The emphasis so far in responding to BP's blowout well and oil spill in the Gulf of Mexico has been on containing and disposing of the crude and trying to protect aquatic life and nearby coastlines. The biggest question, beyond who's going to pay, is how much it's going to cost.
Susan A. Fleming, physical infrastructure director at the US Government Accountability Office, raised an important point when she testified June 16 before a US Senate Homeland Security and Governmental Affairs Committee subcommittee hearing: Costs from a major spill for which a specific party is not responsible could threaten the federal oil spill liability trust fund.
Under the 1990 Oil Pollution Act, parties deemed responsible for a spill must pay for its removal and for damages from it, she told the committee's Federal Financial Management, Government Information, Federal Services, and International Security Subcommittee.
Beyond the limit of this direct liability, Fleming said, OPA authorizes use of as much as $1 billion/spill from the liability trust fund. The fund has been financed by a 5¢/bbl tax on domestic and imported crude and had a $1.6 billion balance in May.
'Significant strain'
"To date, the fund has been able to cover costs from major spills that responsible parties have not paid," she said, adding, "The current spill could result in a significant strain on the fund."
Fleming said a spill's location, the time of year, and the type of oil are key factors affecting noncatastrophic spill costs, according to industry experts, agency officials, and GAO's analyses. The current spill's size, the effectiveness of the response, and the level of public interest also influence costs, she said.
"In ways that are unique to each spill, these factors can affect the breadth and difficulty of the response effort or the extent of damage that requires mitigation," Fleming observed.
Location impacts
When a spill is in a remote location, its costs can grow from the difficulty of mobilizing a response, she said. When it's close to shore, manual labor may be required to remove oil. And a spill close to an economic center can cost more if local services, such as goods flowing in and out of a port, are disrupted.
The time of year also can have an impact, Fleming said. "For example, spills in the spring months in areas of the country that rely on revenue from tourism may incur additional removal costs in order to expedite spill cleanup, or because there are stricter standards for cleanup, which increase the costs," she said.
Response costs also can climb because of hurricanes or seasonably unfavorable weather, she added.
Much more information will be needed before the costs from the Macondo well's blowout and the subsequent spill can be fully calculated, Fleming emphasized. But the factors she described suggest that the final amount will be substantial—and far-reaching.
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