The nation’s worst oil spill

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Issues at stake: How did our administrative, judicial, legislative, and emergency systems allow—and respond to—the Deepwater Horizon explosion and BP oil well spill? This one question includes multiple legal and societal issues, including how America’s dependence on big oil and our faith in technology have outstripped our legal system’s ability to control either, whether we can achieve more than cosmetic reform in drafting and enforcing offshore regulations, and why we learned some lessons from the Exxon Valdez disaster (making the Oil Spill Liability Trust Fund and “natural resource damages” work), but not others (operationalizing effective oil spill response). And how much can environmental law do about all of this anyway?

The Deepwater Horizon, a drilling rig working on the oil company BP’s Macondo well one mile below the surface of the Gulf of Mexico, exploded on April 20, 2010, spewing crude oil into the ocean for months. The well was sealed July 15 and finally capped September 17 after the loss of 11 human lives, countless ocean-dependent livelihoods, flora and fauna, and some five million barrels of crude oil, making it the largest accidental oil spill in U.S. history The most visible and immediate legal and regulatory responses concentrated in two areas: regulatory reform of leasing, revenue and enforcement processes under the Outer Continental Shelf Lands Act; and litigation. While environmental laws such as the Clean Water Act, the National Environmental Policy Act (NEPA), and the Oil Pollution Act also play a role, the Deepwater Horizon disaster is a graphic reminder that protecting the environment from activities dependent on risk-filled new technologies relies on a much broader range of laws and regulations than those whose primary purpose is environmental protection.

To prescribe or not to prescribe? Offshore regulators worldwide are seeking the right balance between prescriptive regulation, which dictates how compliance is achieved, and adaptive performance-based regulation, which sets regulatory objectives and lets developers identify how they will meet them. Adaptive regulation is supposed to help regulators keep up with the rapid advances in technology, something the U.S. Minerals Management Service (MMS) clearly wasn’t doing in the Gulf. Its successor, the newly created Bureau of Ocean Energy Management, Regulation and Enforcement, issued two sets of Outer Continental Shelf Lands Act regulations in October, one prescriptive and one adaptive. The first set prescribes requirements for well design, blowout preventers, cementing, and worst-case spill scenarios. The second builds on adaptive regulations that the MMS drafted but never promulgated, requiring developers to adopt Safety and Environmental Management Systems (SEMS) and letting them design their own SEMS systems.

Performance-based regulation is promising as applied in Norway but not yet proven in North America, nor are the developers’ choices for meeting performance goals for complex technologies easily evaluated from outside the company. The National Commission on the BP Deepwater Horizon Oil Spill and Offshore Drilling also suggests the need for regulatory reform for new technologies and, more pointedly, interagency and agency-industry coordination. This is evidenced in the commission’s working papers to date, which range from decision-making within the Unified Command to the use of dispersants, the amount and fate of the oil, restoration requirements for the Gulf, and the challenge of oil spill response in the Arctic.

Apart from the question of how prescriptive the Bureau of Ocean Energy Management should be in implementing the Outer Continental Shelf Lands Act is how well the agency can more strictly enforce environmental laws such as NEPA. The now infamous MMS decision to categorically exclude the Deepwater Horizon platform from a detailed environmental impact analysis highlights the limits of classic environmental laws. Regulatory reform should address how to ensure consistent enforcement of environmental laws when an agency’s priorities or even its legislative mandates are focused elsewhere.

The sheer range of legal bases for Deepwater Horizon lawsuits offers another reminder of the disaster’s significance beyond environmental law. While claims have since been filed under such environmental statutes as the Clean Water Act, the Endangered Species Act, and NEPA, the first Deepwater Horizon lawsuit was a class action on behalf of shrimpers, fishers and commercial boaters claiming harm to their livelihood. By mid-May, some 70 lawsuits had been filed; by mid-November some 370. On June 1, the U.S. Attorney General announced investigations into potential civil and criminal penalties for those responsible for the spill (on December 15, the Department of Justice filed a civil lawsuit against BP and eight other companies; the investigation into possible criminal charges continues). On August 10, all claims against all defendants for economic, personal injury, and environmental damages were ordered to be transferred to the Eastern District of Louisiana before U.S. District Judge Carl Barbier. There, the transferred cases are now separated into pleading bundles, including personal injury and death, public damage, injunctive and regulatory matters, and lastly, losses by private individuals and businesses (where the largest number of natural resource damage claims is anticipated). Beyond the Gulf of Mexico, environmental groups continue their campaign to litigate regulatory activity and inactivity in the courts—from inadequate environmental impact assessments to inadequate enforcement of Outer Continental Shelf Lands Act requirements.

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Significance: The Deepwater Horizon spill confronted Americans anew with the question of when, if ever, we will wean ourselves from oil. The spill also forced upon us a national-scale case study of how effectively our laws and regulations protect us—before and after—from environmental disasters. Anyone who seriously examines the causes and responses to the Gulf spill recognizes that we are at a turning point. Internationally, offshore regulators are revisiting their procedures post-Deepwater Horizon and are watching our reform efforts closely. Even more significantly, U.S. offshore regulators are looking to models abroad to guide reform at home. Stronger and more uniform international standards for deepwater operations may also result. The first ever National Policy for the Stewardship of the Ocean, Coasts, and Great Lakes, whose announcement in July was postponed by the spill, will also be put to the test.

Next steps: Government and industry investigations into the causes of the Deepwater Horizon spill should conclude by mid-2011. This does not greatly hinder litigation, but it puts much regulatory reform in limbo, as most regulatory changes under the Outer Continental Shelf Lands Act and other laws will have to take the investigations’ results into account. The National Commission is scheduled to release its report in January 2011. The U.S. Geological Survey’s Arctic Studies Initiative, which was ordered by Interior Secretary Ken Salazar just days before the Deepwater Horizon explosion to inform oil and gas decisions in the Arctic, is due out in April 2011. Independent scientific assessments of where the Deepwater Horizon oil went are only now beginning to emerge. On December 1, Salazar announced that while the eastern Gulf remains under a Congressional moratorium, the rest of the Gulf and many Alaskan Arctic waters will continue to be considered open for potential business. Regulators and legislators alike promise stringent new requirements for oil and gas activity in U.S. waters. Those requirements will be shaped, for better or worse, by our collective response to the Deepwater Horizon catastrophe.