The Costs of Oil 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 major 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 which cover a range of oil types and different geographical areas is generally difficult. Understandably many aspects of claims settlements are confidential between claimants and those providing compensation, and detailed cost data are not readily available. Some cost data is published in the Annual Reports of the International Oil Pollution Compensation Fund, but this only concerns spills in States that are party to the Fund Conventions. Because the 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, this data tends to concern only the larger and more expensive spills. There is also a restricted geographical spread of Fund cases, with a high proportion of the oil spills occurring in Japan and North West Europe. No spills in US waters are included since the USA is not party to the Fund Convention. American spill cost data is generally in the public domain, but such data is not representative of costs in other countries.

Some cost data has been made available by individual P&I Clubs, the IOPC Funds and Cristal Limited regarding the cost of non-US tanker spills for the period 1990-1999. The following graph summarises this data, which has been converted into US dollars according to published exchange rates. In cases where not all claims have been settled (e.g. ERIKA) a "best estimate" of the final cost has been used.

It evident from the graph that there is no linear relationship between spill cost and size of tanker (which might in turn be considered indicative of spill volume). Indeed, some of the most expensive 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.

As every oil spill is different with its own unique set of conditions, it is impossible to give, even within a limited geographic area, a reliable average cost per tonne spilt. Certain notoriously expensive cases also skew any such 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) are estimated at US$9.5 billion. 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, but US$61 million was paid out in fishery-related damages. The cost of cleaning up after the SEA EMPRESS (UK, 1996) was US$37 million, with total costs for the incident likely to be in the region of US$62 million once all settlements are made. For the NAKHODKA (Japan, 1997) compensation was settled at approximately US$219 million. Claims are still being processed for the ERIKA (France, 1999), but are likely to considerably exceed the US$ 180 million which is available under the '92 Civil Liability and Fund Conventions. It is too early to speculate on the total cost of the PRESTIGE but it is again likely that it will exceed the total amount of compensation available under the international Compensation Conventions.

Factors Affecting the Costs of Spills
The following sections explore the various technical factors that in combination determine the costs of cleanup and damage.

Type of Oil
Oil 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 (eg gasoline and diesel) do not normally require a cleanup response. They do not persist on the sea surface for any significant time due to rapid evaporation of the volatile components and the speed with which they disperse and dissipate naturally, especially in rough seas. 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. Such 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 usually costly.

The 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. Light oils also tend to be more toxic than heavier oils, which can lead to mortalities of marine plants and animals if high concentrations in the water column result from wave action in shallow waters, where dilution is inadequate. 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 costs. If all other factors are similar, a 100,000 tonne spill is likely to result in far wider contamination and impact than a 10,000 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 degree of difficulty of mounting a cleanup response, both at sea and, if oil strands, ashore. The sensitivity of different shoreline types, the extent to which they self-clean, the degree of cleaning required and the availability and cost of local labour and resources, as well as many other site-specific factors, will influence the overall cost of an oil spill cleanup.

Socio-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. The decision not to respond, however, is a difficult one, especially as it is likely to be viewed by the public, politicians and media as unacceptable. An active response is therefore often adopted even when technical opinion is agreed that it is unlikely to have a significant benefit. This is usually due to 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"). 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 satisfy the criterion that they must 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 usually requires considerable amounts of expensive equipment, vessels, aircraft and trained operators.

An important factor in determining the cost of shoreline cleanup is the extent to which cleaning is required before the contaminated area will be considered acceptable. The removal of bulk oil from a heavily contaminated shoreline is often relatively straightforward and can be accomplished quickly, subject to 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 bulk oil can be removed.

As the degree of contamination is progressively reduced more and more effort is required to effect further improvement. The operation therefore becomes one of diminishing returns, with costs escalating rapidly as the amount of remaining oil decreases and the operation moves through the secondary and final phases. It is for this reason that shoreline cleanup costs cannot be related directly to the degree of initial contamination: a lightly contaminated area may still require a broadly similar amount of secondary and final cleaning to a heavily oiled area. The overall costs therefore depend to a large extent on when the operation is terminated.

Management of Response Operations
Poor management and inadequate planning can result in the mistakes of previous spills being repeated, leading to avoidable damage to the environment and economic resources and excessive costs. Reacting to political, media and public perceptions and pressures, rather than basing decisions on technical realities, 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

Etkin, D.S. (1998) Financial costs of oil spills worldwide. Cutter Information Corporation, MA, USA

Etkin, D.S. (1998) Financial costs of oil spills in the United States. Cutter Information Corporation, MA, USA

Grey, C. (1999) The Cost of Oil Spills from Tankers: An Analysis of IOPC Fund Incidents The International Oil Spill Conference 1999, 7-12 March 1999, Seattle, USA. ITOPF, London

IOPC Fund (2004) Annual report 2003. International Oil Pollution Compensation Funds, London, UK

Purnell, K. (1999) Comparative Costs of Low Technology Shoreline Cleaning Methods The International Oil Spill Conference 1999, 7-12 March 1999, Seattle, USA. ITOPF, London

White, I.C. & Molloy, F. (2003) Factors that Determine the Cost of Oil Spills. International Oil Spill Conference 2003, Vancouver, Canada, 6-11 April 2003

White, I.C. (2002) Factors Affecting the Cost of Oil Spills. GAOCMAO Conference, Muscat, Oman, 12-14 May 2002. ITOPF, London