Thursday, October 8, 2015

Settlement with BP to Resolve Civil Claims Over Deepwater Horizon Oil Spill

This came out on Monday, while most of us were engaged in watching the storm and ensuing flooding...

Attorney General Loretta E. Lynch Delivers Remarks at Press Conference Announcing Settlement with BP to Resolve Civil Claims Over Deepwater Horizon Oil Spill
Washington, DC
United States
~
Monday, October 5, 2015
Here are some parts that pertain to non-market valuation:   

...  The Gulf was flooded with oil.  And the Gulf coast way of life – a uniquely American way of life – was hanging by a thread.  Over the course of nearly three months, the Gulf region was inundated with more than three million barrels of oil.  And by the time the torrent stopped, it had inflicted unprecedented harm on the economy, the environment and the population of the Gulf region.  Ecosystems were disrupted, businesses were shuttered and countless men and women lost their livelihoods and their sense of security.  

... in December of 2010, the Department of Justice filed a lawsuit against BP to hold the company accountable and to provide vital relief for the people of the Gulf region.

... we have secured a historic resolution of our pending claims against BP totaling more than $20 billion – making it the largest settlement with a single entity in American history.  The resolution includes civil claims under the Clean Water Act, for which BP has agreed to pay a $5.5 billion penalty – the largest civil penalty in the history of environmental law.  It includes natural resources damages claims under the Oil Pollution Act, for which BP has agreed to pay $7.1 billion – on top of the $1 billion it previously committed to pay for early restoration work.  And it includes economic damages claims, for which BP has agreed to pay $4.9 billion to the five Gulf states and up to $1 billion to local governments.
... In addition, BP’s payments for natural resources damages will help fund Gulf restoration projects that will revitalize damaged habitats, such as coastal wetlands and support the revival of wildlife populations, including marine mammals, sea turtles, oysters and birds.  
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I hope you see the role of non-market valuation in natural resource damage assessment. BP caused damage and should pay a fine. Many goods and services that are not traded in markets were damaged, impaired or ruined.  In order for the fine to be commensurate with the damages, we need to do the non-market valuation work.  
 
The Oil Pollution Act is an interesting piece of legislation. Enacted in the wake of the Exxon Valdez oil spill, it combines command-and-control (e.g. mandating double-hulled tankers) with Pigouvian taxation. The Valdez spill had a big impact on the subject of non-market valuation, especially as it pertains to the estimation of non-use values via the Contingent Valuation Method. 

I was an undergrad at UNCW when Valdez happened in March of 1989. Like the 2010 BP spill, it was big news.  You can see some of the images here at the Atlantic.  26 years later, while some of the natural resources in Prince William Sound have recovered, many have not

10 comments:

Leanna Kalicharan said...

I enjoyed reading this. I am more clear on the applications of non-market valuation via this post. Also, this is excellent news and definitely set a trend for other potential polluters. I am happy to see the practical implementations of such policy instruments especially on a company like BP.

A.Busch said...

It's a shame that it took a tragedy like the Valdez spill to have such a big impact on non-market valuation. It is however critical that we continue to take non-market values into consideration. I feel these values have been taken for granted for too long and it's refreshing to see them finally have their time in the spot light and be brought to the foreground when considering gains/losses in both destruction and construction. I liked the article on non-market values influencing public policy. It's amazing how relevant it is to not only countless ecosystems and environmental concepts but to numerous recreational activities as well.

Charles Elder said...

Very interesting read and BP deserves to pay every penny of that fine. This really helps to understand how non-market valuations play an important role when disasters like this occur.The impact the spill had on everything in the gulf is being felt today.

Andrew McCulley said...

I agree with the previous comments that the fine is reasonable. It is interesting to see a very relevant case in which non-market valuation techniques were used, and it seems to be a very reliable method in regards to establishing a figure that is commensurate with the damage caused. Furthermore, it's interesting to note how non-market valuation can be influential in policy decisions, such as the mandate that oil tankers be double-hulled.

Eric Quigley said...

I found it interesting when reading other articles related to the BP settlement and also the Exxon Valdez settlement that individuals and groups didn't agree with the amounts of the settlements because they were comparing the settlements to the revenues and profits each of the companies made. On some level, I understand the frustration because of vast impacts each disaster had, however, that mentality undermines the gains in the non-market valuation "battle" arena that was critical in obtaining any meaningful settlement in the first place. It also amazed me that legal battles were still going on for Exxon Valdez up until recently. http://www.adn.com/article/20151014/state-federal-governments-end-exxon-valdez-oil-spill-legal-fight

Joseph Small said...

It is hard to imagine a non-use value of close to 20 billion dollars, but considering the size of the oil spill, it doesn't surprise me. Thank you for posting this! Taking what we learn in class and relating it to real world occurrences always give me a better idea of why it's important.

Shelby White said...

Even though the penalty for BP was the largest settlement for a single entity in United States history, I question if this fine was large enough. It is nearly impossible for non-market valuation to account for all of the ecosystem services and goods lost in the oil spill, but I believe there are future impacts that went unrecognized. There is no way of knowing how much of an effect this oil spill had on trophic levels, bottom habitat, etc. and it may be difficult to quantify these things. Obviously they have to draw the line somewhere and place a fine for damages, but this article highlights how much is potentially missed when environmental degradation occurs.

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