# Current oil spill vs Exxon Valdez **URL:** \ **Category:** Factual Questions\ **Created:** [May 1, 2010, 7:25am UTC](https://boards.straightdope.com/t/current-oil-spill-vs-exxon-valdez/537951 "2010-05-01T07:25:49Z")\ **Posts on this page:** 20\ **Page:** 2
**Author:** ![LonghornDave](https://avatars.discourse-cdn.com/v4/letter/l/a87d85/32.png) [@LonghornDave](https://boards.straightdope.com/u/LonghornDave)\ **Post date:** [May 3, 2010, 3:49pm UTC](https://boards.straightdope.com/t/current-oil-spill-vs-exxon-valdez/537951/21 "2010-05-03T15:49:13Z")
Not that this comes close to estimating the economic impact of the spill, but here are the declines in the market capitalizations for the major parties involved in the operations. BP (Operator 65% owner of well): $39.3 billion Transocean (Rig owner): $7.7 billion Anadarko (well partner): $6.5 billion Mitsui (well partner): $2.6 billion Cameron (blow out preventer): $1.8 billion Halliburton (cement job): $2.7 billion TOTAL: $60.7 billion This is an absolute catastrophe. I think this is going to crush BP. Furthermore, realize that BP self-insures while most of the other parties insure. This is creating havoc in the London insurance markets. They expect losses to exceed that of Katrina. This will negatively affect any oil and gas company trying to get insurance regardless of whether they have any deep water operations. Also, while this isn’t an item that many people are talking about, there are a tremendous number of oil and natural gas wells in the state waters and marshy areas along the coast of LA. Many of those operations are going to be shut in affecting hundreds of the smaller oil and gas companies and related service companies in the area. It is just in general a terrible things for the domestic oil and gas industry. ---
**Author:** ![The\_Great\_Philosopher](https://avatars.discourse-cdn.com/v4/letter/t/3ec8ea/32.png) [@The\_Great\_Philosopher](https://boards.straightdope.com/u/The_Great_Philosopher)\ **Post date:** [May 3, 2010, 4:25pm UTC](https://boards.straightdope.com/t/current-oil-spill-vs-exxon-valdez/537951/22 "2010-05-03T16:25:26Z")
> [@LonghornDave](#): > > This is an absolute catastrophe. I think this is going to crush BP. Furthermore, realize that BP self-insures while most of the other parties insure. This is creating havoc in the London insurance markets. They expect losses to exceed that of Katrina. It isn’t as simple as that though, because legally BP [can’t be required](http://news.firedoglake.com/2010/05/03/who-pays-for-the-bp-oil-spill/) to pay more than $75 million towards the damages. In 1986 Congress set up an Oil Spill fund which all major oil companies contribute to and which can be tapped to cover the cost of spills, and in exchange they limited the maximum damages payable by oil companies in the event of a spill to $75 million. The Oil Spill fund is worth between $1 billion and $1.6 billion. The problem is that’s not going to be anywhere near enough to cover the costs of the spill in the Gulf of Mexico, which this investor’s group [estimates](http://voices.washingtonpost.com/ezra-klein/2010/05/the_economic_consequences_of_t.html) will carry costs in the tens of billions at the minimum. Legally, the government and taxpayers will have to pick up that tab. There’s talk from Obama that BP will agree to cover the rest of the costs themselves, but color me sceptical on that one. ---
**Author:** ![Oakminster](https://avatars.discourse-cdn.com/v4/letter/o/77aa72/32.png) [@Oakminster](https://boards.straightdope.com/u/Oakminster)\ **Post date:** [May 3, 2010, 4:30pm UTC](https://boards.straightdope.com/t/current-oil-spill-vs-exxon-valdez/537951/23 "2010-05-03T16:30:25Z")
> [@LonghornDave](#): > > Also, while this isn’t an item that many people are talking about, there are a tremendous number of oil and natural gas wells in the state waters and marshy areas along the coast of LA. Many of those operations are going to be shut in affecting hundreds of the smaller oil and gas companies and related service companies in the area. It is just in general a terrible things for the domestic oil and gas industry. And that likely means that gas prices will be going up even moreso than usual this summer, which will spread the pain around enough that everybody gets some. ---
**Author:** ![gonzomax](https://avatars.discourse-cdn.com/v4/letter/g/e8c25b/32.png) [@gonzomax](https://boards.straightdope.com/u/gonzomax)\ **Post date:** [May 3, 2010, 6:36pm UTC](https://boards.straightdope.com/t/current-oil-spill-vs-exxon-valdez/537951/24 "2010-05-03T18:36:43Z")
Then BP will fight every law suit with high powered , connected lawyers. ---
**Author:** ![Rumor\_Watkins](https://avatars.discourse-cdn.com/v4/letter/r/d9b06d/32.png) [@Rumor\_Watkins](https://boards.straightdope.com/u/Rumor_Watkins)\ **Post date:** [May 3, 2010, 6:44pm UTC](https://boards.straightdope.com/t/current-oil-spill-vs-exxon-valdez/537951/25 "2010-05-03T18:44:33Z")
> [@The\_Great\_Philosopher](#): > > It isn’t as simple as that though, because legally BP [can’t be required](http://news.firedoglake.com/2010/05/03/who-pays-for-the-bp-oil-spill/) to pay more than $75 million towards the damages. In 1986 Congress set up an Oil Spill fund which all major oil companies contribute to and which can be tapped to cover the cost of spills, and in exchange they limited the maximum damages payable by oil companies in the event of a spill to $75 million. The Oil Spill fund is worth between $1 billion and $1.6 billion. > > The problem is that’s not going to be anywhere near enough to cover the costs of the spill in the Gulf of Mexico, which this investor’s group [estimates](http://voices.washingtonpost.com/ezra-klein/2010/05/the_economic_consequences_of_t.html) will carry costs in the tens of billions at the minimum. Legally, the government and taxpayers will have to pick up that tab. There’s talk from Obama that BP will agree to cover the rest of the costs themselves, but color me sceptical on that one. cute, huh. ☹ ---
**Author:** ![LonghornDave](https://avatars.discourse-cdn.com/v4/letter/l/a87d85/32.png) [@LonghornDave](https://boards.straightdope.com/u/LonghornDave)\ **Post date:** [May 3, 2010, 7:21pm UTC](https://boards.straightdope.com/t/current-oil-spill-vs-exxon-valdez/537951/26 "2010-05-03T19:21:23Z")
> [@The\_Great\_Philosopher](#): > > It isn’t as simple as that though, because legally BP [can’t be required](http://news.firedoglake.com/2010/05/03/who-pays-for-the-bp-oil-spill/) to pay more than $75 million towards the damages. In 1986 Congress set up an Oil Spill fund which all major oil companies contribute to and which can be tapped to cover the cost of spills, and in exchange they limited the maximum damages payable by oil companies in the event of a spill to $75 million. The Oil Spill fund is worth between $1 billion and $1.6 billion. > > The problem is that’s not going to be anywhere near enough to cover the costs of the spill in the Gulf of Mexico, which this investor’s group [estimates](http://voices.washingtonpost.com/ezra-klein/2010/05/the_economic_consequences_of_t.html) will carry costs in the tens of billions at the minimum. Legally, the government and taxpayers will have to pick up that tab. There’s talk from Obama that BP will agree to cover the rest of the costs themselves, but color me sceptical on that one. Of course people shouldn’t misread what you wrote and assume that BP is only going to be responsible for $75 million here. In fact, I am fairly confident that they have already spent more than $75 million. They are responsible for the costs of fixing the spill and cleaning it up. That is going to be in the multi billions level. Further, there is also no way that they pay out only $75 million in damages. ---
**Author:** ![LonghornDave](https://avatars.discourse-cdn.com/v4/letter/l/a87d85/32.png) [@LonghornDave](https://boards.straightdope.com/u/LonghornDave)\ **Post date:** [May 3, 2010, 7:22pm UTC](https://boards.straightdope.com/t/current-oil-spill-vs-exxon-valdez/537951/27 "2010-05-03T19:22:30Z")
> [@gonzomax](#): > > Then BP will fight every law suit with high powered , connected lawyers. Actually, I imagine they will settle nearly every lawsuit. Fighting every lawsuit would cost them far more than settling. ---
**Author:** ![The\_Great\_Philosopher](https://avatars.discourse-cdn.com/v4/letter/t/3ec8ea/32.png) [@The\_Great\_Philosopher](https://boards.straightdope.com/u/The_Great_Philosopher)\ **Post date:** [May 3, 2010, 7:33pm UTC](https://boards.straightdope.com/t/current-oil-spill-vs-exxon-valdez/537951/28 "2010-05-03T19:33:07Z")
> [@LonghornDave](#): > > Of course people shouldn’t misread what you wrote and assume that BP is only going to be responsible for $75 million here. In fact, I am fairly confident that they have already spent more than $75 million. They are responsible for the costs of fixing the spill and cleaning it up. That is going to be in the multi billions level. Further, there is also no way that they pay out only $75 million in damages. You’re right, the $75 million cap refers to non-containment and clean-up costs. So BP will be on the hook for the containment and clean-up costs, and I’m sure that’ll be expensive. However what I said wasn’t all that misleading, because the economic costs I referred to (estimated to be at least $10-20 billion, and possibly in the hundreds of billions in the worst case scenario) do not include containment and clean-up costs either. As the law stands, the government or affected parties will have to pick up the tab for the vast majority of those costs. I’m not sure what you’re basing the statement, “there is no way that they pay out only $75 million in damages” on. They cannot legally be held accountable for more than $75 million of the non-containment and clean-up costs. What do you mean? ---
**Author:** ![LonghornDave](https://avatars.discourse-cdn.com/v4/letter/l/a87d85/32.png) [@LonghornDave](https://boards.straightdope.com/u/LonghornDave)\ **Post date:** [May 3, 2010, 8:07pm UTC](https://boards.straightdope.com/t/current-oil-spill-vs-exxon-valdez/537951/29 "2010-05-03T20:07:12Z")
> [@The\_Great\_Philosopher](#): > > You’re right, the $75 million cap refers to non-containment and clean-up costs. So BP will be on the hook for the containment and clean-up costs, and I’m sure that’ll be expensive. However what I said wasn’t all that misleading, because the economic costs I referred to (estimated to be at least $10-20 billion, and possibly in the hundreds of billions in the worst case scenario) do not include containment and clean-up costs either. As the law stands, the government or affected parties will have to pick up the tab for the vast majority of those costs. I don’t think you said anything incorrect. However, for the average person on this website who quickly skims things and has a cynical attitude toward anything that can be remotely considered pro-business, they will read it and think they only are going to be out $75 million for this. > [@The\_Great\_Philosopher](#): > > I’m not sure what you’re basing the statement, “there is no way that they pay out only $75 million in damages” on. They cannot legally be held accountable for more than $75 million of the non-containment and clean-up costs. What do you mean? For starters, have you read the Oil Pollution Act and related language saying that a company’s limit is $75 million or are you basing your certainty on the linked article? I went through the OPA website and then quickly skimmed the act and didn’t see any mention of it. I’m not in any way saying that it doesn’t say something like that, I am just wondering why you are so certain. I tend to like first level sources, so I would like to read the actual text of the act. Further, the market certainly feels like they will pay significantly more than just cleanup costs and damages of $75 million. It’s not like the cleanup costs are going to be anything close to $40 billion and that’s what the market cap is down by. Cleanup and containment is probably somewhere in the $2 - 10 billion range. You could think this is just a massive overreaction by the market, but I think that they believe there will be a massive hit to BP. ---
**Author:** ![The\_Great\_Philosopher](https://avatars.discourse-cdn.com/v4/letter/t/3ec8ea/32.png) [@The\_Great\_Philosopher](https://boards.straightdope.com/u/The_Great_Philosopher)\ **Post date:** [May 3, 2010, 8:43pm UTC](https://boards.straightdope.com/t/current-oil-spill-vs-exxon-valdez/537951/30 "2010-05-03T20:43:13Z")
> [@LonghornDave](#): > > For starters, have you read the Oil Pollution Act and related language saying that a company’s limit is $75 million or are you basing your certainty on the linked article? I went through the OPA website and then quickly skimmed the act and didn’t see any mention of it. I’m not in any way saying that it doesn’t say something like that, I am just wondering why you are so certain. I tend to like first level sources, so I would like to read the actual text of the act. It’s Section §1004 of the [Oil Pollution Act of 1990](http://www.epa.gov/emergencies/content/lawsregs/opaover.htm) (summary and full text are at that link). It’s also been reported in the [New York Times](http://www.nytimes.com/2010/05/02/us/02liability.html) and a group of senators are [proposing a bill](http://www.huffingtonpost.com/2010/05/03/robert-menendez-pushes-bi_n_561011.html) to raise the cap from $75 million to $10 billion. > [@](#): > > Further, the market certainly feels like they will pay significantly more than just cleanup costs and damages of $75 million. It’s not like the cleanup costs are going to be anything close to $40 billion and that’s what the market cap is down by. Cleanup and containment is probably somewhere in the $2 - 10 billion range. You could think this is just a massive overreaction by the market, but I think that they believe there will be a massive hit to BP. I don’t think the market value is necessarily a good way of assessing how much BP will have to pay. BP will indeed be taking a big direct financial hit - I’ve seen predictions that the containment and clean-up will cost them billions. But there’s a whole bunch of other factors that could affecting the market value: the reinstated moratorium on off-shore drilling, the fact they’ve just lost a major rig and the oil beneath it, the fact 11 of their workers just died, the terrible publicity (they’re getting slammed by the US President in televised press conferences, that’s about as bad as publicity can get), the fact that all drilling in the Gulf of Mexico is going to be severely hindered for months. Or a whole host of other factors. I don’t think you can assess it in terms of, “well, their value is down $40 billion, so they must be paying out $40 billion for total damages”. ---
**Author:** ![LonghornDave](https://avatars.discourse-cdn.com/v4/letter/l/a87d85/32.png) [@LonghornDave](https://boards.straightdope.com/u/LonghornDave)\ **Post date:** [May 3, 2010, 9:26pm UTC](https://boards.straightdope.com/t/current-oil-spill-vs-exxon-valdez/537951/31 "2010-05-03T21:26:01Z")
> [@The\_Great\_Philosopher](#): > > It’s Section §1004 of the [Oil Pollution Act of 1990](http://www.epa.gov/emergencies/content/lawsregs/opaover.htm) (summary and full text are at that link). It’s also been reported in the [New York Times](http://www.nytimes.com/2010/05/02/us/02liability.html) and a group of senators are [proposing a bill](http://www.huffingtonpost.com/2010/05/03/robert-menendez-pushes-bi_n_561011.html) to raise the cap from $75 million to $10 billion. Just from quickly scanning the bill, the there are exceptions to the limitation of $75 million. [QUOTE=Sec. 2704. Limits on liability] (c) Exceptions ``` (1) Acts of responsible party Subsection (a) of this section does not apply if the incident was proximately caused by-- (A) gross negligence or willful misconduct of, or (B) the violation of an applicable Federal safety, construction, or operating regulation by, the responsible party, an agent or employee of the responsible party, or a person acting pursuant to a contractual relationship with the responsible party (except where the sole contractual arrangement arises in connection with carriage by a common carrier by rail). (2) Failure or refusal of responsible party Subsection (a) of this section does not apply if the responsible party fails or refuses-- (A) to report the incident as required by law and the responsible party knows or has reason to know of the incident; (B) to provide all reasonable cooperation and assistance requested by a responsible official in connection with removal activities; or (C) without sufficient cause, to comply with an order issued under subsection (c) or (e) of section 1321 of this title or the Intervention on the High Seas Act (33 U.S.C. 1471 et seq.). ``` [/QUOTE] Also, I wonder if the liability limits have been modified. The following seems to indicate that it should have at least been looked at. > [@](#): > > (4) Adjustment to reflect Consumer Price Index > > ``` > The President, by regulations issued not later than 3 years > after July 11, 2006, and not less than every 3 years thereafter, > shall adjust the limits on liability specified in subsection (a) to > reflect significant increases in the Consumer Price Index. > > ``` ---
**Author:** ![The\_Great\_Philosopher](https://avatars.discourse-cdn.com/v4/letter/t/3ec8ea/32.png) [@The\_Great\_Philosopher](https://boards.straightdope.com/u/The_Great_Philosopher)\ **Post date:** [May 3, 2010, 9:40pm UTC](https://boards.straightdope.com/t/current-oil-spill-vs-exxon-valdez/537951/32 "2010-05-03T21:40:20Z")
> [@LonghornDave](#): > > Just from quickly scanning the bill, the there are exceptions to the limitation of $75 million. > > Also, I wonder if the liability limits have been modified. The following seems to indicate that it should have at least been looked at. Well, according to the New York Times and to a handful of Congressmen, the first point does not apply to BP and the answer to the second is “no”. If you have any evidence for either claim I’d be happy to take a look at it though. ---
**Author:** ![Category5](https://avatars.discourse-cdn.com/v4/letter/c/85f322/32.png) [@Category5](https://boards.straightdope.com/u/Category5)\ **Post date:** [May 4, 2010, 12:25am UTC](https://boards.straightdope.com/t/current-oil-spill-vs-exxon-valdez/537951/33 "2010-05-04T00:25:37Z")
In 2003, after a similar accident in the Gulf, BP and NOAA compiled a report that says: “Loss of well containment would result in more oil spilled in a week than occurred during the whole of the T/V Exxon’s Valdez oil spill.” If this is cranking out 200,000 gallons per day, that’s a million gallons every five days. You’ll hit 10,000,000 gallons in early June unless their containment vessels work. They just started drilling relief wells last week, these are expected to take two or three months to complete. If it takes 90 days, that 18,000,000 gallons sloshing around in the Gulf. The Exxon Valdez spilled 11,000,000 gallons. ---
**Author:** ![LonghornDave](https://avatars.discourse-cdn.com/v4/letter/l/a87d85/32.png) [@LonghornDave](https://boards.straightdope.com/u/LonghornDave)\ **Post date:** [May 4, 2010, 1:38am UTC](https://boards.straightdope.com/t/current-oil-spill-vs-exxon-valdez/537951/34 "2010-05-04T01:38:41Z")
> [@The\_Great\_Philosopher](#): > > Well, according to the New York Times and to a handful of Congressmen, the first point does not apply to BP and the answer to the second is “no”. If you have any evidence for either claim I’d be happy to take a look at it though. It would seem like people would wait until after an investigation is completed before stating that BP was not negligent or in violation of any regulations. Further, how can they make a claim that they have provided all cooperation and assistance in the removal activities when those activities aren’t yet complete. Also, no offense to the New York Times, but the article you posted has already been corrected once for an error and a second error is obviously still in the article. They state that BP is a well-insured company; we know, however, that BP was self-insuring. ---
**Author:** ![Peremensoe](https://avatars.discourse-cdn.com/v4/letter/p/ce7236/32.png) [@Peremensoe](https://boards.straightdope.com/u/Peremensoe)\ **Post date:** [May 4, 2010, 2:45am UTC](https://boards.straightdope.com/t/current-oil-spill-vs-exxon-valdez/537951/35 "2010-05-04T02:45:52Z")
The estimates keep going up. Now the _[Wall Street Journal](http://online.wsj.com/article/SB10001424052748703871904575216382160623498.html?mod=rss_Today%27s_Most_Popular)_ quotes “industry experts” saying that the current flow rate may be 25,000 barrels (one million gallons) per day. Also today the [Coast Guard and Ken Salazar](http://online.wsj.com/article/BT-CO-20100502-702751.html?mod=WSJ_latestheadlines) suggested that the daily flow rate might balloon to 100,000 barrels per day in a “worst case scenario,” if the well head breaks open further, and perhaps take 90 days to bring under control. By those WAG figures, the current spill could conceivably be **35 times larger** than _Valdez_. It’s becoming clear that nobody _really_ knows how big this is or how big its going to get before it’s done. ---
**Author:** ![The\_Great\_Philosopher](https://avatars.discourse-cdn.com/v4/letter/t/3ec8ea/32.png) [@The\_Great\_Philosopher](https://boards.straightdope.com/u/The_Great_Philosopher)\ **Post date:** [May 4, 2010, 1:24pm UTC](https://boards.straightdope.com/t/current-oil-spill-vs-exxon-valdez/537951/36 "2010-05-04T13:24:32Z")
> [@LonghornDave](#): > > It would seem like people would wait until after an investigation is completed before stating that BP was not negligent or in violation of any regulations. Further, how can they make a claim that they have provided all cooperation and assistance in the removal activities when those activities aren’t yet complete. Maybe. On the other hand, maybe BP will make use of this provision: [QUOTE=Section 2702] (A) Third party treated as responsible party ``` Except as provided in subparagraph (B), in any case in which a responsible party establishes that a discharge or threat of a discharge and the resulting removal costs and damages were caused solely by an act or omission of one or more third parties described in section 2703(a)(3) of this title (or solely by such an act or omission in combination with an act of God or an act of war), the third party or parties shall be treated as the responsible party or parties for purposes ``` [/QUOTE] Then they can blame the crisis on Transocean and end up paying nothing at all! And there’s no way you can disprove that, because there’s been no investigation or legal hearings yet, right? I’m being facetious, but the point is, reading the raw text of the legislation doesn’t offer us much because neither of us is a legislative or legal expert. I’ve seen no evidence that BP will legally have to pay more than $75 million for non-containment and cleanup costs, and until I do I’m not going to buy it. ---
**Author:** ![Khendrask](https://avatars.discourse-cdn.com/v4/letter/k/3e96dc/32.png) [@Khendrask](https://boards.straightdope.com/u/Khendrask)\ **Post date:** [May 4, 2010, 1:43pm UTC](https://boards.straightdope.com/t/current-oil-spill-vs-exxon-valdez/537951/37 "2010-05-04T13:43:00Z")
> [@LonghornDave](#): > > To expand, there are 42 gallons in a barrel. /nitpick - 42 Gal (US) in a barrel (Oil Measurement). 31.5 Gal (US) in a barrel (US Measurement). 43.2 Gal (US) in a barrel (UK Measurement). For completeness, 1.2009 Gal (US) in a Gallon (UK Measurement). Times like this, I can see the appeal of the metric system. ---
**Author:** ![Peremensoe](https://avatars.discourse-cdn.com/v4/letter/p/ce7236/32.png) [@Peremensoe](https://boards.straightdope.com/u/Peremensoe)\ **Post date:** [May 5, 2010, 5:54pm UTC](https://boards.straightdope.com/t/current-oil-spill-vs-exxon-valdez/537951/38 "2010-05-05T17:54:27Z")
> [@spark240](#): > > The estimates keep going up. And now again, > [@Market Watch](#): > > BP officials told members of Congress in a closed-door meeting that the oil leak in the Gulf of Mexico could be spewing as much as 60,000 barrels of crude a day, well over an earlier estimate of 5,000 barrels a day, according to reports on Wednesday. ---
**Author:** ![KneadToKnow](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/kneadtoknow/32/3999_2.png) [@KneadToKnow](https://boards.straightdope.com/u/KneadToKnow)\ **Post date:** [May 5, 2010, 7:18pm UTC](https://boards.straightdope.com/t/current-oil-spill-vs-exxon-valdez/537951/39 "2010-05-05T19:18:20Z")
Wait, then why have I always heard the term “55 gallon drum”? ---
**Author:** ![ShibbOleth](https://avatars.discourse-cdn.com/v4/letter/s/848f3c/32.png) [@ShibbOleth](https://boards.straightdope.com/u/ShibbOleth)\ **Post date:** [May 5, 2010, 7:40pm UTC](https://boards.straightdope.com/t/current-oil-spill-vs-exxon-valdez/537951/40 "2010-05-05T19:40:19Z")
> [@KneadToKnow](#): > > Wait, then why have I always heard the term “55 gallon drum”? Drum \<\> barrel [Previous page](https://boards.straightdope.com/t/current-oil-spill-vs-exxon-valdez/537951.md?page=1) [Next page](https://boards.straightdope.com/t/current-oil-spill-vs-exxon-valdez/537951.md?page=3)