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Zero tolerance for oil spills?

June 18, 2013

The rupture of an Apache pipeline has spilled 60,000 barrels of drilling waste over 42 hectares of forest. This is Alberta’s third major spill in recent months.

The Exxon spill in Mayflower, Arkansas, this past spring sparked more debate over the proposed Keystone XL pipeline. The residents in Mayflower, Arkansas, continue to feel the effects of the spill there. (Photo, left.)

Both spills are dwarfed by the Macondo disaster, and its lingering damage.

Whether the XL pipeline is laid or not, we will continue to drill wells, push oil through pipes, and move it around by ship. The question is: Why do we tolerate oil spills? Under current procedure, spills of this sort are just a part of doing business. Why isn’t this the right place for a legal policy of zero tolerance? I suspect we could go a long way toward that by aligning incentives, through financial penalties on the companies involved.

Penalties greater than now levied.

Punitive penalties.

Disproportionate penalties.

Humongous penalties that cause CFOs to blanch any time they hear that a pipeline has breached or that a well has blown out. Paid out of equity, Begin with 0.1% of company capitalization for the first 10,000 barrels spilled, and work up to 10% for a large spill. Levied separately on the company extracting or shipping the oil, the company that owns the oil, and any company that has the oil under contract. Double that, if the spill is under the sea.

This won’t stop exploration or production. Nor is it meant to. What it will do is instill in the companies involved a zero tolerance culture: put more resources to pipeline maintenance, increase safety engineering and organizational visibility of it, spur the creation of fail-safes and back-ups, and create an petrochemical industry that doesn’t have any major spills.

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