BP, oil and liability with Dianne Saxe

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I recently spoke with Dianne Saxe about the BP oil spill and its larger implications. We tried to address a number of issues in 10 minutes, notably the massive conflict of interest between regulatory bodies and industry. As an example the US has re-branded the Mineral Management Service to the Bureau of Ocean Energy Management and Enforcement, very subtle. In Canada we still have the Ministry of Natural Resources, which begs the question of what their purpose is – extracting minerals or protecting the environment?

Next we discussed liability issues on risky projects and how to safely ensure that a company has sufficient funds for a cleanup. In the U.S. they have the super-funds for cleanup and oil tankers pay into a common fund, but in Canada there is very little infrastructure for ensuring there is money in the bank to clean-up after a disaster.

Lastly, we briefly discussed the increased risks of an oil spill in cold waters where oil breaks down much more slowly and the wildlife and vegetation are more fragile.Consequently, an oil spill in cold Canadian waters could potentially be much, much more harmful than the disaster in the Gulf. Take a look at the video and send us your questions.

Title: BP, oil and liability with Dianne Saxe
Length: 11:49
URL: http://www.nimonik.ca/2010/07/bp-oil-and-liability-with-dianne-saxe/

Note: Unclear word/s is/are time-stamped and highlighted.

Jonathan:
Hi I’m Jonathan of the Nimonik and today I’m back with Dianne Saxe, a top environmentalist in Toronto. And today we’re gonna be talking about the catastrophe in the gulf, the BP oil spill – the ongoing BP oil spill where currently filming its July 8th. And the oil is still spewing out of the well with no end in sight. Diane could you give us a quick overview of your firm and then we’ll dive in to a couple of question about this disaster.

Diane:
Yes, hello, were a small environmental law firm of environmental law boutique, we’re based in Toronto but we do give advise across the country. And I’ve been doing nothing but environmental law for more than the last quarter century.

Jonathan:
And so I’ll also skip right into the questions and one thing that comes to mind with regards to the deep water horizon platform is permitting and how the permits are allocated and does a potential conflict of interest between the permitting agencies and the oil companies. And if you see any parallel in the Canadian System with regards to the oil industry.

Diane:
Well that’s a lot of questions Jonathan but I’ll try. Certainly what’s called a regulatory capture has been a problem in the regulation business for decades. And this is the question about whether the regulators have more sympathy with the people they are regulating and with the general public, they are supposed to be regulating for. Regulatory capture is a common problem; one reason is that very often there is an exchange of personnel between regulators and industry. People from the regulatory (…court). Particularly what tends to happen is that you get people who are on the regulatory body and then when they leave the regulatory body, when they want to get a job, they’re going to be looking for private industry.

We also have sometimes occasions where people from industry are seconded into the regulatory body and this particular case the liaison between the oil industry and the US, what they call at that time the Minerals Management Service, is apparently closer than usual in even going as far as sexual intercourse, parties, drinking together, an unusual degree of social interconnection which is certainly not normal and absolutely not permitted but was going on according to what we’ve read.

Now the US is trying to do something about this among other things given they tremendously bad public press about the Minerals Management Service, is now being renamed – it’s now called the Bureau of Ocean Energy Management Regulation and Enforcement, it’s fair to say it wasn’t doing any of those things before. And if you think of the name, the focus of the name before was minerals management service, how do we get the minerals out. It’s exactly the same problem we have for example in Ontario with the Ministry of Natural Resources. Is its job to protect the resources or is it just job to promote industries to extract the resources? And the Ministry of Natural Resources in Ontario has had schizophrenia about this since it was created. It’s always torn into two directions and only one of the directions produces a lot of money.

Jonathan:
Yeah, there’s a lot of pressure applied from the minerals industry, the oil industry. And unless they have a really strong government, it’s hard to withstand that pressure, in the states you had Dick Cheney coming out of Halliburton, a massive oil company, so fear that’s gonna lead to some issues.

Diane:
But we have the similar thing exactly here. So if you look right now, both Canada and the US have panels that they’ve setup to review offshore oil drilling. The US panel includes an oceanographer, an environmentalist, a high profile scientist and nobody from the oil industry. So the oil industry is complaining about that. In Canada, we’ve done the exact opposite, the National Energy Board, which is very very closely associated with the oil industry is going to do the review with no one from the outside – no oceanographers, no environmentalist, no high profile scientist.

Jonathan:
Ok, well that seems a little bit one sided.

Diane:
Well, our federal government in Canada has just recently decided that environmental assessment shouldn’t be allowed to get in the way of energy projects. And exempted energy projects that are dealt with by the National Energy Board from the Canadian environmentalist assessment process or at least from most of it. So our government has decided that you shouldn’t let messing environmentalist stuff get in the way of energy projects.

Jonathan:
And when we start taking a policy like that and then we get into this question of liability and the risks involved in this operation, should we start thinking BP has the resources to pay for the cleanup and to pay damages to the people that are affected in the gulf coast. A lot of companies that are involved in highly risky activities such as drilling oil wells offshore don’t unless we have the money to pay for the massive cleanup and so if this ever happen in Canada, potentially Canadian taxpayers will be stuck footing the bill. Should there be some sort of system where only certain companies that have enough money to pay for cleanup are allowed to do certain risky activities and smaller companies are simply aren’t allowed.

Diane:
Well I don’t think that the issue is the size of the company but I do agree with you that there is a substantial issue about resources for cleanup. In my business, they quite often happens that small companies are individuals of modest means cause huge problems. And it is in a sad sort of way, an extremely lucky victim when the pollutor is rich because it’s only in those cases by in large that you do get clean up. The larger question though has two parts; the first is the liability caps for cleanup. In both Canada and the US, we encourage highly risky activity like nuclear development and offshore drilling by putting on an extremely low cap on the liability of those companies. In the Nova Scotia’s waters for example, the cap is 30 million dollars which BP blew by in the first few days. This is ludicrously low. What it means is that the profits are private but the risks are public. And that in my view is very very poor social policy.

The second question is the question you’re asking which is assuming that we fix the liability cap, which we haven’t done, then what means do we need to have in place so that there is enough money to clean these things up assuming that money is enough which is another story with degree to live for a different day. There are different systems for doing that, the US super fund for example is a sort of a forced insurance policy. The theory being that companies that carry on activities that create certain kinds of environmental risks should pay into a fund and the fund it should respond if there is a clean up required. That’s the model that’s used for oil tankers going around the world, is that there is a fund that’s paid for by the tanker owners and operators which responds when there is oil spills on the high seas or from tankers. And that has helped significantly. We still have tanker accidents but not as many and they get cleaned up better. We don’t have anything like that for drilling.

Jonathan:
More questions that’s a bit more relevant for Canadian viewers would be the clean up challenge of cleaning up an oil spill in colder waters up in Canada, say off the coast of Labrador or out even in the arctic with all these talk of drilling in the arctic, oil breaks down much lower in colder waters and then you have the whole… you know with the boats and putting up these barriers in colder, more dangerous water we assume more challenging, is there not even a greater risk for offshore drilling in Canada than there is down in the gulf of states?

Diane:
Yes I agree, particularly in the arctic. I had the great privilege of spending two weeks kayaking not far from the North Pole. And in the arctic, the ecosystem is extremely fragile and very difficult to heal. Even minor scars from many years ago are still there because there is a very short window for biological processes, has a very small population of things like the bacteria that would normally break oil down. And the other thing to remember is that conditions are so harsh there, life is on a very thin margin. Everything is hanging on just. And it doesn’t take very much to push birds, animals, bacteria; anything beyond that margin would simply couldn’t survive. So if you look at the Exxon Valdez for example, which was a much smaller quantity in Canada, very tiny quantity in comparison to what we’re looking at in the gulf. And a lot of the oil are still there. And there are oil spill sites 40 years ago where there has been still relatively little recovery and enormous damage cost. The more sensitive and fragile the environment, the more devastating the spill and it’s hard to think of a more sensitive and fragile environment than our arctic.

Jonathan:
Absolutely. So I think it’s very clear that Canada has a lot of work to do in terms of securing our national environment from potentially catastrophic disasters like we’re seeing in the gulf today.

Diane:
And we have to want to do it.

Jonathan:
Yes. We need the political will to implement some more rigorous standards, just like we do with the banks, not to extend the conversation, but the banks that have a lot of issues came a lot of issues back in the 80’s. And we implemented a lot of standards back then that helped us avoid the crisis that many countries had over the last couple of years have had with their banking sectors. So it might be the right time for us to implement some stronger standards with the oil industry up in Canada so we avoid a similar BP catastrophe up here.

Diane:
Maybe we should send a link to Mr. Harper.

Jonathan:
Maybe. Maybe. Thanks Diane.

Diane:
Thank you Jonathan, have a great day.

Jonathan:
You too.