THE disaster unfolding in the US Gulf and threatening the Louisiana, Mississippi and Alabama coastlines has been dubbed by President Obama a “potentially unprecedented environmental disaster”. BP, struggling mightily to seal the gushing well, is faced with a diabolically difficult task as the looming environmental catastrophe draws closer by the hour.
BP was actually leasing the well from Transocean, which owns the rig, and it initially sought to make Transocean accountable. BP’s senior managers soon grasped that it was liable for the cleanup and the environmental damage.
The wavering aside, BP’s distress is understandable, and as a shipping journal we sympathise with its sudden plight.
We can be forgiven for an initial reaction of “thank God this did not come from a ship”. The likely course of events would have been instant calls for more stringent measures against owners with a knock-on effect of tighter regulation, higher insurance premiums and, within the bounds of possibility, a new tax on shipping. Yet, the relief is short-lived, because the magnitude of the disaster will make it a shipping problem.
The two relevant international funds covering oil pollution from tankers are the International Convention on Civil Liability for Oil Pollution Damage and the International Oil Pollution Compensation Funds.
Influenced by the 1999 Erika and 2002 Prestige oil spills, and mounting costs of clean-ups generally, a protocol came into force in 2005 providing for an IOPC Supplementary Fund to increase the compensation under the CLC. The total amount of compensation payable for one incident is limited to special drawing rights of about 750m, or around $1bn at current conversion rates.
No one can yet estimate the full liability to be shouldered by BP, but each major spill brings an increase in claims and liability pricetag.
The Erika casualty brought 7,100 claims amounting to $520m. Prestige yielded 1,300 claims worth $1.7bn. The 2007 Hebei Spirit spill brought 126,000 claims worth $43.2bn.
Environmentalists dub the funds’ contribution to clean-ups as inadequate. Claims are settled with only a portion of IOPC Fund, because the fund provides compensation for the economic cost of the cleanup and the loss of income by those affected by the oil spill. P&I clubs foot the rest of the bill.
Environmentalists argue that both should be tapped to cover for environmental damage. As the impact of the Gulf spill builds, so too will pressure on shipping to bear additional cost of future cleanups.