BP Gulf Oil Spill: Facts, Economic Impact

BP Spent $56.4 Billion on Spill So Far

On April 26, 2016, BP PLC announced an additional $917 million in claims paid to businesses along the Gulf Coast. That's in addition to the $18.7 billion BP paid to settle federal and state claims. It agreed to that in a historic penalty levied on July 3, 2015. In total, BP has spent $56.4 billion in court fees, penalties, and clean-up costs. (Source: "Huge Oil Spill Still Shadows BP," WSJ, April 27, 2016.)

This followed the September 5, 2014, federal judge ruling that BP was "grossly negligent." He fined the company a record $18 billion under the Clean Water Act. He ruled that BP repeatedly cut corners to boost profits. (Source: "BP to Pay Out $18.7 Billion," WSJ, July 3, 2015. Judge Hammers BP for Gulf Disaster, WSJ, Sep 5, 2014)

However, that doesn't begin to address the damage done to human life, wildlife, the environment and the local economy. Here are the details.

1
Worst U.S. Spill Ever

bp oil spill cleaning pelican
A pelican covered in oil is cleaned at the Fort Jackson Oiled Wildlife Rehabilitation Center on June 11, 2010 in Buras, Louisiana. Spencer Platt/Getty Images

The BP oil spill began when the Deepwater Horizon rig suffered an explosion on April 20, 2010. Of the 126 workers at the site that day, eleven were killed by the blast. 

In its first month, BP spilled 30 million gallons of oil into the Gulf, three times the Exxon Valdez. Over the next three months, oil leakage in the Gulf of Mexico created the biggest oil disaster in the U.S. Scientists estimated 184 million gallons were spilled, 18 times the amount spilled by the Exxon Valdez. Satellite images showed the oil slick covered 25,000 square miles, impacting the shoreline from Gulfport, Mississippi to Pensacola, Florida.

Its economic impact is far worse. The Gulf fishing and tourism industries produce $3.5 - $4.5 billion a year. It will cost BP $4 billion to contain and clean up the mess, and another $4-$5 billion in penalties. At the time, the NOAA forecasted there was a 60% chance the slick would reach the Florida Keys.

2
Environmental Effects

Oil washed up on the beach at Grand Isle State Park, Louisiana, June 5, 2010.
Matthew D White/Photolibrary/Getty Images

Nearly 10 million pounds of oily residue was removed from Louisiana shorelines between June 2011 - April 7, 2013. However, more than 200 miles still has this oily residue embedded in its marshlands, killing vegetation and causing erosion. While Louisiana was the hardest hit, Alabama, Mississippi, and Florida shorelines were also impacted. Here's how much oil residue was collected between June 2011 and March 2013:

  • Louisiana -- 9,810,133 pounds
  • Alabama -- 941,427 pounds
  • Mississippi -- 112,449 pounds
  • Florida -- 73,341 pounds.

Impact to Fisheries

The oil disaster affected the cellular function of the killifish, a common baitfish at the base of the food chain. It harmed the development of larger fish such as mahi-mahi, and reduced the number of juvenile Bluefin by 20%.

Impact to Wildlife

In 2011, half of the area's bottlenose dolphins were compromised by lung disease. An NOAA study reported this type of disease is caused by "toxic exposure to oil." Nearly 20% were so ill they weren't expected to live. BP contested the study. (Source: WSJ, Sick Dolphins Tied to Oil Spill, December 19, 2013)

More than 1,700 sea turtles were found stranded (between May 2010 and November 2012), compared to 240 normally found a year. In addition, 930 dolphins and whales were stranded (between February 2010 and April 2013), compared to 20 normally found. To replace lost foraging habitat for ducks and other migratory birds, 79,000 acres of harvested and idle rice fields have been intentionally flooded. (Sources: Coastal Protection and Restoration Authority, Deepwater Horizon Oil Spill, April 17, 2013. NOLA.com, BP Deepwater Horizon oil spill draws wide array of comments on 3rd anniversary, April 19, 2013.)

3
Timeline

BP Oil Spill
The damaged blow-out preventer that caused the oil spill was extracted on September 4, 2010. It was taken for evidence to a NASA facility for the Deepwater Horizon Criminal Investigation Team and FBI Evidence Recovery Team. The 50-foot, 300-ton preventer was replaced. Photo by Petty Officer 1st Class Thomas M. Blue/U.S. Coast Guard via Getty Images

On April 20, 2010, an explosion rocked the $600 million rig. Prior to that, it produced 336,000 gallons of oil per day. It had 700,000 gallons of fuel oil stored for operations. BP leased the rig from Transocean for $500,000 a day. A second explosion three days later sunk the rig. At first, BP reported that no oil was leaking. However, on April 24 the Coast Guard said that 42,000 gallons of oil a day was leaking from the rig at 5,000 feet below the surface. At that point, BP started trying to cap the well and stop the leakage. They first used robots to repair and activate a shut-off valve.

On April 28, the government announced the site was leaking 210,000 gallons of oil a day. The oil slick already covered a 5,000 square mile area. On May 2, BP started drilling a relief well to intersect the damaged well and pump in mud and cement to close off the leak. The wells weren't successful until August. Until then, BP attempted to capture the leaking oil. On May 16, they inserted a tube that collected 84,000 gallons a day. Two days later the NOAA declared 19% of the Gulf to be a "no-fishing zone." The next day, thick oil started blanketing the Louisiana wetlands.

On May 27, scientists announced that the oil has been leaking at a rate of 798,000 gallons per day. On June 10, this estimate increased again to 1 million gallons per day. (Source: "100 Days of the BP Oil Spill," Time.)

4
Worse than the Exxon Valdez

BP oil Spill on fire
Smoke rises from a controlled burn May 19, 2010 in the Gulf of Mexico. Photo by John Kepsimelis/U.S. Coast Guard via Getty Images

The BP oil spill damaged the shorelines of four Gulf states - Louisiana, Alabama, Mississippi and Florida. Worse yet, it took three months to build the relief well to stop the flow. It immediately threatened more than 65,000 acres in four National Wildlife Refuges, home to endangered species. Approximately 40% of the coastal wetlands of the lower 48 states is located in Louisiana, and it's worth $96 billion.

The impact of the Exxon oil spill lasted for decades. In 1989, the Exxon Valdez crashed onto the shore of Prince William Sound in Alaska, contaminating 1,300 miles of coastline with 250,000 barrels (11 million gallons) of oil.The tourism industry immediately lost over 26,000 jobs and more than $2.4 billion in sales. By 2003, it still hadn't recovered completely.

5
Did It Benefit the Economy?

BP oil spill death to turtles
A dead sea turtle is carried out of the surf by Donald Tillman April 14, 2011 in Waveland, Mississippi. Any jobs created by cleanup efforts did not offset the damage. Photo by Mario Tama/Getty Images

JPMorgan Chase calculated that oil spill clean-up efforts actually boosted the economy in 2012. BP spent $6 billion to hire 4,000 people to clean up the spill that year. This contributed more than the $700 million lost in fishing and tourism revenues and the 3,000 jobs lost to the six-month deep-water drilling moratorium. But that didn't count long-term costs or things that aren't counted in GDP - like the value of human and animal life that was lost.

6
Oilzilla!

American flag in BP oil spill
An American flag lays in a slick of oil that washed ashore from the Deepwater Horizon oil spill in the Gulf of Mexico on July 4, 2010 in Gulf Shores, Alabama. Photo by Joe Raedle/Getty Images

Oil and hurricanes don't mix, whether shaken well or stirred. Add the worst oil disaster in U.S. history to a hurricane season nearly as bad as the one that spawned Hurricane Katrina and you get "Oilzilla". The NOAA forecasted that 2010 could have been a near-repeat of the 2005 season, with as many as 14 hurricanes.

Oilzilla would have combined the ferocity of a hurricane with the long-lasting effects of an oil spill. It could have flattened the domestic oil industry that way that Three Mile Island did to the U.S. nuclear industry.

At the very least, Oilzilla could have finished off BP PLC, the biggest oil and gas producer in the U.S. The company's stock value had declined 34% since the April 20th explosion, wiping $96 billion in value. This led some to speculate that BP became a prime takeover target, possibly by Royal Dutch Shell. BP's clean-up costs were estimated at $37 billion, three years of cash flow.