liable for oil spilled under the water because it was an owner and operator of the drilling rig involved in the accident United States Environmental Protection Agency, Emergency Management, ( Jan. 28, 2011) 24 Emily Pickrell, Government, BP appeal ruling favoring Transocean, (posted September 21, 2012, 8:16 A.M. CST)

11 E. Importance of the Deepwater Horizon The Deepwater Horizon is important because it shows the fragility of the coastal states and the repercussions for not following regulations. As a result of the oil spill, the seafood supply was immensely decreased, primarily impact[ing] the State of Louisiana's coastal areas and adjacent offshore waters where most of Louisiana fishermen ply the waters for fisheries resources including shrimp, finfish, crabs and oysters. 25 Tourism is another area negatively affected by the oil spill. Louisiana and Florida s primary revenue is generated by tourism. With the beaches and seafood covered in oil the states have lost a major source of income. Furthermore, some of the activities provided to tourist in those states are no longer appealing because the wildlife and sea creatures are either dead or mutated. Moreover, as a result of the devastation caused by the Deepwater Horizon oil spill, several new policies have been developed to enhance technologies including President Obama s proposed Industry Consortium. The consortium aims to improve the safety of offshore drilling by tapping 25 Lawrence C. Smith, Jr., L. Murphy Smith, 74 Alb. L. Rev. 563, Albany Law Review, P. A. Ashcroft Albany Law School,

12 into private-sector technical expertise. 26 Essentially, the government will provide incentives to parties of the private sector for their cooperation and help with creating new innovative technologies in the oil industry. Officials from the White House meet with several oil companies to discuss new methods of oil containment. The government also provided safety lessons from the Marine Spill Response Corporation to oil companies. 27 According to Joseph Aldy, Chevron, Shell, ExxonMobil, and ConocoPhillips came together to create the Marine Well Containment Company which BP later joined in hopes of developing new well containment strategies. Since the founding of MWCC the company has expanded to include seventy percent of oil companies worldwide. The company s primary goal is to create and provide a well-containment system by the end of The oil spill had an overwhelming effect on all aspects of the states including, but not limited to the worker s and general public health. Restoration needed to follow these problems and follow expeditiously. 26 Joseph E. Aldy, Real-Time Economics Analysis and Policy Development During the BP Deepwater Horizon Oil Spill, 64 Vanderbilt Law Review (Fall 2011), 4a2f-9fdb-c7c794e44cd9%40sessionmgr4. 27 Id. 28 Id

13 F. The Cost Incurred by British Petroleum (BP) BP finally admits felony misconduct and recorded the payment of $4.5 billion in penalties. 29 Recent updates have shown that BP is no longer hiding the extent of the cost that they incurred because of the oil spill, which included massive amounts in penalties. As of date, the total damages to BP, the environment, and the U.S. Gulf Coast economy are 5 estimated to be $36.9 billion. The damages are attributed to three major factors: 30 (1) human error and equipment failure at BP's Deepwater Horizon offshore drilling unit; (2) failure of the U.S. government to assign, and in some cases to permit, resources to assist with the containment of the oil spill; and (3) misinformation disseminated by the news media regarding the amount and location of oil pollution in the water and on the beaches of the Gulf of Mexico. The cost of the BP oil spill has been disbursed to many entities. The illustrative list of the cost is as follows: $2.4 billion went to the National Fish and Wildlife and has to be paid over five years. BP has also paid $525 million in civil penalties, $350 million to the National Academy of Sciences, $2.4 billion to environmental restoration, preservation, and 29 Chris Baltimore and David Ingram: BP Agrees to Record Criminal Penalties for US Oil Spill, Nov, 2012; 30 Blackburn and Muir, Supra note

14 conservation efforts throughout the region. BP also paid $4.5 in criminal fines, and $18 billion in clean-up cost. 31 Moreover, statute 33 USCA 2752 states that Coast Guards shall not apply to an amount not to exceed $50,000,000 in any fiscal year which the President may make available from the Fund to carry out section 1321(c) of this title and to initiate the assessment of natural resources damages required under section 2706 of this title. These funds will be available to rectify many aspects of the damage caused by the Deepwater Horizon oil spill. Further, if that amount is not adequate, the Coast Guard (1) may obtain an advance from the Fund of such sums as may be necessary, up to a maximum of $100,000,000, and within 30 days shall notify Congress of the amount advanced and the facts and circumstances necessitating the advance and (2) in the case of the discharge of oil that began in 2010 in connection with the explosion on, and sinking of, the mobile offshore drilling unit Deepwater Horizon, may, without further appropriation, obtain 1 or more advances from the Fund as needed, up to a maximum of $100,000,000 for each advance, with the total amount of all advances not 31 Associated Press, BP Oil Spill Settlement Announced, Robert Kaluza and Donald Vidrine charged with manslaughter, (Posted November 15, 2012),

15 to exceed the amounts available under section 9509(c)(2) of the Internal Revenue Code of 1986, and within 7 days of each advance, shall notify Congress of the amount advanced and the facts and circumstances necessitating the advance. Amounts advanced shall be repaid to the Fund when, and to the extent that, removal costs are recovered by the Coast Guard from responsible parties for the discharge or substantial threat of discharge. Sums to which this subsection applies shall remain available until expended. 32 In addition to the payments mentioned above, BP has also allotted a $20 billion settlement fund for damage to property and businesses as a result of the oil spill. This fund has been set up and is available to persons who live in certain areas of the coastal states. The fund will assist in paying medical claims to those who are sick and injured, as well as, provide relief for economic and property damages. 33 There has already been an estimated amount of $4 million in settlement disbursements, and BP is consistently receiving hundreds of claims a day U.S.C.A. 2752: Annual appropriations: effective July 29, Economic and Property Damages: June, Supra note,

16 BP reported revenue of $5.4 billion in a three month time period. This amount of revenue, in such a short amount of time, shows that BP will survive financially after making these payments. 35 The government and BP have worked tremendously hard to reach out and repair the damage that was caused by the explosion of the Deepwater Horizon. Although they still have a long way to go, the effort has not gone unnoticed. G. Conclusion The Deepwater Horizon explosion devastated the lives of its crew, captain, and hardworking Americans all over the United States. The crew feared for their lives as they were engulfed in thick smoke and watched explosion after explosion on the platform. Fishermen were no longer able to feed their families, through business revenue. Families that made their living from tourism activities no longer had tourist to entertain. Many people that had no ties to the Deepwater Horizon were affected because they became very ill from the pollutants in the Gulf of Mexico. BP cut many corners to save time and expense and in the end it resulted in a lot of ill prepared crew members and faulty equipment AP, supra note Barstow, Rohde, and Saul, supra note

17 It is, at times, perplexing as to why our culture values reward over risk. Our culture has become accustomed to the game of chance, and it is petrifying when human lives are in the balance. The process of oil exploration and production is extremely challenging, offering significant rewards that are offset by equally significant risks. 37 The explosion of the Deepwater Horizon devastated economic growth and property. BP is paying BIG bucks to restore all that was lost. 37 Lawrence C. Smith, Jr., L. Murphy Smith, 74 Alb. L. Rev. 563, Albany Law Review, P. A. Ashcroft Albany Law School,