Running header: Offshore Drilling Unearthing Offshore Drilling



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RUNNING HEADER: Offshore Drilling



Unearthing Offshore Drilling

Alex Hermosura

Legal Studies Academy

First Colonial High School



Abstract

This paper discusses the history of the socio-economical issue that is offshore drilling. It gives a brief history of offshore drilling within the United States with a law basis. The laws dealing with offshore drilling are discussed within the paper along with several cases that the laws have applied to. Several catastrophes involving offshore drilling are mentioned in the paper along with how it was dealt with, the amount of damage, and how they affected the country’s laws. The paper also, however, mentions the importance of offshore drilling to the country and why it is a necessity. It will prove that the United States has progressed enough socially and technologically enough to out date the current laws.

Unearthing Offshore Drilling

History in Law

Offshore oil drilling is an oil extraction technique which allows companies to access deposits of natural resources buried under the ocean floor. Henry L. Williams and associates created the first offshore drilling rig in 1887 by building a 300 foot long pier and putting a standard cable-tool rig at the end of it. These early drills were limited only to drilling in the shallowest parts of the ocean. That was until, 1911, when Gulf Refining Company took away the use of piers and instead built a free-standing free-floating oil rig on Lake Caddo, Louisiana. This became known to many Americans as the first true offshore oil drill. These types of drills became popular to oil companies when, in 1938, Pure Oil and Superior Oil built free standing oil rigs in the Gulf of Mexico. This new technique had become so popular and widely used that an accident was nothing slight of inevitable (American Oil & Gas Historical Society, 2014; Office of Oil and Gas).

On February 28, 1969, the first major offshore oil spill within United States Territory occurred in Santa Barbra, California; thus starting the socio-political debate over offshore drilling. The oil spill had caused 3 million gallons of crude oil to spew out into the Pacific Ocean, creating an 800 mile long oil trail and killing millions of marine-life species. Thirty-five miles of the once paradisiac beaches of California had now been covered in the black sludge. California’s fishing and tourism market had suffered substantially, losing millions of dollars and even more so in oil clean up. The oil spill created a negative opinion toward offshore drilling and politicians took note of it. After the spill, ocean conservation groups started popping up everywhere in an effort to stop further offshore exploration. Finally in 1981 Congress passed a moratorium on offshore drilling covering 85% of the United States’ coastal waters. The only places excluded were the central and western Gulf of Mexico and areas off the coast of Alaska. Then, in 2008, Congress let the moratorium expire and in turn over 300 million acres of Outer Continental Shelf (OCS) was opened for companies to explore and drill. At the time, the Bush Administration was in charge and needed to find solutions for the declining economy. They argued that opening up the OCS would decrease the price of gas and the United States’ reliance on foreign resources. President Bush put in place a policy that would allow the U.S. to lease out areas of the OCS for companies to drill. However, this policy was short lived because when President Obama came into office his secretary of the interior suspended it saying “that some offshore drilling will be allowed, he argued that the Bush plan was too broad in scope” (Office of Oil and Gas). The fact that both administrations found it necessary to start drilling again in the OCS shows that preconceptions of offshore drilling could now be history. Past presidents and legislatures have put laws in place to protect the environment from the dangers of offshore drilling; however, these laws are outdated compared to new technologies used to extract oil.

Laws

In the past century offshore drilling has proven to be an extremely risky technique, and because of this. The United States have created laws to protect everything involved. These laws include things such as who has the right to drill, conditions and rules to follow while drilling, and property rights involving ownership of oil and other natural resources. There are also laws that pertain to the environmental aspect of offshore drilling that were meant to protect and preserve it.



First Major Laws

In the early 1900s offshore drilling was a technique of oil extraction that lied outside of the parameters during that time period. Not only was it a new way of drilling for oil, but it also wasn’t on land. The United States realized that problems would arise because of this so they created laws to define what and where offshore drilling could be conducted. The first laws to truly define offshore drilling boundaries were The Outer Continental Shelf Lands Act and the Submerged Lands Act.

The Outer Continental Shelf Lands Act, created on August 7, 1953, defines the OCS as all submerged lands lying seaward of state coastal waters (3 miles offshore) which are under U.S. jurisdiction. Under the OCSLA, the Secretary of the Interior is responsible for the administration of mineral exploration and development of the OCS. The Act empowers the Secretary to grant leases to the highest qualified responsible bidder on the basis of sealed competitive bids and to formulate regulations as necessary to carry out the provisions of the Act (H.R. 5134, 83rd Cong.; U.S. Fishing and Wildlife Service).

The Act was amended in 1978, which “provides guidelines for implementing an OCS oil and gas exploration and development program” (U.S. Fishing and Wildlife Service). Along with this law, Congress passed the U.S. Submerged Lands Act. “The U.S. government passed the U.S. Submerged Lands Act in 1953, which set the federal government's title and ownership of submerged lands at three miles from a state’s coastline” (43, USC §§ 29-1301-1303). This law also included amendments to satisfy the people in America who still saw offshore drilling as too risky. Title II of the amended act allowed the government to cancel any leases that had a great potential for causing harm to any life, including aquatic life. In title III oil spills had finally been addressed and provided a solution for. The solution would be a tax companies would have to pay in order to drill and it would pay for the damages caused by the spill.

Another important act that helps define the standards oil companies must follow, the actions prohibited for companies to do, and the punishments that follow should a company violate said actions, is the Clean Water Act (CWA). The CWA is based off of the Federal Water Pollution Control Act of 1948 and was expanded in 1972, becoming popularly known as the Clean Water Act. The act “establishes the basic structure for regulating discharges of pollutants into the waters of the United States and regulating quality standards for surface waters” (Clean Water Act, 1972). In addition to this, the Environmental Protection Agency (EPA) has been able to create Pollution control programs that set standards of wastewater for industries under the CWA. The Clean water act prohibits discharging any pollutant into navigable waters from a point source, meaning a pipe or man made ditch, unless a permit is obtained (1972).

Each one of these laws allows for a better understanding of where offshore drilling is allowed, who owns what waters, and punishments for violating offshore laws. Although they were created decades ago, these laws are still in affect today. They all have proven to be effective when a situation questions their rules and will continue to set the backbone for the laws involving offshore drilling.



Current Laws

The legislature in office in the early 2000’s agreed that oil drilling in the Outer Continental Shelf had now become necessary and in turn were going to let the moratorium on offshore drilling expire. However, a mass disaster in 2010 put a scare in the current legislature, and in so, created the current stance on opening the OCS. The accident in 2010 skewed President Barack Obama’s policy from a slow but steady to a complete stop to offshore drilling in areas newly opened and parts of the Gulf of Mexico. Over the course of four years, from 2010 to now, the United States put new moratoriums in place in areas that were once allowed to be drilled, have put on hold the issuing of new offshore drilling leases, and has prohibited some companies from drilling in the OCS. It hasn’t been until this year that the government has eased up on their restrictions and has allowed British Petroleum, the main contributor to the 2010 oil spill, to once again drill in the Gulf of Mexico (Office of Oil and Gas).



Laws within the Companies

Past events have forced companies to comply with the opinion on offshore drilling to allow them to continue. Therefore, companies not only abide by the laws set forth by the government but have created their own laws to ensure the safety and preservation of the environment. A company currently drilling in Alaska wants to expand their leases in the Arctic National Wildlife Refuge (ANWR). The area of ANWR spans 19 million acres and which includes wildlife, but in the area that they want to drill, section 10-02, is practically a wasteland. It is barren and uninhabited by both plant and animal life. The land itself would not be affected because new technologies have developed so the drills can extract the oil without damaging the land. Some scientist believe that species of caribou and porcupine use section 10-02 as a migration path, but that would not be a problem at all because the drilling companies have certain laws that include turning off the engine and machines completely when animal wildlife is present. The oil company currently in Alaska that is drilling 75 miles away from section 10-02, and would be in charge of drilling there too, takes extra precautions to preserve the environment. They put nets around their vehicles should anything fall off. Drilling only takes place in the winter when the roads are icy so the tundra isn’t disturbed. Employees are given two rule violations and after the second one, they are dismissed. The preservation of the environment is very important to the company and section 10-02 would be treated the same way (Driessen, 2013).



Repercussions of Offshore Drilling

Though oil is one of the main sources of energy for the United States, if not controlled, can be very dangerous to animal and human life. Oil has been found to harm all forms of life from aquatic to terrestrial. It is very difficult to clean out of water and makes it impossible for animals and ships to go through. Oil has caused the United States to suffer economically by polluting its waters and in turn shutting down multiple marine based businesses.



Effects on Environment and Human Health

In general, oil spills can affect animals and plants in two ways: from the oil itself and from the response or cleanup operations” (National Oceanic Atmospheric Administration, 2014). Oil itself is extremely poisonous due to its chemical make-up, especially to plants and animals. It can enter an animal’s body by inhaling or ingesting it, or simply by touching it. With some animals, especially small fish, birds, and other invertebrates, oil can take away their ability to maintain body temperature, leading to death, when smothered by it. Lighter oils such as gasoline are known to be very toxic to plants and can kill them on contact. Oils presence in the ecosystem can also be hazardous when trying to be removed. The mass amounts of human interaction through boats and chemicals used for clean up puts the effected ecosystems out of balance (2014). Much like animals, oil can be poisonous to humans too. Oil enters the human body when its fumes are inhaled or when it comes in contact with skin. People who have come in contact with oil in large amounts have been known to develop mental health disorders and even death (Goldstein; Krisberg, 2014).

Effects on Economy

Each oil spill in United States history has caused a mass economic impact. From tourism to fisheries, oil can prevent businesses from being operational. The presence of oil on beaches and off the shore close tourism businesses down due to health and safety reasons and lack of appeal. Fisheries close down because animals are too contaminated for human consumption and the mere fact that there is not much to catch. The biggest economic impact in all oil spills is the clean up. Clean ups for oil spills cost billions of dollars and even more so in fines for breaking the law (New England Aquarium, 2014).



Major spills

Atlantic Empress spill. On July 19th, 1979, the Atlantic Empress and the Aegean Captain collided while transporting oil across the Caribbean Sea due to an unforeseen storm. The Aegean Captain was luckily pulled to a dock in a short enough time to not spill any major amounts of oil. However, the Atlantic Empress was not so lucky. 287,000 tons of the oil it was carrying for Mobil seeped into the ocean, creating the largest offshore oil spill anyone had seen thus far. The ship burned for a total of 15 days before it was finally overcome with flames and sank. A total of 27 sailors died from this collision (Atlantic Empress and Aegean Captain, 2000). There was never an actual case for this due to the fact that it was an accident on both ship’s parts and a natural disaster played a huge part in the spill.

The Exxon-Valdez oil spill. On March 24th, 1989, Exxon Valdez had a major oil spill. While transporting oil, it hit a large reef and “spilled 11,000,000 to 38,000,000 gallons of crude oil.” This created one of the biggest spills in all of history and was extremely catastrophic to wildlife in the Prince William Sound. This case was taken to the Supreme Court under the name Exxon Shipping Co. v. Baker. Joseph Hazelwood, the ship’s captain, had apparently been drinking the night of the spill. He was a relapsed alcoholic and Exxon knew this, yet, they never felt the need to replace him with someone whom they wouldn’t have to worry about. Much to their dismay, his drinking and ignorance lead to this disaster and caused Exxon to lose a lot of money. Compensatory damages were measured to be around $287 million, and $5 billion in punitive damages. This was decided under the Federal Water Pollution control and it’s amendments. Despite this ruling, Judge Alex Kozinski argued that Exxon, the ship owner, should not be responsible for the recklessness and ignorance of an employee. This opinion turned the case into a matter of company responsibility versus employee responsibility, which was the reason it was heard so many times by so many courts and appeals courts (EXXON SHIPPING CO. V. BAKER, 2007).

The Deepwater Horizon oil spill. To this day the Deepwater Horizon oil spill is known as the worst environmental disaster in United States history; A long 87 days of free flowing oil onto the ocean floor which would cause a range of environmental, economical, and legal issues. The blame for the spill was split three ways between British Petroleum (BP), Transocean, and Halliburton. Occurring on April 20th, 2010, the Deepwater Horizon oilrig exploded and began spewing millions of gallons of oil. Days before the explosion, underwater cameras revealed that a pipe owned by BP, “was leaking oil and gas on the ocean floor about 42 miles off the coast of Louisiana” (Smithsonian Institution). The explosion caused the death of eleven employees and sunk the oilrig. It is also estimated that the 87 days before it was capped, 4.9 million barrels of crude oil had leaked into the Gulf of Mexico. A accident could not go without consequences, especially in this case where there were so many questions of negligence. BP and partners were put on trial “25 February 2013 in the United States District Court for the Eastern District of Louisiana in New Orleans to determine payouts and fines under the Clean Water Act and the Natural Resources Damage Assessment” (Feeley, 2013). The case was broken up into three parts. The first was to determine the liability of companies involved and “if they acted with gross negligence and willful misconduct” (Shcmidt, 2013). The second focused on the flow rate of the oil. Finally, the third was to discuss the severity of the damages caused by the oil spill. To find the defendant guilty lawyers had to prove there was negligence and that the companies violated the Clean Water Act. The plaintiff’s lawyers argued, “the major cause of an explosion was the mishandling of a rig safety test, while inadequate training of the staff, poor maintenance of the equipment and substandard cement” (2013). “On 4 September 2014, U.S. District Judge Carl Barbier ruled BP was guilty of gross negligence and willful misconduct” (2013). BP was reckless and did not meet with the standard set forth, but instead choose to take shortcuts that ultimately led to the disastrous event. BP was given 67% of the blame, Transocean 30%, and Halliburton 3%, and the fines would be divided accordingly. In this case the companies were found guilty of negligence and violated the Clean Water Act. Under said law, the fine per barrel can cost up to $4,300 and the estimated number of barrels spilled was 4.9 million (2013).

Amongst all of this, there were also criminal cases against several persons involved. The Justice department filed a criminal charge against Kurt Mix, a BP engineer, for obstructing justice. Kurt Mix purposely deleted emails that contained vital information showing BP was fully aware that the pipes flow rate was three times higher than usual and had a slim chance of staying operational. Two employees, Donald Vidrine and Robert Kaluza, were charged with manslaughter for “acting negligently in their supervision of key safety tests performed on the rig prior to the explosion and failure to alert onshore engineers of problems in the drilling operation.” Other employees were also criminally charged including David Rainey, BP’s former vice-president, for obstruction of congress and two others were charged for obstruction of justice because they lied to federal investigators (Krauss, 2012; Johnston, 2010; Fisk, 2010; Lustgarten, 2010).



Importance of Offshore Drilling

As of now, the United States imports more oil than is being drilled domestically. Our main supplier for oil comes from the Middle Eastern countries of Saudi Arabia and Iraq, both very unstable countries and ones we don’t have strong relations with. Opening the OCS for offshore drilling would generate enough oil to replace all oil imports done with these countries (Craig, 2005).



Arctic National Wildlife Refuge

Cutting our ties with the Middle East, at least in means of oil, during a time when America is dependent for vital energy supplies on overseas oil-producing countries, some of which are allied with terrorist groups, it makes no sense for us to ignore an area within our own borders that could supply up to a third of a trillion dollars’ worth of domestic energy. It is estimated that if we were to drill in section 10-02 735,000 domestic U.S. jobs would be created in the state of Alaska and across the country in all 50 states. Jobs that would be created include manufacturing, construction, vehicle and machine operators, and the work there would support other industries such as health care, real estate, and food services. In America there are approximately 21 billion barrels of oil left untouched, and 16 billion barrels are located in the ANWR (Craig, 2005).

Economically it only makes sense to drill in the Arctic. The amount of jobs, resources, and money that would come from drilling in section 10-02 could be the edge America needs to get out of our economic slump. If we don’t drill in ANWR America will continue to stay foreign-relied which isn’t safe for our economy or our security. If a country can become economically free and secure without damaging anything in the process, then it should.

Importance of Drilling in Alaska and the Gulf of Mexico

The United States has always been hesitant to allow companies to drill because of past oil spills. Although drilling for oil in the OCS became and stayed illegal for over a quarter of a century, it remained open in Alaska and regions in the Gulf of Mexico. When offshore drilling became popular in the 1950’s, it expanded so much so that it was bringing in the second highest amount of money into the United States. In fact, one of the primary reasons for purchasing the state of Alaska was because of the belief of its abundance in “black gold.” For the past 70 years, this claim has proven true, and many companies have taken advantage of it. “XTO Energy, Inc. is the largest producer of natural gas in the domestic U.S., producing natural gas and oil in 18 states […] XTO produces about 2,700 barrels of oil per day in Alaska.” British Petroleum (BP), is one of the largest oil companies in the world that operates in over 100 countries including the United States. In 1959, BP began drilling in Alaska and over the years has only expanded.

BP Exploration (Alaska) Inc. operates 13 North Slope oil fields and four North Slope pipelines and owns significant interest in six other producing fields and TAPS. BP’s net production rate in Alaska is 204,000 barrels of oil equivalent per day (Alaska Oil and Gas Association).

More recent companies to start drilling in Alaska are Statoil, the largest offshore drilling oil company in the world, and Eni, a leading company in both on and off shore drilling. Statoil entered the United States market in 2002 and expanded into Alaska in 2008 by purchasing 16 leases. In 2010, Statoil conducted a 3D marine seismic program on their leases that allows them to create a scale model of it. Eni began drilling in 2005 and has over 89 leases in the OCS, 86 of which being state leases. Many other major companies have offices in Alaska that all bring in millions of barrels into the United States every year. These companies use the Trans-Alaska Pipeline System (TAPS) to make this possible. The Pipeline was built in 1977 and covers 800 miles, from Prudhoe Bay to Valdez. The Alyeska Pipeline Service Company was created to oversee the project with the intent “to design, build, operate and maintain the pipeline, pump stations and the Valdez Marine Terminal.” Since the pipeline was built, over 16 billion barrels of crude oil has been successfully transported from the Northern slopes of Alaska (Alaska Oil and Gas Association).

In the Gulf of Mexico Oil companies drill off the coasts of several states including: Alabama, Florida, Louisiana, Mississippi, and Texas. Most of the companies that drill in Alaska also drill in the Gulf along with a few others. However, because ownership of the OCS was never addressed in the Constitution, ownership laws and feuds between state and federal government made drilling there much more difficult. States wanted the right to be in charge of renting out their leases, while the federal government saw that as a national right. The case of United States v. States of Louisiana, Texas, Mississippi, Alabama, and Florida, was actually a group of cases that the U.S. had with each of these states all dealing with the boundaries of where they were allowed to drill. The United States said that the right to exploit oil and other natural resources in submerged lands should be retained by the federal government. In the case the U.S. made a point to ask for two things, one of which was

seeking a declaration that it is entitled to exclusive possession of, and full dominion and power over, the lands, minerals, and other natural resources underlying the waters of the Gulf of Mexico more than three geographical miles seaward from the coast of each State and extending to the edge of the Continental Shelf.

The other was for the states to be prohibited from interfering in the affairs of the national government in that area and must account for anything that occurs within the gulf from the date June 5th, 1950. The United States also dismissed Alabama’s cross bill asking for the rights to submerged natural resources three marine leagues (approximately 9 miles) off it’s coast (United States of America v. States of Louisiana, Texas, Mississippi, Alabama, and Florida, 1960). However, the U.S. continuous attempts at enforcing their legislation failed, resulting in the U.S Submerged Lands Act. On May 22nd, 1953, the Supreme Court made the decision to enact this law that gave each of the coastal states the full rights to the OCS within certain nautical boundaries set forth by the government. It also established the rights of the federal government to control all waters passed those limits (43, USC §§ 29-1301-1303). Since the law has been passed, the United States has been able to extract billions of barrels of oil from the Gulf of Mexico. Today, the Gulf is responsible for producing 45% of all oil drilled domestically (U.S. Energy Information Association).

New Technologies

Keeping the cases mentioned in mind, studies show that our oil transportation is becoming safer. Due to new technological advancements there has only been one major oil spill so far in the 2000s. Also, technology has uncovered more efficient ways to stop and clean up oil so that there is a minimal amount of damage. The fact that oil transportation is becoming so much safer should be an indicator that closed areas should be reopened without hesitation due to worriedness that a major spill will occur. Oil companies have seen what a major spill can do to business and now tiptoe very carefully, abiding by the extensive rules and regulations to make sure that their business is not affected by one. Of course people make mistakes and things happen, but people are a lot more careful and aware of risks now. Restricted drilling areas should be made public again without any fear that a major spill will occur due to any form of negligence.



News Ways of Cleaning Up Oil

Due to America’s history in oil spills, the youngest and brightest minds are stepping up and finding new ways to clean up oil in the most efficient way. Students at MIT have created a way to get oil out of water by using Nano technology and magnets. The process involves “water-repellent ferrous nanoparticles that would be mixed with the oil, which could then be separated from the water using magnets.” MIT students not only created this new environmentally safe method of cleaning up oil but have also found away to reuse it. The Nano particles that mix with the oil can then be taken out of the oil because they are magnetic. This method is still being tested to ensure is success (Hardesty, 2012). Accelerator physicist Arden Warner made a similar technique, after witnessing the clean up attempts at the Deepwater Horizon oil spill. He found away to magnetize the oil simply by mixing it with iron shavings and waving a refrigerator magnet over it (Armitage, 2014). The country is responding to the problem of oil spills and is starting to obtain a mastery over the situation. These new ways of cleaning oil cannot only make spills a small problem but can allow us have minimal loss from contaminated oil.



Conclusion

In the past, the United States of America has been shaky with offshore drilling. The first major oil spill put a negative connotation on drilling in water because of the economic, environmental, and social damage it caused. However, offshore drilling proved to be necessary when the amount of oil it was bringing to the U.S. ranked it second in amount of money it made. The country continued to have an anxious mind about offshore drilling but allowed certain areas in the OCS to remain open. Over the years the amount of oil spills have lessened while technology for drilling and cleaning up have only gotten better. In addition, companies realize now the severity of what they are doing, and make it a priority to protect and preserve the environment. The laws put forth by previous lawmakers do not match the advancements we have made as human beings both social and technologically. The Outer Continental Shelf should be opened up and leased out to reduce foreign oil and to bring more money into the United States. People have proven that they are prepared for endeavor and have surpassed the laws that were made for a different time.

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