BP, however, is sticking by its decision. “The purpose of dispersants is to break the oil down into ‘bite-size’ particles for the naturally occurring microbes to eat,” says Robert Wine, a spokesperson for the London-based oil giant, noting that the use of dispersants was approved by the U.S. Environmental Protection Agency. He added that the Gulf of Mexico “is rich in oil-eating microbes because of the high levels of natural seepage anyway, and the warm waters.”
If BP is wrong, however, it’s not clear whether it can be made to pay for the longer-term damages. The company and the U.S. government have agreed to set up a $20-billion cleanup and compensation fund over the next 3½ years that will pay out all “legitimate claims” by residents and businesses that suffered because of the spill, as well as the costs incurred as a result of local, state and federal cleanup efforts. The fund, to which BP has already made an initial contribution of US$3 billion, will also accept claims for “natural resource damages,” although neither BP nor the U.S. government has offered specifics.
Tallying the longer-term damage from the spill isn’t easy. In addition to the direct costs of the cleanup, one estimate, by Moody’s Analytics, suggested it could cost the Gulf Coast region 17,000 jobs and about US$1.2 billion in lost economic growth by the end of the year. Another study, by Oxford Economics, pegged the cost to the tourism industry alone at US$7.6 billion to US$22.7 billion. BP, which has so far spent US$6.1 billion on stopping the leak and cleanup efforts, has taken a US$32-billion writedown related to the spill, although some analysts have speculated the total figure could climb as high as US$50 billion. That includes lawsuits and civil fines, which could be as high as US$21 billion if BP is found guilty of “gross negligence” in the disaster. The state of Alabama has already filed lawsuits against BP and the companies it worked with on the Deepwater Horizon, although the suits have yet to put a price tag on the damages being sought.
Despite the growing financial impact, it’s increasingly looking as though the company may actually be able to skate through the disaster with a few deep, but not fatal, wounds. For one thing, many of BP’s cleanup costs can be deducted from its taxes, creating an estimated US$10 billion in future savings—a figure that was confirmed by Wine, BP’s spokesperson. BP also has an estimated US$250 billion worth of assets that it can sell if it needs to raise money (it has already pledged to sell assets worth about US$30 billion). And, most importantly, it now has a powerful partner in the U.S. government, which isn’t eager to see BP cratered since the cost of cleaning up the mess would then land in its lap. Investors, too, are gradually becoming more optimistic. Shares have climbed more than 35 per cent since bottoming out in late June.
BP’s road to recovery is also being fuelled by a widespread desire to forget that the ugly incident ever happened. Amid pressure from local politicians, who depend on the offshore industry to create local jobs, U.S. government officials suggested last week that the Obama administration’s temporary ban on offshore drilling could be lifted well before the Nov. 30 deadline. “The moratorium on new drilling is in effect a moratorium on new supply in the U.S,” says Jeff Rubin, an author and former bank economist. “Deepwater has been the single largest source of new supply over the last 10 years, and BP was at the forefront of that.”
It all raises the question of whether steps will be taken to reduce the possibility of a similar accident in the future. While officials say they are still examining the need for changes to safety procedures and regulation of the industry before eliminating the ban, experts say rising oil prices and rising global demand mean the job of finding oil and extracting it will only become more difficult and dangerous. “The last half of the [world’s] crude is stuck in weird places and requires intense amounts of money and energy to get at it,” says Burke. In the case of deepwater rigs, she says, “you’re dealing with a complete unknown area and unknown pressures. We don’t know what’s going to happen when we start poking holes in these reservoirs.”
What we do know, thanks to BP’s disaster in the Gulf, is that the cost of drilling pales in comparison to the price of cleaning up after something goes wrong—if indeed it can ever be cleaned up at all. Burke recalls a moment during the cleanup of the Exxon Valdez. She was standing in a “dinky little bay, about the size of a two-car driveway, and the spill is about the size of New York City,” trying to collect dime-sized globules of oil sprayed on the rocks by waves. The futility of the effort hit her and she began to cry. “You go up to Prince William Sound right now and dig down three feet and there’s still oil there,” she says. “We’re 25 years later, and we didn’t put all those chemicals in the water like they did in the Gulf, and they still don’t have a herring run.”
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