Tag: oil

Settling Accounts from the BP Gulf Oil Spill

800px-Defense.gov_photo_essay_100506-N-6070S-819By Elinor Tarlow — October 29 at 6:22 p.m.

More than four years ago, BP’s Macondo well exploded, killing 11 men and spewing millions of barrels of oil into the Gulf of Mexico. The surrounding waterways and marine life still bear the scars of the explosion: brightly colored coral colonies have turned brown and dull, some species of fish have developed heart and other deformities, and more than 900 bottlenose dolphins have been found dead or stranded since the explosion.

Although the Gulf States currently lack sufficient resources to assess the extent of the environmental damage and to remedy it appropriately, two recent legal developments lay the groundwork for distributing long-awaited funds to the states.

First, earlier this month, the Treasury Department finalized rules governing a trust fund that will distribute money to the Gulf States for environmental and economic restoration. Certain state and local governments may now apply for grants to support the recovery of communities affected by the oil spill.

The fund, which Congress established in June 2012 as part of the RESTORE Act, will receive 80 percent of the administrative and civil penalties paid to the United States under the Clean Water Act (CWA) by the parties responsible for the oil spill. A portion of these penalties will be distributed among five Gulf States—Florida, Mississippi, Alabama, Louisiana, and Texas.

Although there is currently $653 million available in the trust fund (from the $1.4 billion in fines Transocean paid in an earlier settlement), significantly more funding likely will come from another source—the CWA civil fines that BP will have to pay for its contribution in causing the oil spill.

Second, U.S. District Judge Carl Barbier recently issued a decision that provides some indication of how much money BP will have to pay for violating the CWA and, therefore, how much money the Gulf States ultimately will receive from the fund.

Under the CWA, a polluter must pay civil penalties of $1,100 for each barrel of oil spilled. The CWA provides an enhancement penalty, which imposes fines that are nearly four times as much per barrel if the polluter was “grossly negligent” in causing the spill.

Last month Barbier found that BP’s conduct leading up to the oil spill constituted “gross negligence.” Barbier defined “gross negligence” as similar to recklessness—“an extreme departure from the care required under the circumstances or a failure to exercise even slight care”—and found that because deepwater drilling is such an inherently risky operation, BP employees fell below this standard in two ways. First, Barbier determined that two BP employees were “grossly negligent” when they ignored the results of a critical safety test and decided not to investigate or notify anyone of the clear indications that the well was not safe to drill. Second, Barbier also found that a series of eight actions, including BP’s decision to drill the final 100 feet of the well with little or no margin, cumulatively constituted “gross negligence.”

As a result of Barbier’s determination, BP may pay civil fines under the CWA for as much as $18 billion. Barbier will conduct proceedings to determine the exact amount in January 2015.

This money, though, likely will not become available to the Gulf States anytime soon. In part because the fine is so large, BP will try to challenge Barbier’s determination of gross negligence and the ultimate penalty assessment. BP initially set aside only $3.5 billion for its civil fines under the CWA—roughly one-fifth of what Barbier could impose. And such a substantial fine could significantly affect the company’s economic outlook. To put the fine in context, $18 billion in penalties would be $6 billion more than BP collected in profits in 2012.

Indeed, BP has already appealed Barbier’s decision, alleging his opinion improperly relied on expert evidence that was excluded at trial. BP is now asking Barbier either to revise his ruling to exclude that evidence or to hold a new trial to allow BP to support its position. And BP has stated that, when Barbier begins the penalty proceedings, it will try to show that its conduct merits a penalty less than the $18 billion maximum.

The finalization of rules for the trust fund and Barbier’s decision to expose BP to enhanced penalties under the CWA are important steps in channeling much-needed money to the Gulf States for environmental restoration. But these are merely first steps. As BP winds its way through the court system, it may be some time before the Gulf States know exactly how much money they will be allocated and when they will have access to such funds. In the meantime, the fate of the Gulf States’ waterways and marine life hang in the balance.

“Fugitive” natural gas emissions on the run from the law

A natural gas power plant in Utah. (Photo credit: D. Jolley, Wikipedia)
A natural gas power plant in Utah. (Photo credit: D. Jolley, Wikipedia)

By Samantha Caravello — Aug. 13, 2013 at 12:52pm

Natural gas is being widely lauded as the “bridge fuel” that will allow the United States to reduce its greenhouse gas (GHG) emissions, kick its addiction to foreign oil, and create jobs to boot. But it’s worth taking a closer look at the impacts of natural gas production before getting comfortable with the idea of it as the panacea for our energy problems. We’ve all heard the horror stories of tap water lighting on fire and farm animals reportedly dying from drinking fracking wastewater, but some concerns go even deeper–what if the entire premise of a natural gas-fueled low-carbon future is simply untrue?

Such fears have come to surface recently, as studies like this one conducted by NOAA and University of Colorado scientists have been able use the chemical signatures of air pollution to identify “fugitive” emissions from oil and natural gas emissions as the culprit behind unhealthily high levels of pollution. (A telling anecdote: oil and gas have been identified as the problem behind ozone levels in western plain areas that rival the smog you’d expect in cities like Los Angeles. And a telling video: infrared cameras capture gas leaks that are invisible to the naked eye.)  And ozone precursors are not the only pollutants leaking–methane, a GHG that is significantly more potent than carbon dioxide and the principal component of natural gas, is also escaping at alarming rates.

Addressing these unreported emissions is critical to responsibly planning our country’s transition to a clean energy future: scientists estimate that if methane leakage from natural gas well sites exceeds 3.2 percent, gas becomes a worse contributor to global warming than coal. Given that studies are now estimating leakage rates of 2.3 percent to 17 percent in some areas, we may have a problem.

But that’s why we have the Clean Air Act, right? Well (as you can probably already surmise), there are some problems with that. There is currently no appropriate regulatory framework for addressing fugitive methane emissions from natural gas production (although EPA has taken steps to address the release of ozone precursors from this sector). Title V of the Clean Air Act (CAA) requires major stationary sources to obtain a permit pre-construction, which specifies the amount of each pollutant the source is allowed to emit, but methane leaks from natural gas production are from smaller sources–individual wells, storage tanks, etc.–that do not meet the requirements to be regulated as major sources.[1]  A potential solution to this problem is aggregating all of the wells, but courts have not taken kindly to the EPA’s attempts to do so, and given our current political climate, it seems unlikely to expect a pro-aggregation ruling in the near future.  EPA does have authority to regulate emissions from oil and gas wells through a different portion of the CAA, the New Source Performance Standards (NSPS) program, and it has taken some action to do so through its ozone rule.  However, EPA has not yet set an NSPS for methane, which would be a massive undertaking.

It’s funny–one would think that losing their product at a rate that may enter double digits would be contrary to good business principles. But natural gas is so plentiful and in such high demand that it seems such logic doesn’t apply here. Hopefully studies like the one discussed above will draw public and government attention and outrage to the issue before it’s too late.

[1] Lowrey, Jessica L. Sewing Up the Regulatory Hole: Preventing Winter Ozone in Utah’s Uintah Basin. 3 Seattle Journal of Envt’l Law 295, 304–305 (2013).