Cost of Spills

One of the questions asked most frequently of ITOPF is "How much does it cost to clean up an oil spill?" Unfortunately, there is no simple answer as the cost of oil spills varies considerably from one incident to another, depending on a number of interrelated factors. The type of oil, the location of the spill and the characteristics of the affected area are generally the most important technical factors. However, the quality of the contingency plan and of the management and control of the actual response operations are also crucial.

Cost Data

Obtaining detailed cost information for spills is generally difficult. Understandably many aspects of the clean-up operations and damage claims are confidential business agreements or settlements between claimants and those providing compensation. Detailed cost data are therefore not readily available.

Some cost data is published in the Annual Report of the International Oil Pollution Compensation Funds, but this only concerns spills in States that are party to the Fund Conventions. Because the IOPC Fund only becomes involved in paying compensation once the total value of claims has exceeded the tanker owner's limit of liability under the Civil Liability Conventions, the IOPC data set tends to concern only the larger and more expensive spills. There is also a restricted geographical spread of IOPC Fund cases, with a high proportion of the oil spills occurring in Japan and North West Europe. No spills in US waters are included in this data set, as the United States is not party to the Fund Conventions. American spill cost data is generally in the public domain and published on the internet, but such data is not representative of costs in other countries because of the uniqueness of the US response and damage assessment systems.

Using cost data from a variety of sources, ITOPF has produced the following graph for costs arising from tanker spills around the world, outside the US. The horizontal access shows vessel size, measured in gross tons (GT) while the vertical access shows cost in US dollars (converted using published exchange rates).

It evident from the graph that there is no linear relationship between spill cost and size of tanker. Part of the reason for this is that it is exceptionally rare for a vessel to spill all the oil it carried on board. The usual scenario is that part of the contents of one or more tanks is lost as a result of physical damage. This means that there is not a very clear link between vessel size and volume spilled in an incident. Indeed, some of the most troublesome spills have been caused by relatively small tankers. In these cases the most important factor has been the type of oil spilled. For example, both the NAKHODKA and ERIKA spilled heavy fuel oil, which is highly persistent and came ashore along long lengths of coastline.

Another part of the problem is the fact that the quantity of oil spilled is not closely related to the cost of the spill. As described below in more detail, there are so many different variables involved that it makes little sense, for example, to think of cost in terms of “average” clean-up costs per tonne of oil spilled. In fact, even within a limited geographic area, it is impossible to give a reliable average cost per tonne spilt because every oil spill is different with its own unique set of conditions.

EXXON VALDEZ clean-up

Where published data is available, caution is advised, as certain notoriously expensive cases can easily skew the analysis. The most expensive oil spill in history is the EXXON VALDEZ (Alaska, 1989). Cleanup alone cost in the region of US$2.5 billion and total costs (including fines, penalties and claims settlements) have, at times been estimated at as much as US$7 billion. The court cases continue, however, so the final costs are not yet known. The AMOCO CADIZ (France, 1978) reportedly cost about US $282 million, of which about half was for legal fees and accrued interest. The BRAER (UK, 1993) cost in the region of US$83 million. Cleanup costs in this incident were extremely low since most of the oil dispersed naturally. However, some US$61 million was paid out in fishery-related damages, mostly as a result of a fisheries closure for salmon. The cost of cleaning up after the SEA EMPRESS (UK, 1996) was US$37 million, with total costs for the incident more than US$60 million once all damage settlements were made. For the NAKHODKA (Japan, 1997) compensation was settled at approximately US$219 million. Claims are still being processed for the ERIKA (France, 1999), as at October 2010 payments had been made in respect of 5939 claims for a total of 129.7 Euros.

Factors Affecting the Costs of Spills

The following sections explore the various technical factors which play a role in determining the costs of cleanup and damage.

Type of Oil

oil in sandy bayOil type is one of the most important factors governing cleanup costs. In general, the more viscous, sticky and persistent the oil, the more difficult and costly the cleanup is likely to be, all other factors being equal. Spills of light refined products (e.g. gasoline and diesel) do not normally require a cleanup response. They may be toxic in the short term and require careful monitoring, but because of their high volatility, they do not persist on the sea surface for any significant time. Instead, due to rapid evaporation of the “light end” components and the speed with which they disperse and dissipate naturally, especially in rough seas, spills of light hydrocarbons do not result in long, expensive cleanup operations. At the other end of the spectrum are the highly persistent heavy crude oils and heavy fuel oils which are normally very viscous and have only a small proportion of volatile components. Because they do not break-up easily and often emulsify into persistent mats of oil, these oils have the potential to travel great distances from the original spill location and can cause widespread contamination of coastlines. They are difficult to clean up at sea, in coastal waters and on shorelines. As a consequence, cleanup is invariably long, resource- and manpower- intensive, and therefore, costly.

fish catchThe nature of potential damage also varies according to the type of oil spilled. Light refined products may constitute a fire and explosion hazard which may require restricting access and the temporary closure of port areas or nearby industry. As mentioned above, light oils tend to be more toxic than heavier oils, which can lead to mortalities of marine plants and animals if there are sufficiently high concentrations in the water column. This is not always the case because the dilution of such oils is relatively fast, but it may occur if there is strong wave action in shallow waters, where dilution is less important. Such oils may also cause the tainting of edible fish, shellfish and other marine products. All such effects will, however, usually be highly localised and short-lived because the toxic components are also the ones that evaporate most rapidly, and fish and shellfish rapidly lose the taint once clean water conditions return.

Heavy fuel oils and crude oils are generally of low toxicity and their main impact is usually through physical contamination. Birds and other wildlife may become coated, and tourist beaches, fishing gear, mariculture facilities and other structures can also be contaminated and require cleaning. In some circumstances heavier oils can sink if they interact with sediment particles, which can result in the prolonged contamination of the sea bed. Sunken oil can be a reservoir for the fouling of bottom fishing gear and may cause repeated re-oiling of cleaned beaches if the sunken oil is remobilised after storms. All these problems can result in large claims for clean up costs and economic loss.

Between the two extremes of gasoline and heavy fuel oil there are many intermediate crude oils and refined products that are transported by tankers and used in a variety of marine engines. The fate and effects of all these oils, as well as the requirement for cleanup, will vary greatly, which will also mean that cost varies greatly.

Amount Spilled, Spill Location and Rate of Spillage

The amount of oil spilled is clearly an important factor in determining overall response costs and damages. For example, if all other factors are similar, a 10,000 tonne spill is likely to result in far wider zone of contamination and impact than a 100 tonne spill. However, the location of the spill is also important. For example, the three largest tanker spills of all time - ATLANTIC EMPRESS off Tobago, West Indies in 1979 (287,000 tonnes), ABT SUMMER off Angola in 1991 (260,000 tonnes) and CASTILLO DE BELLVER off South Africa in 1983 (252,000 tonnes) resulted in minimal cleanup and damages because these spills happened well offshore and none of the spilled oil contaminated coastlines. In such circumstances the cost of the response would normally be limited to aerial surveillance to monitor slick movement and natural dissipation. This emphasises the inappropriateness of simplistic comparisons between the cost of individual spills based on the single parameter of spill volume.

The rate of spillage can also be an important factor. For example, the cleanup operation required in response to a single large release of oil may be considerable but may be completed in a matter of weeks. However, the same quantity of oil lost over several months from a damaged vessel close to the coast may require a prolonged cleanup effort, with repeated cleaning of amenity areas and potentially more prolonged effects on fishery resources and tourism.

The physical characteristics of the spill site (e.g. prevailing winds and weather, tidal range, currents, water depth, coastal topography) also have a bearing on cost as they affect the feasibility and difficulty of mounting response operations at sea and ashore. The sensitivity of different shoreline types, the extent to which they self-clean, and the availability and cost of local labour and resources will influence the overall cost of an oil spill cleanup.

beach resortSocio-economic factors and resources at risk vary both within and between countries. Some areas will be of high national or even international importance for fishing, mariculture, tourism, other industries or conservation, whereas others will only rank as locally important. Seasonal differences will also occur in the sensitivity of these resources to oil pollution and therefore the economic impact of a spill. This in turn will help determine the requirement for and extent of the cleanup and thus its cost.

Cleanup at Sea

As noted earlier, oil spills will sometimes dissipate naturally and not pose a threat to sensitive coastal resources. On other occasions there may be little that can be done due to bad weather or other particular circumstances. Under such circumstances, the decision to not attempt to respond may, nonetheless, be a difficult one, especially as it is likely to be viewed by the public, politicians and media as unacceptable. It is sometimes observed that an active response is therefore often adopted even when technical opinion is agreed that it is unlikely to have a significant benefit. Part of this may be a result of the fact that oil spilled on the surface of the sea spreads rapidly, thereby extending over an area that is too great to be countered by available techniques. Added to this are the limitations on containment and collection systems imposed by winds, waves and currents, and the problems posed for the effective use of chemical dispersants by high viscosity oils and the rapid formation of water-in-oil emulsions ("mousse"). At times, these technical realities frequently fail to deter those in charge from deploying numerous oil recovery ships or dispersant spraying vessels and aircraft in order to be "seen to be doing something". In extreme cases an ineffective at-sea response may be continued for a long period, leading to high cleanup costs for little or no benefit. The actual cost-effectiveness of an at-sea response will depend upon many factors including the nature of the incident; the availability of trained personnel and required equipment and materials; the number of vessels, aircraft and specialised equipment employed; and, perhaps most importantly, the effectiveness of the pre-spill planning and the control of the actual operations.

Shoreline Cleanup

Shoreline cleanup frequently relies on manual recovery methods and locally-available equipment. In terms of amount of oil collected relative to financial outlay it is often more cost effective than an at-sea response, which typically requires expensive equipment, vessels, aircraft and trained operators.

secondary cleanupAn important factor in the cost of shoreline cleanup is the extent to which cleaning is required to bring the contaminated area to a condition considered as acceptable. The first stage in most shoreline response along a heavily contaminated shoreline is the removal of bulk oil. This is hard work, yet is often relatively straightforward and can be accomplished quickly, depending on the type of shoreline (e.g. rock, sand, mud) and ease of access. The type and amount of oil involved, the time of year, prevailing weather conditions and other factors will also influence the ease with which thick accumulations of bulk oil can be removed.

As the cleanup operation progresses and the degree of contamination is continually reduced, ever more effort is required to effect further improvement. The operation becomes one of diminishing returns, with costs escalating rapidly as the amount of remaining oil becomes less and less. This is one of the key reasons that shoreline cleanup costs cannot be related directly to the degree of initial contamination: the level of effort to deal with a lightly contaminated area during the “secondary” and final cleaning may be very similar to that expended in the first place on the heavily oiled area. The overall costs therefore depend to a large extent on the degree of fine cleaning required for each location and the duration of work until the operation can finally be terminated.

Management of Response Operations

press conferenceUnfortunately, poor management and inadequate planning often result in the mistakes of previous spills being repeated time and time again. The result is damage to the environment and economic resources that could have been avoided and thus, excessive costs. The tendency to react to political, media and public perceptions and pressures, rather than basing decisions on technical realities, is a special problem that can also escalate the cost of any incident beyond what would be considered "reasonable" under the international compensation conventions.

Conclusions

Various technical factors in combination determine the actual costs of any particular incident and simplistic comparisons between different events based on a single parameter such as quantity of oil spilled can be highly misleading. An understanding of the relative importance of the various factors that determine the cost of spills can help focus spill prevention programmes, the development of realistic oil spill contingency plans and the delivery of a cost-effective response.

Sources of Information on Costs of Spills