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The Economic Impact Of The Gulf Oil Spill

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As BP personnel and volunteers try to contain the oil spill in the Gulf of Mexico, the social and environmental costs to the Gulf States grow by the hour. The calamitous oil spill, which by most estimates is leaking 5,000 barrels a day, has a hefty price tag and many are wondering who will assume responsibility for liability claims.

While it is generally assumed BP is responsible for all costs associated with the cleanup, White House press secretary Robert Gibbs was asked Monday whether the Oil Pollution Act of 1990 limits the amount of liability assessed to a company at $75 million, that is, beyond the initial cleanup cost. At the time, Mr. Gibbs wasn't clear on the specific provisions of the bill.

Later in the day, Kenneth Baer, Communications Director for the Office of Management and Budget, issued the following statement: "Let's be clear: BP is responsible for -- and will be held accountable for -- the very significant clean-up and recovery costs. If BP is found to be grossly negligent or to have engaged in willful misconduct or conduct in violation of federal regulations, then there is no cap under the Oil Pollution Act for damages. "You can be sure'' Baer wrote, "that BP will be held accountable to the full extent of the law.''

On Monday, Democratic Sens. Bill Nelson of Florida and Robert Menendez and Frank Lautenberg of New Jersey introduced legislation to raise the $75 million cap to $10 billion, a proposal quickly embraced by the White House. "We support efforts to raise the cap based on the information we currently have,'' Baer wrote in an email.

BP estimates the clean up is costing the company and its equity partners, Anadarko and Mitsui, $6 million a day, a figure sure to rise in the coming weeks as damage estimates are updated. The volume of the Deepwater Horizon spill has yet to be determined, unlike the Exxon Valdez spill in 1989 which held a known amount (10.8 million gallons) of crude oil. Already, this oil slick has leaked more than nine million gallons.

Felicia C. Coleman, Director of the Coastal & Marine Laboratory at Florida State University, says "many of these communities rely entirely on the high ecological productivity of the northeastern Gulf of Mexico, whether they are involved in commercial or recreational fishing (valued in the billions of dollars in this part of the country) or tourism (yet more billions). In some areas, it's not a question of recovery. It will mean the loss of a way of life.''

BP is pursuing three lines of attack simultaneously in order to stop the leak and secure the MC252 well. The first is with the blow out preventor (BOP) on the well using under water robots, which could stop or reduce the flow of oil; the second is the use of a subsea oil recovery plan using a containment system, or hood, over each of the three leaks they have identified. The final strategy is to drill a so-called "relief well" to intersect and permanently secure the leaking well.

As efforts continue to smother the spill, the National Oceanic and Atmospheric Administration (NOAA) is restricting fishing for a minimum of ten days in federal waters most affected by the BP oil spill, mainly between Louisiana state waters at the mouth of the Mississippi River to waters off Florida's Pensacola Bay.