assessments conducted following the spill, many industry players think that the BP spill

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1 Anacletus Z. Gyinia(S ) Admiralty Class Assignment. Topic: Deepwater Horizon Oil Spill: Legal and Regulatory Framework in Spill Management and Recovery. INTRODUCTION The Deepwater Horizon Oil Spill in the Gulf of Mexico in April 2010 provided a real test of the legal, regulatory and policy responses which were enacted after the Exxon Valdez oil spill disaster in March 1989 in the State of Alaska. On the basis of the multiple assessments conducted following the spill, many industry players think that the BP spill exposed severe systemic inadequacies. In this paper, the disaster is reviewed not merely from the standpoint of the multifaceted legal matters, but also emphasis is placed on the key issues and players in the aftermath of the tragedy. The policy and legal regimes that guided and continue to guide the response to the disaster are outlined. Additionally, the interplay amongst local, state and federal stakeholders on the disaster is discussed. There is also a discussion on the impact the disaster has on the social, economic and environmental health and livelihoods of the communities affected. Finally, an outline of the key findings on the investigations, remedial measures proposed and the policy and legal measures for dealing with similar disasters is undertaken. What this review did not set out to do was to look at the issues focused on the legal battles and the settlement matters that are pending. Rather, the work focused on the legal framework that belies the suits and the settlements and the recovery efforts. HISTORICAL BACKGROUND: EXXON-VALDEZ OIL SPILL AND MATTERS ARISING. 1

2 There can be no meaningful discussion of any oil spill in the United States post 1989 which ignores Exxon Valdez because it was the basis upon which current major legislation and regulatory reforms have been modeled. In his seminal review titled, The American Tort System's Response to Environmental Disaster: The Exxon Valdez Oil Spill, A Case Study, 19 Stan. Envtl. L.J. 259, (2000), Deborah S. Bardwick, notes that when Exxon Valdez occurred, the response to the disaster was slow, piecemeal, uncoordinated and lacking in clear leadership. Critically, the thinking following this disaster was that, if these shortcomings could be forestalled, the nation should never have another Exxon Valdez. According to Bardwick, the lack of leadership, coordination and lackluster response increased Exxon's cleanup costs by as much as two billion Dollars. By the time the cleanup effort was terminated, it had involved some 11,000 workers. i The writer adds that the spill was expansive; an estimated eleven million gallons of oil spilled into the waters of Alaska, and the oil slick itself spread over 1000 square miles. Oil soaked or spattered 1200 miles of coastline. Many said never again should a spill of this magnitude be allowed to happen or when it happens its management must be dramatically better, speedier and better coordinated. The systemic response to Exxon Valdez would be severely tested by the BP Gulf Spill as would be shown shortly. The litigation that followed Exxon Valdez was nearly as overwhelming as the spill itself. Consecutive estimates by the author referenced above say a multiplicity of law suits in both state and federal courts requiring more than 200 experts, 400 court orders, 1000 depositions, 4000 pleadings, and legal theories ensued, id. The nation, through its political leadership at all levels, goaded by the media pressure, rose to action. 2

3 Of all the regulatory reforms that followed, the OIL Pollution Act of 1990 was the centerpiece. THE DEEPWATER HORIZON OIL SPILL, KEY PLAYERS AND IMMEDIATE POST DISASTER MANAGEMENT. The Louisiana Oil Spill Coordinator s Office says the April 20, 2010 explosion that caused the spill killed eleven men; the office describes the disaster on its website as the largest oil spill in history ii, dwarfing Exxon Valdez in many respects. It is estimated to have discharged far more oil into the Gulf of Mexico than Exxon Valdez. Coastal Louisiana, the most productive ecosystem in the nation and home to nearly 40% of the nation's wetlands, was severely affected by the Deep-water Horizon Oil Spill. According to the presidential commission report on the disaster, by the time the well was capped, it is estimated that the Deepwater Horizon had released more than 4.9 million barrels of oil into the Gulf, resulting in significant impacts on the Gulf s communities, ecosystem and economic activity. The spill caused the closure of 88,522 square miles of federal waters to fishing, and affected hundreds of miles of shoreline, bayous, and bays. iii In response to the spill, President Obama called for immediate and coordinated federal, state, local, and industry action. At its peak, efforts to stem the spill and combat its effects included more than 47,000 personnel; 7,000 vessels; 120 aircraft; and the participation of scores of federal, state, and local agencies. Id The media face for this disaster were BP as the responsible party, the Coast Guards who spearheaded the remedial and recovery efforts and some local political leaders. But 3

4 the key players in this disaster were many more than that. In particular, one must mention the following: 1. Three federal agencies (Commerce, Interior, and Defense) and five affected states (Alabama, Louisiana, Florida, Mississippi, and Texas) through the individual state co-trustees. 2. Natural Resource Damage Assessment (NRDA) in the Gulf of Mexico. By mid- May 2010, the National Oceanic and Atmospheric Administration (NOAA) and the co-trustees had formed more than a dozen technical working groups devoted to assessing damages to various types of natural resources, from coastlines to the deep seas, and from plankton to porpoises. 3. By operation of relevant federal legislation, principally, the following eight organizations were named as responsible parties: BP Exploration and Production, Inc. ( BP ), Transocean Holdings Inc. ( Transocean ), Triton Asset Leasing GmbH ( Triton ), Transocean Offshore Deepwater Drilling Inc. ( Transocean Offshore ), Transocean Deepwater Inc ( Transocean Deepwater ), Anadarko Petroleum ( Anadarko ), Anadarko E&P Company LP ( Anadarko E&P ) and MOEX Offshore 2007 LLC ( MOEX ). The spill containment effort was an enormous operation, often in the full glare of the world s media. As noted earlier, the Oil Pollution Act authorizes certain federal agencies, states and Indian tribes, collectively referred to as the Natural Resource Trustees (Trustees) to evaluate the impacts of an oil spill on natural resources. iv These Trustees are charged with making the environment and the public whole for injuries to natural resources and services resulting from an incident involving a discharge of oil or 4

5 substantial threat of a discharge of oil. Making the environment whole includes both restoring injured resources to the condition they would have been in but for the discharge as well as compensating for the temporal loss of natural resources, and the ecosystem services they provide, from the time of injury until the time they are fully restored. v Working together with the trustees of the states of Alabama, Mississippi, Texas and Florida, along with the Department of Commerce - National Oceanic and Atmospheric Administration, the Department of the Interior - Fish and Wildlife Service, National Park Service, Bureau of Land Management and the Bureau of Indian Affairs as well as the Department of Defense Navy, the work of capping the blowout and dealing with the environmental catastrophe, engaged these agencies for months. In the weeks immediately following the spill relationships amongst these players were characterized by animosity, ambiguity, and uncertainty over who was ultimately directing affairs. For example, the President of Plaquemine Parish, Billy Nungessor, was always before national television cameras at odds with the Obama Administration, Thad Allen (the National Incident Command head), BP and the Coast Guards arguing over the best way to contain the disaster. Along with the recovery work there were multiple active investigations across the federal government apparatus related to the BP Oil Spill, its causes and its aftermath. They included that of the Obama Administration through Executive Order # 13543, Congress, Attorney-General Eric Holder, among others. In the main, they all sought to inquire into: - Matters related to the explosion in order to: - Reach an independent, science-based understanding of what happened. 5

6 - Investigate and prosecute all meritorious reports of fraud related to the oil spill and its aftermath. - Recommend recovery, remedial and corrective proactive actions to prevent and mitigate the impact of any future spills that result from offshore drilling vi APPLICABLE LEGAL CHALLENGES AND RELATEED MATTERS. In a paper titled, The Exxon Valdez Resurfaces in the Gulf of Mexico... and the Hazards of "Megasystem Centripetal Di-Polarity", 38 B.C. Envtl. Aff. L. Rev. 391, (2011), Zygmunt J.B Plater argues that the BP Oil Spill litigation presents some of the most challenging issues for court administration in any piece of complex litigation. The very magnitude of the litigation--involving dozens of different kinds of claims across the five Gulf States directly affected but also numerous claims from outside that area and based on a wide range of tort, environmental, statutory, and maritime law-- reflects the problems it poses vii In re: Oil SPILL by the Oil Rig Deepwater Horizon in the Gulf of Mexico, on April 20, This Document Relates to: All Cases in Pleading Bundle B1., 2011 WL (E.D.La.), the task of determining the substantive law applicable to multiple claims across multiple parties requires an examination of the interplay of the Outer Continental Shelf Land Act, 43 U.S.C. 1349(b)(1), 43 U.S.C. 1333(a)(1), and 1333(a)(2)(A) ( OCSLA ); the Oil Pollution Act, 33 U.S.C. 2701, et seq. ( OPA ); and federal maritime law. viii Because the Deepwater Horizon disaster and resulting oil spill ( the Spill ) took place on the Outer Continental Shelf of the United States, it is only natural that OCSLA provides the jurisdictional and substantive legal framework, id. But since this assignment 6

7 aims not to dwell so much on the law suits per se, an attempt at a broader review of the multiple international laws/conventions, federal and state statutes as well as other regulatory matters that underpin this disaster will receive considerable attention. INTERNATIONAL LAW AND CONVENTIONS First, international law provides the United States with the property rights that make deepwater drilling possible. The United Nations Convention on the Law of the Sea (UNCLOS) to which the United States is not party but largely recognizes as customary international law, establishes that the U.S. property rights extend into the deepwater, which allows it to drill ix. Third, the United States is party to complementary conventions developed under the auspices of the International Maritime Organization (IMO) that create obligations for member states to establish safety standards and to prevent and respond to oil spills. This specialized agency of the United Nations Organization focuses on working with countries to assure the safety and security of shipping and the prevention of marine pollution by ships. x Like many other countries, the United States meets these obligations through statutory provisions and regulations, which are generally implemented by the U.S. Coast Guard, among others already referenced in this discussion. FEDERAL LAWS AND REGULATORY BODIES FOR OIL SPILLS Federal admiralty jurisdiction is conferred on the United States courts, and not the states by Article III, Section Two of the United States Constitution xi, to wit the judicial power of the United States shall extend.to all cases of admiralty and maritime Jurisdiction Given the political structure of the U.S, federal, state, and local law each apply to particular aspects of the BP Deepwater Horizon oil spill. 7

8 OUTER CONTINENTAL SHELF LANDS ACT (OCSLA) This Act governs federal offshore oil and gas exploration, 43 U.S.C. 1331(a) (2006) and describes the Outer Continental Shelf as a vital national resource reserve held by the Federal Government for the public, which should be made available for expeditious and orderly development, subject to environmental safe-guards, in a manner which is consistent with the maintenance of competition and other national needs. xii See 43 U.S.C. 1332(3). In enacting OCSLA, Congress expected that drilling operations would employ technology, precautions, and techniques sufficient to prevent or minimize the likelihood of blowouts, loss of well control, fires, spillages... or other occurrences which may cause damage to the environment or property, id. As a creation of the OCSLA, a National Oil and Hazardous Substances Pollution Contingency Plan, took direct charge of the spill and recovery. xiii THE OIL POLLUTION ACT This discourse cannot conclude without a discussion of the Oil Pollution Act of Noteworthy are the following sections:. (a) In general, the act provides that each responsible party for a vessel or a facility from which oil is discharged, or which poses the substantial threat of a discharge of oil, into or upon the navigable waters or adjoining shorelines or the exclusive economic zone is liable for the removal costs and damages specified in subsection (b) of this section that result from such incident xiv (b) Covered removal costs and damages 8

9 (1) Removal costs The removal costs referred to in subsection (a) of this section are (A) all removal costs incurred by the United States, a State, or an Indian tribe under subsection (c), (d), (e), or (l) of section 1321 of this title, under the Intervention on the High Seas Act (33 U.S.C et seq.), or under State law; and (B) Any removal costs incurred by any person for acts taken by the person which are consistent with the National Contingency Plan. (2) Damages The damages referred to in subsection (a) of this section are the following: (A) Natural resources Damages for injury to, destruction of, loss of, or loss of use of, natural resources, including the reasonable costs of assessing the damage, which shall be recoverable by a United States trustee, a State trustee, an Indian tribe trustee, or a foreign trustee. (B) Real or personal property Damages for injury to, or economic losses resulting from destruction of, real or personal property, which shall be recoverable by a claimant who owns or leases that property. (C) Subsistence use Damages for loss of subsistence use of natural resources, which shall be recoverable by any claimant who so uses natural resources which have been injured, destroyed, or lost, without regard to the ownership or management of the resources. (D) Revenues 9

10 Damages equal to the net loss of taxes, royalties, rents, fees, or net profit shares due to the injury, destruction, or loss of real property, personal property, or natural resources, which shall be recoverable by the Government of the United States, a State, or a political subdivision thereof. (E) Profits and earning capacity Damages equal to the loss of profits or impairment of earning capacity due to the injury, destruction, or loss of real property, personal property, or natural resources, which shall be recoverable by any claimant. (F) Public services Damages for net costs of providing increased or additional public services during or after removal activities, including protection from fire, safety, or health hazards, caused by a discharge of oil, which shall be recoverable by a State, or a political subdivision of a State. xv THE CLEAN WATER ACT Additionally, the provisions of the Clean Water Act, constituted another primary source of legislation which guided both the federal government s interventions as well as some of the legal challenges arising from the spill. The CWA has a primary goal of restoration and maintenance of the Nation s waters and provides several causes of action enforceable by the United States in order to promote these goals. These include provisions for the recovery of civil (and criminal) penalties. The CWA civil penalty provision associated with oil spills provides that penalties recovered under the Act must be deposited into the Oil Spill Liability Trust Fund. 10

11 Other major legal matters and theories that have dominated the legal challenges include the Jones Act, Limitation of Liability Act, Admiralty Jurisdiction, Forum Selection Clause, the Longshore Harbor Worker Compensation Act, Death on the High Seas Act(DOHSA), Maritime Negligence, EPA. This list is by no means exhaustive. FEDERAL DEPARTMENTS AND ORGANIZATIONAL CHANGES In the wake of the disaster, the Secretary to the Department of Interior, Ken Salazar, separated the Minerals Management Service into the Bureau of Ocean Energy Management, Regulation, and Enforcement (BOEMRE); the Bureau of Safety and Environmental Enforcement; and the Office of Natural Resource Revenue. xvi The organizational reforms were aimed at injecting energy and better focus to enable the Department of the Interior offer better horizontal integration in dealing with the disaster. In addition to this reorganization, Secretary Salazar also established a new Ocean Energy Safety Advisory Committee, a permanent advisory body of the nation's leading scientific, engineering, and technical experts who will provide critical guidance on improving offshore drilling safety, well containment, and spill response, xvii in January The Coast Guard designated the disaster as a Spill of National Significance by late April 2010 and with this development the establishment of a National Incident Command and Thad Allen was appointed as the National Incident Commander id. The long-term spill response has involved additional federal agencies and other entities that cover different but often overlapping, substantive areas. However, many of those entities are the same as those initially responding as part of the national response team. The official government website on the spill lists fifteen federal partners in the 11

12 response as follows Corporation for National and Community Service, Department of Agriculture, Department of Defense, DOE, Department of Homeland Security, DOI, Department of Justice, Department of Labor, EPA, Health and Human Services, National Aeronautics and Space Administration, NOAA, Small Business Administration, Research and Innovative Technology Administration, and the White House xviii These entities work, often in tandem, on thirteen topics deemed core to the response and recovery: administration, assistance, data/energy, environment, food, health, investigation, military, travel, volunteer, weather, wildlife, and workers.id. STATE AND LOCAL LAWS LOUISIANA STATUTE LOSPRA: when the Legislature enacted the Louisiana Oil Spill and Response Act in 1991, it was in direct response to the Exxon Valdez spill and in keeping with the plethora of legislative enactments by states around the country primarily modeled in a manner to complement the Oil Spill Act. This statute was not intended to duplicate OPA but functions more like gap filler where OPA could not account for local peculiarities, among others. LOSPRA is primarily aimed at the State s response to oil spill. The legislative intent was to support and complement the Oil Pollution Act of 1990 and other federal law, specifically those provisions relating to the national contingency plan for cleanup of oil spills and discharges, including provisions relating to the responsibilities of state agencies designated as natural resources trustess and therefore intended for the statute to be interpreted and implemented in a manner consistent with federal law. 12

13 It provides that damages for injury to or economic loss resulting from destruction of, immovable or corporeal movable property, which shall be recoverable by a person who owns or leases that property, among others are available to many categories of person affected by the spill. WILDLIFE VALUE RECOVERY STATUTE. Louisiana's Wildlife Value Recovery Statute provides that [a] person who kills... or injures any fish, wild birds, [or] other wildlife and aquatic life in violation of this Title, or a regulation adopted pursuant to this Title, or a federal statute or regulation governing fish and wildlife... is liable to the state for the value of each fish, wild bird, [or] other wildlife and aquatic life, unlawfully killed,... or injured xix Generally, a suit to recover following breach of this legislation may be brought by (a) the attorney for the LDWF, (b) the Louisiana Attorney General, or (c) the district attorney of the parish in which the violation occurred. Id. PRESIDENTIAL COMMISSION AND LONG-TERM RECOVERY OF THE GULF REGION: This review must, of necessity, commence with the broad national, bi-partisan presidential commission s work. In May, 2010, President Barack Obama, by Executive Order setup a National Commission to enquire into the disaster. The Commission s core terms of reference were to (a). examine the relevant facts and circumstances concerning the root causes of the Deepwater Horizon oil disaster; (b) develop options for guarding against, and mitigating the impact of, oil spills associated with offshore drilling, taking into consideration the environmental, public health, and economic effects of such options and (c) submit a final public report to the 13

14 President with its findings and options for consideration within 6 months of the date of the Commission's first meeting. xx Other investigations of less general scope include those of Congress, Attorney- General Eric Holder, and others by other relevant federal sector departments such as Energy, Interior etc. The report further highlights the Administration s efforts to manage other aspects of the disaster concurrently with the spill containment. At the President s request, BP committed $20 billion to a trust fund designed to provide compensation for damages incurred by individuals and businesses, as well as for certain government claims. Responsibility for adjudicating individual and business claims against BP to be paid out of this fund was turned over to an independent claims facility run by Kenneth Feinberg, who on August 23, 2010 opened the Gulf Coast Claims Facility to manage the process. Additionally, the National Incident Command (NIC) established the Integrated Solutions Team (IST) to develop and coordinate support services for individuals and small businesses impacted by the spill s effects. Id. The findings of this commission provide a basis for multiple organizational, recovery and legal actions across many parties and have redefined relations amongst BP Exploration and Production, Inc. ( BP ), Transocean Holdings Inc. ( Transocean ), Triton Asset Leasing GmbH ( Triton ), Transocean Offshore Deepwater Drilling Inc. ( Transocean Offshore ), Transocean Deepwater Inc ( Transocean Deepwater ), Anadarko Petroleum ( Anadarko ), Anadarko E&P Company LP ( Anadarko E&P ) and MOEX Offshore 2007 LLC ( MOEX ) as well as various federal, state and local authorities and other stakeholders in the business of oil drilling. 14

15 RECOMMENDATIONS FOR LONG-TERM RECOVERY: In order to help address the harm inflicted upon the region, the Commission observed that adequate funding is not the only solution, but must go beyond to incorporate legislative reforms, dedicated recovery teams for the Gulf region and more critically evolve research based scientific and technical solutions that are capable of fixing disasters. Id. In the main the report highlights the following as its major recommendations: A portion of any Clean Water Act civil penalties be directed to the Gulf States (Alabama, Florida, Louisiana, Mississippi, and Texas) to enable them to jumpstart their own recovery efforts. The remaining amount of penalties is deposited in the Oil Spill Liability Trust Fund in accordance with existing law. This would allow for resources to be available to respond to future spills. The report further recommended that the President followed through with Congress to act on the legislative priorities that the Administration had made; in particular the amendments of sections of the Limitation of Liability. The Gulf Recovery Council must work with all relevant federal, state and local authorities to ensure that scientific and technical know-how is developed based on scientific research for deployment in future occurrences. 15

16 REFERENCES i Deborah Bardwick, The American Tort System's Response to Environmental Disaster: The Exxon Valdez Oil Spill As A Case Study, 19 Stan. Envtl. L.J. 259, (2000). ii iii iv Oil Pollution Act of 1990(OPA) v vii Zygmunt J.B. Plater, titled, The Exxon Valdez Resurfaces in the Gulf of Mexico... and the Hazards of "Megasystem Centripetal Di-Polarity", 38 B.C. Envtl. Aff. L. Rev. 391, (2011). viii In re: Oil SPILL by the Oil Rig Deepwater Horizon in the Gulf of Mexico, on April 20, This Document Relates to: All Cases in Pleading Bundle B1., 2011 WL (E.D.La.) ix x xi xii See 43 U.S.C. 1332(3). xiii Ensco Offshore Co. v. Salazar, CIV.A , 2010 WL (E.D. La. 2010) xiv Oil Pollution Act of xv xvi Hari M. Osofsky, Multidimensional Governance and the Bp Deepwater Horizon Oil Spill, 63 Fla. L. Rev. 1077, (2011) xvii Supra xviii pdf xix La. Rev. Stat. Ann. 56:

17 xx 1. The Jones Act 2. Limitation of Liability Act 3. Death on the Highseas Act 4. The Clean Water Act 5. Louisiana Oil Spill Recovery Act 6. The presidential Commission Report, titled, America s Gulf, A Long Term Recovery Plan after the Deepwater Horizon Oil Spill Available at: 7. Ensco Offshore Co. v. Salazar, CIV.A , 2010 WL (E.D. La. 2010) The Outer Continental Shelf Lands Act 12. Securing Protections for the Injured from Limitations on Liability Act (SPILL Act) 17