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Costs of the Bouchard No. 120 Oil Spill

An oiled lobster pot and a barrel of floats awaiting disposable. Photo taken in Fairhaven on June 9, 2003.

Costs of the Bouchard No. 120 oil spill

by Dr. Joe Costa, Buzzards Bay NEP Executive Director

Soon after the Bouchard No. 120 spill, we noted that Buzzards Bay was like a big bathtub, with walls on most sides, and that we expected much of the spilled oil to wash ashore, rather than floating out to sea. Furthermore, because the 98,000 gallons of spilled No. 6 fuel oil was black and conspicuous, sticky, and hard to clean off surfaces, and because the spill occurred in one of the most densely populated and heavily utilized East Coast shorelines, we expected this spill to be among the most costly to clean on a dollar per gallon basis. This expectation was met, and the Bouchard No. 120 spill may be the most expensive spill to clean up per gallon for any spill over 50,000 gallons.

In July 2003, the Command Center had estimated that direct cleanup costs totaled $38 million dollars. This estimate was based on expected costs, and some anticipated costs, such as certain municipal expenditures. However, the latter expenses were largely paid directly through the claims process set up by Bouchard's Insurance Company. In April 2004, the Buzzards Bay NEP received from Bouchard's claim agent revised amounts of $35.5 million for direct cleanup costs, and $2.5 million for claims. This claims process paid some municipality expenses, and also paid private damages and loss of income of commercial shellfisherman. Without knowing the breakdown in the claims costs, for the discussion below we will presume direct cleanup costs by the towns paid as claims amounted to half a million dollars, so total cleanup costs for the Bouchard No. 120 spill were about $36 million.

Is $36 million a lot of money for this size spill? Is $2 million or $2.5 million a lot of money for third party claims for this size spill? In April 2004, it was also announced that Bouchard Transportation Company would pay $9 or $10 million dollars as a result of a guilty plea in the federal criminal investigation. Over the next year, scientists will continue to evaluate damages to natural resources, and assess financial damages for those impacts. How much will the assessed damages be? How will these natural resource damages assessments compare to other spills?




I try to answer these questions below. However, to understand the costs associated with the Bouchard No. 120 spill in Buzzards Bay, you must go back to the 1989 Exxon Valdez oil spill, and the subsequent federal legislation passed that defines the cleanup and cost processes in the aftermath of an oil spill.

The Exxon Valdez spill and OPA 90

On March 24, 1989 the oil tanker Exxon Valdez grounded on Bligh Reef in Prince William Sound, Alaska, resulting in the release of 10.8 million gallons of Alaska North Slope crude oil. In the first days and weeks of the spill there was considerable confusion as to who was responsible for the cleanup, who would pay for those costs, and what emergency actions that state and federal agencies should take. Because of this accident, the delays and confusion about the cleanup, and the questions about liability for environmental impacts, the US Congress passed the Oil Pollution Act of 1990 (OPA 90). OPA 90 established cleanup procedures, cleanup financing, and the financial claims and damages process used for oil spills today. OPA 90 also set in motion new requirements for the phasing in of double hulled tankers, as well as a wide variety of navigation and other rules designed to reduce the likelihood of future accidents, and ensure their timely cleanup of spills.

Generally, OPA 90 is viewed as a legislative success story. In the decade after the passage of OPA 90, the number of annual oil spills declined 50%, and the volume of oil spilled per volume transported declined nearly two-thirds. In the following years, there have been several notable, but lesser spills than the Exxon Valdez in the US. These new experiences have lead to the federal government further changing and improving upon the oil spill rules and regulations. In a nutshell, today the core of OPA 90 performs these three functions:

• Reduces the potential for future accidents or failures of oil-carrying vessels or oil facilities that could result in oil spills
• Allows the government, in partnership with the Responsible Party, to take immediate control of spills that do occur
• Helps ensure that spilled oil is removed as quickly as practical to help prevent substantive damage to the marine environment

OPA 90 also helped set up a $1 billion Oil Spill Liability Trust Fund for oil spill cleanup. This fund was created by a tax on oil transportation during the early 1990s.

The actual current OPA 90 regulations are found in the US Code Title 33 USC Chapter 40. In 2001, the USCG released a good Programatic Assessment of the OPA90 regulations, which includes an assessment of the relative benefits of double hulls and financial responsibility and other factors in reducing oil spills.

Liability Limits

The limits of liability under OPA are defined in the US Code 33 USC Section 1321 and 33 USC Section 2704. For accidents the size of the Bouchard No. 120, the liability of cleanup costs is $10 million dollars, with the remainder of the cleanup costs being paid by the national oil spill trust fund. However, if the accident was caused by "gross negligence or willful misconduct of, or the violation of an applicable Federal safety, construction, or operating regulation[s]...," the $10 million limit does not apply. If the Responsible Party is found criminally negligent, they might have to pay all cleanup costs, as well as additional fines and fees.

Bouchard Settlement and Criminal Fines

On March 29, 2004, the US Attorney involved in the case announced that Bouchard Transportation agreed to plead guilty to two charges of criminal negligence and pay a $10 million dollar fine. The $10 million dollar fine will be reduced to $9 million if Bouchard agrees to undertake certain actions. Bouchard has also agreed to pay cleanup costs and approved claims. This agreement was finalized in November 2004. Go to our Criminal Settlement Information page for more information.

How does the Bouchard No. 120 penalty compare to other spills? It is larger than the last New England penalty of $8.5 million for the North Cape, and the dollar amount is among the highest in the US. Deciding upon the penalty amount clearly depends on many factors. However, in reviewing the data from the 1999 Helton and Penn report (data table at bottom of this page), penalties correspond very roughly with cleanup costs as shown by the graphic below. It should be noted that both axes have logarithmic scales, so the data is in fact quite variable.

The Exxon Valdez versus the Bouchard No. 120

It has now been agreed upon by the Coast Guard that 98,000 gallons of oil was spilled by the Bouchard No. 120 in April 2003. While the Exxon Valdez spill is at least 100 times larger than the Buzzards Bay spill, some interesting comparisons can be made between the spills.

Like Buzzards Bay, Prince William Sound is a semi-enclosed body of water with many islands and a complex irregular coastline. Buzzards Bay however, has only 350 miles of coast, in contrast to 3,000 miles of coast in Prince William Sound. If the oil had been spread uniformly around both Buzzards Bay and Prince William Sound on a per mile basis, Buzzards Bay received about 280 gallons per mile, whereas Prince William Sound averaged nearly 13 times more, at 3,600 gallons per mile. Of course, in neither spill was oil uniformly spread around the bay. In Prince William Sound, only 486 miles or 16% of the total shoreline of the sound was oiled to some degree. In Buzzards Bay, a much finer level of oiling was documented (most of Prince William Sound is remote and unpopulated and was not scrutinized to the same level as Buzzards Bay), so the best comparison is made by comparing "light", "medium" and "heavily oiled" areas of Buzzards Bay (excluding the "very light" and "trace" levels of oiling). The "light", "medium" and "heavily oiled" areas of Buzzards Bay totaled roughly 51 miles, or roughly 15% of the coast. Thus, on a per mile of affected shoreline basis, Prince William Sound, received 22,000 gallons per affected mile, whereas Buzzards Bay received 1,900 gallons per affected mile.

Crude Oil, like No. 6 oil, has a strong impact on birds. In Prince William Sound, 30,000 bird carcasses were found, or one bird for every 360 gallons spilled. In Buzzards Bay, 462 bird carcasses were found, or one bird for every 220 gallons spilled. Unlike Buzzards Bay, many marine mammals were killed in Prince William Sound (1000 otters and 100 harbor seals). The absence of mammal mortality in Buzzards Bay probably reflects both the lesser abundance of mammals in Buzzards Bay on a per square mile basis, and the more pronounced and continuous abundance of oil in certain parts of Prince William Sound.

Reported cleanup costs for the Exxon Valdez Spill vary, but the total $2.5 billion is often cited. Adjusting for inflation (50% CPI increase 1989 to 2003), this equals $3.8 billion dollars today. Adjusted for the volume of the spill, this equals $351 per gallon spilled. In Buzzards Bay, our last reported costs from July 2003 was that the emergency response totaled $38 million, or $388 per gallon spilled. Both cleanup costs per gallon exceed the Exxon Valdez example, and as shown by the tables below, the Bouchard No. 120 spill may have one of the highest per gallon cleanup costs for oil spills over 20,000 gallons.

Besides the $2.5 billion cleanup costs in the Exxon Valdez spill, court settlements and claims totaled $1 billion, and natural resource damages and other punitive damages in the Exxon Valdez spill totaled $5 billion, for a total cleanup and damage cost of $8.5 billion.

Many of the larger spills have comparable cleanup costs per gallon as shown by the table below and as described in the paper by . For example, the June 1989 World Prodigy spill of 294,000 gallons of No. 2 fuel oil in Narragansett Bay Rhode Island had a cleanup cost of $78.4 million, or $267 per gallon.

The Cost of Claims

One of the advantages of OPA 90 is that individuals and businesses can immediately file damage claims and obtain timely reimbursements. This process worked well overall in Buzzards Bay, and commercial shellfisherman, marinas, and property owners received payments for lost incomes, cleaning costs, equipment replacement costs, and other spill cleanup related expenses, including those by municipalities. As of the middle of last summer, more than 460 claims were filed with an undisclosed total payout. Under OPA90, the Responsible Party does not have to disclose the total of the payouts, however, Bouchard's Agent reported to us that those claims have amounted to $2.5 million. Some of these claims included loss of income (from shellfisherman for example), property damage or loss. For example, oiled boats or fishing equipment had to be cleaned, or in some cases equipment needed to be replaced, or the company experienced a loss in services. A few of the claims were for emergency response form municipal agencies, and these totals will be known from municipal public meetings. For example, a few of the claims for fire department action may total in the tens of thousands of dollars, but it is likely that most claims were under a few thousand dollars. Given the small number of claims, the $2.5 million total seems consistent.

NRDA Costs

Could the Natural Resource Damage Assessment (NRDA) costs or valuation for Buzzards Bay exceed actual cleanup costs? Some more recent oil spills in New England can elucidate the answer. In January 1996, the oil tanker North Cape grounded off Moonstone Beach in Rhode Island, and spilled 867,000 gallons of No.2 fuel oil. Much oil washed ashore in a concentrated area, but most washed out to sea and dissipated. Cleanup totaled only $6.6 million or a remarkably low $8 dollars per gallon. Fines for negligence totaled $8.5 million, and the NRDA assessment was valued at $18 million. Similarly, in the American Trader heavy crude spill off Huntington Beach, CA, cleanup response costs were approximately $14 million, and penalties were $5.3 million, and NRDA assessment were valued at $23 million. While in both these cases the NRDA assessment exceeded spill cleanup costs, this may not be the case in Buzzards Bay. The NRDA assessment will depend on estimates of the number of animals killed, not the volume of oil or cleanup costs. The Bouchard spill appears to have had less birds and invertebrates killed than these two spills, suggesting that the NRDA assessment may be lower. Some other recent spills have had NRDA costs have amounted to only $1 to $4 million. NRDA costs are not punitive, they are the costs of actual lost environmental services. On the other hand some threatened US species were killed and habitat damaged in Buzzards Bay, and the value to be assigned to these damages is still unresolved. The NRDA assessment is not expected to be complete until 2006.

Summary of oil spill potential costs for Bouchard under OPA90

			Payment by:	Payment by:
Expense Category	Process	Estimated	Responsible Party	Oil Spill Liability Trust Fund	Comments
Cleanup Costs	Overseen by Command Center	$36 Million	up to $10 Million (for this size spill)	balance	This $36 million total was as of 4/19/04. The RP could pay all because it was criminally negligent.
3rd Party Claims Process	Claims filed with BTC's insurance company, only claims accepted by RP are paid	$2.5 Million	All	None	Includes private claims and some municipality claims.
Natural Resource Damages	NRDA Trustees	unknown	All?	None?	Probably millions
Private Lawsuits	Legal system	unknown	All	None	A lawsuit theoretically could be filed for denied claims, but it is uncertain if any lawsuits will be filed
Criminal Fines	Settlement or criminal case	$9 or $10 million	All	None	Varies from case to case

Costs not included in this table include the RP's casualty and salvage loss, and finacial losses of cargo.

Oil Spill Costs Comparison Tables

In the table below, clean up costs per gallon are shown to illustrate the variability in this expense depending on the oil, and how much washed ashore.

Accident	year	oil type	volume (ga)	infl. adj. clean-up costs	cost per gallon	penalties
Exxon Valdez, Price William Sound AK	1989	Crude	10,836,000	$3,800,000,000	$351	$165,000,000
Bouchard 120, Buzzards Bay	2003	No. 6	98,000	$36,000,000	$367	$10,000,000
North Cape, Moonstone Beach RI	1996	No. 2	828,000	$6,600,000	$8	$8,500,000
World Prodigy, Narragansett RI	1989	No. 2	294,000	$29,992,500	$102	?
American Trader, Huntington Beach, CA	1990	H Crude	397,236	$19,600,000	$49	$5,300,000

The following table is from Helton, D. and T. Penn. 1999. PUTTING RESPONSE AND NATURAL RESOURCE DAMAGE COSTS IN PERSPECTIVE. Paper ID #114, 1999 International Oil Spill Conference. The dollar values were adjusted to 1997 dollars.

Incident	PRP Response	Public Response	NRDA	3rd party	Penalties	Other	Total
Amazon Venture	41.80%	3.20%	49.60%	?	?	5.30%	$3,849,679
American Trader	20.60%	3.40%	39.50%	20.60%	9.10%	6.80%	$71,536,431
An Ping	?	61.20%	5.10%	?	31.60%	2.10%	$492,877
Apex Houston	?	0.50%	94.90%	?	3.80%	0.10%	$9,880,307
Apex Towing/Shinoussa	?	39.20%	26.90%	?	?	34.00%	$7,355,975
Arco Pipeline	?	3.90%	32.80%	54.70%	6.00%	2.60%	$23,759,517
Arco Anchorage	94.80%	2.10%	2.30%	?	0.20%	0.60%	$20,463,216
Berry Petroleum	?	38.60%	33.80%	1.30%	25.50%	0.80%	$4,351,687
BT Nautilus	82.40%	0.70%	16.50%	?	?	0.40%	$29,787,835
Burlington Asphalt	?	80.80%	17.90%	?	?	1.30%	$304,522
Colonial Pipeline	50.40%	2.00%	8.40%	33.60%	5.00%	0.50%	$33,033,904
Exxon Bayway	30.90%	?	17.10%	?	8.60%	43.30%	$71,427,585
Exxon Valdez	27.30%	1.50%	9.70%	57.80%	0.30%	3.50%	$11,859,836,448
Fortuna Reefer	?	23.80%	76.20%	?	?	?	$1,640,000
Glacier Bay	1.00%	3.60%	0.00%	95.30%	?	0.10%	$90,482,442
Greenhill	?	24.70%	73.60%	?	?	1.60%	$3,101,243
Jahre Spray	?	34.00%	47.00%	9.80%	2.60%	6.60%	$319,535
Jupiter	?	3.40%	10.40%	81.30%	?	4.90%	$7,555,393
Mega Borg	?	61.30%	5.00%	?	?	33.60%	$6,706,201
Mobiloil	35.90%	0.50%	2.60%	?	0.50%	60.60%	$12,910,203
Morris J. Berman	5.90%	48.30%	?	1.30%	44.30%	0.20%	$183,186,201
Nestucca	23.50%	23.40%	20.50%	4.20%	?	28.40%	$28,916,857
Nosac Forest	?	13.40%	49.40%	?	36.30%	0.90%	$275,735
Presidente Rivera	?	47.10%	41.00%	3.20%	6.50%	2.20%	$8,017,890
Quinnipiac River	?	94.30%	5.40%	?	?	0.30%	$736,047
RTC-380	?	41.00%	56.70%	?	?	2.40%	$466,399
Tenyo Maru	16.20%	36.10%	37.10%	0.10%	10.10%	0.40%	$17,473,459
Texaco Anacortes	79.80%	1.50%	5.00%	?	5.00%	8.70%	$11,809,453
Unocal Tank Farm	88.60%	1.80%	9.50%	?	?	0.10%	$16,782,110
World Prodigy	39.00%	22.00%	9.00%	14.60%	13.90%	1.40%	$9,285,247

Links relating to Oil Spill Costs and OPA 90

Estimating Cleanup Costs for Oil Spills (web article, 1 MB pdf file)
Worldwide Analysis of Marine Oil Spill Cleanup Cost Factors (web article, 1 MB pdf)
NOAA Oil spill case histories (2 MB pdf file).
USCG Regional Response Teams Pamphlet Series page
Newpaer Article on a recent Washington state spill: "Oil spill costs -- in dollars, ecological damage -- rising."
UC Santa Barbara PhD student (Victoria Broje) web page of oil spill links
USCG OPA 90 Programmatic Regulatory Assessment (2001)
US EPA site on oil spill penalties
Tank barge regulations
1995 Federal Register notification on tank barge regulations.

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