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Thursday, June 24, 2010

Deepwater Horizon Oil Spill: Selected Issues for Congress

Curry L. Hagerty, Coordinator
Specialist in Energy and Natural Resources Policy

Jonathan L. Ramseur, Coordinator
Specialist in Environmental Policy

On April 20, 2010, an explosion and fire occurred on the Deepwater Horizon drilling rig in the Gulf of Mexico. This resulted in 11 worker fatalities, a massive oil release, and a national response effort in the Gulf of Mexico region by the federal and state governments as well as BP. Based on estimates from the Flow Rate Technical Group, which is led by the U.S. Geological Survey, the 2010 Gulf spill has become the largest oil spill in U.S. waters, eclipsing the 1989 Exxon Valdez spill several times over. The oil spill has damaged natural resources and has had regional economic impacts. In addition, questions have been raised as to whether the regulations and regulators of offshore oil exploration have kept pace with the increasingly complex technologies needed to explore and develop deeper waters.

Crude oil has been washing into marshes and estuaries and onto beaches in Louisiana, Mississippi, and Alabama. Oil has killed wildlife, and efforts are underway to save oil-coated birds. The most immediate economic impact of the oil spill has been on the Gulf fishing industry: commercial and recreational fishing have faced extensive prohibitions within the federal waters of the Gulf exclusive economic zone. The fishing industry, including seafood processing and related wholesale and retail businesses, supports over 200,000 jobs with related economic activity of $5.5 billion. Other immediate economic impacts include a decline in tourism. On the other hand, jobs related to cleanup activities could mitigate some of the losses in the fishing and tourism industry.

The Minerals Management Service (MMS) and the U.S. Coast Guard are the primary regulators of drilling activity. The Environmental Protection Agency (EPA) has multiple responsibilities, with a representative serving as the vice-chair of the National Response Team and Regional Response Teams. The Federal Emergency Management Administration (FEMA) has responsibilities with respect to the economic impacts of the spill; its role so far has been primarily that of an observer, but that may change once the scope of impacts can be better understood.

MMS is also the lead regulatory authority for offshore oil and gas leasing, including collection of royalty payments. MMS regulations generally require that a company with leasing obligations demonstrate that proposed oil and gas activity conforms to federal laws and regulations, is safe, prevents waste, does not unreasonably interfere with other uses of the OCS, and does not cause impermissible harm or damage to the human, marine, or coastal environments. On May 13, 2010, the Department of the Interior announced that Secretary Ken Salazar had initiated the process of reorganizing the MMS administratively to separate the financial and regulatory missions of the agency. The Coast Guard generally overseas the safety of systems at the platform level of a mobile offshore drilling unit.

Several issues for Congress have emerged as a result of the Deepwater Horizon incident. What lessons should be drawn from the incident? What technological and regulatory changes may be needed to meet risks peculiar to drilling in deeper water? How should Congress distribute costs associated with a catastrophic oil spill? What interventions may be necessary to ensure recovery of Gulf resources and amenities? What does the Deepwater Horizon incident imply for national energy policy, and the trade-offs between energy needs, risks of deepwater drilling, and protection of natural resources and amenities?

This report provides an overview of selected issues related to the Deepwater Horizon incident and is not intended to be comprehensive. It will be updated to reflect emerging issues.

Date of Report: June 18, 2010
Number of Pages: 44
Order Number: R41262
Price: $29.95

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