The recent blowout at Greenoil’s offshore oil field operation off the coast of Antillia have raised a number of concerns regarding the criminal and civil liability implications of the incident. Thankfully, the well head has now been sealed, but oil from the original blowout continues to leak into surrounding international as well as the local waters and coasts of Antillia. This raises a major question for executives at Greenoil: what kind of civil and criminal liabilities can the international oil company expect to see in the coming months and years? This report addresses this question on two fronts: first and foremost, in respect to the possible civil and criminal legal actions which may be brought against the company and, second, on what grounds Greenoil is actually liable according to international and United States law.
This report is based on three primary types of resources: academic research regarding liability, an assessment of existing legal requirements, and a review of similar oil spill cases in the past and their resulting repercussions.
The combination of these resources creates a holistic picture for the executives at Greenoil, both in terms of what Greenoil may face in the future and what it is truly liable for. Overall, the report shows that Greenoil should expect to be held liable for at least the majority part of resulting environmental and economic damage in Antillia, both from the country itself and other international entities. However, the report also presents several ways that Greenoil can mitigate its liability by sharing the responsibility with other entities.
It is important to understand that there are many entities, both individual persons and large organizations, that will seek to make Greenoil completely liable for the oil spill off the coast of Antillia. By way of example, one organization’s report states that “An ever increasing number of instances of massive environmental damage and human rights violations result from the operation of multinational corporations” (Pigaru et al., 2012, 98). This quote by itself highlights the fact that many organizations and individuals are ready to jump on an incident like the Greenoil spill in Antillia, and keep them fully accountable. For that reason, this report highlights some of the possible entities that could lay claim to Greenoil’s liability, either on a criminal or else a civil front. These are identified below. The best way to understand the possible claimants for the Antillia spill is to look to a similar major oil spill from the past. The Deepwater Horizon oil spill in the Gulf of Mexico is a perfect example for this, as British Petroleum (BP) reached a nearly $8 billion settlement agreement with the claimants (Hassan, 2012). According to this report, the BP settlement came to two separate agreements, including “one relating to private economic losses in relation to the oil spill and the second to compensate individuals with medical claims related to the spill” (Hassan, 2012, n.p.).
Therefore, possible claimants for the Antillia spill will come from two sources: both the economic sector (such as larger businesses and even public governments) and from private individuals affected by the spill in the long run. Possible claimants run from large seafood producers to individual bartenders or souvenir vendors, as they rely on the tourism industry in Antillia for their paycheck. Greenoil should, therefore, immediately begin the process of identifying these specific possible claimants to avoid surprise in the near future. However, it is also clear that a settlement can be reached with these claimants, as has been seen in the past. How this can be achieved specifically will be discussed in more detail below. Another important aspect of an adequate preparation in response to the Antillia oil spill is to understand the international and United States laws surrounding oil spills and the liability of international oil companies. As of 2010, the legal requirement for liability in the United States is that oil and gas companies do not have to pay more than $75 million in “liability costs for accidents they cause- no matter how great the damages” (Loris, Spencer, & Carafano, 2010, n.p.). However, many individuals and organizations alike are fighting for reform in this area. Instead of individual accountability, the current legal system “starts with a very low liability cap” and then requires “all participants to contribute to a government-mandated trust fund to pay for damages” (Loris, Spencer, & Carafano, 2010, n.p.). According to some, this is simply socializing risk.
However, the system does stand in favor of Greenoil’s position, as it limits its financial liability. Understanding legal liability in the face of an international oil spill is certainly not an easy task. As one resource states, “The lw of oil spill liability is a patchwork, built from relatively ancient traditions of maritime law but with a major overlay of modern statues,” both a mixture of “civil liability (at both the federal and state level) and criminal regimes” (Richardson, 2010, 1). However, there are three specific principles that emerge from this patchwork, and all three are applicable to Greenoil’s case of the oil spill in Atillia. These three principles are strict liability, channeling of liability, and liability limits. While these are based on a variety of legal traditions, they all find their root in the Oil Pollution Act of 1990, which was “enacted largely in response to the last major oil spill, from the Exxon Valdez” (Richardson, 2010, 2). Richardson goes on to describe these three principles in detail, and it is worthwhile to address them here as well. First and foremost, strict liability means that the parties responsible for an oil spill are automatically liable for the damages caused by it. In other words, strict liability makes it unnecessary “to show that party acted negligently for liability to attach” (Richardson, 2010, 2).
In this way, Greenoil will automatically – although at least partly – be held liable for the Antillia oil spill, but that it can share liability with other parties involved in the oil spill. Channeling of liability means “specifying exactly who is to be treated as the responsible party for liability purposes” (Richardson, 2010, 2). Unfortunately for Greenoil, according to the channeling of liability the holder of the drilling permit is the responsible party for oil spills that occur in offshore facilities, like Deepwater Horizon and like the one Greenwater held off the coast of Antillia (Richardson, 2010, 2). The only way to overcome this is to pursue a civil suit to recover damages from other involved parties. However, Greenoil will only be directly held liable for $75 million, as that is the legal cap according to OPA 90 (Richardson, 2010, 3). While controversial, this is certainly beneficial for Greenoil, as it “applies to both major classes of damage from oil spills: natural resource damages and economic damages to private parties” (Richardson, 2010, 3). Therefore, even with the suits of potential claimants as discussed above, Greenoil’s direct liability will be limited to $75 million. However, this is also contingent on the type of oil spill; if the spill was caused by “gross negligence or willful misconduct or by violation of federal regulations,” there is no liability cap whatsoever (Richardson, 2010, 3). Therefore, as recommended below, Greenoil should conduct its own investigation immediately in order to determine the exact cause of the oil spill and if any misconduct was present.
It is also important to note that this liability cap does not necessarily apply to resulting criminal charges from the federal government, as seen with the Exxon Valdez oil spill nearly thirty years ago. In short, the varying laws on oil spill liability make understanding Greenoil’s exact liability in the wake of the Antillia oil spill relatively difficult. This is primarily because there is a difference between the legal framework of liability and what has been seen in reality in past cases of oil spills in international waters. While certain principles, like strict liability and channeling, make this process simpler, the simple fact that the operation was located off the coast of Antillia makes it more complicated as there are many more factors at play. As Richardson concludes, “The availability of different legal regimes (civil or criminal) and jurisdictions (state and federal) add significant complexity and uncertainty before litigation even reaches the trial phase” (Richardson, 2010, 5). However, the above discussion makes it clear that Greenoil will, at the very least, be held liable for both environmental and economic damages by both public and private parties. Greenoil should prepare accordingly, and specific next steps for how to address this legal liability – including both legal recourse and organizational strategy – are discussed in more detail below.
In addition to the legal framework, it is just as important to understand the environmental issues that will arise in the wake of the Antillia oil spill – which, of course, also involves a legal aspect as well. While the short-term effects of oil spills are relatively well-known and understood, it is more difficult to both measure and understand the long-term impact: “It is inevitably difficult to establish the precise extent and likely duration of environmental damage caused by an oil spill and to distinguish such impacts from changes brought about by a variety of other factors, both natural and man-made” (Dicks, 1999, 1). In other words, it is often difficult to find a direct causal relationship between oil spills and the long-term damage on the ecosystem. This is an important point to consider, as Greenoil may be facing further civil or criminal suits in the near future that go beyond its liability.
Besides the difficulty in understanding the long-term impact of an oil spill, there is also an inherent “limit to the extent that compensation obtained from the ‘polluter’ can be used to the direct benefit of a damaged environment” (Dicks, 1999, 1). In other words, monetary compensation cannot always make up the damage that an oil spill ostensibly creates in the environment. The legal implication of the difficulty in understanding the direct and long-term impact of oil spills is relatively clear. In short, it creates “substantial uncertainty for both victims and responsible parties” of the oil spill (Richardson, 2010, 5). Even the United Nations recognizes the complexity and limitation: “Environmental damage compensation is limited to costs incurred for reasonable measures to reinstate the contaminated environment” (UNIMO, 2016, n.p.). In this way, Greenoil can understand its rights in regards to the limitations on its liability for environmental damage as including the company’s liability to the original limit identified above.
Unfortunately, there is no question that Greenoil will be held liable for the environmental and economic damages caused by the Antilla oil spill. The grounds for liability are two-fold: first, that Greenoil is the permit holder for the operation at which the oil spill occurred and, second, that the oil spill has apparently caused both environmental and economic damage to the surrounding waters, and is expected to carry the damaging oil slick onto the coast of Antilla. Because of strict liability under United States law, Greenoil will automatically be held liable for the damage caused by the oil spill. Beyond this, Greenoil may be held liable for additional damages as filed by civil suits and criminal charges. While it remains to be seen what form exactly these various suits and charges will take, the above assessment makes it clear that they will take place. Therefore, the two next steps that this report recommends are as follows: first, to conduct a thorough and independent investigation of what occurred at the Antilla oil operation to cause the spill in the first place to ascertain complete possible liability and, second, to identify if there were any other liable entities that can be used as legal recourse as the next few months and years unfold.