Deepwater Horizon oil spill also referred to as the bp oil spill, the bp oil disaster



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Other economic consequences


On 5 July 2010, 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.[319] The United States Oil Pollution Act of 1990 limits BP's liability for non-cleanup costs to $75 million unless gross negligence is proven.[320] BP has said it would pay for all cleanup and remediation regardless of the statutory liability cap. Nevertheless, some Democratic lawmakers sought to pass legislation that would increase the liability limit to $10 billion.[321][322] 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.[323] 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.[324]

On 25 June, BP's market value reached a 1-year low. The company's total value lost since 20 April was $105 billion. Investors saw their holdings in BP shrink to $27.02, a nearly 54% loss of value in 2010.[325] 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 included a one-time $32.2 billion charge, including $20 billion for the fund created for reparations and $2.9 billion in actual costs.[326]

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,[327] who a month later was named CEO of BP.[326]

On 1 October, BP pledged as collateral all royalties from the Thunder Horse, Atlantis, Mad Dog, Great White, Mars, Ursa, and Na Kika fields in the Gulf of Mexico. At that time, BP also said that it had spent $11.2 billion, while the company's London Stock Exchange price reached 439.75 pence, the highest point since 28 May.[328]

By the end of September, BP reported that it had spent $11.2 billion. Third-quarter profit of $1.79 billion (compared to $5.3 billion in 2009) showed, however, that BP continued to do well and should be able to pay total costs estimated at $40 billion.[318]

BP gas stations, the majority of which the company does not own, reported sales off between 10 and 40% due to backlash against the company. Some BP station owners that lost sales said the name should change back to Amoco, while others said 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.[329]

Local officials in Louisiana expressed concern that the offshore drilling moratorium imposed in response to the spill would further harm the economies of coastal communities.[330] In a 2010 news story, The Christian Science Monitor reported, "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."[330] BP agreed to allocate $100 million for payments to offshore oil workers who were unemployed due to the six-month moratorium on drilling in the deep-water Gulf of Mexico.[150]

The real estate prices and a number of transactions in the Gulf of Mexico area decreased significantly during the period of the oil spill. As a result, area officials wanted 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.[331]

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 was potentially damaging the reputation of all British companies with operations in the U.S.[332] and sparked a wave of U.S. protectionism that restricted British firms from winning government contracts, making political donations and lobbying.[333]

Litigation


Main article: Deepwater Horizon litigation

See also: Hornbeck Offshore Services LLC v. Salazar

By 26 May 2010, over 130 lawsuits relating to the spill had been filed[323] against one or more of BP, Transocean, Cameron International Corporation, and Halliburton Energy Services,[334] although it was considered likely by observers that these would be combined into one court as a multidistrict litigation.[334] On 21 April 2011, BP issued $40bn worth of lawsuits against rig owner Transocean, cementer Halliburton and blowout preventer manufacturer Cameron. The oil firm alleged failed safety systems and irresponsible behaviour of contractors had led to the explosion, including claims that Halliburton failed to properly use modelling software to analyze safe drilling conditions.[335] The firms deny the allegations.

On 2 March 2012, BP and plaintiffs agreed to settle their lawsuits. If approved by the court, the deal would settle roughly 100,000 claims filled by individuals and businesses affected by the oil spill.[336][337] According to a group presenting the plaintiffs, the deal has no specific cap; BP estimated that it would pay approximately $7.8 billion.[338] BP says that it has $9.5 billion in assets set aside in a trust to pay the claims, and the settlement will not increase the $37.2 billion the company budgeted for spill-related expenses.[336][336][336] On 13 August, BP asked US District Judge Carl Barbier to approve the estimated $7.8bn settlement, saying its actions "did not constitute gross negligence or willful misconduct". However, citing instances of environmental harm, the U.S. government advised Judge Barbier to avoid making any finding about BP's potential gross negligence when he rules on the settlement. In the statement the U.S. further advised that Barbier disregard any claims that may attempt to minimize the environmental and economic impacts of the spill[339]

On 31 August the US justice department filed papers in federal court in New Orleans blaming BP PLC for the Gulf oil spill, describing the spill as an example of "gross negligence and willful misconduct". A finding of gross negligence would significantly increase the civil damages owed by BP. The trial is scheduled for January. 2013.[340]

Health consequences


On 29 May 2010, 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 26 May 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 before 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."[341]

On 15 June, Marylee Orr, Executive Director for Louisiana Environmental Action Network (LEAN),[342] 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.[343][344] By 21 June 143 oil spill exposure 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.[345]

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."[346][347] On the second day of the meeting the suicide of William Allen Kruse, a charter boat captain working as a BP clean-up worker,[348] 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.[349][350] On 10 August, the Institute of Medicine released a Workshop Summary: Assessing the Effects of the Gulf of Mexico Oil Spill on Human Health.

Chemicals from the oil and dispersant are believed to be the cause of illness reported by people who live along the Gulf of Mexico. According to chemist Bob Naman, the addition of dispersants created an even more toxic substance when mixed with crude oil. According to Naman, poly-aromatic hydrocarbons (PAHs) are making people sick. PAHs contain compounds that have been identified as carcinogenic, mutagenic, and teratogenic. "The dispersants are being added to the water and are causing chemical compounds to become water soluble, which is then given off into the air, so it is coming down as rain, in addition to being in the water and beaches of these areas of the Gulf," Naman said, and added "I’m scared of what I'm finding. These cyclic compounds intermingle with the Corexit dispersant and generate other cyclic compounds that aren't good. Many have double bonds, and many are on the EPA's danger list. This is an unprecedented environmental catastrophe." Dr. Riki Ott has been working with oil-spill related illness since the Exxon Valdez. She is working in the Gulf and says: "People are already dying from this... I’m dealing with three autopsies' right now. I don’t think we’ll have to wait years to see the effects like we did in Alaska, people are dropping dead now. I know two people who are down to 4.75 per cent of their lung capacity, their heart has enlarged to make up for that, and their esophagus is disintegrating, and one of them is a 16-year-old boy who went swimming in the Gulf."[351][352] According to Mississippi Riverkeeper of the Waterkeeper Alliance, blood samples from eight individuals from Florida (Pensacola) and Alabama, male and female, residents and BP cleanup workers “were analyzed for volatile solvents and all came back with ethylbenzene and m,p-xylene in excess of 95th percentile values of 0.11 ppb for ethylbenzene and 0.34 ppb for m,p-xylene.” The highest concentration value was four times the 95th percentile. “The blood of all three females and five males had chemicals that are found in the BP crude oil”, the report went on to say.[353]

In August 2011, The Government Accountability Project (GAP) began a survey of the health effects of the oil spill on cleanup workers. Reports included "eye, nose and throat irritation; respiratory problems; blood in urine, vomit and rectal bleeding; seizures; nausea and violent vomiting episodes that last for hours; skin irritation, burning and lesions; short-term memory loss and confusion; liver and kidney damage; central nervous system effects and nervous system damage; hypertension; and miscarriages". Cleanup workers claimed to have been threatened with termination when requesting respirators, because it would “look bad in media coverage,” or they were told that respirators were unnecessary, as Corexit was “as safe as Dawn dishwashing soap”. Cleanup workers and residents reported being sprayed directly with Corexit, with skin lesions and blurred eyesight as the result. Dr. James Diaz, writing for the American Journal of Disaster Medicine said the ailments appearing among Gulf response workers and residents reflected those reported after previous oil spills, like the Exxon Valdez oil spill. Diaz warned that "chronic adverse health effects, including cancers, liver and kidney disease, mental health disorders, birth defects and developmental disorders should be anticipated among sensitive populations and those most heavily exposed". Diaz also believes neurological disorders should be anticipated.[354]

According to marine biologist Riki Ott, "The dispersants used in BP's draconian experiment contain solvents, such as petroleum distillates and 2-butoxyethanol. Solvents dissolve oil, grease, and rubber. It should be no surprise that solvents are also notoriously toxic to people, something the medical community has long known".[288]


U.S. and Canadian offshore drilling policies


Main articles: United States offshore drilling debate and 2010 United States deepwater drilling moratorium

See also: Hornbeck Offshore Services LLC v. Salazar



After the Deepwater Horizon explosion, a six-month offshore drilling (below 500 feet (150 m) of water) moratorium was enforced by the United States Department of the Interior.[355] 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.[356] The moratorium suspended work on 33 rigs.[355] It was challenged by several drilling and oil services companies. On 22 June, 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.[355] 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 8 July.[357][358]



U.S. Oil Production and Imports 1920 to 2005

On 30 June, Salazar said that "he is working very hard to finalize a new offshore drilling moratorium".[359] 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.[359] 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".[360]

On 28 April, 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.[361] 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.[362] On 3 May California Governor Arnold Schwarzenegger withdrew his support for a proposed plan to allow expanded offshore drilling projects in California.[363][364] On 8 July, 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 20 July.[365][366]

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.[367] The chief argument in the U.S. offshore drilling debate has been to make the United States less dependent on imported oil.[368][369] American dependence on imports grew from 24% in 1970[370] to 66% in 2008.[371]

Spill response fund


BP initially promised to compensate all those affected. Tony Hayward 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."[372]

On 16 June, after meeting with President Obama, BP executives agreed to create a $20 billion spill response fund.[150][373][374] 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.[150][375] The fund will be administered by Kenneth Feinberg.[150][373][374] One aim of the fund will be to minimize lawsuits against the company.[376] 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.[150]

After provisions of the Deepwater Horizon Oil Spill Trust were released 11 August, it was revealed that the BP Spill Fund may be backed by future drilling revenue, using BP's production as collateral.[377]

The Gulf Coast Claims Facility began accepting claims on 23 August. 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 has been asked repeatedly to reveal his salary. In late July, he stated that he will disclose the salary BP is paying him, after initially declining to do so.[378] In mid-August, he said that he would disclose the amount "probably next month" but insists that he is not beholden to BP.[379] However, in early October, he had not yet divulged the information as promised, and when asked, he declined to say how much he is being paid, only that it is a flat fee "totally unrelated" to the size of the fund and amounts paid.[380] On 8 October, it was revealed that Feinberg and his law firm have been paid more than $2.5 million from mid-June to 1 October.[381]

Feinberg said almost 19,000 claims were submitted in the first week. Of those, roughly 1,200 claims were compensated, totaling about six million dollars, the remainder "lacked proper paperwork".[382] 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.[383] BP had already paid out $375 million, but those who had already filed claims would need to submit a new form.[384] 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.[385]

As of 8 September 2010, 50,000 claims, 44,000 of those for lost income, had been filed. Over 10,000 claims had been paid, totaling nearly $80 million.[386] By 17 September, 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. Feinberg acknowledged that he had no excuse for the delay.[387]

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".[388] 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.[389] 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 urgent. "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".[390]

On 25 September, 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% of the total amount that BP agreed to set aside.[391] 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.[392]

By early October, denied claims dropped from 528 to 116, as checks were cut and mailed to businesses that were initially told they would get no help. Along with those still waiting for money, dozens of people say they have received small fractions of the compensation they requested.[380]

By November, BP said it had sent $1.7 billion in checks.[318] About 92,000 claimants had been paid or approved for payment as of 30 October 2010. The claims facility declined to reveal the total amount requested by the nearly 315,000 people who have now filed. Denied claims rose dramatically in October; some 20,000 people had been told they have no right to emergency compensation, compared to about 125 denials at the end of September. Others say they are getting mere fractions of what they've lost, while still others received large checks and full payments.[393]

In a letter sent 20 November by the Department of Justice, Associate Attorney General Thomas Perrelli told Kenneth Feinberg that transparency is needed in the claims process so victims can see they're being treated fairly. The DOJ also expressed concerns about the pace of the pay-out process as the interim and final claims begin.[394][395]

Feinberg had said claimants would have to surrender their right to sue BP to receive payments beyond emergency disbursements. The deadline to apply for emergency payments expired 23 November. But after Gulf residents complained that the emergency payments were so small that they felt pushed into a hurried settlement to get more money, Feinberg made a concession. Under the new rules (beginning 24 November and lasting until 23 August 2013), businesses and individuals may request compensation once a quarter while they decide whether to permanently settle their claim. Still, the claims process has its critics. Alabama Rep. Jo Bonner asked the Justice Department to investigate the claims facility and to assume direct oversight of the process, saying he had no more trust in the new process than he had in the emergency-payment program. Feinberg had said he would hire his own adjusters, but according to Rep. Bonner, he is still using the same ones as when BP administered the fund. A spokeswoman for Feinberg said the hiring process of new adjusters was under way.[396]

According to BP's law firm, Feinberg's law firm received a total of $3.3 million from BP as of early November. The law firm was paid $850,000 a month since June 2010, and payment of this fee will continue until the end of the year; afterwards, the contract will be reviewed.[397]

In March 2011, Feinberg's law firm received an increase in the monthly wage from BP. Compensation rose from $850,000 to $1.25 million.[398]

Feinberg estimates that about $6 billion of the fund will be paid out in claims, including government claims and cleanup costs. He plans to return the remaining $14 billion to BP once all the settlements are paid out by August 2013.[399]

In July 2011, Mississippi's attorney general Jim Hood announced he is suing Feinberg to get access to claims filed by coastal residents, saying he's "seeking to make the process more transparent so people will know if Feinberg is looking out for the best interests of oil spill victims or BP". Hood has stated he believes Feinberg's operation is "intentionally delaying and denying legitimate claims". Feinberg has been criticized by others about the amount and speed of payments as well as a lack of transparency.[400] Also in July, Attorney General Eric Holder announced that an independent audit will be performed on the $20 billion fund set up to compensate victims of the BP oil spill. To July 2011, the fund has paid $4.7 billion to 198,475 claimants. The total number who have filed claims stands at 522,506, many with multiple claims. In all, the fund has nearly 1 million claims and continues to receive thousands of claims each week.[36]

An independent audit of the GCCF won Senate approval 21 October 2011. The audit is seen as a means of assuring claimants of efficiency and transparency in the BP claims process.[401]

In early 2012, an independent auditor found that 7,300 claimants were wrongly denied or underpaid an average of about $8,800 by Feinberg. 2,600 claimants were incorrectly rejected but "can't get their money now because their files didn't include information needed to calculate their proper payment amount".[402] On 19 April 2012 the Justice Department announced that because of the claimants being shortchanged, more than $64 million in additional payments is coming to roughly 7,300 residents and businesses.[403]




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