The Deepwater Horizon Oil Spill and its Economic Impact on the Seafood. Industry. Introduction

Transcription

1 Tiajuana Robinson Admiralty Law Professor Hooks November 16, 2012 The Deepwater Horizon Oil Spill and its Economic Impact on the Seafood Industry Introduction The United States has faced many grave tragedies throughout history. On April 20, 2010 the United States was faced with one of its greatest disasters. The Deepwater Horizon spill affected the lives and livelihood of countless residents and businesses alike along the Gulf of Coast. The government responded to the incident in a timely manner; however, individuals affected by this disaster will have questions for many years to come. This paper will address the Deepwater Horizon spill s effect on the seafood industry and the remedies available. The Deepwater Horizon spill also referred to as the BP oil occurred in the Gulf of Mexico. The Deepwater drilling rig exploded in the Gulf of Mexico, killing eleven workers and dispersing countless amounts of oil into the gulf. The

2 rig was owned by Transocean. Cameron International made the faulty blowout preventer, which, had it functioned properly, could have prevented the explosion. Halliburton manufactured the cement casings which were intended to prevent the leakage of gas from the wellhead. 1 The Deepwater Horizon was a mobile offshore drilling unit. The rig was built by South Korean company Hyundai Heavy Industries. The rig was under lease to BP from March 2008 to September At the time of the explosion, it was drilling an exploratory well, located in the Mississippi Canyon Block 252 of the Gulf of Mexico in the United States exclusive economic zone about 41 miles off the Louisiana coast. BP was the operator and principal developer of the Macondo Prospect. 2 A week after the Deepwater Horizon incident, President Obama ordered Secretary of the Interior Ken Salazar to conduct a 30-day environmental review of the causes of the disaster and to offer precautions that might prevent a similar disaster from occurring again. 3 Thereafter, BP launched an investigation drawing on the expertise of more than 50 technical and other specialists from within BP and the industry. This investigation was led by BP s head of safety and operations, and

3 performed independently from BP s accident response. The BP investigation concluded that no single cause was responsible for the accident. The investigation instead found that a complex and interlinked series of mechanical, human judgment, engineering design, operational implementation and team interface failures, involving several companies, including BP, contributed to the accident. 4 Given the gravity of harm caused by this accident BP had to act swiftly in providing relief to those affected by this spill. However, finding a solution to this enormous injury would prove to be difficult. Law & Procedural History By May 2010, hundreds of lawsuits against BP, Transocean, Halliburton and Cameron International had already been filed. Because of the sheer volume of lawsuits and the variety of business and individuals affected by the BP oil spill, many lawsuits will were grouped under a process known as multidistrict litigation and through class actions. 5 Relief in the aftermath of this disaster was provided through the Oil Pollution Act (OPA) of 1990 and the BP fund. 4 Thttp:// d 5

4 The Oil Pollution Act (OPA) was signed into law in August 1990, largely in response to rising public concern following the Exxon Valdez incident. The OPA improved the nation s ability to prevent and respond to oil spills by establishing provisions that expand the federal government s ability and provide the money and resources necessary, to respond to oil spills. 6 OPA 90 imposes strict liability for oil pollution on the owner or operator of a vessel from which a discharge occurs. OPA 90 greatly expands the scope of damages that are recoverable from the owner or operator of a vessel which is determined to be responsible for a spill. First and foremost are cleanup and removal costs. In addition, OPA 90 also imposes liability on a responsible party for damages to the environment and for damages incurred by third parties. Third party damages can include claims for loss of profits or earning capacity caused by a spill in addition to direct damages to real or personal property. 7 Although the OPA imposes strict liability on the owner or operator of a discharging vessel, OPA 90 provides for limited defenses to liability. These defenses will absolve the owner or operator of a discharging vessel for all liability arising out of a spill, but they are available only if they are proven to be the sole cause of the discharge. The available defenses are: 1.) act of God; 2) act of war, or

5 3) act or omission of a third party not in any contractual relationships with the responsible party. 8 Additionally, the Oil Spill Liability Trust Fund (OSLTF) provided relief with a different purpose. The OSLTF is a billion-dollar fund established as a funding source to pay removal costs and damages resulting from oil spills or substantial threats of oil spills to navigable waters of the United States. The OSLTF is used for costs not directly paid by the polluter, referred to as the responsible party. The fund is also used to pay, cost to respond to mystery spills, for which the source has not been identified. This allows claimants to submit claims for uncompensated removal costs and OPA damages caused by the oil spill if the responsible party does not satisfy their claims. The discharge must be into or on the navigable waters of the United States or adjoining shorelines or the Exclusive Economic Zone. 9 In regard to the Deepwater Horizon spill, the U.S. Coast Guard has officially designated BP Exploration & Production Inc. and Transocean Holding Inc. as responsible parties. This means that BP is required to establish and administer a claims process for affected individuals and businesses under the OPA 90. However, as previously noted, BP s liability is capped at $75 million. Fortunately, there are three exceptions to the liability cap

6 First, a responsible party cannot limit its liability under the OPA 90 if the oil spill was proximately caused by gross negligence or willful misconduct by the responsible party, its agent, employee, or person acting pursuant to a contract with the responsible party. Second, if the spill was caused by one of those parties violating a federal safety, construction, or operation regulation, the responsible party cannot limit its liability. Finally, if the responsible party did not inform the president of the United States of the discharge, and knew or should have known that such a possibility existed its liability cannot be limited under the statute. Even if BP could successfully cap its liability at the $75 million maximum under the OPA 90, fear that the company will skirt its full liability should be alleviated by the creation of BP s $20 billion compensation fund (BP Fund).28 On June 16, 2010, BP announced the creation of its supplemental fund as a means to provide a faster and more fair way to pay damage claims for individuals and businesses harmed by the Gulf Oil Spill. 29 The BP Fund will not be controlled by either BP or by the government. 10. In August 2010, a federal judicial panel decided that most of the hundreds of federal lawsuits stemming from the BP oil spill will be consolidated in federal court in New Orleans, under a process known as multidistrict litigation (MDL) And%20Its%20Effects%20On%20The%20Oyster%20Industry.pdf

7 Specifically, the BP oil spill MDL will be handled by Judge Carl Barbier in U.S. District Court of the Eastern District of Louisiana (located in New Orleans). 11 While many plaintiffs support centralization in the Eastern District of Louisiana, other plaintiffs argue in favor of selection of the Northern District of Alabama, the Southern District of Alabama, the Middle District of Florida, the Northern District of Florida, the Southern District of Florida, the Western District of Louisiana, the Southern District of Mississippi, the District of South Carolina, or the Southern District of Texas. A few responding parties opposed centralization altogether. They essentially argued that the involved actions are all subject to dismissal for failure to comply with the Oil Pollution Act s (OPA) presentment requirement, because the OPA is a strict liability statute, the only issue in dispute (at least as to the BP defendants) is the amount of damages to which each claimant is entitled, which, they argued, required an inherently individualized inquiry and is thus inappropriate for MDL treatment. 12 Economic impact on the seafood industry The seafood industry suffered immeasurable harm. The economic impact on the seafood will resonate form years to come. BP also created a Seafood

8 Compensation Program. The Seafood Compensation Program shall cover and compensate the Economic Damage Claims not otherwise excluded for Commercial Fisherman, Seafood crew, Oyster leaseholders and Seafood Vessel Owners. Gulf State restaurants represent a $77 billion industry and employ more than 2.2 million people. The industry relies on the oysters and other Gulf seafood for its livelihood, and that very livelihood has been severely threatened by the oil spilling from the damaged Macondo wellhead. One study estimates that over the next three years, the five Gulf States will experience losses of about $22.7 billion. 13 Two-years later, experts say the coastline and the wetlands are recovering, and at rates faster than expected. On the other hand, the fishing industry is struggling to get back to where it was in the days before the spill. Last year proved to be one of the worst years in decades and some say the spill's effects are keeping some boats tied to the docks. 14 Eyeless shrimp and crabs with holes in their shells are showing up in relatively empty fishing nets while killifish, a minnow-like fish at the base of the food chain, show signs of chemical poisoning. 15 However, the demand is still there. 13 Jill Schensul, Jill Schensul on the Gulf Oil Spill s Damage to Tourism, NorthJersey.com (Aug. 8, 2010),

9 Conclusion The economic impact of the deepwater horizon oil spill cannot yet be calculated with precision. However, the effect will be considerable, even if the spill never reaches our shores, because of the important role that perceptions play in planning and decision-making for our customers. The effects will continue to see the effects in both the seafood and tourism industries. Those effects will have a domino effect through the economy for years to come.